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

May 6, 1999

N.D. Net Farm Income Outside of RRV Improves in 1998 But Remains Low

Average net farm income for North Dakota's farmers operating outside of the Red River Valley totaled $27,700 for 1998—an amount up 82 percent from the $15,200 they netted in 1997 but still the third lowest level in a decade. One in every four farms had negative net farm income for 1998. The latest net farm income figure comes from a summary of 466 farms enrolled in North Dakota's Farm Business Management Education program.

"Many producers managed to dodge the bullet of low prices with high yields, emergency government aid, loan deficiency payments and lower production costs," says Andrew Swenson, farm management specialist for the North Dakota State University Extension Service. "This very fact, however, is sobering when looking forward to the 1999 crop year because we still have low prices but cannot count on emergency government aid and record crop yields. On the other hand, crop production costs probably will decline again in 1999."

Last year North Dakota had record yields of sunflowers, flax, corn, potatoes and sugarbeets, and slightly above-average yields of wheat and barley, Swenson says.

Low prices hurt producers who sold their 1998 crop, but the price scenario also affected those with stored grain that they produced in previous years but sold at lower prices in 1998, Swenson says. Stored durum was one of the reasons the northwest quarter of the state had the lowest profits in 1998. Also, that area of the state grows fewer acres of the crops that had record yields.

In contrast, Swenson says the east-central portion of the state reversed its pattern of the past several years by posting stronger net farm income than any of the other regions. The reason for the turnaround was exceptionally good crop yields.

Beef farms averaged only slightly more than $1,000 net profit, with net income per beef cow at only $14. This is the fifth consecutive year of extremely low returns to beef producers, Swenson says. From 1994 through 1998, returns per beef cow averaged $3, compared to a $165 per beef cow average for the previous five-year period (1989-1993). Meanwhile, dairy farms showed the greatest profit in 1998, averaging $44,700 because of historically high milk prices.

The average size of the farms in the North Dakota's Farm Business Management Education summary were 1,560 crop acres, and 673 pasture acreage. Average gross revenues were nearly $200,000.

Although the trend toward working off the farm continued in 1998, the rate of the trend moderated, probably because farms are getting bigger and net farm income increased relative to 1997, Swenson says. Nonfarm wages and salaries averaged $10,069 last year for farmers throughout the state (excluding the Red River Valley). The amount of nonfarm wages and salaries represents a 4-percent jump from 1997—and an 88-percent hike from the 1990 average.

"Debt as a percent of assets remained at a relatively high level," Swenson concludes. "It seems as if every year becomes increasingly more critical, and 1999 will be a make-or-break year for many operations. Unfortunately, even if 1999 is a mediocre year, the same critical situation will exist for 2000 and beyond, but crop production costs have declined, and next year, after five years of dismal returns, beef cow-calf profitability should improve."

The state Farm Business Management summary is available for $6, which includes postage and handling. It can be ordered from Farm Business Management, P.O. Box 6022, Bismarck, ND 58506. The telephone number is (701) 224-8390. In addition to whole-farm financial information, these books detail costs and returns of livestock and crop enterprises. Regional summaries for western, north-central and south-central North Dakota are also available.

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Source: Andrew Swenson (701) 231-7379

Editor: DeanHulse (701) 231-6136