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Study: Illinois farm living costs on increase, again

By TIM ALEXANDER
Illinois Correspondent

TOULON, Ill. — Farm family living expenses rose by $6,726 in 2007, according to a recently released University of Illinois extension study based on data compiled from 1,232 farm families enrolled in the Illinois Farm Business Farm Management Assoc. (FBFM).

“Living expenses are increasing, always have been and will continue to increase,” said Gary Goodwin, a field staff advisor with the Western Illinois FBFM office in Toulon.

Goodwin and study leader Dale Lattz, a farm management specialist with the extension, noticed a significant increase in non-capital expenses over previous years.

“Non-capital expenses jumped $5,300 per family (from $54,494 to $60,294),” noted Lattz. “This average was 9.6 percent higher than in 2006 and 14.3 percent higher than in 2005.”

The amount spent for capital items increased to an average of $6,118 from $4,692 per family in 2006, according to the study.
“Capital items can include things like new swimming pools, vehicles or a house remodel. This line probably reflects good times in agriculture more than any other line does,” Goodwin explained. “However, farmers don’t necessarily go hog wild when they have a good year. If they have extra money, they usually put it back into the farm. They don’t like to spend it on themselves.”

Family living expendables, counted as part of non-capital spending in the study, increased from $42,463 to $46,881 per farm family. “This is due to the general increase in the cost of living,” he said. Goodwin also pointed to significant increases in medical and life insurance costs reflected in the study.

“Medical expenses rose from an average of $7,665 in 2006 to $8,071 last year for farm families,” he said. Medical expenses can include out-of-pocket costs for health insurance along with doctor and hospital expenses.

The study revealed that income and Social Security tax payments rose by around 7 percent in 2007 for farm families, to $10,964 compared with $10,251 the previous year. In addition, the study shows that Illinois farmers are continuing to seek off-farm sources of income to help offset rising farm family living costs, as well as help with medical and insurance costs.

“Net non-farm income continues to increase, averaging $31,668 in 2007,” Lattz said. “Net non-farm income has increased $13,676, or 76 percent, in the last 10 years.”

Though off-farm income continues to rise as farm commodities fetch record high prices, farm families will have to remain diligent to pay for increases in both farm operation and family expenses, Goodwin said.

“Expenses are going to be higher down the road, and that’s why farms have to get larger or face problems. They should use their records to control their costs. Using records can help,” he said.
“People are still losing farms, though nothing like during bad economic times such as 1981, as of yet. This is following a similar pattern to the early 1970s. The profit we make on corn and beans is very similar to the 1973 and 1974 time period.

“In comparison to that time period, a spike up in prices received were offset a couple years later with higher costs for everything, family living as well as farm input costs. We’re concerned that pattern may repeat itself,” he said.

To see the complete study, Farm and Family Living Income and Expenses for 2007, go to the UoI extension’s farmdoc website at www.farmdoc.uiuc.edu

7/16/2008