Curtis Mahnken: 2024 FINBIN Results Document the Challenges for Minnesota Farmers
Good day and welcome to the University of Minnesota podcast Minnesota CropCast. I'm your host Dave Nicolai, University of Minnesota Extension field crops agronomist. I'm here with my co host Doctor. Seth Nave. Seth is Extension Soybean Specialist here at the University of Minnesota.
Speaker 1:And Seth, we decided to tackle a different subject matter than we normally do in terms of agronomic situations but one that I think is appropriate when we talk about instituting some information for growers about the 2025 crop year. So Seth, any comments before we introduce our guest?
Speaker 2:Well, it beats talking about the weather, so let's do it.
Speaker 1:Alright, well we're privileged to have on in a studio today with us Curtis Monken. Curtis is an economist with the University of Minnesota with the Center of Farm Financial Management. So Curtis, welcome.
Speaker 3:Thank you for having me. I'm excited to be here.
Speaker 1:Why don't you tell us a little bit about yourself and background? And I did read a little bit of a bio and there was something about milk running through your veins. Do you wanna explain that in your Yeah.
Speaker 3:Absolutely. And milk running through my veins fits very well here in being in Minnesota, right? So I grew up on a dairy farm in the Southern part of Illinois, about an hour fifteen minutes southeast of Saint Louis, really close in Mississippi River just on the other side and way south. It's about a ten and a half hour drive from here. But then I I grew up milking milking cows with my dad, with my grandfather, showed cows in four H.
Speaker 3:You know, I did all of the things and then even on my mom's side of the family we had a beef farm. But then I I did my my undergraduate at Southern Illinois University Carbondale, went back to the farm, was going to try to start my own farm, and you know, funny enough, I went to get a loan to buy cows and the lender told me that since I didn't have any money, they weren't going to give me any money. And so then I decided, well, I should go to grad school. So I ended up going to Michigan State University working on dairy economics quite honestly when I was there. And then I went and worked at the University of Kentucky and the Kentucky Farm Business Management Program.
Speaker 3:And I was there until 2010 when I had the great opportunity to come up to the Center for Farm Financial Management, work with the FinPAC team, and do all of the different things that we do here in helping all of the producers with all the different programs that we have. And actually, when I started here, we had a program called trade adjustment assistance for farmers that I was actually working with lobstermen in primarily Maine, but throughout the New England states, shrimpers in the Gulf Coast and Alaska and the Atlantic Coast, Catfish Farmers, Wild Blueberry Growers in Maine, and then asparagus growers. So I've kinda crisscrossed the Midwest, and then I've done a lot of different commodities and different products working with them throughout the throughout my time. I've been here at Minnesota since 2010, so it's been a very it it seems like fifteen years is a long time, but yet at the same time, it's very short compared to some of my coworkers.
Speaker 2:It's it's really nice. Sorry to jump over you, Dave. But it's nice, you know, we've got so many people that are have corn and soybeans in their blood that it's nice that that that we've got some diversity of folks that have had some experiences, especially in these crops that are export dependent and things like that. So I think your history is gonna serve you well over these next few years as we kinda embark in some interesting times. But I promised Dave that I wouldn't go off on any trade related tangents, we're gonna stay focused here on the task at hand.
Speaker 2:So back to your question, Dave.
Speaker 1:Alright, so what I was going to ask Curtis a little bit, can you explain probably briefly, otherwise you could spend you know, quite a bit of time, What is the Center for Farm Financial Management and what is your role currently within the organization and how how does that work here at the University of Minnesota?
Speaker 3:Yeah. So the Center for Farm Financial Management, actually, we just celebrated our fortieth anniversary. So our main goal is to produce educational software and programs to help producers improve their farm financial management and marketing abilities. And we primarily do that, like I said, through software. We produce a, a tool called FinPak, which is probably, hopefully, pretty familiar with many of your listeners here, especially in the Upper Midwest in Minnesota.
