Kansas State University
Statewide Net Farm Income Averaged $151,127; Varied Widely by Region
June 19, 2013 – Judicious use of risk management tools and other key management decisions saved the day for many Kansas farmers last year even as the state endured its worst drought in decades, according to Kansas Farm Management Association program director, Kevin Herbel.
“Without a doubt, the farm income picture would look very different without crop insurance,” said Herbel as he described highlights of the 2012 KFMA Executive Summary released recently, which sheds light annually on the financial picture of KFMA member farms.
The data, available at Kansas Farm Management Association, showed net farm income across 1,290 of the KFMA member farms last year averaged $151,127, down from $166,375 in 2011 but above the five-year average of $141,288. According to Herbel, during 2012 the average KFMA farm had crop insurance proceeds of $87,998, which accounts for 14 percent of the value of farm production (VFP) and 58 percent of net farm income for the year. In 2011, crop insurance also was important as 45 percent of the net farm income (12 percent of VFP) was from crop insurance proceeds.
Again in 2012, net farm income varied widely by region, with northwest Kansas averaging $288,176 and southwest averaging $98,071. In the north central part of the state, net farm income averaged $114,357; in south central, $160,703; northeast, $138,024 and in southeast Kansas, $150,644.
The differences by region are at least in part, a reflection of the different types of farming operations, irrigation options and severity of the drought itself, KFMA economists said.
The value of farm production averaged $620,109 in 2012, up from $607,854 in 2011 and the five-year average of $543,418.
The KFMA annual report is, to some extent, a reflection of Kansas agriculture statewide. It also provides yearly comparisons and between different types of farming operations.
“The average net farm income number at $151,127 was higher than what you’d think, given the drought,” said Gregg Ibendahl, associate professor of agricultural economics at Kansas State University. “Thanks to crop insurance, we stayed above the five year average of about $141,000. Across the state, although we had dry conditions, overall net farm income wasn’t bad.”
About half of the KFMA member farms made $100,000 or less and 10 percent lost money, but about eight percent made more than $400,000, said Ibendahl, who is a farm management specialist with K-State Research and Extension.
In addressing the disparity, he noted that 20 percent of the farms that made more than $400,000 were in the northwest part of the state which is also home to some of the state’s largest farms, so economies of scale come into play somewhat.
Ibendahl noted that in any given year, it’s typical to have about 10 percent of KFMA member farms lose money and 10 percent that break even. That means that about 80 percent are actually making money.
Crop farms fare best
Crop operations, both dryland and irrigated, had net farm income that exceeded the previous year and the five-year average. Net income for dryland farming operations in 2012 averaged $166,174, up from the previous year at $157,296 and above the five-year average of $151,417. Net income for irrigated crop farms averaged $323,889, down from $449,115 in 2011 but up from the five-year average of $302,420.
“If you were a cattle person, and if you weren’t backgrounding or finishing, you probably did okay. If you were backgrounding or finishing – that’s the group that took it on the chin last year,” Ibendahl said, noting that grain and feed costs during the drought cut deep into those operations’ net income.
Those cattle operations described as backgrounding-finishing showed an average net income of $46,519, sharply lower than the previous year at $397,138 and below the five-year average of $146,297.
“Cow-calf operators did somewhat better,” Ibendahl said. Operations listed as “cowherd” on the summary saw an average net income of $98,178, up from $60,016 in 2011 and above the $37,859 average.
Overall differences and return on net worth
“High income farms made quite a bit of money on the price side by selling their product, but they also did a good job of holding expenses down,” Ibendahl said. “Conversely, the lower 25 percent may have had some debt issues that weighed on their debt-to-income ratio.
He noted that overall, KFMA members showed a return on net worth (equity) of 5.74 percent: “That’s better than any savings account or CD right now. It’s been 7.3 and 7.67 the prior two years, so it’s down, but still good.”
Ibendahl said that overall debt levels reflected in the summary are not too high, which paints a pretty healthy picture for Kansas agriculture.
Herbel added that while total dollars of debt per farm have increased from $368,031 to $438,155 during the past five years, the debt-to-asset ratio for KFMA farms has declined from 28.3 percent in 2008 to 21.5 percent in 2012. During this same time period, the current ratio, which measures current assets compared to current liabilities, has increased from 3.00 to 3.41, indicating an improved current financial position for KFMA farms.
