NDSU publication provides summary of N.D. farm financial performance
The “Financial Characteristics of North Dakota Farms, 2004-2013” publication summarizes the performance of more than 500 farms enrolled in the North Dakota Farm Business Management Education program.
Acreage per farm has remained fairly stable the past 10 years as young farmers have replaced retiring producers. In 2013, average and median acreage per farm was 2,581 and 1,865, respectively. However, farm gross cash revenue has more than doubled. In 2013, the average and median gross cash revenue was $868,840 and $606,730, respectively. Median total farm assets increased 130 percent and median total farm liabilities increased 59 percent during the past 10 years. In 2013, more than 70 percent of the farms were crop farms and the median age of a farm operator was 48.
There was a significant decline in financial performance in 2013 because of sharply lower grain prices and about 8 percent higher crop production costs per acre. Median net farm income dropped 62 percent to $90,629 from the record high profit year of 2012.
“Financial performance in 2007-2012, excluding 2009, was much superior to other years in the 2004 through 2013 period,” says Andy Swenson, North Dakota State University farm management specialist. “Overall performance was the worst in 2006. It was the best in 2012 due to record crop prices and surprisingly strong yields for nearly all crops because stored soil moisture from a wet 2011 sustained crops through the dry summer.” Median current ratio, a measure of a farm’s ability to meet financial obligations when they come due, was the highest, at 2.3, in 2012, compared with 1.9 in 2013 and a range of 1.2 to 1.4 during 2009 and 2003 through 2006.
“The median term debt and capital repayment margin was $25,849 in 2013,” Swenson says. “It was the highest, at $185,291, in 2012. Prior to 2007, the 10-year high was $21,012. Only 3.5 cents from every dollar of gross revenue was necessary to cover interest expense in 2013, up from 2.8 in 2012. Since 2006, interest expense as a percent of gross revenues generally has improved because of lower interest rates and much higher gross revenues.”
The Red River Valley and crop farms typically had stronger profitability, solvency and repayment capacity than other regions and farm types. Exceptions were 2013, 2009 and 2007, when the north-central region, and 2005, when the south-central region had the best performance. Also, in 2005, livestock farms had better financial performance than other farm types.
“In 2013, farms with sales of less than $500,000 were nearly three times more likely to have a debt-to-asset ratio higher than 70 percent than farms with sales greater than $500,000,” Swenson says. “Also, as expected, the debt-to-asset ratio improved and the level of cropland ownership increased as farmers got older.”
The publication uses 16 financial measures to evaluate liquidity, solvency, repayment capacity, profitability and financial efficiency.
Farms are grouped by region, type, size, gross cash sales, land tenure, profit, debt-to-asset ratio and the age of the farmer to look at relationships between financial performance and farm characteristics.