Average net farm income was $43,762 in 1999 for the 216 farms included in this annual report of the Southwestern Minnesota Farm Business Management Association. This is a large increase from the extremely low levels of 1998 and continues the historical pattern of large swings in farm income . Almost all of the increase can be attributed to the increases in the value of inventories and an average government payment of $44,674 in 1999. (Net farm income is an accrual measure calculated by subtracting total cash farm expense and depreciation from gross cash farm income and adjusting for changes in inventory items.) After subtracting an opportunity cost for equity capital, labor and management, earnings follow a similar but lower pattern. As in previous years, the actual profit levels experienced by individual farms vary greatly from the overall average profit. The high 20% of these farms had an average profit of $132,905 which is an increase from 1998. The low 20% of the farms had an average loss of -$16,562 in 1999 which is better than 1998. Average gross cash farm income in 1999 was $388,731. This was a 5% increase from 1998. Four sources of sales made up more than 70% of total income in 1999: corn, hogs, soybeans, and beef finishing. In 1998, these four sources also contributed about 70%. Soybean sales decreased 21% between 1998 and 1999. Hog sales increased by 6%; corn sales by 17%, and beef finishing by 45%. Government payments of all types increased to $44,674 per average farm in 1999--an increase from $30,021 in 1998 and $12,257 in 1997. As a percentage of total income, government payments were 11% in 1999, compared to 8% in 1998 and 3% in 1997. The average total government payments in 1999 include $11,031 from FAIR transition payments for the 1999 year; $168 for FAIR transition payments for the 2000 year but received in 1999; $11,555 for (emergency) market loss payments; $18,992 for loan deficiency payments (LDPs) for all crops; $423 for the conservation reserve program (CRP); and $2,504 for other payments. Cash expenses increased 6% to an average of $324,802 in 1999. As a percentage of both cash expenses and depreciation in 1999, feeder purchases; seed, fertilizer, and crop chemicals; feed expenses; land rent; and depreciation continue to dominate. Both the average rate of return on assets (ROA) and the rate of return to equity (ROE) increased substantially in 1999 compared to 1998. In 1999 ROA averaged 7% and ROE was just under 7% using assets valued on a cost basis. Using a market value basis, average total equity (of the 185 sole proprietors) was $544,539 at the end of 1999. This was an increase of $33,532 during the year. Average equity has continued to improve since 1986. The average debt-asset ratio remained unchanged at 49% at the end of 1999. Crop yields decreased slightly from the record levels in 1998 for the Association. The average corn yield was 156 bushels per acre; soybeans were at 45 bushels per acre. Results by Type of Farm The 216 farms in the report are classified as a certain type of farm (e.g., hog) on the basis of having 70 percent or more of their gross sales from that category. Using this 70 percent rule in 1999, there are 62 crop farms, 12 hog farms, 34 crop and hog farms, 6 beef farms, and 18 crop and beef farms. (There are 75 farms which do not have a single source (or pair of sources) of income over 70%.) Compared to 1998, all types of farms had better net farm incomes in 1999. A similar story can be seen in the rate of return to assets (ROA). (Assets are valued on a cost-basis for ROA). Using assets valued on a market basis, the average crop farm has a debt-to-asset ratio of 43% at the end of 1999. Farms with 70% of their income from either hogs or beef had an average debt-to-asset ratio of 55% or higher. The report provides additional information on profitability, liquidity, and solvency as well as other whole-farm information and detailed information on crop and livestock enterprises. Also reported are whole-farm financial condition and performance by county, sales size class, and type of farm.