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High crop prices buoy farm incomes

By MIKE CORN
mcorn@dailynews.net

COLBY — Mark Wood never imagined northwest Kansas farmers in the management association he crisscrosses throughout the year could improve on their 2010 financial performance, when net farm income hit a staggering average of $344,567.

He was wrong, completely wrong — even with drought affecting some parts of the 17-county district, part of the Kansas Farm Management Association operated by Kansas State University.

Net farm income for 2011 instead climbed higher, reaching $440,000, said Wood, a KFMA economist based in Colby.

“Which is the highest we’ve ever had,” he said. “We didn’t get hit by the drought like areas to the south.”

But farmers in some areas in the district, notably counties in the eastern half of the district — Phillips, Norton and Ness — struggled to raise a wheat crop.

Still, based on the strength of fall crops and cattle, farmers on the eastern side of the district had net farm incomes of $239,000.

“Which is excellent,” he said. “I think farmers in the eastern counties are going to be higher than any other association in the state.”

Kansas is split into six districts, with nearly 3,000 farms participating. Farms in the program often are considered to be among the biggest and best in the state.

Across the board, Wood said the high incomes were built on the strength of fall crops. He said there were instances of 140-bushel dryland milo and 60-bushel beans.

For the largest of the farms, most of them in the western part of the district, the results simply were staggering.

The top 25 percent had average net farm incomes of slightly more than $1 million.

“That’s really high income,” he said. “You wonder if you want to say anything. That’s kind of embarrassing.”

But it’s a reflection of a larger number of acres harvested by farmers.

The top 25 percent, he said, harvested an average of 4,400 acres. The next quarter harvested an average of 2,800 acres.
Family living expenses soared to $71,000 before taxes. Taxes added another $22,000 to that total. A year earlier, family living expenses before taxes were $10,000 less.

“You give them four good years in a row, and they will spend it,” Wood said of how farmers react. “They’re no different than anyone else.”

The sharply higher incomes stem from continued high grain prices.

“Our profit margins were very good,” he said. “Our expenses didn’t eat our lunch.”

Profit margins for farmers in the eastern part of the district amounted to 27.6 percent — after farmers paid themselves a wage. The entire district had a profit margin of 36.7 percent.

Wood simply marveled at the jump recorded by farmers in the eastern part of the district. Even with a struggling wheat crop, incomes increased 59 percent from a year earlier. Across the district, the increase was 28 percent.

“The fall crops really did come through,” he said. “And the cattle were a positive.”
Cattle being a positive was something of a surprise, even with feed costs accounted for, given so much feed was shipped south into Oklahoma and Texas.

Most of that income, he said, is being poured back into the farm, now that farmers have either upgraded equipment or purchased new machinery.

“We’re finding it’s showing up in equity,” Wood said. “They are not out buying the high-priced land.”

In fact, selling a crop provides enough to cover operating expenses, letting farmers forego the need to borrow money.

While he thinks crop prices will remain high, he said weather could reverse course at any time.

“In western Kansas, the snake can turn about and bite its own tail at anytime,” he said.