Whether a Kansas farmer is a KFMA member or not, they can look at the numbers and compare them to their own, Ibendahl added. That can help determine areas in which they’re doing a good job or where they may want to focus more effort.
“We like to say that benchmarks don’t give you the right answer, but they do tend to point you in the direction you should go,” Ibendahl said.
The Kansas Farm Management Association, based at Kansas State University, is part of K-State Research and Extension. KFMA agricultural economists, who are faculty members in K-State’s Department of Agricultural Economics, work cooperatively with members, providing production and financial management information for Kansas farmers through on-farm visits, enterprise analyses, and other educational programs and resources.
http://www.ksre.ksu.edu/news/story/farm_income061913.asp
Story by: Mary Lou Peter
mlpeter@ksu.edu
K-State Research & Extension News
Kevin Herbel, KFMA Program Administrator – kherbel@ksu.edu; Gregory Ibendahl, Associate Professor, Department of Agricultural Economics – ibendahl@ksu.edu
K-State’s Master of Agribusiness Program is hosting its 5th Professional Development and Alumni Reunion event. This event is open to MAB students, alumni and all professionals in the agribusiness industry.
The event is August 8-9 at Cargill’s Headquarters in Wayzata, Minnesota. This event is open to those interested in discussing hot-button topics affecting the global food and agriculture environment with industry experts.
Tentative agenda topics include what could go wrong, regarding food pricing and risk; how humans think about and make decisions; improving productivity with crop yields and technology; Global Implications: They aren’t making more land, are they?; and updates regarding research and extension work being conducted in Russia and the Former Soviet Union, and Africa.
The early-bird registration deadline is July 19. Click here for more information regarding registration and hotel accommodations. Please contact Mary at mjbowen@ksu.edu or 785-532-4435, for more information.
The Department of Agricultural Economics at Kansas State University seeks to fill a tenure-track Assistant Professor position. The position is budgeted at 60% teaching and 40% research.
The Department has a reputation for excellence in all three functions of the University’s land grant mission (teaching, research, and extension). The successful candidate is expected to be an active contributor to the Department’s teaching and research programs. The Department offers B.S. degrees in agricultural economics and agribusiness, M.S. degrees in agricultural economics and agribusiness, a Master of Agribusiness (MAB) degree, and a Ph.D. in economics with a specialization in agricultural economics. Currently, over 400 undergraduate and 120 graduate students are enrolled in our programs.
Areas of research emphasis may include, but are not limited to, production agriculture, agricultural marketing, agribusiness, resource economics, climate change, energy, risk management, trade, and development. The Department is known for a research program that addresses real-world problems in local and global agriculture and agribusiness. More information on the Department can be found at www.ageconomics.ksu.edu.
Closing Date: Review of applications will begin on August 15, 2013 and continue until the position is filled. Incomplete applications will not be reviewed.
Equal Employment Opportunity: Kansas State University is an Affirmative Action/Equal Opportunity employer committed to nondiscrimination on the basis of race, sex, national origin, disability, religion, age, sexual orientation, or other non-merit reasons (including employment of disabled veterans and veterans of the U.S. Military).
June 6, 2013 - With today’s volatile commodity market and questions surrounding the quality of credit for various agricultural sectors, information about the current and future state of agricultural financial conditions is in high demand by those interested in and following agriculture.
However, information about these evolving conditions is somewhat limited, especially on the short- and long-term outlook. To track and forecast these credit condition developments, agricultural economists at Kansas State University have created the K-State Agricultural Lender Survey.
“A recurring question asked by farmers is, ‘what does the future hold for agricultural credit conditions?’” said Allen Featherstone, professor of agricultural economics and program director of the Master in Agribusiness degree at Kansas State University. “We set out to find answers to this and other questions for the agricultural lending industry, by working with our industry partners and other colleagues at K-State to conduct this survey.”
The purpose of the K-State Agricultural Lender Survey is to not only answer questions about the evolution of agricultural credit conditions, but also to provide a broader overview of all agricultural lenders. While information about agricultural financial conditions does exist, most of it is from the commercial bankers’ viewpoint and limited information is available on expectations or forecasts of the short- and long-term evolution of credit conditions. Ultimately, the survey should help producers, agribusinesses and lenders make more informed and sound financial decisions.
While the March 2013 survey results provide many insights into agricultural credit trends, one really stands out – competition for agricultural loans is rising. One respondent went as far as to say, “Competition is fierce for agricultural loans.”
