2018-19 Rapid Ag: Financial counseling to help financially stressed producers explore options to survive

April 7, 2017

Principle Leaders

Robert Craven and Kevin Klair


Department of Applied Economics

Funding Awarded

March 2017-Fiscal Year 2018: $248,000

The Problem

Everywhere you turn in agriculture these days there is concern about the farm financial situation. Ag lenders, commodity groups, agribusinesses, educators and certainly farmers are concerned about low or negative profits and what this means for individual producers. These concerns are certainly justified. From 2012 to 2015, median net farm income for Minnesota producers fell by nearly 85% from $189,679 in 2012 to $27,478 in 2015. The scale and abruptness of this decline in income has not occurred since the 1980’s. The average term debt coverage ratio fell below 1 to 0.83 for the first time in nearly 20 years. A ratio below one indicates that producers have insufficient funds to meet their debt payments. A recurring theme at ag lending conferences is that many producers have burned through the working capital accumulated during the boom years and have also refinanced their land to get more working capital. If the low profit margins continue, some producers will need to start selling land to stay in business.


There is no doubt that many Minnesota producers are experiencing financial stress. But the financial stress is not equally distributed among producers. The Center for Farm Financial Management’s FINBIN database contains financial data from about 2,300 Minnesota farms, approximately ten percent of the commercial farms in Minnesota. Farms in this database can be segmented by net farm income. In 2015, the 20% of farms with the lowest profit, had a median net farm income of minus $74,414. In fact, nearly 50% of Minnesota farms had negative profits in 2015. In 2014, the median loss for the low 20% profit group was minus $63,220. Losses are expected in this same range when end of the year numbers are available for 2016. Losses are mounting for farms in the lower end of the profit range.

Another indication of growing financial stress are the number of farmer-lender mediation notices being initiated by lenders. Annual notices have almost tripled from FY2013 to FY2016, totaling just under 3,000 for FY2016. However, notices were at about 3,000 in 2009 and 2010 also due to stress in some sectors of agriculture.

Most Minnesota producers have experienced some financial stress during the past couple of years, but a portion of them are facing much more serious financial struggles and will be faced with some very difficult decisions during the next few months or year regarding how to stay in business or whether to exit farming.

Minnesota currently has two types of resources available to help financially stressed producers, but both are very limited in scope. The first resource is three Farmer-Lender mediation staff available to help review a farm’s financial information to prepare for mediation. Only farms who have received a mediation notice are eligible for this assistance. The second resource are MN Department of Agriculture Farm Advocates. The nine farm advocates can help any producer in Minnesota, but tend to help those in the mediation process. They are not unbiased resources, but as the name implies, become advocates to help producers through the mediation process or other legal issues.

During the 1980’s thousands of farmers came to U of M Extension for assistance in understanding their financial situation and exploring whether they had any viable options to stay in business. Extension no longer has the resources to provide that kind of assistance. However, both local Extension Educators and regional Agricultural Business Management educators are asking what to do when producers ask for individual financial counseling. There is an expectation or hope among some producers, commodity groups, and lenders that Extension will again provide help. Extension either needs to communicate that we do not have the resources to help or we need to create new resources to meet this critical need.


  1. Provide financial counseling to Minnesota farms experiencing financial stress to help them understand their financial situation and explore options that might help them keep their farm functioning as a viable business.
  2. Develop University of Minnesota resources to respond to the financial downturn impacting all sectors of production agriculture and to provide a means for the University to help struggling farmers during this period of high financial stress.