FARM INCOME. PRODUCTION COSTS for. Production Costs. Income. Investments. AE-4566 April 2004

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1 Advance Report Production Costs FARM INCOME Income Investments PRODUCTION COSTS for 2003 AE-4566 April 2004

2 Farm Income and Production Costs for 2003: Advance Report This publication is prepared in the Department of Agricultural and Consumer Economics, College of Agricultural, Consumer and Environmental Sciences, University of Illinois at Urbana-Champaign by Dale H. Lattz, Extension Specialist, Farm Management; Dwight D. Raab, Extension Specialist, Farm Business Analysis; and Charles E. Cagley, State Coordinator, Illinois FBFM Association, for use by FBFM field staff at meetings held in March 2004 and distributed to University of Illinois Extension staff. All data is based on Illinois Farm Business Records kept in cooperation with the Illinois Farm Business Farm Management (FBFM) Association and this department. An update of this report will be published in the 79 th Annual Summary of Illinois Farm Business Records for The Illinois Farm Business Farm Management Association, in cooperation with University of Illinois Extension and the Department of Agricultural and Consumer Economics, has been providing farm recordkeeping and business analysis services to Illinois farm operators for over 75 years. Urbana, Illinois April 2004 Copyright by University of Illinois Board of Trustees. Authors and publishers have granted permission for copies of this work or parts of this work to be reproduced, provided that (1) copies are distributed at or below the cost of reproduction; (2) the author, the publication, and the University of Illinois College of Agricultural, Consumer and Environmental Sciences and the relevant division within the College are identified; and (3) proper notice of copyright is affixed to each copy. Issued in furtherance of Cooperative Extension Work, Acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture. Dennis R. Campion, Director, University of Illinois Extension, University of Illinois at Urbana-Champaign. University of Illinois Extension provides equal opportunities in programs and employment.

3 ii CONTENTS Definitions... iv Highlights for v Illinois counties by record sampling areas... vii FARM INCOME AND EARNINGS Average size, income, returns, and costs on Illinois FBFM record-keeping farms by type of farmc1999 to Summary of income, corn yields, crop and livestock returns by farm type and location, average per farmc2000 to Net farm income and other selected factors, Illinois FBFM AssociationC Operators= share of labor and management income per farmc2001, 2002, and Net farm income per operator and estimated change in net worth after living expenses and taxesc Capital debt repayment capacity (CDRC), Illinois farm operatorsc1999 to Operator=s net farm income, income before depreciation, and interest paidc1994 to Selected financial factors, operator onlyc Selected FBFM factors, operator onlyc1994 to Financial characteristics of Illinois FBFM grain farms Financial characteristics of Illinois FBFM hog farms Financial characteristics of Illinois FBFM beef farms Financial characteristics of Illinois FBFM dairy farms Illinois FBFM Association farms by interest paid as percent of gross farm returnsc1994 to Operator=s net farm income by interest paid as a percent of gross farm returns Illinois FBFM management returns per tillable acre by farm type Summary of farm and family sources and uses of dollarsc1993 to Equivalent cash rent based on landlord=s crop-share datac1980 to Landlord=s net rent per tillable acre on full tenant farms, crop-share leasec1994 to Central Illinois grain farmscoperator=s share of labor and management earnings Central Illinois grain farmscvalue of production per $1.00 of nonfeed cost... 20

4 iii Northern Illinois grain farmscoperator=s share of labor and management earnings Northern Illinois grain farmscvalue of production per $1.00 of nonfeed cost Southern Illinois grain farmscoperator=s share of labor and management earnings Southern Illinois grain farmscvalue of production per $1.00 of nonfeed cost Northern Illinois hog farmscvalue of production per $1.00 of nonfeed cost North and central Illinois beef farmscvalue of production per $1.00 of nonfeed cost Northern Illinois dairy farmscvalue of production per $1.00 of nonfeed cost Southern Illinois dairy farmscvalue of production per $1.00 of nonfeed cost COST OF PRODUCTIONCCORN AND SOYBEANS Cost per acre to grow corn and soybeanscnorthern Illinois grain farms ( SPR) Cost per acre to grow corn and soybeansccentral Illinois grain farms ( SPR) Cost per acre to grow corn and soybeansccentral Illinois grain farms (low soil rating of 56B85 SPR) Cost per acre to grow corn and soybeanscsouthern Illinois grain farms Illinois cost to grow cornc1972 to date Illinois cost to grow soybeansc1972 to date Costs and returns per bushel of cornccentral Illinois grain farms, 1994 to Costs and returns per bushel of soybeansccentral Illinois grain farms, 1994 to Trends in selected operating costs per acreccentral Illinois pure-grain farms, 1994 to COST OF PRODUCTIONCLIVESTOCK Livestock enterprise standards of performancec Livestock returns above cost of feed and purchased animalsc1999 to Cost to produce pork, farms under 350 littersc2000 to Cost to produce pork, farms over 350 littersc2000 to Cost and returns per 100 pounds of pork, farms with over 350 littersc1994 to Returns per $100 of feed fed for hog farmsc1994 to Costs and returns for beef-feeding enterprisesc1999 to Costs and returns per 100 pounds of milkc2000 to

5 iv DEFINITIONS Operator=s Share Net Farm IncomeCThe sum of operator=s share of gross sales plus net change in inventory and capital accounts less all expenses for items purchased, including interest paid and annual depreciation. This is the accrual earnings available to pay living expenses, pay income and social security taxes, and make principal payments on term debt. Operator=s Share Labor and Management IncomeCThe wage (salary) for the operator of this farm, whether tenant-, part-owner-, or owner-operated, earned for labor and management performed. It is net farm income reduced by a charge for unpaid family labor used (nonoperators), and 5.5 percent interest on equity capital (2.40 percent on current value of bare land to reflect a normalized annual net rent). Crop ReturnsCThe sum of grain and feed sales, value of all feed fed, government farm program payments, and change in feed and grain inventories less value of purchased feed on the total farm. Return above Feed CostCThe sum of livestock and livestock products sold, change in inventories less value of livestock purchased, and market value (opportunity cost) for all feeds fed. Return per $1.00 of All CostCThe overall farm efficiency ratio (profit margin) showing total value of all farm production per $1.00 of all non-feed cost on the total farm. Grain FarmsCFarms on which the value of the feed fed to livestock was less than 40 percent of the crop returns. Hog or Beef FarmsCFarms on which the value of feed fed was more than 40 percent of the crop returns and either hog or beef cattle enterprises received more than half of the value of the feed fed. Dairy FarmsCFarms on which the value of feed fed was more than 40 percent of the crop returns and where dairy enterprises received more than a third of the value of feed fed.

