Average net farm income was $69,787 in 2009 for the 95 farms included in this annual report of the Southwestern Minnesota Farm Business Management Association. Average earnings decreased by 63% from $190,901 in 2008. This continues the downward trend that began in 2008 after six years of steady increases. As expected, low incomes for virtually all types of livestock operations pulled the average down, and some livestock farms sustained large losses. Crop farms, on average, were profitable but also earned much lower incomes compared to recent years. Median net farm income, or the income earned by the middle farm, was $96,130, substantially higher than the average. This indicates that the average was pulled down or skewed by large losses sustained by some farms. This is a reversal from previous years when large profits made by some farms pushed the average income above the median. • As is the case every year, incomes varied widely across the entire group. The average net farm income for the most profitable 20% of the farms was $246,125 while the least profitable 20% lost $-192,897. • Average gross cash income was virtually unchanged from 2008 (Figure 2) while cash expenses increased by 3%. Most of the reduction in income resulted from reduced value of inventories. • Government payments accounted for 2% of gross cash farm income (Figure 2). Crop sales accounted for 48% of income while livestock sales were 41%. • Average rate of return on assets (ROA) was 3% with assets valued at adjusted cost or book value, down from 11% in 2008 (Figure 3). Rate of return on equity (ROE) averaged 2%, down from 15%. The fact that ROE was lower than ROA indicates that debt capital earned less than the average interest rate paid. This has not happened for the association farms since 2001. • The average farm reported net worth growth of $78,660. Net worth growth from earnings (farm and non-farm) averaged $25,212. The remainder resulted from changes in asset values. The average debt-to-asset ratio increased slightly from 39% to 40% (Figure 4). Crop Returns • Corn and soybean yields were up. Corn averaged 185 bushels per acre compared to 172 in 2008. Soybeans yields averaged 49 bushels, up from 44 in 2008 (Figure 5). • Both corn and soybean prices received decreased but remained above historical averages. The average price received for corn was $3.83 per bushel compared to $4.51 in 2008. Soybeans average $10.15 per bushel, down from $10.83. • The cost to raise an acre of corn (with land rent) increased 18% while soybean costs increased 11%. The cost to produce a bushel of corn on cash rented land increased from $2.90 per bushel in 2008 to $3.30 in 2009, while soybean costs per bushel increased from $7.21 to $8.18. These costs include a charge for unpaid labor and management, but do not include a charge for equity capital. Type of Farm: Crop farms had the highest net earnings, with an average net farm income of $115,857 and an average ROA of 6.6 % (Figure 6). • Hog/crop and hog farms (those farms with over 70% of gross income from sale of hogs or a combination of hogs and crops) suffered large losses, with an average net farm loss of $-370,973 and an ROA of -10% (Figure 7). • Beef/crop and beef farms (those farms with over 70% of gross income from sale of beef or a combination of beef and crops) experienced reduced earnings, with average net farm incomes of $69,569 and an ROA of 4.5% (Figure 8). Size of Farm • When sorted by gross farm income, medium sized farms, those with sales of between $250,000 and $1,000,000, were most profitable with rates of return on assets of around 7%. • The largest farms, those with gross revenue over $1,000,000, were the least profitable based on rate of return on assets. This group earned an average ROA of -2.9%. However, this is probably more a function of enterprise rather than business size as this group includes several hog farms that suffered large losses. 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. The report also includes whole-farm financial condition and performance by business size, type of farm, debt-to-asset ratio, and age of operator.