NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665

August 13, 1998

New Financial Profile of North Dakota Farms Could Help Producers Measure Performance

Fifty-seven percent of North Dakota farms were not able to make all scheduled term debt payments in 1997. This is one of many statistics on North Dakota farms contained in a new publication from North Dakota State University, "Financial Characteristics of North Dakota Farms, 1995-1997."

The publication contains highlights from a financial analysis of more than 550 farms enrolled in the North Dakota Farm Business Management program, says Andrew Swenson, farm management specialist for the NDSU Extension Service. The publication also provides useful benchmarks for farmers as they evaluate the financial performance of their own farms.

"The farms in the sample tend to be larger than the state average farm size, with gross sales averaging $223,369 in 1997," says Swenson. "Average acreage ranged from about 1,450 in the Red River Valley to 2,500 (including 1,175 acres of pasture) in the west. Also, the average age of farmers in the study, 42, is younger than the state average. But these farms may be pretty representative of operators who rely on farming for their livelihood."

The publication provides median financial performance figures for farms of various types and sizes and in different regions, as described by 16 economic measures, including net farm income, debt-to-asset ratio, current ratio (current assets divided by current liabilites), rate of return on assets and interest expense as a percent of gross revenue.

Swenson reports some of the significant findings in the new study as the following:

• There was severe deterioration of financial performance in 1997, particularly for those categories that performed best in 1996: the Red River Valley and the south central regions; crop farms; the 35 to 45 age group; farms with more than $250,000 sales; and farms with 1 to 20 percent crop land ownership.
• Performance of livestock farms improved for the first time in four years.
• Median net farm income for crop farms was $16,051 in 1997, a decrease of more than $30,000 from 1996. It remained poor for livestock and mixed enterprise farms, with $15,569 and $8,393 respectively. (Taxes and family living costs are not included as expenses in determining net farm income.)
• Three of 10 farms had negative net farm income.
• Nearly two-thirds of the state's farms, and more than 98 percent of farms in the Red River Valley, were crop farms.
• Solvency has deteriorated for the fourth consecutive year. The median debt-to-asset ratio has increased from 46.4 percent in 1994 to 58.6 percent in 1997.
• Median net farm income as a percentage of gross revenue, a financial efficiency measure, was 8.1 percent in 1997, compared to a range of 16.2 percent to 28.0 percent between 1996 and 1991.
• About 33 percent of farms have sales in excess of $250,000, whereas 20 percent have sales less than $100,000.
• Farms with sales of less than $100,000 had the best debt repayment capacity in part because these farms have the most nonfarm income.
• Median interest expense as a percentage of gross revenue increased to 10 percent in 1997, from 9 percent in 1996.

For a free copy of the publication, contact the Department of Agricultural Economics, NDSU, Fargo ND 58105 or call (701) 231-7441. This publication may also be obtained on the World Wide Web at http://agecon.lib.umn.edu/ndsu/aer403.pdf.

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Source: Andy Swenson (701) 231-7379

Editor: Dean Hulse (701) 231-6136