The publication “Financial Characteristics of North Dakota Farms, 2002-2011” summarizes the performance of more than 500 farms enrolled in the North Dakota Farm Business Management Education program. The program uses 16 financial measures to evaluate liquidity, solvency, repayment capacity, profitability and financial efficiency.

Farms are grouped by region, type, size, gross cash sales, land tenure, profit, debt-to-asset ratio and age of farmer to look at relationships between financial performance and farm characteristics.

In 2011, median and average acreage per farm was 1,968 and 2,619, respectively. Farm gross cash revenue has increased by more than 150 percent in the past decade. In 2011, the median and average was $569,268 and $757,134, respectively. More than 70 percent of the farms were crop farms. The median age of farm operators was 47.

“Median net farm income was $144,414 in 2011, the second highest in the 2002-2011 period,” says Andy Swenson, North Dakota State University Extension Service farm management specialist. “The positives of high grain prices, large crop insurance indemnity payments and strong livestock prices more than offset below average yields, record high costs and nearly one-fourth of the cropland idled by wet weather.”

The highest income during the past 10 years was achieved in 2010 because of very strong yields and prices. Grain prices improved during the small-grain harvest and continued upward the rest of the year. This provided additional profit opportunities for those who had inventories of 2009 crop year grain to sell. Record yields were set for corn and sugar beets, while wheat, barley and canola had the second highest in history. Also, per-acre costs of most crops were flat, federal disaster payments for the 2008 crop year were finally determined and paid in 2010, and higher livestock prices led to the largest year-to-year increase in beef cow-calf profit in two decades.

Financial performance in 2011, 2010, 2008 and 2007 were much superior to other years in the 2002-2011 period. Overall performance was the worst in 2006. One measure of financial efficiency is the percentage of each dollar of gross revenue that is converted to profit. The highest median net farm income as a percent of gross revenue in a decade was 33 percent in 2010, while the lowest was 13 percent in 2009. It was 28 percent in 2011, 24 percent in 2008 and 31 percent in 2007 after ranging between 14 to 20 percent from 2002 to 2006.

The Red River Valley and crop farms typically had stronger profitability, solvency and repayment capacity than other regions and farm types. Exceptions were 2007 and 2009, when the north-central region had the best regional performance, and 2005, when the south-central region and livestock farms had a better performance.

Farms with sales of less than $500,000 were more than three times more likely to have a debt-to-asset ratio higher than 70 percent than farms with sales greater than $500,000.

“As expected, the percent of debts to assets decreased and the level of cropland ownership increased as farmers got older,” Swenson says. “The rate of return on equity was greater than the rate of return on assets, which indicates that debt capital was employed profitably, nine of the past 10 years for farms with sales greater than $500,000, but in only three years by the farm group with less than $250,000 of sales.”

For a free copy of the publication, contact the NDSU Department of Agribusiness and Applied Economics, Dept. 7610, P.O. Box 6050, Fargo, ND 58108- 6050, or call (701) 231-7441. This publication also may be obtained on the Web at http://ageconsearch.umn.edu/ (search for Financial Characteristics of North Dakota Farms).

NDSU Agriculture Communication – Sept. 25, 2012