6 v HIGHLIGHTS FOR 2003 Average farm operator returns for labor and management on 3,018 Illinois farms was higher for all geographic areas in the state and increased considerably in 2003 compared to returns experienced by producers in The average return to the operator's labor and management income in 2003 was $55,678. The 2003 returns were $42,702 above the 2002 average of $12,976 and $28,229 above the average for the last five years. Although the 2003 earnings figure is a substantial improvement when compared to the last few years, the 1999 through 2003 five year average is a modest $27,449. A reasonable charge for the farm operator=s debt-free capital invested in machinery, equipment, land, and inventory averaged $14,962. Combining this amount with the return to the operator=s labor and management resulted in average operator net farm income of $70,640. Record breaking corn yields along with higher grain prices offset below average soybean yields. Improved livestock returns also contributed to the better incomes on farms producing livestock. A change in the method of calculating depreciation also affected the earnings figure. As a result of the higher grain prices, for the second year in a row government farm program payments were at levels considerably below farm program payments made during the 1998 through 2001 time period. Farm earnings were highest in the central and far southern areas of the state. Earnings were modestly lower as you moved farther north. Corn yields were at record high levels, 27 bushels per acre higher in 2003 compared to yields recorded in 2002 while soybean yields were 9 bushels per acre lower. The average corn yield on the 3,018 farms was 172 bushels per acre. Soybean yields averaged 38 bushels per acre. Corn and soybean yields were generally highest in the central part of the state although many areas recorded high corn yields. Year-end inventory price for the 2003 corn crop of $2.35 per bushel was 5 cents higher per bushel than a year earlier. Soybeans were inventoried at $7.50 per bushel, $2.00 higher than December 31, Average sales prices received for the 2002 corn and soybean crop sold in 2003 were above their inventory price resulting in a positive marketing margin. Crop returns averaged $382 per tillable acre, $45 per acre higher than the 2002 crop returns. Returns to all livestock enterprises were equal to or higher in 2003 compared to Higher market hog prices were the main factor for the higher hog returns. Although returns were better, farrow-to-finish hog producers were still about $1 to $2 per hundredweight below the breakeven level in covering total costs in Dairy producers experienced slightly better returns due to higher milk prices, $1,480 returns above feed per cow in 2003 compared to $1,370 in Milk prices were 4 percent higher compared to the year before. Feeder cattle enterprises were the big winners last year experienced significantly higher returns due to higher slaughter cattle prices. Slaughter cattle prices received were 22 percent higher while prices paid for replacement feeder cattle were 10 percent higher. Returns above feed per cow increased for beef cow enterprises due to higher prices received for market animals. Returns were slightly above the last 5-year average. During the last number of years livestock producers have benefited from relatively low feed costs. Feed costs did increase again in 2003 for most livestock enterprises due to higher grain prices. Feed costs will also increase in 2004 as grain prices continued to increase. With relatively low grain stocks, livestock producers are hoping for at least average to above average yields to limit the increase in feed costs. Another factor contributing to the improved earnings was a change in the method of calculating the depreciation deduction for machinery and buildings. As changes in the tax law allowed larger and larger write-offs in the year machinery and buildings were purchased, the depreciation method used for analysis was

7 vi changed from using tax depreciation to a method that more closely reflects the actual decline in the value of machinery and buildings. The new method does not utilize the additional bonus depreciation or expense election write-off in the year of purchase, uses a slightly longer life and a lower rate than the IRS allowed methods for tax depreciation. It is estimated that the change to the new depreciation method resulted in $10,000 to $15,000 less in depreciation per farm in 2003 as compared to what would have been deducted if the tax depreciation figure was used. Estimates in net worth change can be made by adjusting net farm income for nonfarm income, withdrawals for family living, and income and social security tax paid. This amount would be a modified-cost-basis change in net worth, which excludes changes due to inflation. As seen on page 5, estimated changes in net worth showed increases in all areas of the state. Changes in net worth among individual farm operators could vary greatly due to differences in farm and nonfarm income and family living withdrawals. Average amount of interest paid per farm is shown on pages 3 and 6. Average operator interest paid in 2003 was $16,921, down $73 from On a per-acre basis, interest paid has decreased from a high of $38 in 1983 to $18 in Interest paid as a percentage of gross farm returns was 5.6 percent in 2003 compared to 6.7 percent in Some key financial factors, such as the current, debt-to-asset, and debt-to-equity ratios, can be found on pages 10 to 14 by type of farm. This type of information is useful in providing some benchmarks when evaluating the financial efficiency of a farm operation. Returns and costs for crops and livestock enterprises can be seen on pages 25 to 31 and 33 to 40. Returns to farrow-to-finish hog producers were higher than the year before. Total returns averaged $37.81 per hundredweight in 2003 compared to $31.81 the year before. Feed costs increased, averaging $22.56 per hundredweight. The average price received per hundredweight for slaughter cattle and the price paid for replacement feeder cattle were both higher than the year before. Due to the higher prices for slaughter cattle, returns to the feeder cattle enterprise were at all time highs. Total economic costs per acre to produce corn and soybeans in 2003 decreased as compared to 2002 in all areas of the state. The main factor for the decrease in per acre costs was due to lower machinery and building depreciation costs. Cost per bushel to produce corn decreased significantly in all areas of the state due to high corn yields. Cost per bushel to raise soybeans increased in all areas of the state except for southern Illinois. Lower soybean yields were the main factor resulting in the increased costs per bushel. Total economic costs per acre to raise corn and soybeans on these farms averaged $395 and $320 respectively. From a sample of pure grain farms in the state, the total economic costs per bushel of corn produced were $2.27 with an average yield of 174 bushels per acre. The total costs per bushel of soybeans were $8.42 with an average yield of 38 bushels per acre. This compared with costs per bushel of $2.76 and $6.79 for corn and soybeans respectively in This was the lowest cost per bushel to grow corn since 1994 and the highest for soybeans since The variation in yields and costs the past few years makes it important to analyze these costs over more than one year. The five-year average to produce corn and soybeans on these farms is $2.58 per bushel for corn and $7.24 per bushel for soybeans. In summary, farm earnings were considerably higher in 2003 compared to 2002 and generally at good levels across all geographic areas of the state. Record breaking corn yields along with higher grain prices offset below average soybean yields. Improved livestock returns also contributed to the better incomes on farms producing livestock.

