Choose your superlative and apply it to North Dakota farm financial performance in 2007, says Andrew Swenson, North Dakota State University Extension Service farm management specialist.

“It was outstanding,” Swenson says. “The average net farm income of farms enrolled in the North Dakota Farm Business Management Program was $192,000, while the median was $130, 000. This is three to four times greater than normal. In the past, this level of profit has been attained by the top 20 percent of producers, but never has the average for all producers come close to this level. For comparison purposes, the average in 2006 was $54,800 and the average during the previous five years (2002 through 2006) was $61,600.”

However, it was not a great year for all types of farms. Farms whose dominant source of income was from crop production were much more successful than other types of farms. Crop farms averaged $252,000 in net farm income on about 2,200 crop acres per farm. In contrast, beef farms averaged less that $42,000. Farms with a substantial portion of income from both beef and crop sales averaged $138,000. “Other” farm types averaged $64,000.

A combination of unusual circumstances occurred to create the lofty crop profit in 2007. First, crop prices rose throughout the year. A portion of net farm income came from this phenomenon. Nearly all crop inventory held at the start of the year garnered financial gain from sales at prices higher than it was valued on the beginning balance sheet.

The second and most significant circumstance was that nearly every crop set all-time record average prices by a wide margin. Third, yields were above average. Some set records. One crop, dry edible beans, combined very high, but not record, prices with all-time record yields.

The average net income from winter wheat was more than $150 per acre. It had a state average record yield of 50 bushels per acre. It also helped that acreage of winter wheat was the fourth highest in history.

Average profit for corn, soybeans, durum and oil sunflowers on cash-rented ground was between $100 and $150 per acre. In 2007, the state average soybean yield tied for second highest, corn yield was third highest and oil sunflower yield was tied for the sixth highest in North Dakota history. Corn acreage in North Dakota set a record, nearly 1 million more than in 2006.

Spring wheat and barley achieved average net returns of between $75 and $100 per acre by also combining record prices and above-average yields.

Total acreage of all farms in the state summary of the North Dakota Farm Business Management Education Program averaged slightly less than 2,500, of which 636 acres was pasture. The average age of the operator for these farms was 46.

Net farm income is calculated as cash revenue less cash expenses plus adjustments for inventory changes and depreciation. Income and self-employment taxes and family living expenses are not used in the calculation. Net farm income represents the return to the farm family for labor, management and equity investment used in the farm business.

“Looking at historic trends, farm profit in 2007 was extremely outside the norm,” Swenson says. “As such, it may be unreasonable to expect that all the circumstances leading to that profit level will continue in the future.”

Nonetheless, Swenson expects that 2008 will be quite profitable for crop farms because strong commodity prices and crop insurance coverage will tend to offset some significant challenges. One negative is that the amount of gains from the sale of crop inventories will probably not be replicated because there was not as much unpriced inventory held at the beginning of 2008 as there was in 2007.

“More significant challenges in 2008 involve production costs and yields,” Swenson says. “We know that costs will be substantially higher. Per-acre costs of crop production set a record in 2007, but pale in comparison to the costs producers are incurring in 2008. Averaged over all crops, the increase in total production costs per acre in 2008 probably will be around 30 percent.”

Also, given the cool, dry weather in much of the state at the start of the growing season, it is probable that yields, on average, will be less in 2008 than last year.

The state farm business management summary is 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 for livestock and crop enterprises.

NDSU Agriculture Communication