The average Minnesota farm is growing rapidly in terms of total assets and net worth, according to the 2010 FINBIN Report on Minnesota Farm Finances published by the University of Minnesota’s Center for Farm Financial Management. FINBIN, one of the largest and most accessible farm financial databases in the world, summarizes actual farm data from thousands of agricultural producers to generate detailed reports on whole farm, crop and livestock financials.
In constant dollars, total assets per farm have increased by more than $1.1 million over the past 15 years. However, total debt increased by about $500,000 over the same period. As a result, the average farm has gained almost $700,000 of real net worth over the past 15 years. This equates to 10% growth in net worth per year.
The FINBIN report included 2,446 Minnesota farms, or about 10% of the state’s commercial farms with total sales of more than $100,000. From $250,000 to $500,000 in total sales are generally needed to provide for a family’s living expenses.
Net worth increases can have two sources—those resulting from earnings, either farm or non-farm, and those resulting from asset appreciation.
Over the past 15 years, 79% of the net worth growth was earned. Retained earnings result when farm and non-farm income exceed the amount consumed by family expenditures and income taxes. The remaining 21% of net worth growth resulted from asset appreciation.
In high-profit years, the high-debt farms are able to leverage borrowed capital to multiply their earnings growth. However, they remain in high-risk territory in terms of their liquidity and solvency positions.
More details of the 2010 FINBIN Report on Minnesota Farm Finances are available at www.finbin.umn.edu.