8 ILLINOIS FARM BUSINESS FARM MANAGEMENT ASSOCIATION cooperating with nine local farm management associations and the Department of Agricultural and Consumer Economics, College of Agricultural, Consumer and Environmental Sciences, University of Illinois at Urbana-Champaign STATE TOTAL--6,356 cooperating farmers and 60 member field staff* July 1, 2003, distribution of cooperators by counties and associations Associations and Field Staff BLACKHAWK 655 Kristian S. Lauritzen Alan A. Petersohn Jeffery L. Johnson Rodney B. Gieseke Garett Plumley Mark Sturtevant David A. Goodell WESTERN 723 Gary R. Goodwin Roberta Boarman Robert Rhea Susan M. Sharon Miriam M. Mock Michael J. Brokaw Bradley L. Zwilling SANGAMON VALLEY 586 Aaron Liesman James E. Phelan Kevin E. Coultas John Kloppenburg Todd F. Behrends LINCOLN 839 Michael E. Schmitz Thomas J. Nolte John E. White Dennis J. Graden Louis J. Aldag Dathel W. Davidson Daniel A. Doan Randall J. Harmon Mitchel W. Fickling ( Numbers are Enrollment Totals r Field Staff Office (Home) u District Record Processing Office State Office Jo Daviess Stephenson Winnebago Boone McHenry Lake 42 r r 41 5 u r r Carroll Ogle r DeKalb Kane Cook r DuPage Whiteside Lee r r 4 0 rr Kendall Will Henry Bureau LaSalle Rock Island 81 Grundy Mercer r rr 44 urr Kankakee u Stark Putnam r 61 Knox r u 65 Warren Marshall Livingston r r 138 r Peoria Iroquois Woodford r r 170 r Fulton r McLean r r Hancock McDonough Tazewell 19 r Ford 83 r r r 58 Vermilion Mason r ur r Champaign Schuyler 74 Logan 164 Dewitt Adams rr Brown Menard 61 r 81 r rr Cass Macon r r r 59 r 23 Pike Morgan Sangamon r 86 Douglas Edgar 59 Scott r u r 92 r ru 80 r Moultrie Christian Coles r Shelby 87 Greene Macoupin Clark Montgomery Cumberland r r Jersey Fayette 70 Effingham Jasper Crawford 3 19 r 4 Madison Bond u 22 Clay 23 Marion Richland Lawrence r 29 Clinton ru r 36 St. Clair r 80 Wayne 29 7 Wabash Washington Jefferson r Randolph Perry Hamilton White r 1 Franklin Jackson 28 Williamson Saline Gallatin 20 r Union Johnson Pope Hardin 3 r 22 7 u Alex Pulaski Massac OFFICIAL ENROLLMENT July 1, 2003 Associations and Field Staff NORTHEASTERN 273 David J. O Brien Michael G. Bossert Charles W. Brahmstedt ILLINOIS VALLEY 688 Danny L. Stetson John A. Hudson Dale J. Heinkel Bradley G. Lenschow James P. McCabe Scott M. Newport PIONEER 1,215 Michael C. Heiser Jerry Crump Maurice E. Sprout Kent V. Meister Darren L. Bray Gary Freeman Richard Smith Rodney G. Robenstein Brian J. Pulley Nathan A. Waibel Jeffrey A. Marquis EAST CENTRAL 1,156 James E. Cullison Bruce E. Burk Donald E. Becker Mitchell A. Fruhling Jeffrey D. Lewis Robert Daggett Richard Thomas Gary L. Knoblett Brandyn L. Traum Christopher A. Leman SHAWNEE 221 Robert D. Kiesecoms Douglas E. Hileman

9 -1- Average Size, Income, Returns, and Costs on Illinois FBFM Record-Keeping Farms by Type of Farm 1999 to 2003* All Operators Livestock Net Mach. Tillable Net Farm Labor-Mgmt. Crop Ret. Above & Labor Number Acres Income Income Returns/TA Feed/TA Cost/TA** Year of Farms (TA) $ $ $ $ $ All Farms , ,640 55, , ,204 12, , ,396 16, , ,541 33, , ,119 18, Grain Farms , ,637 57, , ,619 15, , ,982 15, , ,450 34, , ,363 17, Hog Farms ,182 51, ,116 (15,839) ,741 37, ,772 68, ,161 27, Dairy Farms ,600 42, ,408 12, ,473 41, ,987 16, ,248 29, Beef Farms ,456 51, ,576 (11,509) ,469 (15,454) ,374 (11,451) ,574 8, *In 2003, 85% of the farms were classified as grain, 4% as hog, 3% as dairy, 2% as beef, and 6% as part-time or other types. **This is net above custom work income.