This is especially relevant because the survey respondents stated that farm loan volumes rose and are expected to rise in the short-term. In addition, large lending institutions, those with more than $50 million in agricultural loans, reported the largest gain in farm loan volumes, with the expectation for further increases in the near-term.
For more information about the outlook for agricultural credit conditions, go to the K-State Agricultural Lender Survey.
This survey was developed by K-State’s Department of Agricultural Economics’ Brady Brewer, doctoral candidate; Brian Briggeman, associate professor and director of the Arthur Capper Cooperative Center; Allen Featherstone; and Christine Wilson, professor and assistant dean, Academic Programs, for the College of Agriculture.
Story by: Amanda Erichsen, aerichsen@k-state.edu
For more information, contact Allen Featherstone at afeather@ksu.edu.
http://www.ksre.ksu.edu/news/story/lender_survey060613.aspx
K-State Research and Extension is a short name for the Kansas State University Agricultural Experiment Station and Cooperative Extension Service, a program designed to generate and distribute useful knowledge for the well-being of Kansans. Supported by county, state, federal and private funds, the program has county Extension offices, experiment fields, area Extension offices and regional research centers statewide. Its headquarters is on the K-State campus, Manhattan.
May 21, 2013 – The Kansas State University College of Agriculture Alumni Association recognized one of the founders of U.S. Premium Beef, a Kansas Wheat executive and a K-State entomologist for their contributions to agriculture and Kansas during its annual Wild for Ag events on May 4, at the K-State Alumni Center.
Steven Hunt, Liberty, Mo., received the 2013 Distinguished Alumni Award. He currently is an adviser to U.S. Premium Beef LLC, a marketing company that provides U.S. beef producers with an opportunity to retain ownership of the beef they produce from the ranch to retail. He helped found the company in 1996 and served as its CEO from its formation until January 2013.
After completing a bachelor’s degree in agricultural economics in 1981, Hunt worked in many areas of commercial banking including direct agricultural lending, credit training, finance, international and commercial lending, and pursued his lifelong interest in production agriculture.
Hunt has held a seat on the National Beef Packing Company Board of Directors for 16 years and is active in various trade and civic organizations, including the Federal Reserve Bank of Kansas City Roundtable, the American Royal Board of Directors, the Midwest U.S.–Japan Advisory Board, National Cattlemen’s Beef Association, Livestock Meat Industry Council, Boy Scouts of America and the Agricultural Marketing Resource Center Advisory Board.
He was named the college’s 2001 Outstanding Young Alumnus and the 2002 Distinguished Alumnus for the Department of Agricultural Economics. Beef magazine listed Hunt in its “Beef Top 40” of individuals who influenced the beef industry over the last 40 years. He also received the 2010 Jay B. Dillingham Agricultural Leadership and Excellence Award from the Agricultural Business Council of Kansas City.
Pictured above: Greg Zolnerowich (from left), professor of entomology, Justin Gilpin, CEO of Kansas Wheat, and Steve Hunt, former CEO and co-founder of U.S. Premium Beef, were recently recognized for their achievements by the Kansas State University College of Agriculture. Click here to read about the other honorees.
May 13, 2013 – The Federal Crop Insurance program has evolved from what was basically an experiment started to help farmers recover from the Great Depression and Dust Bowl to one of the most vital programs offered to farmers. Producers and their bankers rely heavily on crop insurance to provide a reliable safety net for crop production.
Art Barnaby
Art Barnaby, professor of agricultural economics at Kansas State University, gave an overview of the crop insurance program and the changes it has gone through for Sorghum U, an educational series sponsored by the Sorghum Checkoff, Sorghum Partners LLC, and High Plains Journal.
Crop insurance dates back to the 1930s when it was a government-run program with government employees doing both sales and service. Barnaby said that changed in 1980 when a public/private partnership was established with the passage of the Federal Crop Insurance Act. Four years later another major change came along with proven yields.
“Prior to that everything was set on a county yield number,” Barnaby said. “Those with lower yield tended to buy insurance and those with higher yields did not buy insurance. This led to unintended subsidies.”
