The average net farm income of more than 500 farms enrolled in the North Dakota Farm Business Management Education Program declined by 9 percent in 2006 to $55,000. There was a large contrast in profitability by region.

""Net farm income dropped nearly 90 percent in the west to $7,000 per farm, from $60,000 in 2005,"" says Andrew Swenson, North Dakota State University farm management specialist. ""Conversely, profit was up sharply, to $114,000 per farm, in the Red River Valley.""

The farms in the west averaged more than 3,400 acres (1,507 crop acres and 1,912 pasture acres), but were hard hit by drought, lower beef cattle prices and higher costs. Wheat lost money because of low yields. Beef cattle profits were down by more than half, from $212 to $90 per cow. Sixty percent of the drop was from lower revenue and 40 percent was from higher costs. Beef cattle profits dropped statewide, but the impact of costs on cowherd profit was more severe in the west.

Portions of north-central and south-central regions also were adversely impacted by drought, but, on average, net farm income was $50,280 in the north-central region and $56,030 in the south-central. Average farm size in the central regions was more than 2,400 acres, including pasture. It was a good year for sunflowers and barley in the central regions. Sunflowers averaged more than $30 per acre return on cash-rented land, excluding government payments decoupled from production. On average, spring wheat also was profitable.

The 97 farms in the program that are in the Red River Valley overcame high production costs with phenomenal sugar beet yields of 26 ton per acre, good corn, soybean and wheat yields, and good crop prices. These farms averaged about 1,450 crop acres. Sugar beets and corn profit was particularly strong, while spring wheat and soybeans averaged $21 and $23 per acre profit on cash-rented land, respectively.

In 2006, the average cash revenue and expenses of farms in the North Dakota Farm Business Management Education Program were $360,580 and $299,061, respectively. Inventory change added $16,881 to income and depreciation. Capital adjustments increased expenses by $23,696. The top five sources of cash income per farm were spring wheat, $62,000; all beef cattle enterprises, $53,000; soybeans, $51,000; corn, $27,000; and crop insurance indemnity payments, $24,000. The five largest cash expense items were land rent, $44,000; fertilizer, $36,500; crop chemicals, $29,000; seed, $27,500; and fuel and oil, $24,500.

""The drop in net farm income occurred at the same time that the recorded annual family living expenses plus income taxes increased to nearly $54,000 per farm,"" Swenson says. ""This almost would consume all of the $55,000 average net farm income. However, a second source of income, off-farm wages and salaries, averaged slightly more than $16,000. All other sources of nonfarm income, such as business and rental income, averaged about $7,000.

""It seems as if the difference between very profitable farms and the rest is widening,"" he says. ""There is a substantial segment of farms that are struggling to earn enough to cover family living expenses and add wealth. Although the most profitable one-third of the farms averaged $146,000 net farm income, the remaining two-thirds of all farms averaged less than $8,000 net farm income in 2006."

The state farm business management summary soon will be available on the Web at http://www.ndfarmmanagement.com. It can be ordered for $6 from Farm Business Management, P.O. Box 6022, Bismarck, ND 58506. The price includes postage and handling. Phone orders can be made by calling (701) 328-9640. Regional summaries for western, north-central and south-central North Dakota, and the Red River Valley of Minnesota and North Dakota also are available. In addition to whole-farm financial information, these books detail costs and returns of livestock and crop enterprises.

NDSU Agriculture Communication