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Mar. 27--FARGO, N.D. -- Red River Valley farmers in adult farm
management programs got bigger and were more profitable in 1999
than in 1998, according to a new report.
"One thing that always sticks out is the difference
between the high-and low-profitability groups," says Andrew
Swenson, a North Dakota State University, Fargo, Extension Service
agricultural economist, who analyzes the numbers.
The 1999 Red River Valley report covers 211 farmers in the
North Dakota and Minnesota Farm and Ranch Business Management
Education courses.
Here are highlights:
-- Profitability -- The average farm in the group realized an
$87,052 profit, which includes $91,375 in government payments. The
1999 payments were extraordinary, because of market loss and crop
disaster payments.
The most profitable 20 percent of the farms earned $225,351 in
profits. That includes nearly $152,000 in government payments.
The least profitable 20 percent lost nearly $2,000, despite
$62,300 in government payments.
The relatively strong year comes after two weak years. The 1997
small grain crop was poor and the 1998 sugar beet crop was poor in
key areas, and prices were poor both years.
The average return on equity was 11.4 percent, up from 2.4
percent last year. The most profitable farms garnered a 17.8
percent return on equity, compared with 10.2 percent in 1998.
-- Debt -- Debt-to-asset ratios declined to 48 percent from 50
percent a year ago.
The most profitable farms reduced 3 percentage points, to a 45
percent debt-to-asset ratio, while the least profitable group
increased 2 points to a 60 percent debt-to-asset ratio.
The report shows that the average farms were able to cover all
of their scheduled term debt principal and interest payments. For
each dollar of revenue generated, farmers could keep nearly 18
cents in 1999, vs. keeping only 5 cents in 1998.
-- Cropland -- Average farm size in the group increased by a
significant 16 percent -- up 244 acres -- to 1,729 acres, during
the year. It isn't clear whether this increase is because more
larger farmers enrolled in the program this year.
The most profitable farms this year have 2,957 acres -- 33
percent larger than last year's most profitable group. The least
profitable farms were 32 percent smaller than last year's
least-profitable group, averaging 1,181 acres.
Farmers in all categories owned 21 percent to 22 percent of the
land they farm.
-- Farm income -- Net per-farm income -- profit -- averaged
$87,052. That's the highest in several years and up significantly
from last year's $20,563 average.
At an average of 1.2 farmers per farm, that's about $73,000 per
family.
The 20 percent of least-profitable valley farms averaged a
$1,947 loss and the 20 percent most profitable averaged $225,351.
Swenson notes that the most profitable farms average 1.5
operators, so the profit would be $150,234 per farm.
"In the valley, some of these farms have up to five
operators per farm," Swenson says.
Larger farms tended to be more profitable than smaller farms in
1999, returning to a typical pattern, Swenson says. In 1998, both
the high-and low-profit farms were larger than average.
¡¤Government -- Federal payments played a key role in 1999
returns. Government payments averaged $91,000 for the farms, up
from about $40,000 in 1998.
Government payments for many farmers doubled or tripled. The
reason is that disaster payments were designed to offset losses
over five years.
Farmers received a doubling of normal Agricultural Market
Transition Payments as a "market loss" payment. Still
another increase came in loan deficiency payments, or LDPs,
Swenson says.
-- Crop insurance -- This income averaged $29,074 for all farms
-- up 23 percent from 1998, despite that year's serious sugar beet
losses.
The 20 percent of farmers in the most profitable category
picked up $52,453 in insurance income, up 55 percent from the
previous year. In 1998, the low-profit farms tended to have more
crop insurance income.
-- Inventory -- Farms ended the year with crop inventories
averaging $176,842, up 26 percent from the previous year.
Inventories on the most profitable farms were up 38 percent.
"Usually when cash is tight, they'll sell down
inventory," says Swenson, adding timing of sales for income
tax and crop prices are other factors.
-- Machinery -- The average farm (annual sales of $492,628)
ended the year with $217,000 in machinery and equipment.
The average farmer bought nearly $32,000 in machinery during
the year, up from about $26,000 the previous year. The most
profitable farmers ($904,556 in sales) bought $61,480 in 1999, up
from $47,000 in 1998.
In 1999, the average farm paid $14,000 in fuel and oil bills,
nearly $28,000 in repairs, $7,500 in lease payments, and $12,800
in custom hire payments.
-- Crops -- Sugar beets account for 25 percent of the gross
cash farm income of the average farms -- ranging from 20 percent
for the least profitable to 26 percent to the most profitable.
At an average of $118,744, beet income was tops among income
generators, followed by $91,375 in government payments, $72,296
for spring wheat receipts and $69,853 for soybeans.
WHO ARE THEY?
The Red River Valley farmers in the farm business management
group included 211 farms in 1999, up slightly from 197 in 1998.
The enrollees pay an annual fee to receive farm analysis
education from programs run through the state departments of
education.
The figures are especially important for policy makers because
they're publicly published figures and compiled from the farm
level with detailed enterprise analysis, says Andy Swenson, a
North Dakota State University Extension Service agricultural
economist, who analyzes the numbers.
Subsequent reports will be for farmers outside the valley.
Typically, about 15 percent of the valley's farms in the
program are new or changed in any given year. Almost all are
crops-only farms. The largest concentrations are in Clay and
Wilkin counties in Minnesota and Richland in North Dakota.
North Dakota's programs in the valley run no farther north than
Kindred, in Cass County. Minnesota's enrollees account for nearly
70 percent of the total in the report. They are scattered
throughout the valley.
Farms in the report tend to be larger than the averages
reported by the National Agricultural Statistics Service. NASS
counts "farms" as anything with $1,000 or more in animal
or crop sales. The average farm in this year's group had $492,628
in farm production value in 1999. That ranged from $256,506 for
the least profitable to $904,556 for the most profitable.
"These farms are large enough where the operators derive
all or most of their family living from the farm," Swenson
says.
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