"Record-breaking corn and soybean yields and strong grain prices early in the year more than offset increased costs," said Dale Lattz, U of I Extension farm management specialist who assembled the study based on data from more than 3,000 farms participating in the Illinois Farm Business Farm Management Association's (FBFM) record-keeping program.
"Relatively high livestock prices also contributed to the better incomes on livestock farms. Lower grain prices at harvest resulted in the opportunity for producers to receive loan deficiency payments on corn and for part of the time on soybeans."
The result, Lattz noted, was that total government payments received in 2004 by producers were above payments received in 2002 and 2003. However, Lattz warned that there could be trouble on the horizon.
"Farm earnings could drop significantly in 2005 if we return to more average yields without a significant increase in grain prices," he said. "Also having a negative impact on earnings is a sharp increase in certain input costs, like fertilizer, drying gas and fuel. Producers need to plan accordingly for 2005 and monitor their actual cash flows against projections."
Average farm operator returns for labor and management was higher for all geographic areas of Illinois compared to 2003.
"The average return to the operator's labor and management income in 2004 was $77,906," said Lattz. "This figure can be thought of as the farmer's 'wage' or 'salary.' This is what remains from the operator's net farm income after a fair return to the operator's equity in machinery and land has been subtracted.
"The 2004 returns were $22,228 above the 2003 average of $55,678 and $38,510 above the average for the last five years. Although the 2004 earnings figure is a substantial improvement when compared to the last few years, the 2000 through 2004 five-year average is a modest $39,396."
Lattz said that farm earnings were highest in the west central and far southern areas of the state. Earnings were lowest in the northeastern part of the state.
"Wages earned by farm operators were highest on hog farms followed by dairy, grain and beef farms," he said. "Returns to operator's labor and management averaged $185,569 on hog farms, $83,953 on dairy farms, $74,696 on grain farms, and $37,246 on beef farms.
"Farms classified as grain farms were 86 percent of all farms while hog farms comprise 4 percent of the total."
Lattz said the average size of the Illinois farm continues to grow, up to 959 tillable acres in 2004. This was 36 acres larger than the previous year and 109 acres larger than five years ago.
Total economic costs per acre to produce corn and soybeans in 2004 increased as compared to 2003 in all areas of the state.
"The main factor for the increase in per acre costs was due to higher crop, fuel and machinery repair costs," he said. The FBFM organization provides record-keeping and business analysis services for farmers. More information about FBFM can be found at its website: http://www.fbfm.org .
The complete study is available online at farmdoc at: http://www.farmdoc.uiuc.edu/manage/newsletters/fefo05_07/fefo05_07.html .