Speaker 3:But we are doing that where we are also developing programs that are helping them with business planning, with cost of production calculations, with, beginning farmers, helping them understand how to start a farm. I like to say that the center has a tool from for anyone within their farming journey, from exploring farming to exiting farming. So then my role within the center is to work with our team of programmers that we have, and also kind of be a liaison to the USDA, to other, external stakeholders to help figure out what tools need to be developed, and then help develop them, and provide leadership on several programs. And then also just be some economist type working person, you know. So basically, what I mean by that is really, trying to analyze data, figure out what some of the data means, and then, help people understand how to better utilize that information to improve their financial management abilities.
Speaker 1:Well, let's just jump just jump into that situation in there. Recently, the Center for Fire and Financial Management has released a news release that was very comprehensive about 2024. And there were some opportunities for farmers to input obviously information, farm management across the state of Minnesota with FINBIN and FINPACK. Do you want to talk a little bit about some of those highlights because you know from year to year things change in the farm economy and certainly 2024 was a challenging year, so I'll let you take it from here.
Speaker 3:Yeah. So if you think back a couple a couple years ago, so to 2022, 2021, even if you think way back to 2012, prices were pretty high, especially for crop farmers. But then in 2023 and 2024, net farm income or the the take home pay for a farmer, if you will, actually fell quite a bit. So, in 2024, the median net farm income for Minnesota producers was actually under $22,000, which is the lowest that we have going back to 1996. And there's obviously a lot that's happened, in between 1996 and now almost thirty years.
Speaker 3:Crop producers in in particular, the median net farm income was down 95% from the previous year, down to $2,400 median net farm income. So that $21,000 was actually held up by our livestock industry. So dairy, their net farm income went up to a hundred and 27,000, hogs went from negative to a hundred and 1,000. So there's obviously quite a bit of variability as we go between things. So as we look at those numbers, we also do benchmarking between, you know, between counties, between states.
Speaker 3:We're working with several states. We only have Minnesota in for right now, but again, those numbers are quite they're very variable. That's also about 2,300 farms that we work with here in Minnesota. And we work with the Minnesota State College System with their Farm Business Management Program as well as the Southwest Farm Analysis Group, which is part of the University of Minnesota Extension. They use FinPak to collect the data and then they work one on one with farms to, okay, now that we have this data, what do we do with it and how do we improve?
Speaker 2:Yeah, I just wanted to make sure and drill down on this very fundamental point here. So the data is coming from Minnesota farmers primarily, and the package allows you to identify Minnesota or more but you're also collecting data outside. So you, the data that you're using is entirely farmer derived. Correct. And do you feel that it's pretty representative?
Speaker 2:Do you go through any data cleaning? Do you keep out, you know, the challenge always with farmers is farm size and receipt Right. Total receipts and and how, you know, regional variation in Minnesota and things like that. So how how do you deal with questions like that?
Speaker 3:Yeah. Great question. So actually, we have a group of Minnesota state educators that come in and work with us as well as Garen Paulson from the Southwest Association. And we spent two days actually going through cleaning the data, looking for outliers, looking for special circumstances, making sure that it is representative of what is going on within the state. So as we are as we are evaluating all of that data, we're like I said, we're looking for those outliers.
Speaker 3:We're wanting to protect the farmers who are putting data in so that it can't be identified to them. We have strict standards when it comes to, you know, certain numbers, you know, in terms of like how many liabilities are missing and, you know, we have strict standards when it comes to that. So in terms of the data that we have in Minnesota, we feel very confident that not only is it nice, solid, representative data, but it's clean and so that we can be able to tell the story and that it is representative. And then when we look across size, we actually do have some graphs that in fact we've we've put out some some new some new graphs with it this year that are looking at size differences and, you know, where are the most profitable farms versus the least profitable farms. So we have lots of different ways where we can slice and dice the data.