Crop insurance continued to change with the addition of Market Value Protection in 1991, and Crop Revenue Coverage/Revenue Protection in 1996. The Agricultural Risk Protection Act came along in 2000 to encourage a greater number of farmers to participate, Barnaby said. The Federal Crop Insurance Reform Act of 1994 was passed, making participation in the crop insurance program mandatory for farmers to be eligible for deficiency payments under price support program, certain loans, and other benefits.
“Now about 270 million acres are insured,” Barnaby said. “A large number of farmers are now enrolled in the program largely due to the law change in 2000.”
In the last farm bill debate there were several proposals to reduce the costs of crops. These included limiting the premium subsidy for farmers and having a means test.
“It was forecast, as we saw the drought developing, that this would cost the government $40 billion, but that was clearly nonsense from the start,” Barnaby said. “It was a near impossibility, in fact.”
Barnaby pointed out that ad hoc disaster aid, Supplemental Revenue Election, and Agriculture Risk Coverage are just free crop revenue insurance.
“If you took the crop insurance program as it is and provided a 100 percent subsidy that would in effect be a disaster program,” Barnaby said.
The use of put options in crop insurance is another recent change. Barnaby said all USDA risk management tools including the Average Crop Revenue Election; Supplemental Revenue Election, marketing loans and ARC are derivatives of options and insurance. Adding put options and insurance to revenue insurance is more efficient than insuring price and yield separately. A major change from previous crop insurance contracts is that all contracts now use the same projected price based on new crop futures prices.
“As a result all Common Crop Insurance Policy contracts have the same yield guarantee,” Barnaby said.
Beginning in 2011 with CCIP contracts any additional revenue that is coming from revenue protection has to be due to the put derivative that is built inside the insurance contract.
“So if prices go down the payment will be higher under this contract than under yield only, but all of the additional payment has to come from the price component,” according to Barnaby.
Out of the top 12 most common crop insurance contracts for grain sorghum in South Dakota the top three were revenue protection contracts. Barnaby said this is the case all across the country.
“This is the cheapest form of price protection you will ever get at less than one cent per bushel,” Barnaby said.
Many farmers who would never have used crop insurance in the past have changed their minds. According to the Risk Management Association in 2012 farmers invested more than $12 million in premium for more than 6,600 crop insurance policies. Last year Federal Crop Insurance protected nearly 70 percent of all corn acres, 80 percent of all soybean acres, and 50 percent of all wheat acres.
Written by Doug Rich, High Plains Journal.
May 10, 2013 – By the very nature of his work as an extension agricultural economist, Kansas State University’s Dan O’Brien is used to reaching out to farmers, agri-businesses and others with the latest research-based information pertaining to grain market analysis. And he’s added another tool to help disseminate that information.
O’Brien, a crops marketing specialist with K-State Research and Extension, has launched the “Focused on Grains” blog, available at www.ksugrains.wordpress.com. It addresses everything from U.S. Department of Agriculture reports to supply and demand factors to Kansas Agricultural Statistics data – anything that’s affecting or may affect Kansas grain markets, O’Brien said. The blog includes his monthly market outlook and price forecasts, as well as weekly grain market updates.
Focused on Grains also includes links to related resources, including interviews aired on the Agriculture Today radio show, production projections from the recent Wheat Quality Council’s Kansas Wheat Tour, bioenergy issues and relevant information from other state extension services.
“It’s as if I have someone in my office and we’re having a discussion about the various factors affecting wheat prices, for instance. But this way I can communicate grain marketing information from KSU with a lot more people via the Internet,” said O’Brien, who noted that he continues to give presentations at extension field days and conferences around the state and nationally, and posts information on the extension agricultural economics website: www.agmanager.info.
The Kansas State University chapter of Blue Key, a nationwide honor society for college seniors, has initiated 15 new members for the 2013-2014 academic year. Of these 15 new members, Kassie Curran and Reagan Kays represent the Department of Agricultural Economics.
Blue Key is a premier honor society that recognizes college seniors at institutions of higher education for excellence in scholarship, leadership, and service. Members of Kansas State University’s Blue Key chapter embody the society’s motto of “Serving, I Live” by providing leadership mentoring and training programs on campus and throughout the state of Kansas.
The honor society sponsors and coordinates various activities and programs at the university, including the Catalyst Self Development Experience; Quest, the freshmen honorary; ULead Leadership Consulting for college and high school students; a high school leadership conference; and the annual Leadership Appreciation reception to recognize students and organizational advisers for their leadership on campus. Blue Key also annually awards more than $15,000 in scholarships to Kansas State University undergraduates each year.