10 Summary of Income, Corn Yields, Crop and Livestock Returns by Farm Type and Location, Average per Farm 2000 to 2003 Northern Illinois Central Illinois Southern Illinois Grain Hog Beef Dairy All* Grain Grain Hog All* Grain Hog Beef Dairy All* SPR SPR Operator's Share of Net Farm Income 2003 $58,217 $54,445 $83,210 $53,729 $59,042 $86,568 $62,459 $94,263 $78,063 $86,245 $91,087 $27,646 $93,891 $84, $25,380 ($8,960) $23,031 $32,506 $24,201 $44,263 $35,520 $17,314 $39,740 ($9,160) ($1,343) ($10,685) $28,213 ($6,765) 2001 $18,009 $39,360 $12,248 $52,726 $21,654 $43,483 $29,854 $79,565 $40,596 $38,957 $64,973 ($1,506) $84,731 $41, $40,770 $65,009 $20,759 $33,128 $40,661 $61,156 $48,167 $116,109 $59,484 $69,145 $99,145 $7,798 $61,422 $68,911 Corn Yields Crop Returns per Tillable Acre 2003 $379 $375 $379 $391 $379 $404 $367 $384 $389 $327 $334 $215 $370 $ $352 $355 $367 $381 $355 $358 $339 $361 $351 $246 $257 $186 $302 $ $344 $343 $354 $343 $345 $397 $337 $347 $372 $314 $313 $249 $328 $ $352 $366 $369 $349 $353 $386 $355 $362 $374 $325 $327 $233 $338 $ Livestock Returns above Feed Cost per Tillable Acre 2003 $9 $273 $199 $407 $60 $4 $9 $339 $19 $4 $304 $62 $370 $ $4 $242 $79 $344 $45 $3 $4 $146 $10 $1 $134 $17 $438 $ $6 $417 $93 $471 $69 $5 $8 $403 $31 $5 $257 $35 $506 $ $10 $391 $107 $306 $57 $6 $10 $467 $32 $7 $295 $76 $461 $53 Return per $1.00 of All Costs 2003 $1.01 $1.00 $1.08 $1.01 $1.01 $1.11 $1.04 $1.06 $1.08 $1.09 $1.09 $0.85 $1.06 $ $0.90 $0.80 $0.83 $0.92 $0.90 $0.97 $0.94 $0.88 $0.96 $0.78 $0.79 $0.63 $0.89 $ $0.88 $0.97 $0.82 $0.97 $0.89 $0.96 $0.92 $1.01 $0.95 $0.94 $1.01 $0.68 $1.04 $ $0.94 $1.04 $0.80 $0.90 $0.94 $1.02 $0.98 $1.11 $1.01 $1.02 $1.09 $0.71 $0.96 $1.02 * Average size of farm in 2003 is 819 tillable acres for northern Illinois, 1,002 for central, and 1,082 for southern.

11 -3- Net Farm Income and Other Selected Factors Illinois FBFM Association Black- East Illinois Northhawk Central Valley Lincoln eastern Pioneer Number of Farms Tillable Acres Corn Yield Soybean Yield Crop Returns/TA $381 $384 $392 $333 $356 $382 Income before Depreciation $74,489 $87,903 $78,387 $94,599 $72,720 $82,928 Depreciation 19,467 18,024 20,131 21,180 18,667 16,793 Net Farm Income 55,022 69,879 58,256 73,419 54,053 66,135 Capital Purchases $35,074 $32,147 $34,213 $38,326 $26,112 $29,817 Interest Paid 21,286 12,911 17,344 16,281 13,080 12, Sangamon State State Valley Shawnee Western Average Average Number of Farms ,018 3,165 Tillable Acres 1,209 1, Corn Yield Soybean Yield Crop Returns/TA $431 $347 $ Income before Depreciation $146,071 $151,842 $98,300 $91,668 $57,963 Depreciation 27,127 34,793 27,505 21,028 30,759 Net Farm Income 118, ,049 70,795 70,640 27,204 Capital Purchases $45,138 $38,721 $46,768 $35,869 $31,092 Interest Paid 18,582 22,250 23,345 16,921 16,994 ¹ Sum of all operators per farm.

12 -4- Illinois FBFM Association Operators Share of Labor and Management Income per Farm 2001, 2002, and 2003 (Sum of All Operators/Farm ) Blackhawk Farms 391 Tillable Acres 714 Blackhawk $41,825 $16,292 $7,737 Northeastern $39,931 ($8,825) ($4,069) Northeastern Farms 128 Tillable Acres 837 Western Illinois Valley $43,983 Illinois Valley Farms 378 Tillable Acres 968 $8,998 $7,112 Farms 473 Tillable Acres 848 Western Sangamon Valley Farms 260 Tillable Acres 1,209 $51,333 $23,942 $11,391 Pioneer $52,551 $24,238 $21,693 Pioneer Farms 518 Tillable Acres 851 Lincoln Farms 275 Tillable Acres 921 Sangamon Valley $99,000 $24,236 $18,424 East Central $58,073 $23,719 $30,325 East Central Farms 521 Tillable Acres 980 Shawnee 1992 Avg , Avg , Avg , Avg , Avg , Avg , Avg (8,461) 1999 Avg , Avg , Avg , Avg , Avg ,678 No. of Farms (2003)... 3,018 Tillable Acres (2003) (Sum of All Operators/Farm) Lincoln $59,742 ($11,978) $24,125 Shawnee $90,785 ($66,528) $25,321 Farms 74 Tillable Acres 1,522 LEGEND Association 2003 Average 2002 Average 2001 Average

13 -5- Illinois FBFM Association Net Farm Income per Operator and Estimated Change in Net Worth After Living Expenses and Taxes 2003 Top figures are net farm income per operator. Bottom figures are the estimated change in net worth. Average Net Farm Income per Operator Blackhawk $49,215 $20,500 Northeastern $44,842 $16,000 $62,357 $33,500 Illinois Valley $52,897 $24,000 Western $58,631 $30,000 Pioneer $60,025 $31,500 Sangamon Valley $100,374 $71,500 East Central $66,198 $37,500 Net Draw Against Net Worth Increases Living Cost $47,750 Taxes (Income & Social Security) 7,000 Net Nonfarm Income -26,000 TOTAL $28,750 Lincoln $61,916 $33,000 Shawnee $98,932 $70,000 All figures are cost basis.