Speaker 2:So it's really, you know, you're really at the high level, you're providing a benchmark that you can look at year to year. I always think about this because every farmer is different and of course every farmer thinks that they're different than every other farmer especially. But if you have, if you can start with a benchmark, then at least you can start breaking things out. And if you can kind of go granular by size especially, I think that's one really useful way to break things out.
Speaker 3:And one of the things that we that we always talk about with benchmarking is that you need to benchmark against yourself first. So you benchmark from year to year, and then compare yourselves to like size farms or operations
Speaker 1:the like. So let's talk a little bit about some of those benchmarks from the standpoint of what happened in 2024. When you go back and analyze this now, there was some things I think that I gleaned out of the news release and so forth about maybe two things. One is the cost of crop inputs and the other thing that played into this perhaps to some extent was weather related in terms of the yields. Absolutely.
Speaker 1:So if you had to make an assignment for some of the obstacles or conditions in 2024 that growers in Minnesota ran into, Would you go with those two things and then yourself and your colleagues and talk about just the cost of the inputs along with weather related lower yields or am I missing something else that impacted Price,
Speaker 2:price, Dave, price.
Speaker 1:That's true, that's true.
Speaker 2:But I
Speaker 1:mean it from the standpoint of price that has in there. But I'm also looking at things that as we talk about, and we'll get into this later, that are within the control immediately of producers if they want to avoid a repeat of 20 20 or go on the upward trend. Anyhow, just some comments about some of those. And certainly prices is out is out there in marketing, but what are some of these other things?
Speaker 3:Yeah. So I mean, I'll start with kind of the, you know, obviously weather was the the first one that everybody kind of thinks of. And when we look at like the corn yield, soybean yield, corn yield was actually a 80 bushels an acre, which was down 6%. Soybeans were 47 bushels per acre, which was down 7%. But then you combine that with the sales, and that kind of led to our corn our corn sales prices, so yield and price.
Speaker 3:That was actually down 26% from the previous year. For corn, soybeans were down 18%. So you combine that and then even just looking at our expenses, they weren't really down that much. May I I think the the numbers that I have here in front of me about 2%. So when you combine, you know, much lower income with expenses that are kind of staying where they are, that's how we end up with, you know, the the net farm income dropping to the lowest level since 1996.
Speaker 3:You know, even just looking at some of the other, you know, I always like to look at the operating expense ratio, which is just putting operating expenses as a percent of gross sales. That was let's see. That number was 82%, which was actually the same as what it was from 2023. So, you know, different things going on there. But production expenses, you know, not really not really changing that much.
Speaker 3:So what we end up looking at when it when it comes to what can people do to avoid a repeat Mhmm. Is just start looking at little changes. We like to we like to talk about I'm a baseball fan. I'm, again, from the St. Louis area.
Speaker 3:I grew up rooting for the St. Louis Cardinals.
Speaker 1:Noticed you didn't say anything about the Twins.
Speaker 3:I I didn't. But, you know, 1987 as a as a fledgling baseball fan, that that was tough on a a young kid Yeah. Think
Speaker 1:the Twins eked that one out
Speaker 3:over Yeah. Yeah. So but you know, we we talk about base hits. We talk about just doing 5% better in certain area in in every area. And when you combine all of that, it really ends up to a really powerful a really powerful story, a really powerful impact when you can just do just a little bit better, when you can do just a little bit better with marketing, when you can do just a little bit better with your controlling your expenses, it really adds up and to where they can make a true impact.
Speaker 2:Yeah, I think that it speaks, I keep digressing here as my normal role is here on this podcast, but it's another angle to this, the dataset is that it's so powerful because it's actual data, it's not, we get all of this information about what the price of fertilizers are, what the average crop sale price is, and all these other average farm rental is. But those things aren't necessarily what the farmers pay. I mean, farm rental might be, but these are actual numbers that a farmer would pay for their product or their fertilizers. And then it includes their marketing efforts as So it's not an average price of that crop, it's the price that that farmer received for their crop, which is I think really important.