Kassie Curran, food science and industry, Farlington. Curran is earning a minor in agricultural economics. She also conducts research with Sean Fox in the department. Curran has served as president of the College of Agriculture Ambassadors, has been active in Collegiate Farm Bureau and Collegiate Cattlewomen, and has served as state vice president for the Kansas FFA Association. She is a College of Agriculture scholar, and is involved in the Frontier Food Safety/Food Security Research Program. She will serve as director of alumni and outreach for Blue Key.
Reagan Kays, agribusiness, Weir. Kays has been active in Alpha Gamma Rho fraternity, the Kansas State University Student Foundation, College of Agriculture Ambassadors and the university’s Student Governing Association. He has also been involved in the Agricultural Economics/Agribusiness Club, as well as Collegiate Farm Bureau. Kays will serve as president of Blue Key.
May 3, 2013 – A team of students from Kansas State University finished in third place at this year’s national marketing competition hosted by the National Agri-Marketing Association. The competition was April 17-18 in Kansas City, Mo.
Team members majoring in agricultural economics or agribusiness include Kendal Clawson, Kellie Jackson, Taylor Peterson, Michelle Hill, Cassie Kniebel (minor), Brady Rundel, Annie Patterson, Preston Lagemann, Hannah Miller, Kelsey Harris, Kurtis Clawson (minor), and Kendall Voth. Other team members included Gordon Harton, Logan Britton and Marie Klimova. The team is coached by David Lehman, instructor in the department of marketing.
“Every team participating in the marketing competition does an excellent job of developing a thorough marketing plan, a process that takes most teams the majority of the academic year to complete,” said Kristen Marshall, the association’s careers committee chair. “Those teams that advanced to the finals truly did exceptional work on their projects. Each year I am amazed by the talent of these teams. They’re truly an awesome group that we hope will continue in agricultural marketing as they begin their professional careers.”
K-State’s team had 15 students involved with this year’s project to market, “Omega Beef,” omega-3 enriched beef. The product was developed as a solution for health-conscious consumers to have their intake of omega-3 fatty acids with a beef flavor and taste. The team spent the last several months conducting market research, writing the marketing plan and developing a presentation.
In the competition, students decide on a project and develop a plan to successfully bring the product or service to the marketplace. In developing their marketing plan, students follow the same practices and principles used by today’s marketing professionals. Teams submit a written plan summary prior to the competition and then make a formal presentation of their marketing plan to a panel of judges at the competition. The judges’ panel consists of marketing and agribusiness professionals.
Overall, 29 student chapters of the National Agri-Marketing Association participated in the marketing competition. The competition is part of the association’s annual conference and trade show. More than 350 student members attended the conference.
“The marketing competition is a great learning tool for these students and provides them with some really good practical experience,” Marshall said. “Our congratulations to K-State for their exceptional work and success at the competition this year.”
Article written by Logan Britton, NAMA team member.
Picture provided by AgWired.
Two faculty of the Department of Agricultural Economics have earned a publication honor from the Western Agricultural Economics Association, Inc. (WAEA). Nathan Hendricks, assistant professor, and Jeff Peterson, professor, submitted the paper “Fixed Effects Estimation of the Intensive and Extensive Margins of Irrigation Water Demand” to be published in the April 2012 issue of the Journal of Agricultural and Resource Economics (JARE). The article was selected to receive this year’s WAEA Outstanding JARE Award.
Hendricks and Peterson will be honored for their award at the Awards Luncheon, June 28, during the WAEA annual meeting in Monterey, Calif. Hendricks has been with the Department of Agricultural Economics at K-State since 2011. Peterson has been with the department since 2000.
The following is the abstract for the article. Irrigation water demand is estimated using field-level panel data from Kansas over 16 years. The cost of pumping varies over time due to changes in energy prices and across space due to differences in the depth to water. Exploiting this variation allows us to estimate the demand elasticity while controlling for field-farmer and year fixed effects. Fixed effects also allow us to control for land use without an instrument or assumptions about the distribution of errors. Our estimates of water demand are used to calculate the cost of reducing irrigation water use through water pricing, irrigation cessation, and intensity-reduction program.
Click here to read the full journal article
http://ageconsearch.umn.edu/bitstream/122312/2/Hendricks,%20pg.%201-19.pdf
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