14 Capital Debt Repayment Capacity (CDRC), Illinois Farm Operators 1999 to Net Farm Income $36,119 $53,541 $33,396 $27,204 $70,640 + Net Nonfarm Income ¹ ,170 22,424 23,374 24,716 25,919 - Family Living ² (40,703) (42,772) (43,288) (43,970) (47,619) - Income & Social Security Taxes ² (9,941) (9,898) (10,328) (8,880) (6,814) Change in Net Worth ³ $4,645 $23,295 $3,154 ($930) $42,126 + Depreciation $27,905 $29,760 $31,474 $30,759 $21, Funds Available for Debt Repayment..... $32,550 $53,055 $34,628 $29,829 $63,154 Capital Purchases $25,576 $31,879 $34,702 $31,092 $35,869 Cash Interest Paid $18,774 $19,416 $19,491 $16,994 $16,921 ¹ Actual net nonfarm income received. ² Actual amounts less 10 percent used. ³ Cost basis no change in land value included.

15 Operator's Net Farm Income, Income before Depreciation and Interest Paid 100 Thousands of Dollars Year Net Farm Income Interest Paid Income Before Depreciation

16 Selected Financial Factors, Operator Only 2003 Farm Type Item Grain Hog Dairy Beef All Number of Farms... 2, ,018 Tillable Acres Gross Farm Returns/Operator Acre... $401 $745 $766 $554 $423 Total Nonfeed Costs/Operator Acre... $368 $721 $754 $512 $390 Management Returns/Operator Acre... $37 $26 $14 $45 $36 Net Farm Income per Operator... $64,936 $54,872 $51,203 $60,420 $62,357 Labor & Management Income per Operator... $51,825 $42,015 $37,269 $41,946 $49, Capital Purchases... $36,483 $44,285 $34,776 $34,326 $35,869 Farm Production per Man Year... $295,885 $229,586 $141,204 $188,519 $278,162 Production per $1.00 Nonfeed Costs... $1.09 $1.03 $1.02 $1.08 $1.08 Percent of Farm Production Cash Operating Expenses Depreciation Operator Income

17 Selected FBFM Factors, Operator Only 1994 to Number of Farms 3,691 3,553 3,628 3,287 3,126 3,195 3,143 3,072 3,165 3,018 Total Acres Tillable Acres Corn Yield Soybean Yield Wheat Yield % Tillable Land in Corn/Corn Silage Total Cash Operating Income $224,773 $251,373 $254,870 $266,383 $252,431 $263,153 $277,733 $296,275 $276,889 $316,260 Crop and Livestock Inventory Change 1,703 2,700 19,587 4,722 (22,658) (3,603) 14,988 (529) 3,569 22,837 Misc. Income and Change in Acct. Rec. 8,388 (224) 8,704 8,637 1, (1,632) 1,562 (1,915) Less: Purchased Feed and PIK Certs. (19,400) (20,348) (24,615) (21,304) (15,046) (13,347) (14,838) (15,421) (14,730) (16,709) Purchased Livestock (13,975) (12,590) (9,990) (12,821) (10,966) (11,919) (14,238) (15,795) (13,753) (15,250) Gross Farm Returns $201,489 $220,911 $248,556 $245,617 $205,266 $235,213 $263,961 $262,898 $253,537 $305,223 Total Operating Expense $138,243 $149,105 $161,557 $166,876 $167,915 $172,515 $182,254 $199,804 $197,181 $215,539 Income before Depreciation 63,246 71,806 86,999 78,741 37,351 62,698 81,707 63,094 56,356 89,684 Less Depreciation (Plus Capital Acct. Adj.) 23,048 25,029 26,065 27,674 26,301 26,579 28,166 29,698 29,152 19,044 Net Farm Income $40,198 $46,777 $60,934 $51,067 $11,050 $36,119 $53,541 $33,396 $27,204 $70,640 Net Farm Income as % GFR Operator's Labor and Mgmt. Income $23,955 $26,508 $41,345 $28,452 ($8,461) $18,172 $33,707 $16,712 $12,976 $55,678 Interest Expense $13,522 $16,436 $16,461 $17,007 $18,123 $18,774 $19,416 $19,491 $16,994 $16,921 Interest Expense as % of GFR Gross Farm Returns/Tillable Acre $271 $288 $316 $311 $255 $282 $311 $299 $283 $331 Total Operating Expense/Tillable Acre $186 $195 $206 $211 $209 $207 $214 $227 $220 $234 Depreciation/Tillable Acre $31 $33 $33 $35 $33 $32 $33 $34 $33 $21 Net farm Income/Tillable Acre $54 $61 $78 $65 $14 $43 $63 $38 $30 $77 Total Investment Crops and Feed $133,796 $141,762 $156,863 $160,286 $144,940 $133,190 $135,015 $143,355 $143,976 $155,083 Livestock (Market & Breeding Stock) 32,208 32,353 32,867 29,923 25,634 24,086 26,820 30,224 27,521 27,223 Machinery (Book Value) 49,193 52,989 56,458 57,326 53,991 54,146 54,210 56,272 54,580 61,487 Buildings (Book Value) 20,800 22,044 23,140 22,768 21,655 22,111 22,253 23,038 23,259 26,135 Land 297, , , , , , , , , ,278 Total $533,082 $594,265 $667,950 $714,781 $710,928 $708,716 $721,446 $763,986 $793,345 $834,206

