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

September 7, 2000

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

In 1999 the debt-to-asset ratio of North Dakota farms improved for the first time in six years, and less than one out of 10 farms had negative net farm income compared to one out of four farms in 1997 and 1998. 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, 1997-1999," 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 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."

The farms in this study are larger and the operators are younger than the state average. Average size of farm and age of operator in 1999 was 2,244 acres and 43 years, respectively, compared to 1,292 acres and 51 years for all farms in the state.

"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:

• Despite very low crop prices, 1999 median net farm income of $42,009 was the highest since 1993 because of extraordinary government and crop insurance payments and improved beef prices.

• The worst financial performance in the 1990s occurred in 1997 and 1998 when more than half of farms could not make scheduled term debt payments with farm and non-farm income.

• The trend of farms getting larger continued in 1999. Median farm acreage and sales were 39 percent and 44 percent higher, respectively, than in 1991.

• Red River Valley farms typically have smaller total acreage and percent of cropland owned, but have much larger total farm sales, assets and liabilities than farms in other regions.

• Nearly two-thirds of all farms, but only 30 percent of farms in the West region were crop farms.

• Crop farms are about four times more likely to have gross revenue in excess of $250,000 than livestock or mixed-enterprise farms. Profitability of livestock and mixed-enterprise farms were extremely weak during the 1995-1998 period.

• Median net farm income as a percent of gross revenue, a financial efficiency measure, was 22.4 percent in 1999 compared to only 8.1 percent in 1997 and a range of 21.7 percent to 28.0 percent over the 1991-1994 period.

• In 1999, the median rate of return on assets was 5.9 percent, for farms with less than 1,600 acres, and 9.7 percent for larger acreage farms.

• About 37 percent of farms with sales less than $100,000 were in the high debt group (greater than 70% debt), compared to 15 percent of farms that had sales greater than $250,000.

• Farmers between 35 and 45 years old typically had more debt, higher gross sales, larger farms and were more profitable than the younger or older age groups.

For a free copy of the publication, contact the Department of Agribusiness and Applied Economics, NDSU, Fargo ND 58105-5437, or call (701) 231-7441. This publication may also be obtained on the World Wide Web (http://agecon.lib.umn.edu/ndsu/aer447.pdf or http://agecon.libu.mn.edu/ndsu.html).

Source: Andy Swenson, (701) 231-7379
Editor: Tom Jirik, (701) 231-9629

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