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2002 farm income

[APRIL 12, 2003]  URBANA -- The average farmer's return for labor and management dropped $3,700 in 2002 from the 2001 figure and in some regions registered in negative figures, according to a University of Illinois Extension study. Labor and management earnings averaged $12,976 in 2002 compared with $16,712 in 2002.

Operators' net farm income, another measure of farm earnings, did not meet family living requirements in many cases, which likely resulted in a decline in net worth for many farm families.

"Higher grain prices and slightly lower costs in 2002 did not offset lower corn yields and less government payments," explained Dale Lattz, U of I Extension farm management specialist, who conducted the study along with Charles Cagely, state coordinator of the Illinois Farm Business Farm Management Association. "Lower livestock returns also contributed to lower incomes on farms producing livestock. Changes in government farm programs and higher grain prices sharply reduced the amount of government farm program payments producers received in 2002."

The study was based on records from farms participating in the FBFM record-keeping and business analysis program.

"Average farm operator returns for labor and management on 3,165 Illinois farms varied considerably between geographic areas and decreased slightly in 2002 compared to returns experienced by producers in 2001," said Lattz.

"Farm earnings were highest in the west central and central areas of the state. Earnings were lowest in southern and northeastern Illinois, where dry weather reduced corn and soybean yields. Producers in far southern Illinois experienced large losses due to very low yields caused by drought conditions last summer."

The average return for a farmer's labor and management, a figure that might be thought of as a "wage," was $20,000 to $25,000 in central Illinois, minus $10,000 to minus $15,000 in southern Illinois and minus $60,000 to minus $70,000 in far southeastern Illinois. Northeastern Illinois also experienced negative earnings. Labor and management returns averaged $15,000 to $20,000 in northwestern Illinois.

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Lattz explained that the net farm income figure results from combining the labor-management return with a reasonable charge for the operator's debt-free capital invested in machinery, equipment, land and inventories. The latter figure averaged $14,228 for the state as a whole and when added to the labor-management return gives a net farm income figure of $27,204, a decline from 2001's $33,396.

"This figure, plus any non-farm income, is what the operator has available for family living expenses, income and Social Security taxes and to repay long-term debt," Lattz explained. "Family living studies indicate that on average it takes about $50,000 to $55,000 to meet family living expenses and to pay income and Social Security taxes. The average net farm income for 2002 is below the average family living requirements, resulting in a decline in net worth for the farm enterprise."

Non-farm income can cushion this decline or even result in an increase in net worth, depending on the level of non-farm income.

Returns for a farmer's labor and management were highest on grain farms, followed by dairy, beef and hog farms. The average figure was $15,677 on grain farms, $12,760 on dairy farms, a negative $11,509 on beef farms, and a negative $15,839 on hog farms.

A detailed study of the results can be found at the U of I's farmdoc website:
http://www.farmdoc.uiuc.edu/manage/
newsletters/fefo03_07/fefo03_07.html.

More information about the FBFM record-keeping and business analysis program can be obtained by contacting the local FBFM specialist, local U of I Extension offices or at the FBFM website, http://www.fbfm.org.

[University of Illinois news release]

Weekly outlook

Hog market

[APRIL 8, 2003]  URBANA -- The continued financial discouragement in hog prices needs to stimulate more producers to reduce their herd sizes, allowing for even larger reductions in the national breeding herd this year, said a Purdue University Extension marketing specialist.

"Unfortunately, it appears that the industry is slow to adjust hog numbers downward at this time, likely due to the concentrated industry structure and the newness of capital investments made over the last 10 years," said Chris Hurt. "In past hog cycles, it has taken around 1½ years from a period of losses until the industry reduced production and returned to profits.

"If the timing is similar on this cycle, this would mean we are just entering the time when higher prices would be expected, with the highest prices and profits not anticipated until 2004."

Hurt's comments came as he reviewed the hog market, which he described as "failing one price test after another so far this year."

The USDA's "March Hogs and Pigs" report provided renewed hope for higher prices in the futures market, yet cash prices remained stuck in the lower $30s one week after the release. Losses continue to mount, as the market must now rely on the traditional spring price rally to salvage a return to a break-even situation.

"Needless to say, producers need to see the hog market pass this test," Hurt noted.

The March inventory report from USDA indicated that producers across the country have reduced the size of their breeding herds by 4.5 percent. Given the large financial losses over the past year, even greater reductions in the herd can be expected throughout 2003.

"Farrowing intentions for this spring and summer are down at least 3 percent, which should reduce the number of market animals through next winter," said Hurt. "The direction is correct, but there remains a question of whether the magnitude of the reduction is large enough to push hog prices back into profitable ranges."

Minnesota was the only major production state to have an increase in the size of its breeding herd, up 4 percent. Oklahoma and Texas breeding herds remained unchanged. Illinois and Iowa herds were down 7 percent, Indiana was down 6 percent, Nebraska was down 4 percent, and both Missouri and Ohio were off 3 percent.

"Producer decisions to decrease their herds may have been influenced in the eastern Corn Belt by the small corn crop -- 121 bushels per acre average in Indiana and only 88 bushels per acre in Ohio," said Hurt. "However, the record corn crop in the western Corn Belt does not explain large decreases in the Iowa herd, where yields average 165 bushes per acre."

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The market herd was reported to be down only 1.6 percent. There is some hopeful news in the weight breakdowns, as it appears that the number available for slaughter should soon begin to drop. The 180-pound-and-over category was more than 1 percent greater than last year at this time. However, most of these hogs should have been marketed by early April.