18 -10- Financial Characteristics of Illinois FBFM Grain Farms 4-Year My Average Farm Number of Farms 2,279 2,211 2,129 2,147 2,192 Liquidity Working Capital $111,027 $85,660 $93,394 $100,365 $97,612 Current Ratio Upper Quartile NA Median Solvency Net Worth (Market) $898,938 $836,499 $820,022 $809,830 $841,322 Debt/Equity Ratio (%) Upper Quartile NA Median Debt/Total Asset Ratio (%) Upper Quartile NA Median Profitability Net Farm Income $60,982 $29,825 $29,633 $46,720 $41,790 Return on Farm Assets (%) Upper Quartile NA Median Return on Farm Equity (%) Upper Quartile NA Median Repayment Capacity Debt/Farm Operating Income Financial Efficiency (as a % of Gross Farm Returns) Interest Expense Ratio Upper Quartile NA Median Operating Expense Ratio Upper Quartile NA Median Depreciation Expense Ratio Upper Quartile NA Median Farm Operating Income Ratio Upper Quartile NA Median Asset Turnover Ratio Upper Quartile NA Median NA = not available yet. Preliminary data for 2003.

19 -11- Financial Characteristics of Illinois FBFM Hog Farms 4-Year My Average Farm Number of Farms Liquidity Working Capital $93,086 $88,510 $122,590 $151,744 $113,983 Current Ratio Upper Quartile NA Median Solvency Net Worth (Market) $1,004,283 $866,820 $879,364 $825,049 $893,879 Debt/Equity Ratio Upper Quartile NA Median Debt/Total Asset Ratio Upper Quartile NA Median Profitability Net Farm Income $51,633 -$5,677 $44,384 $83,731 $43,518 Return on Farm Assets Upper Quartile NA Median Return on Farm Equity Upper Quartile NA Median Repayment Capacity Debt/Farm Operating Income Financial Efficiency (as a % of Gross Farm Returns) Interest Expense Ratio Upper Quartile NA Median Operating Expense Ratio Upper Quartile NA Median Depreciation Expense Ratio Upper Quartile NA Median Farm Operating Income Ratio Upper Quartile NA Median Asset Turnover Ratio Upper Quartile NA Median NA = not available yet. Preliminary data for 2003.

20 -12- Financial Characteristics of Illinois FBFM Beef Farms 4-Year My Average Farm Number of Farms Liquidity Working Capital $134,419 $91,485 $87,456 $107,171 $105,133 Current Ratio Upper Quartile NA Median Solvency Net Worth (Market) $930,104 $822,846 $745,408 $738,400 $809,190 Debt/Equity Ratio Upper Quartile NA Median Debt/Total Asset Ratio Upper Quartile NA Median Profitability Net Farm Income $77,074 $7,767 $12,952 $18,938 $29,183 Return on Farm Assets Upper Quartile NA Median Return on Farm Equity Upper Quartile NA Median Repayment Capacity Debt/Farm Operating Income Financial Efficiency (as a % of Gross Farm Returns) Interest Expense Ratio Upper Quartile NA Median Operating Expense Ratio Upper Quartile NA Median Depreciation Expense Ratio Upper Quartile NA Median Farm Operating Income Ratio Upper Quartile NA Median Asset Turnover Ratio Upper Quartile NA Median NA = not available yet. Preliminary data for 2003.

21 -13- Financial Characteristics of Illinois FBFM Dairy Farms 4-Year My Average Farm Number of Farms Liquidity Working Capital $28,006 $15,859 $18,945 $28,764 $22,894 Current Ratio Upper Quartile NA Median Solvency Net Worth (Market) $550,256 $573,170 $582,794 $648,372 $588,648 Debt/Equity Ratio Upper Quartile NA Median Debt/Total Asset Ratio Upper Quartile NA Median Profitability Net Farm Income $52,881 $19,408 $46,376 $37,262 $38,982 Return on Farm Assets Upper Quartile NA Median Return on Farm Equity Upper Quartile NA Median Repayment Capacity Debt/Farm Operating Income Financial Efficiency (as a % of Gross Farm Returns) Interest Expense Ratio Upper Quartile NA Median Operating Expense Ratio Upper Quartile NA Median Depreciation Expense Ratio Upper Quartile NA Median Farm Operating Income Ratio Upper Quartile NA Median Asset Turnover Ratio Upper Quartile NA Median NA = not available yet. Preliminary data for 2003.

22 Illinois FBFM Association Farms by Interest Paid as Percent of Gross Farm Returns 1994 to 2003¹ Operator Interest Paid as % of Gross Farm Returns Year Under All Number of farms , , , , , , , , , , , , , , , , , , , ,850 Percent of farms * * * * * Net Farm Income ,980 28,256 16,971 3,094 (8,605) (16,565) (39,203) 40, ,009 30,487 25,315 8,765 7,433 (2,183) (13,028) 46, ,977 40,839 24,901 12,459 6,723 (9,778) (27,047) 61, ,785 35,742 19,643 8,021 (1,242) (6,655) (36,958) 50, ,200 7,000 (2,229) (21,893) (45,224) (35,417) (65,547) 14, ,212 28,518 13,029 1,309 (6,174) (18,065) (22,223) 37, ,020 38,050 27,035 13,931 (2,156) 276 (38,549) 51, ,043 21,789 4,684 1,367 (2,528) (38,957) (44,147) 32, ,763 14,420 3,265 (15,283) (25,645) (29,582) (55,756) 27, ,740 40,994 25,607 12,051 (3,753) 23,173 (5,018) 66,649 Average Operator Interest Paid and Interest Paid as % of Gross Farm Returns - All Farms 1994 $13, % 1996 $15, % 1998 $17, % 2000 $18, % 2002 $16, % 1995 $15, % 1997 $16, % 1999 $17, % 2001 $18, % 2003 $15, % ¹1994 operator interest paid and operator net farm income for total farm, 1995 to 2003 interest paid and net farm income by operator. * Less than 1%.

