N.D. Farm Household Expenditures Increased in 2008

Living expenditures averaged $57,404 for North Dakota farm households in 2008. This figure is based on 251 farms enrolled in the North Dakota Farm Business Management Education Program that kept detailed living expense records throughout the year.

The average does not include income taxes or self-employment taxes, says Andrew Swenson, North Dakota State University Extension Service farm management specialist. The average household size of the farms was 3.1 people.

The largest expenditure was medical care and health insurance at $9,374. Medical care and health insurance has been the largest expense since 2001. In the decade of the '90s, food was the largest expense. Food now is the fifth largest expense at $7,540.

The second largest spending category was shelter, supplies and furnishings at $9,082. This category had an unusually large increase, more than 20 percent, from last year. It includes upkeep and repairs. The increase probably was due to house updating or remodeling because farms had strong net income in 2008. The third largest spending category was personal purchases and recreation at $8,434, which was a 7 percent increase.

Operation and purchase of nonfarm vehicles moved up to the fourth largest expense item at $8,347 for 2008. This was an increase of more than 25 percent. During the previous 10 years, it was the fifth largest expense.

“One explanation is high fuel prices,” Swenson says. “However, the main reason was vehicle purchases. Vehicle purchases are volatile from year to year depending on farm income. In 2008, the average amount spent on vehicle purchases was 50 percent higher than 2007 and double the purchases made in 2006.”

Other expense categories were significantly lower, starting with contributions and gifts at $3,227. The six smallest expense categories were utilities at $2,676, “other” at $2,186, clothing at $1,996, life and other personal insurance at $1,752, education at $1,746 and nonfarm interest expenses at $1,044.

During the past 10 years, average farm family living expenditures reported by the North Dakota Farm Business Management Education Program have increased from $34,889 in 1999 to $57,404 in 2008. The increase in 2008 was 12 percent from the previous year and represents the largest annual increase during the 10-year period.

One contributor to the jump in expenditures was a general increase in the price of goods and services. There was a 3.8 percent annual increase in the U.S. Consumer Price Index (CPI) in 2008. (CPI information can be found at http://www.bls.gov). This was the largest increase since 1991. However, during the last four months of 2008, as the general economy plummeted, the CPI actually decreased on a month-to-month basis.

“A more important reason than inflation to explain the increase in farm household expenditures was a greater level of purchasing by producers who experienced net farm income that was three times larger than the 2002 to 2006 five-year average,” Swenson says. “In good income years, the purchasing of vehicles and home improvements should be expected to increase.”

NDSU Agriculture Communication