JUNE 1996
Farm Business Management Report:
MN, ND Farm Income Down
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Prairie Grains is the
official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain Growers Association,
South Dakota Wheat,
Inc., and the
Minnesota Barley
Growers Association.
The report analyzed farm income and expenses in 1995 from 408 farms participating in the FBM education program throughout a 16-county area in northwest Minnesota. Financial data in the report is not intended to be inclusive of all farms in the region.
Expenses per dollar of income was 86 cents, up four cents from 1994. The average farm was 45 percent in debt last year, up two percent from 1994. Average net worth was $335,334, up from $280,383 in 1994.
For spring wheat on cash-rented land (average rent cost, $48.63), average gross return was $149.82 per acre and total costs, $159.70, for an average net loss of $9.88. There was a wide swing on net return per acre: the top 20 percent of farms netted $51.07, and the lowest 20 percent lost $56.87 per acre. About 33 bushels per acre on average was needed to break even.
Barley on cash-rented land (average rent, $44) grossed an average of $143.21 per acre, and with an average total expense of $138.94, net return averaged $4.27. For the top 20 percent of farms, net return was $60.07, while the low 20 percent lost an average of $56.48 per acre. An average barley yield of about 48 bushels per acre was needed to break even.
Why the big swing in wheat and barley net profit from the top 20 percent to the low 20 percent of the FBM enrollees? Some factors are pure luck of the draw, such as losses from the weather and market timing: those who stored grain received better prices than those who sold at harvest.
Some things are controllable, however. The more profitable farms spread costs over more acres; use inputs more efficiently, are more timely with pesticide applications; make prudent investments and capital purchases, and take farm records seriously, says FBM instructor Greg Kalinoski.
The North Dakota FBM numbers
Last year N.D. net farm income fell 5 percent in the western third of the state, 24 percent in the south central region and 31 percent in the north central region, according to an analysis of farms enrolled in the N.D. FBM program. Only in the Red River Valley did average net farm income go up. In the rest of the state the average net farm income fell from $39,891 to $30,440, the lowest it has been in six years.
As net farm income fell outside the Red River Valley, family living expenses dropped and non-farm income increased, indicating that families were both cutting back on spending and making an effort to bring in more income from off the farm.
In the Red River Valley the 20 percent of low-profit farms averaged minus $39,004 in net farm income, while the 60 percent middle-profit farms averaged $51,853 and the 20 percent of high-profit farms averaged $174,683. Average for all farms was $58,133, up from about $51,000 reported in 1994.
Much of the seeming increase in Red River Valley farm income was not real but was caused by a new definition used in the analysis, says Andrew Swenson, NDSU farm management specialist. Under a more stringent geographical definition, some farms considered as being in the Red River Valley in 1994 were not included in that region last year.
Two main factors explain the decline in farm profitability in 1995: poor cattle prices, and poor crops in some areas of the state, says Swenson. Last year, cow-calf producers had an average net return of minus $28 per cow. And generally, profit from crop production was low in areas north of I-94 between the Red River Valley and highway 281, and south of 1-94 between highway 281 and the Missouri River, says Swenson.
Excess precipitation robbed producers of tillable acres, yield and quality, and some areas had orange wheat blossom midge problems. Although prices were high for good quality grain, Swenson says many producers took substantial discounts for poor quality caused by scab. Also, disaster payments were not available in 1995, and this hurt some producers.
Swenson's analysis was based on reports of 592 farms enrolled in the North Dakota Farm and Ranch Business Management education program. Regional and state summaries of farms in that program are $5 each and can be ordered from Farm Business Management, P.O. Box 6022, Bismarck, ND 58506. These summaries give detailed costs and returns of individual crop and livestock enterprises, as well as whole-farm financial information.
For more information on the Minnesota Farm Business Management Program, or the annual financial report for northwestern MN farms, call 1-800-959-6282.