23 Operator's Net Farm Income by Interest Paid as a Percent of Gross Farm Returns $80,000 $60,000 Operator Net Farm Income $40,000 $20,000 $0 -$20,000 -$40,000 Under 10% % % % % % 35%+ Interest Paid as % of Gross Farm Returns Avg.

24 Illinois FBFM Management Returns per Tillable Acre by Farm Type¹ Northern and Central Illinois Southern Illinois Dairy Beef Hog Grain Dairy Beef Hog Grain (5) (4) (74) (11) (17) 40 (56) (4) (107) (101) (58) (16) (65) (111) (48) (32) (5) (23) (31) (22) (44) (54) (34) (47) (10) 8 (14) (112) (29) (10) (23) (18) (17) (81) (44) (59) (20) 21 (33) (117) (38) (6) (140) (204) (30) (6) (201) (184) (59) 1999 (20) 5 0 (3) 9 (114) (33) (34) 2000 (72) (72) 72 9 (16) (94) (80) 8 (14) 56 (117) 17 (9) 2002 (62) (59) (80) (6) (82) (132) (110) (59) 2003 ² (53) ¹ 1995 and later, data is operator's management returns per operator tillable acre. Prior to 1995, data is total farm management returns per total farm tillable acre. ² Estimated from preliminary data.

25 Summary of Farm and Family Sources and Uses of Dollars 1993 to Number of Families ,087 1,175 1,216 1,102 Tillable Acres NA NA NA NA NA NA NA NA NA Acres Owned NA NA NA NA NA NA NA NA NA Total Tillable Operator Acres NA NA Farm Assets, Jan. 1 $432,768 $489,103 NA NA NA NA NA NA NA NA NA Farm Assets, Dec , ,589 NA NA NA NA NA NA NA NA NA Liabilities, Jan , ,667 NA NA NA NA NA NA NA NA NA Liabilities, Dec , ,748 NA NA NA NA NA NA NA NA NA Net Farm Income 55,731 41,242 $43,156 $62,203 $48,205 $10,292 $38,091 $49,960 $29,678 $32,168 $66,290 SOURCES OF DOLLARS Nontaxable Receipts $23,638 $23,361 $31,506 $36,931 $35,229 $33,527 $34,025 $42,542 $39,162 $38,503 $38,042 Net Nonfarm Income 13,122 13,566 13,790 15,349 16,368 17,992 19,170 22,424 23,374 24,716 25,919 Money Borrowed 135, , , , , , , , , , ,363 Total Farm Receipts 220, , , , , , , , , , ,957 TOTAL SOURCE ALL DOLLARS $392,517 $420,039 $434,403 $433,156 $470,557 $469,879 $488,575 $497,921 $523,437 $519,682 $610,281 USES OF DOLLARS FARM Interest Paid $14,121 $13,004 $16,225 $15,169 $16,203 $17,782 $19,585 $19,213 $19,297 $17,194 $17,713 Other Farm Expenses 139, , , , , , , , , , ,726 Mach. & Bldg. Purchases 26,946 30,301 27,866 29,887 36,458 31,073 23,232 29,877 30,557 29,699 35,291 TOTAL FARM EXPENDITURES $180,637 $190,100 $197,565 $195,097 $221,159 $207,008 $209,072 $223,684 $235,008 $229,613 $271,730 Principal Payments $135,090 $137,948 $148,666 $134,754 $144,677 $156,891 $182,933 $166,890 $179,988 $183,423 $225,968 Income & Social Security Taxes 10,504 12,487 9,975 11,263 11,724 13,859 11,046 10,998 11,475 9,867 7,571 Savings & Investment 26,063 38,274 36,906 48,112 48,440 47,327 40,252 48,826 48,866 47,915 52, LIVING EXPENSES Contributions $1,290 $1,410 $1,328 $1,383 $1,507 $1,489 $1,448 $1,597 $1,567 $1,454 $1,583 Medical 5,357 5,064 5,144 5,119 5,170 5,392 5,613 5,561 5,710 6,335 6,581 Life Insurance 2,413 2,536 2,555 2,555 2,427 2,544 2,575 2,701 2,660 2,590 2,681 Expendables 26,165 27,069 27,594 29,443 30,200 30,651 31,218 32,685 33,275 34,096 37,314 Total Noncapital $35,225 $36,079 $36,621 $38,500 $39,304 $40,076 $40,854 $42,544 $43,212 $44,475 $48,159 Capital 4,996 5,143 4,633 5,457 5,283 4,714 4,371 4,982 4,885 4,380 4,749 TOTAL LIVING EXPENSE $40,221 $41,222 $41,254 $43,957 $44,587 $44,790 $45,225 $47,526 $48,097 $48,855 $52,908 TOTAL USE ALL DOLLARS $392,515 $420,031 $434,366 $433,183 $470,587 $469,875 $488,528 $497,924 $523,434 $519,673 $610,253 Debt/Asset Dec. 31 (farm) NA NA NA NA NA NA NA NA NA Interest as % of Farm Receipts Total Family Living/TA (Opr. TA) $54 $53 $76 $85 $79 $81 $78 $80 $81 $78 $79 Nonfarm Income/TA (Opr. TA) Net Family Living/TA (Opr. TA) $36 $36 $50 $56 $50 $48 $45 $42 $41 $39 $40 Net Farm Cash/TA (Opr. TA) Cash Surplus (Deficit)/TA (Opr. TA) $2 ($17) $8 ($7) ($13) ($20) $7 $0 ($8) ($10) ($0) NA = not available. Beginning in 1995, last five lines were divided by operator tillable acres instead of total tillable acres.

