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NDSU Publication Provides Summary of N.D. Farm Financial Performance

Farm gross cash revenue has more than doubled during the past 10 years.

The “Financial Characteristics of North Dakota Farms, 2003-2012” publication 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 the age of the farmer to look at relationships between financial performance and farm characteristics.

In 2012, median and average acreage per farm was 1,932 and 2,550, respectively. Farm gross cash revenue has more than doubled during the past 10 years. In 2012, the median and average gross cash revenue was $585,143 and $799,464, respectively. More than 70 percent of the farms were crop farms. The median age of farm operators was 47.

“Financial performance in 2007-2012, excluding 2009, was much superior to other years in the 2003 through 2012 period,” says Andy Swenson, North Dakota State University farm management specialist. “Overall performance was the worst in 2006. It was the best in 2012 due to record crop prices and surprisingly strong yields for nearly all crops because stored soil moisture from a wet 2011 sustained crops through the dry summer.”

Median current ratio, a measure of a farm’s ability to meet financial obligations when they come due, was the highest, at 2.3, in 2012, compared with a range of 1.2 to 1.4 during 2009 and 2003 through 2006.

“The median term debt and capital repayment margin was the highest, at $185,291, in 2012,” Swenson says. “Prior to 2007, the 10-year high was $21,012. Only 2.8 cents from every dollar of gross revenue was necessary to cover interest expense in 2012. Since 2006, it generally has improved because of lower interest rates and much higher gross revenues.”

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 record.

“In 2012, farms with sales of less than $500,000 were four times more likely to have a debt-to-asset ratio higher than 70 percent than farms with sales greater than $500,000,” Swenson says. “Also, as expected, the debt-to-asset ratio improved and the level of cropland ownership increased as farmers got older.”

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 is on the Web at http://ageconsearch.umn.edu/ (search for Financial Characteristics of North Dakota Farms).

NDSU Agriculture Communication – Oct. 4, 2012

Source:Andy Swenson, (701) 231-7379, andrew.swenson@ndsu.edu
Editor:Rich Mattern, (701) 231-6136, richard.mattern@ndsu.edu
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