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Turning tide

Home and family costs
It's no secret, farmers are cutting costs in their personal lives. Check out where the biggest cuts are being made.

Each year, I draw upon the excellent farm business data compiled and summarized by Nebraska Farm Business, Inc. (NFBI). According to the data, the tide is turning in regards to family living costs. Granted, not all the same farm businesses participate each year, nevertheless the data is useful in identifying industry trends. 

The NFBI reported the average family living cost to be $83,210 for 2016. This is down considerably from 2012, which peaked out slightly above $100,000.  This calculates to an approximately 17 percent drop in four years. Of course, 2012 was the peak of the agricultural economic supercycle, and family living costs had nearly doubled from 2006.  

So, where were the most dramatic cost cuts made?  Interestingly enough, personal care was down 50 percent from the apex. Household supplies and cash donations were also among the largest cuts. It was surprising to see that both medical care and healthcare insurance were measurably decreased. Yes, some producers have reduced premiums by opting for plans with higher deductibles. Others decided to forego health insurance all together and pay the government penalty. However, in my travels and discussions, there appears to be a bit of bifurcation in health insurance as many producers continue to pay in the range of $20,000 to $40,000 annually, while others are paying $4,000 or less each year.

Additionally, nonfarm capital purchases were also down significantly. These items peaked at over $120,000 in 2012, but are now squarely in the $12,000 range.  Similarly, nonfarm vehicle and real estate purchases were down as well.  When living expenses and nonfarm capital purchases were combined, the Nebraska farms averaged $114,505. And with income taxes and Social Security added, total costs were nearly $148,000. Remember these are the averages according to the Nebraska data, not the extremes on either end of the spectrum. 

Food for thought…

When all columns were tallied, the total withdrawal out of cash flow was an average of $147,717. Yet, living costs were only 56 percent. Furthermore, income taxes and Social Security were 23 percent, and nonfarm capital purchases and savings were 21 percent. Interestingly, these farm families had a negative $3,207 in savings and investments representing the tight cash flows and possible withdrawals for liquidity. 

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