26 -18- Equivalent Cash Rent Based on Landlord s Crop-Share Data 1980 to 2003 Taxes, Bldg., Equivalent Gross Net & Misc. Gross Returns Expenses Rents Expenses Cash Rents¹ (per tillable acre) SPR $ $58.98 $ $25.88 $ SPR $ $57.90 $99.21 $29.17 $ ¹ Net rents plus taxes, building repairs, depreciation, and miscellaneous expenses. Source: Landlord Shares and Farm Returns reports AE-4693; AE-4657; AERR 205, 203, 199, 197, 190, 187; and unpublished data, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign. For years 1995 and after, landlord's income and expenses estimated from operator data from FBFM record summaries. Prepared by Dale H. Lattz and R. A. Hinton, Extension Specialists, Farm Management, Department of Agricultural and Consumer Economics, College of Agricultural, Consumer and Environmental Sciences, University of Illinois at Urbana-Champaign.

27 Landlord's Net Rent per Tillable Acre on Full Tenant Farms, Crop-Share Lease 1994 to 2003 $140 $120 Per Tillable Acre $100 $80 $60 $ Year Southern North/Central North/Central

28 Central Illinois Grain Farms Operator's Share of Labor and Management Earnings $90 Thousands of Dollars $80 $70 $60 $50 $40 $30 $20 $ Tillable Acres 2003 average average 2003 all farms Central Illinois Grain Farms Value of Production per $1.00 of Nonfeed Cost $1.20 $1.15 Dollars per $1 NFC $1.10 $1.05 $1.00 $0.95 $ Tillable Acres 2003 average average 2003 all farms

29 Northern Illinois Grain Farms Operator's Share of Labor and Management Earnings $90 Thousands of Dollars $75 $60 $45 $30 $15 $ Tillable Acres 2003 average average 2003 all farms Northern Illinois Grain Farms Value of Production per $1.00 of Nonfeed Cost $1.15 $1.10 Dollars per $1 NFC $1.05 $1.00 $0.95 $0.90 $ Tillable Acres 2003 average average 2003 all farms

30 Southern Illinois Grain Farms Operator's Share of Labor and Management Earnings $90 $80 Thousands of Dollars $70 $60 $50 $40 $30 $20 $10 $ Tillable Acres 2003 average average 2003 all farms Southern Illinois Grain Farms Value of Production per $1.00 of Nonfeed Cost $1.20 $1.15 Dollars per $1 NFC $1.10 $1.05 $1.00 $0.95 $0.90 $0.85 $ Tillable Acres 2003 average average 2003 all farms

31 Northern Illinois Hog Farms Value of Production per $1.00 of Nonfeed Cost $1.10 Dollars per $1 NFC $1.05 $1.00 $0.95 $ Tillable Acres 2003 average average 2003 all farms North and Central Illinois Beef Farms Value of Production per $1.00 of Nonfeed Cost $1.30 $1.20 Dollars per $1 NFC $1.10 $1.00 $0.90 $ Tillable Acres 2003 average average 2003 all farms

32 North & Central Illinois Dairy Farms Value of Production per $1.00 of Nonfeed Cost $1.04 $1.02 Dollars per $1 NFC $1.00 $0.98 $0.96 $ Tillable Acres 2003 average average 2003 all farms Southern Illinois Dairy Farms Value of Production per $1.00 of Nonfeed Cost $1.15 $1.10 Dollars per $1 NFC $1.05 $1.00 $0.95 $ Tillable Acres 2003 average average 2003 all farms

33 Northern Illinois Grain Farms No Livestock ( SPR) Corn Projected 2004 Soybeans Projected 2004 Average My Average My Farm Farm Farm Farm Number of Farms Acres of Crop % Land in Crop NONLAND COSTS Variable Costs Soil Fertility... $51 $53 $55 $18 $19 $20 Pesticides Seed Drying Machinery Repair, Fuel & Hire Total Variable... $165 $174 $179 $105 $111 $115 % Change... -2% 5% 3% 2% 6% 4% Other Nonland Costs Labor... $35 $33 $33 $34 $32 $33 Building Storage Machinery Depreciation Nonland Interest Overhead Total Other... $125 $109 $113 $111 $97 $102 Total Nonland Costs... $290 $283 $292 $216 $208 $217 % Change... -4% -2% 3% -2% -4% 4% LAND COSTS Taxes... $27 $26 $25 $27 $26 $25 Adjusted Net Rent Total Land Costs... $121 $122 $125 $121 $122 $125 TOTAL ALL COSTS... $411 $405 $417 $337 $330 $342 % Change... -4% -1% 3% -3% -2% 4% Yield per Acre, Bushel Nonland Costs per Bushel... $1.88 $1.63 $4.60 $5.94 All Costs per Bushel... $2.67 $2.33 $7.17 $9.43 Average Yield Past 4 Years All Costs per Bushel... $2.63 $2.52 $2.59 $7.02 $7.50 $

34 Per Acre Cost to Grow Corn and Soybeans Central Illinois Grain Farms No Livestock ( SPR) Corn Projected 2004 Soybeans Projected 2004 Average My Average My Farm Farm Farm Farm Number of Farms Acres of Crop % Land in Crop NONLAND COSTS Variable Costs Soil Fertility... $55 $57 $59 $20 $20 $21 Pesticides Seed Drying Machinery Repair, Fuel & Hire Total Variable... $162 $167 $172 $103 $106 $109 % Change... -1% 3% 3% -2% 3% 3% Other Nonland Costs Labor... $37 $36 $36 $35 $34 $34 Building Storage Machinery Depreciation Nonland Interest Overhead Total Other... $124 $110 $115 $108 $97 $102 Total Nonland Costs... $286 $277 $287 $211 $203 $211 % Change... -2% -3% 4% -1% -4% 4% LAND COSTS Taxes... $27 $25 $24 $27 $25 $24 Adjusted Net Rent Total Land Costs... $130 $130 $133 $130 $130 $133 TOTAL ALL COSTS... $416 $407 $420 $341 $333 $344 % Change... -3% -2% 3% -3% -2% 3% Yield per Acre, Bushel Nonland Costs per Bushel... $1.88 $1.49 $4.06 $4.95 All Costs per Bushel... $2.74 $2.19 $6.56 $8.12 Average Yield Past 4 Years All costs per bushel... $2.55 $2.42 $2.50 $6.69 $6.94 $