Lessons Learned from 2007 Farm Income Averages

1. Not everyone made money. Seven percent of the operations had an accrual basis net loss in 2007. All thesefarms had heavy livestock influence.

    

2. Most farm income numbers looked good last year, but be prepared to look below the surface. If a crop farmer's efficiency didn't improve and leverage levels didn't decrease, the financial health of the business should be examined.

    

3. Costs of production are increasing — 39% for irrigated corn, 26% for irrigated beans and 82% for dryland wheat from 2002 to 2007. In 2007, the average cost of production for irrigated corn rose by 44 cents per bushel or $47.05 per acre. That's a 13% increase over 2006's per acre cost.

Barrett writes: "The increase in cost of production means an increased level or risk on each acre of production. This increased level of risk means that if and when things turn for the worse, the ability for your financial health to quickly go bad, and be worse than ever before, is at a higher level than ever experienced."

Check out Barrett's article in Cornhusker Economics for more information.