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May 25, 2006 In 2005, It Was Better to Farm Outside the Red River Valley A rare event occurred in 2005, according to Andrew Swenson, a farm management specialist with the North Dakota State University Extension Service. “North Dakota farms outside of the Red River Valley made more money than Red River Valley farms,” Swenson says. “Since 1994, the Minnesota and North Dakota Farm Business Management programs have published a combined Red River Valley report. Only in 1998 and 2005 have farms in the Red River Valley earned less than farms that are west of the valley.” In 2005, the 234 farms in the Red River Valley report had average net farm income of $44,360, compared with $59,607 for farms in the North Dakota Farm Business Management program outside of the Red River Valley. “This was a rather shocking turn of events,” Swenson says. “During the prior six years (1999-2004), Red River Valley farms had averaged nearly double the net income of their outside-of-the-valley neighbors. “What was unique in 2005 to cause the profit turnaround was the fact that all farms felt the negative impact of higher input costs, but nonvalley farms were able to offset this with strong crop yields and livestock profit. The weather also was not kind to Red River Valley farmers in 2005. Net farm income dropped 48 percent. Particularly hard hit by excess moisture was the northern valley. For instance, the reporting farms in Kittson and Marshall counties in northwest Minnesota averaged a loss of $43,200.” Corn and soybean yields were good, but some counties west of the valley did even better. For example, Barnes County averaged higher soybean and corn yields than Cass county. Ransom, Dickey, LaMoure and Sargent counties had higher yields than Richland County. Wheat yields were slightly greater in the Red River Valley than the rest of the state, but not nearly enough to compensate for higher production costs. The beef cow-calf enterprise, nearly extinct in the Red River Valley, made record profits in 2005. How do costs and revenues typically differ between these two geographic areas? Per-acre production costs always have been higher in the Red River Valley. Historically, more inputs are applied to support the higher expected yields, land costs are higher and the heavy soils of the Red River Valley, combined with greater precipitation, require more land preparation and its associated machinery and labor costs. As an example, in 2005 the average cost per acre to grow wheat on cash-rented land was $213 in the Red River Valley, compared with $145 outside of the valley in North Dakota. However, the Red River Valley usually more than makes up for higher costs with a different enterprise mix and higher yields. The biggest difference in the enterprise mix is the addition of sugar beets and the lack of livestock. Also, corn and soybeans historically have been more concentrated, but production of these crops has greatly increased during the last 10 years in many counties west of the Red River Valley. “The odds are that the trends of the past will be re-established in 2006,” Swenson says. “There never have been successive years in which Red River Valley farms have taken a backseat in profits, compared with those outside the valley.” ### Source:
Andrew Swenson, (701) 231-7379, aswenson@ndsuext.nodak.edu |
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North Dakota State University |
