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Farmers harvest soybeans in October 2015. Matt Gade/Forum News Service.

Report: Average SD farm spent $1M locally in 2015

MITCHELL, S.D. -- The average South Dakota farm pumped more than $1 million into the local economy last year.

According to Mitchell Technical Institute's South Dakota Center for Farm/Ranch Management, South Dakota farmers spent close to $1.1 million in operating costs, capital investments and family living expenses, much of which stayed in state.

Kathy Meland, an instructor for the farm/ranch management center who compiled the report, said 2015 was a rough year for farmers financially because crop prices declined more than expenses.

"Cash-farm income is down to levels that we haven't seen since 2009. We peaked, and we're on the downhill years," Meland said.

The average farm incurred $887,312 in expenses in 2015, the report said. Cash-farm income was $1.017 million. Both figures were down slightly from the previous year, and net cash-farm income fell for the fourth consecutive year after prices for grain and livestock "dropped rather dramatically."

Livestock production ranked as the top source of both revenue and expenses, on average. The typical farmer spent about $366,000 in direct costs like purchasing feeder livestock and feed products.

"This activity is a real economic engine for our area, as most of the feed is produced and processed in South Dakota," the report said.

Blair Gades, owner and president of Dealer's Livestock Equipment in Mitchell, said his business is affected when farmers' incomes drop, too.

Dealer's has sold feeders, shelters, storage bins and other farm-and-ranch items in Mitchell since the mid-1980s. Gades said his revenue dropped by about 25 percent between 2014 and 2015 as farmers and ranchers try to cut back on expenses.

"Any time prices are down, it adversely affects us. There's no doubt about it. They're watching every penny a lot closer," Gades said.

Gades has gone to trade shows intending to sell equipment, and he has heard speakers tell the attendees to avoid spending money.

"We're at a show trying to sell something, and they're at the same show telling them not to spend money. That's a pretty hard pill to swallow," he said.

Crop production expenses totaled about $200,000 on average, spent mostly on seed, fertilizer, chemicals and crop insurance. But many farmers also incurred expenses by hiring outside consultants, the report said, which supports employees of local farm cooperatives and private agricultural companies.

Other major expenses included $100,000 in land rent, $50,000 in equipment repairs, $43,000 in payroll and a variety of other expenses not included in the report.

The average farmer also spent $118,000 on land, buildings, machinery and breeding livestock and $66,000 on local family living expenses, which excludes out-of-state expenses (like income tax) and recreational assets (like a jet ski) Meland said.

Meland said 2016 so far doesn't look like a better year financially for South Dakota farmers, but she declined to make a financial prediction.

"There's just so many variables as to what's going to happen in '16. The verdict is out by any means, but '15 was just a tough year financially for many farmers," she said.

Meland said the future beyond 2016 is just as difficult to predict, but with a crop and grain rally, farm and ranch operations could return to more financially stable conditions.

Gades worries about the future, as his business isn't guaranteed a steady flow of income. His revenue fluctuates alongside the farmers', he said.

"I'm always worried about the future in the ag business," Gades said. "We love what we do. We really enjoy it. It's just never easy."