By C. Robert Holcomb, University of Minnesota Extensio
Why some farmers are more profitable than others is a perennial question. The answer is of interest not only to farmers, but to all professionals working in the agricultural sector.
Farm business data from the Southwest Minnesota Farm Business Management Association show the net farm income for the top producers growing at a faster rate than for all producers. A recent University of Minnesota Extension study identified what the top income groups are doing differently compared to the rest of the producers.
As part of a larger study, the association members were surveyed to determine information relating to level of education, how the producer got started in the business, additional farm management education, and attitudes toward an assortment of farm business and risk management issues.
This data was compared to five-year averages for financial and physical data. The farms were divided into two groups based on whether the net farm income per operator was less than or greater than $100,000.
Initial results show that:
- Farms in the lower income group received more inheritance than the top income group although the top group was more likely to have purchased their farm from relatives.
- The top income group also indicated they spent more time reading farm management educational material than the low income group.
- While the education and ability to successfully market farm yields and project income and expenses is critical, the amount of time spent on marketing and on projecting income and expenses were not significantly differently between the two groups. The data implies that what the producer does with marketing and financial information does have an impact on net farm income. The top income group is more likely to utilize commodity futures and options.
- The amount of time spent on farm recordkeeping, the amount of financial help the operator received when started farming, the time spent attending educational meetings, and the amount of changes and/or updates performed by the farm manager in the past seven years were not significant when comparing the high and low income groups. What the producer does with this information has a much greater impact on net farm income when compared to only looking at the amount of time spent on the activity.
The research summary is titled, Producer Attitudes, Assistance, and Time Allocation Affecting Farm Income, and is available online on Extension's Agricultural Business Management website www.extension.umn.edu/agbusinessmanagement.
Others involved in this work are Kent Olson, Extension educators Gary Hachfeld, Jim Kurtz and Dave Bau. Victor Gauto, graduate student in Applied Economics, performed the statistical analysis.