Speaker 1:You know, one of the things I think that the center's done in the past is they've segmented this and analyzed this. And they'll say, for example, for the people that are in the database in say for example the higher percentages of the top 15 or 20 or 10%. One, what are some attributes and things that they're doing that are correct or right or reducing certain things? And any comments, don't know if they've had an opportunity to go back into the data set and say for example, if you wanna be in the higher end of this data pool in terms of the income, do they have a tendency to do a certain thing at a certain level or certain percentage or cost and so forth? Any comments about some of those things?
Speaker 3:Yeah, it's actually one of the things I I love looking at the data for is to figure out what are those quote unquote top farmers doing. And quite honestly, it it comes back to, you know, doing just a little bit better in this area. What in the past, what we've seen is that they aren't necessarily skimping, if you will, on some of our variable expenses like feed or feed. I'm a dairy farmer there, so Or the crop.
Speaker 1:Let's go to the crop site.
Speaker 3:Yeah. So seed or fertilizers or, you know, things like that. But where they're able to make some other impact is on their overhead expenses. So incorporating land costs and, you know, spreading out land costs over over a certain number of acres. Maintaining equipment actually is something that has been you know, they're not necessarily getting new paint every year, but they're also not operating equipment that is causing them to repair that equipment all the time.
Speaker 3:So they're spreading out overhead costs over many acres. But, you know, marketing, that really is two sides of the coin here. They're doing just a little bit better with marketing, and they're hopefully, they're listening to Ed Usset, from our team. And and, you know, maybe not necessarily chasing dollars, but understanding what their cost of production is so that they can really, put together that pricing plan, that marketing plan so that they can, you know, figure out, okay, this is what I'm I'm okay with this amount of revenue, and then this is this is an acceptable area for us to market our crops at.
Speaker 2:Yeah. Think it's a really important tool for farmers to look at, you know, kind of in their class of producers and understand where they sit in the scheme, I think is important. Then look at their peers on either end of this. But you know, as a of a pointy headed science guy, have to remind folks these aren't necessarily causal relationships, right? These are all really integrated correlative things.
Speaker 2:And especially when you get into land and things like this, we get really messy because, you know, the demographics and those ages of the farmers and owned land versus rented, and I'm sure you break all that out as But those things have really giant impacts. And then those have subsequent impacts on how they manage those land as well. So a lot going on, but I think, I don't want to minimize how informative it is, but it's also something that I would urge a farmer not to just make one big change in their operation because there's something that, you know, the class that's making money is really doing one thing and they're maybe not doing it. But it's something to look at.
Speaker 1:Right. So if one of our listeners wants to dive deeper into the report, Right. You know, because we are obviously in a podcast situation here and we can repeat in some printed items, but where can they go to find out more about this in this segmentation that we just talked about? Sure. And maybe learn some lessons in terms of some of the results and choices.
Speaker 1:Is there besides the news release, is there an opportunity to read to go in-depth here?
Speaker 3:Yeah. So if if listener wants to go and learn and really dive deep into what's going on, they can go to Finbin, so that's f I n b I n. You can go to finbin.umn.edu, and you can you can look at all kinds of reports. So, if they're wanting to look at what happened specifically on corn or soybean enterprises, they can go. There's some reports that are there, they can break it down.
Speaker 3:You can even get to county level, depending on how many farms are in certain counties. So you can actually get get that deep and look at what's going on for that particular that particular area, that particular crop. And even if you have some livestock farmers like me who are listening, there's some livestock reports that are there as well.
Speaker 1:Would that go for other crop enterprises as well besides corn and soybean where they have opportunity to look at other options?
Speaker 3:Absolutely. We have a very, very large as someone who helps put in all of the different crops into FinPak, we have a very large number of crops that you can go look at. I I even when our team of of data reviewers are in, I know pumpkins are are something that are there.
