NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
May 4, 2000
The average net farm income for farmers enrolled North Dakota's Farm Business Management Education Program who operate outside of the Red River Valley was $51,181 in 1999--the second highest level of income in a decade. But that good news is tempered by several factors, says an agricultural economist at North Dakota State University.
"Getting that level of income in 1999 took extraordinary government and crop insurance payments, much improved beef cow-calf profitability, and, as always, more acres per farm," says Andrew Swenson, farm management specialist with the NDSU Extension Service. "This increase was especially welcome because in 1997 and 1998 farmers experienced the lowest net farm income of the `90s,"
In 1998, average net farm income for the Farm Business Management enrollees was only $27,700, even though there were record yields for five crops and government aid in the form of a market loss payment.
"Going into 1999, we knew cattle prices were on the rebound, but record crop yields and emergency government aid are not something you can plan on every year to help offset low crop prices," Swenson says. "In 1999, we had a mixed bag in terms of yields. Small grains, canola and sunflowers were lower than 1998, but corn, soybeans and flax were at record levels. What really made the difference in 1999 were government and crop insurance payments. In 1998, average governments payments and insurance income was $28,058, and $8,009, respectively, compared to $46,546 and $27,215 in 1999. The increase in government payments was from loan deficiency payments and emergency federal legislation that provided crop loss and market loss payments."
The wet spring that prevented planting in 1999 actually turned out to be a blessing in disguise for many producers because the crop insurance often provided more net income than if all expenses were incurred to raise a low-priced crop, Swenson says. In 1999, durum producers with low yields benefitted from an ill-designed crop revenue coverage (CRC) insurance that provided unusually high coverage levels. In fact, producers who had the lowest net farm income were in northwest and north central North Dakota, where they were able to plant durum and get a crop.
The average 1999 net farm income for the top 20 percent of farms enrolled in the Farm Business Management program was $137,107, and for the lowest 20 percent, a negative $7,970. The gap between these two fifths was the widest of the decade. The average net income of the farms in the middle 60 percent was $42,320. Swenson says this number is probably more representative of typical farm than the broader average. The high-profit farms averaged 2,716 crop acres and received $154,313 in government payments and insurance income, compared to 1,044 crop acres and $37,869 for the low-profit farms.
Profitability of beef farms averaged $36,749 in 1999, which was lower than the average of all farms but a dramatic improvement over the $1,000 beef farm profit of 1998, Swenson says. Net return per beef cow was $97 in 1999, compared to the 1994-1998 average of $3.
Net farm income is calculated on an accrual basis and is the farm income after all costs, including depreciation, are deducted, Swenson explains. Representing the return for the farm family's year of labor, management and the equity investment in the farm, net farm income does not take into account family living expenses, income and social security taxes.
Although net farm income was volatile in the 90s, there were several consistent trends in the Farm Business Management data, Swenson says. For example, farm size steadily increased. By 1999, the average size of the farms in the program had increased by more than 40 percent: from 1,169 crop acres and 451 pasture acres in 1990 to 1,622 crop acres and 683 pasture acres in 1999. The proportion of crop land being rented (versus being owned) increased from 61 percent to 69 percent.
Also during the period, off-farm wages and salaries increased every year, from about $5,300 in 1990 to nearly $11,000 in 1999. In addition, the average age of farmer increased from 38.8 in 1990 to 43.3 in 1999.
"Based on the data, it can be argued that farm families are working harder on and off the farm and getting older," Swenson says.
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) 328-9640. 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: Dean Hulse (701) 231-6136