Farm family living expenditures increased from $43,107 in 2004 to $67,947 in 2011, according to farms enrolled in the North Dakota Farm Business Management Education Program who kept detailed family living records.

This increase occurred even though the average size of the households declined from 3.4 to 3 people. The expenditures do not consider income, Social Security or Medicare taxes.

Changes in family living expenditures from year to year are determined by changes in the prices of items purchased and changes in the amount and types of items purchased. Price changes, as measured by the consumer price index, increased by an average annual rate of 2.6 percent from 2004 to 2011, but North Dakota farm family living expenditures increased by an average of 6.8 percent. This indicates that most of the increase in farm family expenditures was from purchasing more and/or different items, not because of inflation.

“The unusual increase in expenditures is associated with very strong net farm income during the years 2007, 2008, 2010 and 2011,” says Andy Swenson, North Dakota State University Extension Service farm management specialist. “Greater expenditures on personal items, recreation, vehicles and home improvements should be expected after good income years.”

The largest cost is housing, a broad category that includes household supplies, furnishings and repairs, utilities, rent, mortgage interest and insurance. These costs represent 20 percent of total farm family living expenditures. Nationally, housing costs are higher, representing 30 percent of total expenditures. Housing costs for farm families are lower because the farmhouse often is considered an integral part of the business, so little or no house rental or mortgage interest is included in family living expenses.

The medical care and health insurance category is a primary budgeting concern for most families. The percentage of North Dakota farm family expenses allocated is more than twice the national average because of the lack of employer-sponsored health benefits for the self-employed farm family, although the members of some farm families participate in off-farm jobs.

Medical care and health insurance increased from $7,291 in 2004 to $10,810 in 2011 and averaged 17 percent of total farm family expenditures during this period. Personal purchases and recreation was the third most important category, averaging 15 percent, but it spiked higher in 2011.

“Food expenses, as a percent of total farm household expenditures, actually have been in a downward trend from 15 percent in 2004 to 13 percent in 2011,” Swenson says. “North Dakota farm families appear to be managing their food dollars similarly to the national average. Nationally, the Bureau of Labor Statistics (Report No. 1037, 2012) reported that food expenditures for a consumer unit of 2.5 people were $6,129 in 2010, or $2,452 per person. Food expenditures for North Dakota farm families in 2010 were $7,498 for a household of 2.9 people, or only $2,586 per person.”

On average, about 12 percent of North Dakota farm family living expenditures have been for nonfarm vehicle operation and purchase during the past eight years. Vehicle purchases are variable because they correspond with net farm income. Vehicle purchases averaged more than $1,000 more in high-income years than in low-income years.

Contributions and gifts have increased significantly through eight years by going from $2,249 in 2004 to $4,478 in 2011, and averaged 6 percent of total farm family expenditures.

The combined expenditures on nonfarm interest, child care, alimony and child support, and miscellaneous averaged $3,010, or 5.6 percent of total expenditures from 2004 to 2011.

Clothing expenses were $2,221 in 2011 and education expenses were $1,897. These expenses averaged only 3.6 and 3.1 percent of total farm family expenditures in the 2004 to 2011 period, respectively.

A NDSU publication, ""Farm Family Living Trends in North Dakota,” summarizes farm family living expense trends using information from the North Dakota Farm Business Management Education Program.

It can be requested from county offices of the NDSU Extension Service or found at http://www.ag.ndsu.edu/pubs/yf/fammgmt/he453.pdf. A summary of the most recent consumer expenditure survey conducted by the U.S. Department of Labor can be accessed at http://www.bls.gov/cex/csxann02.pdf, and consumer prices indices can be found at http://www.bls.gov/cpi/.

NDSU Agriculture Communication – Oct. 10, 2012