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

August 26, 1999

New Publication Shows Trends in N.D. Farm Financial Performance

One out of four North Dakota farms had negative net farm income in 1998, and one out of two farms was not able to make all scheduled term debt payments with 1998 income. These findings are among many relating to North Dakota farms in a new publication from North Dakota State University.

Titled "Financial Characteristics of North Dakota Farms, 1996-1998," the publication contains highlights from a financial analysis of more than 530 farms enrolled in the North Dakota Farm Business Management program, along with useful benchmarks all farmers can use to evaluate the financial performance of their own operations, says Andrew Swenson, farm management specialist for the NDSU Extension Service.

Those benchmarks are in the form of 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 liabilities), rate of return on assets and interest expense as a percentage of gross revenue.

"The median provides a better indicator of how the typical farm is faring," Swenson explains, "because a few very large farms can significantly raise the average. The median is a midpoint: half the farms have a higher amount and half are lower."

Average acreage per farm in the study ranged from 1,481 acres in the Red River Valley to 2,933 acres (pasture and crop land) in the west. The state average was 1,290 acres. The average age of farmers in the study, 43, was younger than the state average.

"These farms may be representative of operators who rely on farming for their livelihood," Swenson concludes. "Nearly 5 percent of all North Dakota farms with gross sales greater than $100,000 are included in the analysis."

Swenson points to other significant findings in the new study:

• In 1998, farms experienced the second weakest annual financial performance of the 1991-1998 period because record yields of five crops and emergency federal farm aid were unable to offset low crop and livestock prices.
• Net farm income in 1998 improved relative to the extremely poor 1997 year, especially for farms in the south central region, for farms with greater than $250,000 in gross sales and for crop farms. Median net farm income was $19,491 in 1998, compared to $14,290 in 1997 and $31,063 in 1996.
• Solvency deteriorated for the fifth consecutive year. In 1998, one-third of all farms had debt exceeding 70 percent of asset values, compared to only one out of every six farms in 1993.
• Profitability of livestock and mixed-enterprise farms have been extremely weak during the 1995-1998 period. In 1998, median net farm income for livestock and for mixed-enterprise farms was $14,944 and $8,147, respectively, compared to $26,398 for crop farms.
• Crop farms are about four times more likely to have sales in excess of $250,000 than either livestock or mixed-enterprise farms.
• Nearly two-thirds of all farms and 97 percent of farms in the Red River Valley were crop farms.
• Median net farm income as a percentage of gross revenue, a financial efficiency measure, was only 12.7 percent in 1998 and 8.1 percent in 1997, compared to a range of from 21.7 to 28.0 percent during the 1991-1994 period.
• Median interest expense as a percentage of gross revenue increased to 16.7 percent for farms with sales under $100,000 in 1998.
• Farms that rent more than 60 percent but less than 100 percent of crop land are more likely to be crop farms and have larger sales and better profitability than farms that rent all crop land or farms that rent less than 60 percent of crop land.
• Farmers 35 t0 45 years old generally had more profitable operations than farmers who were younger than 35 or older than 45.

For a free copy of the publication, contact the Department of Agricultural Economics, NDSU, Fargo ND 58105-5437, or call (701) 231-7441. This publication may also be obtained on the World Wide Web (http://agecon.libu.mn.edu/ndsu/aer426.pdf or http://agecon.libu.mn.edu/ndsu.html ).

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Source: Andrew Swenson (701) 231-7379
Editor: Dean Hulse (701) 231-6136

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Click here for a pdf version of this graphic. (13KB b&w information graphic)