Speaker 2:I'm sure you're the envy of the economists in other states like Iowa and Illinois that, only have corn and soybeans and and some oats in their database. So I'm sure there's a lot of folks, finding you just for some of those other other crops that we do grow and we have significant number, enough numbers of farmers growing those those crops in Minnesota really Yeah, provide good data.
Speaker 3:Yeah, absolutely.
Speaker 1:Well the other thing we wanted to visit with you about that you're being involved with and Seth and I had an opportunity to listen to you here recently and that is what are some tools that can help producers when they go through this analysis and yes, read the report and you know that's, you know I shouldn't say backward looking but it's historic in nature and so forth. If you're thinking about 2025 and the future, one of those is crop cost and in terms of making an analysis of what if situations in here, what are the breakevens and so forth, whether you're working with your lender or landlord and so forth. You want to tell us a little bit about that, how that came to be and what kind of information people can glean off of that and probably it's I shouldn't say it's a back of the napkin analysis but it's more than that but it gives people an idea so. Right. Go ahead.
Speaker 3:Yeah. So crop cost, which is a tool that we released back in November of twenty twenty four. It's a completely free tool for people to be able to go and use. You can create an account. You can create, as you said, Dave, you can create different plans where you can look at, put in all of your crops.
Speaker 3:You can even break that out per, per field if you want to or per landlord or whatnot. But it allows you to, take your information and type your information in, and you can go through. You can actually allocate out some of your overhead costs between between your different your different enterprises and it gives you a cost of production number so that you can compare that to what you might be able to get marketing wise. And then it also it will give you a sensitivity analysis so you can look and see, okay, well, if, if we have weather again and I'm only able to get, a certain yield number, then here's what I would expect. Here's my cost of production with that number so that I can look at what my marketing plans are.
Speaker 3:You can also pretty easily copy those plans. So if you have a kind of a backwards looking plan, the analysis type if you if you will, you can actually copy that plan forward and then start making some changes. I will say it's not as powerful as FinPak, but it is a pretty easy tool for you to be able to go and use to enter your information to okay. A quick look, if you will, at and still a pretty sturdy number to compare to what your your marketing levels are.
Speaker 2:So I I have a question here, kind of in a timely fashion here. We just had planting intentions report. We've got some big changes in the market going on right now. As a farmer in Minnesota that's interested in maybe pushing some acres towards corn or soybeans, is this the tool that I might use to try to determine if that one quarter section of mine should maybe stay in corn for another year? Or go back to a fifty fifty rotation?
Speaker 2:Is this the type of thing that might be helpful for them?
Speaker 3:Yeah. This is definitely a tool that would be helpful for them. Again, we're you know, if they have that information, if they even have a FINPACK report, they can type that information in. They can use their own their own cost of production, their own numbers, their own budgets, and then they can use that to to help again start shifting some acres around. And it's a pretty like I said, it's a pretty easy tool to be able to just make copies and then, do some quick analyses.
Speaker 2:I think it'd be really nice for farmers to I mean, farmers know this stuff in their gut, in in their heart. They understand, you know, the challenges they have with corn residue. They understand they have issues with, you know, storing and drying corn. So they have a feeling for what they want to grow and like to grow, but it, you know, actual put a number on either, you know, potential returns or potential losses on an acre or a bushel basis, I think, would be really helpful for them. And from an agronomy standpoint, I would really like to see this for very specific acres because we have some farmers are farming wide enough acres now that not every acre of their farm grows corn and soybean equally well.
Speaker 2:And so I think those are something that farmers maybe have to be a little bit more strategic about going forward.
Speaker 1:So where would someone, if they're interested in or listening to us, find this software tool? What does cost? It's online and so forth. You wanna talk a little bit about that?
Speaker 3:Yeah. So you can go to cropcost.umn.edu. So that's cr0pc0st.umn.edu. It's a completely free tool. You you can sign up and register.