Pigs that will come to market in April through August were down from 2 percent to 2.5 percent. If so, this could finally mean that slaughter supplies will soon be coming down and provide the needed stimulus for rising prices, Hurt noted.

"Producers have been operating at a loss for the last 13 months, dating back to March of 2002," said Hurt. "Those losses were the most severe in the last quarter of 2002, when they averaged an estimated $21 per head for average production costs. Losses were more moderate in the first quarter of 2003 but still were about $9 per head. Low hog prices helped packers to their best margins in four years during this period."

Given the larger-than-expected supplies so far this year, pork production for the entire year may be down only 1 percent. However, that means about a 2 percent reduction for the remainder of the year. With continued small beef supplies and the potential for a recovering economy, hog prices are expected to average $37 to $38 for the year. The highest prices are still expected to come this spring, when daily highs could move into the lower to mid-$40s.

Late summer prices are expected to drop back toward the higher $30s. Prices in the mid-$30s should be expected for late in the year, with prices moving into the higher $30s for the first quarter of 2004.

"Moderation in costs of production should also be expected over the next 12 months," said Hurt. "Interest rates remain low and could even dip somewhat before increasing late in 2003. Fuel and energy prices are likely to move lower with the resolution of the military conflict in Iraq and the increase of oil supplies from that country into the world market.

"Feed prices face the uncertainty of the coming growing season, but a 'normal' weather situation in the United States could lower both corn and meal prices somewhat, although dramatic reductions in corn prices should not be expected at this time."

[University of Illinois news release]

• Repairing storm damage to trees
  (Article from Michigan State University Extension)

[APRIL 7, 2003] 

Master Gardener plant sale

One of the U of I Extension Master Gardener fund-raisers will be coming our way on Saturday, April 26. The sale is scheduled for 9 a.m. to noon (or sellout) at the Extension office, 980 N. Postville Drive in Lincoln, on the northwest corner of the fairgrounds. The Master Gardener group will offer perennials, annuals and houseplants this year. Of course you can talk to a Master Gardener as well, if you can get one pulled aside!

Composting self-study course

There have been many requests for composting information over the winter. In response, we will be offering the Home Study Composting Course. There are six sessions total. To participate, just send us your name and address with a check for $5 to cover the postage cost. We will send you two lessons per week for three weeks. At that time you should be able to construct your own compost bin and make it work properly.

If you would like to see a large-scale compost system in action, you may visit one at the west end of the Extension office building (located on the fairgrounds side of the fence) or at Jefferson School's garden in Lincoln.

Field operations

With a few days of drier soil conditions, some field work has been occurring in Logan County. Most of the field work has been fertilizer application, leveling off ground and some limited spraying. Of course thoughts have popped up about planting corn, but what are the advantages and the disadvantages?

The primary advantage is getting corn planting completed by the recommended date so that there isn't a penalty for late planting. There is also a penalty for early planting, but it isn't as great as planting on the late side. April 10 planting dates carry about a 6 percent yield reduction. Optimal planting time is April 25-30, with very slight reductions in potential yield for planting April 20-May 4. Optimal plant populations are between 30,000 and 32,500.

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There are some other factors to consider when planting early: Herbicides and insecticides are probably not going to stay active as long as we think they are; seed in the ground takes longer to germinate and is exposed to more secondary insect damage; stands may emerge more unevenly; and the risk for replant goes up.

The major advantage to early planting is wrapping things up in a timely fashion. This has to be weighed against the other factors.

Extension Week

The West Central Region has designated next week as Extension Week. It is a time for us to be grateful for many things that have happened through the years and continue to happen with the great support that is provided in our community.

Many of University of Illinois Extension's programs aren't always associated with Extension. Some of those programs are 4-H, the Family Nutrition Program, Master Gardeners, and of course agriculture and horticulture.

Since the official beginning of Extension, with the Federal Smith-Lever Act in 1914, and the beginnings of Extension in Logan County in 1918, the University of Illinois Extension system has continued to bring research-based information to the local people. Your continued support throughout the year has made it all possible.

To highlight the week, I thought it might be good to have a little contest. The office will provide awards to at least 10 individuals who send in a list of "Farm Advisers" and "Home Advisers" for Logan County since the Extension started.

[John Fulton]

Youth to salute 4-H at the state Capitol

[APRIL 7, 2003]  SPRINGFIELD -- More than 2,500 Illinois 4-H youth and family members will participate in the seventh annual 4-H Legislative Connection at the state Capitol on April 15. During the event, 4-H youth will meet their state lawmakers and learn more about the legislative process.

Throughout the first floor of the Capitol, 4-H exhibits will be on display. The "Best of the Best" 4-H exhibition will feature nearly 800 Superior Award-winning exhibits from last summer's Illinois State Fair.

Educational workshops and tours are also included in the day's activities.

The Illinois 4-H Club Presidents Invitational Conference will run in conjunction with Legislative Connection.

An action-packed rally in the Capitol rotunda and a special luncheon program will celebrate achievements of more than 400,000 Illinois 4-H members and leaders.

The 4-H Legislative Connection is a nationally recognized program, cited twice by the USDA for national program of excellence. It has been replicated in 12 states.

Nationally, 4-H is the largest out-of-school educational program for youth and is part of U of I Extension programs.

[4-H news release provided by Amy Hyde of the University of Illinois Extension in Logan County]

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