Average net farm income was $81,750 in 2000 for the 212 farms included in this annual report of the Southwestern Minnesota Farm Business Management Association. The median or middle income was $69,414. This is the second annual increase from the extremely low levels of 1998. Almost all of the increase can be attributed to the increase in the value of inventories, government payment, and the decrease in depreciation charge. However, the change in depreciation was almost entirely due to a change in the accounting procedures, not a change in purchasing behavior by farmers. Using the "new" depreciation rules, net farm income (NFI) in the previous 5 years was estimated to be higher than when the "old" rules were used. For example, the "new" NFI was estimated to be $61,347 in 1999 which is $17,585 higher than the NFI using the "old" rules. As in previous years, the actual profit levels experienced by individual farms vary greatly from the overall average profit. When the net farm incomes for the 212 farms in the report are ranked from lowest to highest, the resulting graph shows how much the incomes do vary. Several farms experienced negative income and several experienced very high incomes. Most of the net farm incomes ranged from below 0 to about $150,000. The median or middle income was $69,414. The high 20% of the farms had an average net farm income of $199,929 which is an increase from 1999. The low 20% of the farms had an average loss of $424 in 2000 which is better than 1999. Average gross cash farm income in 2000 was $422,897. This was a 9% increase from 1999. Four sources of sales again dominated: corn, hogs, soybeans, and beef finishing. Soybean sales increased 18% between 1999 and 2000; hog sales, by 14%; corn sales by 4%, and beef finishing by 7%. Government payments of all types increased again to $50,567 per average farm in 2000--an increase from $44,674 in 1999, $30,021 in 1998, and $12,257 in 1997. As a percentage of total income, government payments were 12% in 2000, compared to 11% in 1999, 8% in 1998, and 3% in 1997. Cash expenses increased 7% to an average of $348,711 in 2000. As a percentage of both cash expenses and depreciation in 2000, feeder purchases; feed, seed, fertilizer, and crop chemicals; and rent dominate. Both the average rate of return on assets (ROA) and the rate of return to equity (ROE) increased substantially in 2000 compared to 1999. In 2000 ROA averaged 12% and ROE was 19% using assets valued on a cost basis. Using a market value basis, average total equity (of the 181 sole proprietors) was $605,149 at the end of 2000. This was an increase of $50,064 during the year for these 181 farms. Average equity has continued to improve since 1986. The average debt-asset ratio improved, that is, decreased to 47% at the end of 2000. The average corn yield was 150 bushels per acre; soybeans were at 46 bushels per acre. Results by Type of Farm The 212 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 2000, there are 63 crop farms, 13 hog farms, 24 crop and hog farms, 6 beef farms, and 15 crop and beef farms. (There are 87 farms which do not have a single source (or pair of sources) of income over 70%.) Compared to 1999, all types of farms (except beef farms) had better net farm incomes in 2000. 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 45% at the end of 2000. Farms with 70% of their income from either hogs or beef had an average debt-to-asset ratio higher than 50%. 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.