The average net farm income was $60,978 for the 59 farms included in the 2001 annual report of the Southeastern Minnesota Farm Business Management Association. This was a decrease of 21% from 2000 (Figure 1). Even though gross cash farm income increased more than cash expenses, the decrease in net farm income is due in large part to a large decrease in the inventory value of crops and feed. As in previous years, the income levels experienced by individual farms vary greatly from the overall average. When the net farm incomes for the 59 farms in the report were ranked from lowest to highest, the resulting graph shows how much the incomes do vary (Figure 2). Several farms experienced negative incomes, and several experienced very high incomes. Most of the net farm income ranged from -$10,000 to $130,000. The median or middle income was $31,577, considerably lower than the average. The high 20% of these farms had an average net farm income of $213,598 in 2001; farms in the low 20%, -$16,927. This was a decrease for both groups. Average gross cash farm income in 2001 was $365,819 for these 59 farms. This was a 4% increase from 2000. Milk sales were 42% of the average gross cash farm income. Together, milk, corn, and soybean sales and government payments amounted to 82% of gross income in 2001 (Figure 3). Compared to 2000, milk sales increased by 28%. Government payments decreased by 20%. Government payments (of all types) averaged $40,227 in 2001. They were $50,496 in 2000, $50,700 in 1999, $23,322 in 1998, and $12,907 in 1997. Government payments were 11% of gross income in 2001, compared to 14% in 2000, 12% in 1999, 7% in 1998, and 4% in 1997. Average total cash expenses were $274,867 in 2001. This was a decrease of 3% from the 2000 average. As a percentage of both cash expenses and depreciation, feed expenses were 16% in 2001, up from 2000 (Figure 4). Seed, fertilizer, and crop chemicals were 17% of the total, down slightly from 2000. Interest expense was 7% of the total, lower than in 2000. Real estate taxes remained at 2% in 2001 although the absolute dollar level was slightly lower. Both the rate of return on assets (ROA) and the rate of return to equity (ROE) decreased on average (Figure 5). ROA was slightly higher than ROE indicating that debt capital was earning less than it was costing. Average total equity (of the 45 sole proprietors) was $583,049 at the end of 2001, an increase of $21,177during the year. (Assets were valued on a cost basis.) Except for a decline during 1993, average equity has improved steadily since 1986 (Figure 6). At the end of 2001, the average debt-asset ratio was down slightly to 34%. In 2001, the average corn and soybean yields were lower for the Association (Figure 6). The average corn yield was 144 bushels per acre; the soybean yield was 40 bushels per acre. Results by Type of Farm The 59 farms in the report were classified as a certain type (e.g., dairy) on the basis of having 70 percent or more of their gross sales from that category. Using this 70 percent rule, there were 19 crop farms, 15 dairy farms, and 7 crop and dairy farms. There are 18 farms which did not have a single source (or pair of sources) of income over 70%. The average crop and dairy farm had the highest average net farm income ($137,179) in 2001 (Figure 8). The average dairy farm had the second highest net farm income. In terms of the rate of return to assets (ROA), dairy farms had the highest ROA (12%) in 2001 (Figure 9). (Assets are valued on a cost basis.) Dairy farms had an average debt-asset ratio of 28% in 2001; crop farms averaged 33% (Figure 10). 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 year, county, type of farm, sales size class, and age of operator.