The average net farm income is $66,412 for the 62 farms included in the 1999 annual report of the Southeastern Minnesota Farm Business Management Association. This is an increase of 1% from 1998. Even though gross cash farm income increased, cash expenses and depreciation also increased and inventory values changed little. Income is still at a high level compared to the early 1990s and the 1980s. (Net farm income is an accrual measure calculated by subtracting cash farm expenses and depreciation from total cash farm income and adjusting the difference for changes in other capital and inventory items.) After subtracting an opportunity cost for equity capital, unpaid labor and management earnings follow a similar but lower pattern. As in previous years, the income levels experienced by individual farms vary greatly from the overall average. The high 20% of these farms had an average net farm income of $222,349 in 1999; farms in the low 20%, -$10,442. This is an increase for both the high group and the low group. Average gross cash farm income in 1999 was $411,665 for these 62 farms. This is a 29% increase from 1998. Together, milk, corn, hog, and soybean sales were 75% of gross income in 1999. Compared to 1998, milk sales increased by 6%; corn sales by 26%; beef finishing sales by 26%. Hog sales increased by 270% from the extremely low levels in 1997. Soybean sales decreased by 9%. Government payments (of all types) more than doubled from an average of $23,322 in 1998 to $50,700 in 1999. (They were $12,907 in 1997.) Government payments were 12% of gross income in 1999, compared to 7% in 1998 and 4% in 1997. Average total cash expenses were $314,644 in 1999. This is an increase of 31% from the 1998 average. As a percentage of both cash expenses and depreciation, feed expenses were 20% in 1999, up from 1998. Seed, fertilizer, and crop chemicals were 15% of the total, down from 1998. Interest expense was 6% of the total, lower than in 1998. Real estate taxes amounted to 2% in 1999--slightly lower in percentage but slightly higher in absolute dollar level. Both the rate of return on assets (ROA) and the rate of return to equity (ROE) remained unchanged on average. However, ROA was slightly higher than ROE indicating that debt capital was earning less than it was costing. Average total equity (of the 49 sole proprietors) was $523,529 at the end of 1999, an increase of $45,645 during the year. (Assets were valued on a cost basis.) Except for a decline during 1993, average equity has improved steadily since 1986. At the end of 1999, the average debt-asset ratio was down slightly to 34%. In 1999, crop yields were lower than the record levels of 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 62 farms in the report are 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 are 9 crop farms, 16 dairy farms, and 7 crop and dairy farms, and 7 crop and hog farms. There are 18 farms which do 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 ($145,058) in 1999. The average dairy farm had the second highest net farm income. In terms of the rate of return to assets (ROA), dairy farms and crop and dairy farms have the highest ROA (10%) in 1999. (Assets are valued on a cost basis.) (There were less than 5 crop and hog farms in 1998, so that information is not reported.) Crop and hog farms had an average debt-asset ratio of 48% in 1999; crop farms averaged 46%; and other farms averaged less than 40%. 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 and corn and soybean returns by county.