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NDSU Publication Provides 10 Year Summary of N.D. Farm Financial Performance

The publication uses 16 financial measures to look at relationships between financial performance and farm characteristics.

The “Financial Characteristics of North Dakota Farms, 2006-2015” publication summarizes the performance of more than 500 farms enrolled in the North Dakota Farm Business Management Education program.

In 2015, the median age of farm operators was 48 and the average and median acreage per farm was 2,371 and 1,847, respectively. Over 70 percent of the farms were crop farms.

Acreage per farm has remained fairly stable the past 10 years, as young farmers have replaced retiring producers, but the farms have increased in size as measured by gross revenue and the value of total assets.

Median farm gross cash revenue more than doubled from $281,667 in 2006 to $606,730 in 2013 before falling to $499,756 in 2015. Median total farm assets increased 115 percent and median total farm liabilities increased 73 percent over the past 10 years.

“Financial performance from 2007 to 2012, excluding 2009, was superior to other years in the 2006 through 2015 period,” says Andy Swenson, North Dakota State University farm management specialist. “Overall performance was best in 2012. Over the 10 year period, the lowest net farm income, rates of return on assets and equity, repayment capacity and financial efficiency occurred in 2015.”

There has been a sharp decline in financial performance since 2012, despite record wheat yields and beef prices, because of sharply lower grain prices. Median net farm income declined 62 percent in 2013, 40 percent in 2014, and 65 percent to $18,982 per farm in 2015.

“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 minus $16,382 in 2015,” says Swenson. “It was the highest, at $185,291, in 2012.”

In 2015, 4.3 cents from every dollar of gross revenue was necessary to cover interest expense. From 2006 to 2012, interest expense as percent of gross revenues generally improved because of lower interest rates and much higher gross revenues.

In 2015, median rates of return on assets and equity were 0.4 percent and minus 1.6 percent, respectively, compared to 16.2 percent and 24.8 percent 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 2006, 2009, 2014 and 2015.

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

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

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).

NDSU Agriculture Communication - Sept. 12, 2016

Source:Andrew Swenson, 701-231-7379, andrew.swenson@ndsu.edu
Editor:Kelli Armbruster, 701-231-6136, kelli.armbruster@ndsu.edu
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