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Records Indicate Increased Spending by N.D. Farm Households in 2006

During the past 10 years, average farm family living expenses have increased from $30,519 in 1997 to $47,031 in 2006.

Living expenditures averaged $47,031 for North Dakota farm households in 2006. This figure is based on 258 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 3.2 people.

The largest expenditure was medical care and health insurance at $8,437. This has been the largest expense since 2001, Swenson notes. In the decade of the '90s, food was the largest expense. Food now is fourth at $6,879. The second largest expense was shelter, supplies and furnishings at $6,978. The third largest expense was personal purchases and recreation at $6,956. This also was the category that experienced the third largest percentage increase from the previous year.

Another large expense, at $5,024, was vehicle operation and purchase for the household, but not for farm business purposes. From there the expenses by category are significantly lower, starting with contributions and gifts at $2,525. Two of the smaller expense categories were life and other personal insurance at $1,947 and nonfarm interest expenses at $956. These two categories had the largest percent increases from the previous year. A few farms had very large life insurance purchases, possibly for estate planning purposes.

During the past 10 years, average farm family living expenses have increased from $30,519 in 1997 to $47,031 in 2006. There have been changes in the relative importance of expense categories, as measured by the percent of total household expenditures, during this time period. The largest increases have been in medical care and health insurance, which went from 16.5 percent to 18 percent of total household expenditures. Vehicle operation and purchase increased from 9 percent to 11 percent. Expense categories that had the greatest decline in relative importance were food, which went from 17.4 percent to 14.6 percent of household spending, and clothing, which went from 6 percent to 4 percent.

Overall, North Dakota farm family living expenses increased 3.6 percent from 2005 to 2006. This is similar to the 3.2 percent increase in the U.S. Consumer Price Index (CPI). The CPI measures price changes of a market basket of consumer goods and services that reflects the spending patterns of urban consumers. However, the percent change in farm family living expenditures often doesn't closely track the CPI because it reflects both a change in prices and the level of purchases, whereas the CPI only is a measure of price change. Farm income can vary significantly from year to year, which has a destabilizing impact on household spending, especially for durable goods.

""Something which may be of concern to all family households, rural and urban, is that the average percent increase in the CPI during 2005 and 2006, although somewhat modest, does represent the largest increase during a two-year period that has occurred in the past 14 years,"" Swenson says. ""The concern is whether this becomes a longer-term inflationary trend.""

The CPI information can be found at http://www.bls.gov/cpi.


NDSU Agriculture Communication

Source:Andrew Swenson, (701) 231-7379, andrew.swenson@ndsu.edu
Editor:Rich Mattern, (701) 231-6136, richard.mattern@ndsu.edu

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