The “Financial Characteristics of North Dakota Farms, 2005-2014” publication summarizes the performance of more than 500 farms enrolled in the North Dakota Farm Business Management Education program.

Acreage per farm has remained fairly stable the past 10 years as young farmers have replaced retiring producers. In 2014, average and median acreage per farm was 2,478 and 1,847 acres respectively. However, median farm gross cash revenue more than doubled from $281,667 in 2005 to $606,730 in 2013 before falling to $531,374 in 2014.

Median total farm assets increased 135 percent and median total farm liabilities increased 84 percent over the past 10 years. More than 70 percent of the farms were crop farms. The median age of farm operators was 48 in 2014.

There was a significant decline in financial performance for 2014 and 2013, despite record wheat yields and beef prices, because of sharply lower grain prices. Median net farm income declined to $54,543 in 2014 and $90,629 in 2013 from $238,054 in the record high profit year of 2012.

The Red River Valley and crop farms typically have stronger profitability, solvency and repayment capacity than other regions and farm types, respectively, but not in 2013 and 2014.

The 2014 median net farm income was $32,347 for crop farms compared to $95,130 for livestock farms, and only $3,921 for Red River Valley farms compared to $69,995 for farms in the west region.

“Financial performance from 2007-2012, excluding 2009, was superior to other years in the 2005 through 2014 period,” says Andy Swenson, North Dakota State University Extension farm and family resource management specialist. “Overall performance was the best in 2012. Over the 10 year period the worst liquidity, solvency and net farm income occurred in 2006, but the lowest rates of return on assets and equity, repayment capacity and financial efficiency measures were in 2014.

Median current ratio, a measure of a farm’s ability to meet financial obligations when they come due, was the highest in 2012, at 2.3, compared to 1.6 in 2014. “The median term debt and capital repayment margin, which is the amount available after making term debt payments and providing for family living expenses and taxes, was only $3,556 in 2014. It was the highest, at $185,291, in 2012,” Swenson says. Only 3.5 cents from every dollar of gross revenue was necessary to cover interest expense in 2013 and 2014, up from 2.8 cents in 2012. Since 2006, interest expense as percent of gross revenue has generally improved because of lower interest rates and much higher gross revenues.”

In 2014, median rates of return on assets and equity were 2.8 and 2.1 percent, respectively, compared to 16.2 and 24.8 percent, respectively, in 2012. The rate of return on equity was less than the rate of return on assets, which indicates that debt capital was not employed profitability, in 2005, 2006, 2009 and 2014.

“In 2014, farms with sales of less than $500,000 were nearly twice as likely to have a debt-to-asset ratio 70 percent higher 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.”

The publication 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.

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 is also available at http://ageconsearch.umn.edu/ (search for Financial Characteristics of North Dakota Farms).

Agriculture Communication - Sept. 10, 2015