The publication ""Financial Characteristics of North Dakota Farms, 2006-2007"" contains highlights from a financial analysis of more than 500 farms enrolled in the North Dakota Farm Business Management program, along with useful benchmarks to evaluate the financial performance of farms of various types and sizes and in different regions. Farm financial trends from 1998 through 2007 also are given.

These benchmarks are in the form of 16 median financial performance figures, including net farm income, debt to asset ratio, current ratio, term debt coverage ratio and interest expense as a percentage of gross revenue.

In 2007, median and average acreage per farm was 2,000 and 2,478, respectively. Median and average cash farm revenue was $353,252 and $458,843, respectively. Nearly one-third of the farms had gross sales exceeding $500,000.

“The median may be a better indicator of the typical farm because a few very large farms can significantly raise the average,” says Andrew Swenson, North Dakota State University Extension Service farm and family resource management specialist. “The median is a midpoint; half the farms have a higher amount and half are lower.”

During a 10-year period (1998 through 2007), the size of farms and the age of farm operators enrolled in the North Dakota Farm Business Management Education Program increased. Median gross revenue doubled and median farm assets and liabilities increased 62 percent and 37 percent, respectively. The median age of the farm operator increased from 42 to 47.

Every financial measure for 2007 was superior to any other year for the 1998 through 2007 period. The highest median net farm income was $127,791 in 2007, compared with the second highest, $49,181 in 2003. The lowest was $19,491 in 1998.

The Red River Valley and crop farms typically had stronger profitability, solvency and repayment capacity from 1998 through 2007 than other regions and farm types. Exceptions were 2007, when the central regions had the best regional performance and 2005, when the south-central region and livestock farms had better performances. The 2007 and 2006 median net farm income for crop farms was $171,838 and $53,642, respectively, compared with only $25,531 and $6,150 for livestock farms. In 2007, more than 70 percent of farms were classified as crop farms.

“Farms with sales of less than $100,000 were more than twice as likely to have high levels of debt (more than 70 percent debt-to-asset ratio) than were farms with sales greater than $500,000,” Swenson says. “Farms that own some cropland, but less than 40 percent, were more likely to be crop farms, farm more acreage, have larger sales and be more profitable. As expected, solvency and percent of cropland owned increased with farmer age.”

In five of the last 10 years (1999, 2000, 2003, 2004 and 2007), the rate of return on equity exceeded the rate of return on assets, which indicates that debt capital was employed profitably. Interest expense as a percent of gross revenue improved in 2007 because of a sharp increase in gross revenue, after worsening in 2005 and 2006 because of higher debt and interest rates.

For a free copy of the publication, contact the Department of Agribusiness and Applied Economics, NDSU, Fargo, ND 58105-5437, or call (701) 231-7441. This publication also may be obtained on the Web at http://agecon.lib.umn.edu/ (search for “Financial Characteristics of North Dakota Farms, 2006 2007”).

NDSU Agriculture Communication