NEWS for North Dakotans
Agriculture Communication, North Dakota State
University
7 Morrill Hall, Fargo, ND 58105-5665
May 7, 1998
North Dakota net farm income will rise between now and 2007, under normal weather conditions, according to a new report by three agricultural economists at North Dakota State University. During that same period cropland values will rise slightly and farm debt-to-asset ratios will stay about the same.
These predictions from Won Koo, Richard Taylor and Marvin Duncan apply primarily to high- and average-profit farms in North Dakota. Low-profit farms, they say, will have about the same debt-to-asset ratio in 2007 as today, but will experience a decrease in net farm income.
This means that low-profit farms are likely to have serious problems sustaining themselves into the next century without substantial infusions of off-farm income—particularly since these farms have the highest debt-to-asset ratios to begin with. At the moment the debt-to-asset ratio of high-profit farms is about 29 percent, average-profit farms 38 percent, and low-profit farms 54 percent.
The economists predict that over the next nine years the average net income for high-profit farms in North Dakota will go from $94,000 to $111,000 and for average-profit farms from $51,000 to $59,000. Net income for low-profit farms will drop from an average of $2,000 this year to minus $5,000 in 2007.
"Net farm income in North Dakota in 1997 was very low mainly because of weather conditions and diseases such as scab," says Koo. "Our predictions for the years 1998 through 2007 are based on the expectation of normal weather conditions, without major disease problems."
Koo, Taylor and Duncan predict that cropland prices will decline until 2004, then increase gradually. Cash rents, they say, will be highest in 2000—due to the lagged effect of higher returns to land in 1995-96—and from then on will decline slowly.
The new study is based on records of farmers participating in the North Dakota Vocational Agricultural farm record system, and on farm price projections of the Food and Agriculture Policy Research Institute. For their computer model the economists defined their "high-profit farm" as the average of farms in the top 20 percent of profitability in all four production regions—the Red River Valley, north central, south central, and west regions. Their low-profit farm was the average of farms in the low 20 percent of profitability in all regions, and their average-profit farm was the average of all farms in all regions.
For a copy of the study, "1998 North Dakota Agricultural Outlook: Representative Farms 1997-2007," call the department of agricultural economics at NDSU, (701) 231-7441.
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Sources: Won Koo (701) 231-7448 & Richard Taylor (701) 231-7990
Editor: Barry Brissman (701) 231-7866
Click here for a pdf version of this graphic.