Speaker 3:We don't we can't look at any of your data. All we know is how many people have signed up. We don't know how many plans you've created or anything like that. So data privacy wise, very strong. So it's, like I said, completely free to go sign up and then create as many plans as you want and start to analyze your cost of production.
Speaker 1:And it's completely, you know, it's wide open, it's obviously more than just corn and soybeans. Right. You can compare other enterprises. Say for example, in parts of Minnesota you might have a canning crop. Right.
Speaker 1:I'll use it as an example. It might be sugar beets, might be small grain
Speaker 3:Right.
Speaker 1:Wheat oats, whatever it might be. And then you can compare those across those situations that are with that. Seth and I had a question though a little bit earlier and this in part, whether it's this planning tool or even historically, where did some of the crop insurance reference prices, farm program payments, are they represented in both the report that came out from last year and do you have an opportunity to input those in this planning tool as well? Maybe both, you know, there's a two part question.
Speaker 3:Yeah. So in previous years, like with FinPAC, when you look at FinBin and and the data that goes into FinBin, we do we do take into account, government payments, if you will. Mhmm. So for example, looking forward at at 2025 data, just the the hypothesis right now with the new payments that are were approved at the end of twenty twenty four and they're working on getting payments out, those will be taken into account. So where you can it we we like to call them below the line because we like to see what happened without the government payments.
Speaker 3:But then when we get to that median net farm income number, that is that is all incorporated there where the government payments are built into there. So then with the planning tools, there is an opportunity for you to be able to go in and add those as well so that you can, play around with those numbers.
Speaker 2:Awesome. I think Dave and I had one last question for you and that's really related to other packages, products, other tools that you have that you may want to mention. I know you have tons, maybe just want to mention the breadth of them and maybe highlight a couple that might be of interest for folks.
Speaker 1:Yeah,
Speaker 3:CFFM has many many tools. Obviously, FINPACK is our anchor, is why we are a center. But then even just building off of that, we have a business planning software called AgPlan. Again, completely the only the only product that costs out of our office is FinPak. All of the other tools are completely free.
Speaker 3:So AgPlan, business online business planning software. We have a if you're a beginning farmer, we have, we are the beginning farmer, clearinghouse with the USDA, so you can go and look at resources from all over The US. We even have a again, if you're a beginning farmer, we have a USDA assistance tab so that they can go and they can learn what USDA assistance programs might be applicable to them. We also have if you are a diversified marketer, which is typically specialty crops, We have a a market channel analysis tool, but that those are just a few. But quite honestly, the easiest place to go find all of those is our website, which is cffm.umn.edu.
Speaker 1:I had an opportunity to go into the crop cost tool and it's very open. I did notice that you now have an opportunity to input and very customize it depending upon your land cost, whether you own the land, rent, etcetera. But then also for what our normal crop inputs and things that Seth and I talk about whether it's fertility, weed control, cost and so forth on that. And if they have a situation where they have to input possible cost and they're not sure about that, they can look go back and look at some of these other data trends and Absolutely. Pull those reports, say for example what typical costs are.
Speaker 1:And then some of it might be labor, some of it might be machinery, and know, don't always know all of those things off the top of your head but you can various resources. But I think just going back to the again that University of Minnesota Center for Farm Financial Management, if you lose track of everything we talked List everything that we've covered at this.
Speaker 3:Yes, absolutely.
Speaker 1:That would be great. So Seth any last words? That's I think really recovered a lot of opportunity here in '25 so we want to thank you Curtis for stopping in and being our guest and if people reach out, they can go to the website and learn a little bit more about that. And if they have individual questions, they can probably shoot an email to some of the staff as well to help with that process. So we want to thank again Curtis Morgan for being our guest here as an economist from the Center of Farm Financial Management also working obviously right with the University of Minnesota Extension with that.
Speaker 1:And I'm Dave Nicolai with the University of Minnesota extension educator in field crops along with my cohost here Doctor. Seth Nave, University of Minnesota extension soybean specialist. Thank you for listening and we look forward to talking with you next time.
