Extension and Ag Research News


North Dakota Farm Profits Remained Strong in 2008

Net farm income averaged $180,746.

Last year’s farm profit in North Dakota nearly matched the results of 2007. The 2008 state average report of the North Dakota Farm Business Management program showed net farm income averaged $180,746. The median was substantially less at $114,520. The median is the midpoint, which means one-half of the farms had a higher number and one-half had a lower number.

“Average net farm income was down 6 percent and the median was 12 percent lower than reported in 2007,” says Andy Swenson, North Dakota State University Extension Service farm management specialist. “However, 2008 net farm income was much higher than normal. The average net farm income for the five years of 2002 through 2006, prior to the 2007 to 2008 period of strong crop prices, was $61,600.”

Similar to 2007, beef farms performed much worse than crop farms in 2008. The average net beef farm income was less than $15,000. Profitability of the cow-calf enterprise collapsed to $12 per cow because of lower calf prices and higher costs.

For crop farms, high crop prices and crop insurance payments helped offset the impact of dry weather in the west and the greatest one-year increase in production costs that farmers have ever seen.

On cash rented land, the cost of production for soybeans increased by more than one-fourth. For spring wheat, barley and corn, the increase ranged between 33 percent and 40 percent. For durum, costs increased by almost one-half.

“In 2008, very high contract prices were offered to entice growers to plant the crop that competing buyers wanted to procure,” Swenson says. “This provided strong profit potential. Malting barley probably is the best example of profit potential that was realized, with a net return, on average, of $158 per acre on cash-rented land. Average net return also was strong for corn, spring wheat, canola, pinto beans, sunflowers and soybeans, ranging from $92 to $73 per acre. Net return per acre does not include direct government payments, which, when averaged over all crop acres, is about $9.50 per acre.”

Total acreage per farm in the state summary of the North Dakota Farm Business Management Education Program averaged slightly less than 2,600 acres. Of that acreage, 717 acres was pasture. The average age of the operator for these farms was 45 years.

Net farm income is calculated by adjusting net cash income less depreciation by changes in inventory. Management depreciation of machinery is used instead of tax depreciation. This results in a higher net farm income because management depreciation usually is a lower but more accurate estimate of machinery ownership cost than tax depreciation, which often is accelerated through features of federal legislation designed to encourage machinery purchases and stimulate the economy.

Farmers have substantial investments in equipment, livestock and land. Net farm income represents the annual “payment” a producer receives on these farm investments and for the management and labor the farm family provides. Farmers are self-employed and therefore do not receive benefits that employers often provide wage or salary earners, such as pension plans and health insurance. Therefore, farm operators need to provide for those items and for self-employment and income taxes from their net farm income.

The 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 of livestock and crop enterprises.

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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