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Published August 31, 2010, 07:50 AM

Report: Most ND farms will do all right during coming decade

North Dakota farms generally will fare OK financially during the next decade, says a new report from North Dakota State University in Fargo.

By: Jonathan Knutson, Agweek

North Dakota farms generally will fare OK financially during the next decade, says a new report from North Dakota State University in Fargo.

But farm expenses are likely to remain a major concern, and producers “will need to be very diligent towards new purchases,” says Richard Taylor, one of the report’s authors.

He, Won Koo and Andrew Swenson wrote the report for the Center for Agricultural Policy and Trade Studies at NDSU.

Treat the report with a dash of skepticism.

Long-term predictions are notoriously tricky, especially when major political or weather events can occur during the period in question, Taylor says.

For instance, the recent, unexpected surge in wheat prices already has affected some of the report’s short-term forecasts, he says.

The report predicts that for most farms in the state, net income in 2019 will be similar to net income in 2009.

However, low-profit farms “may not have financial resiliency to survive without off-farm income,” the report says.

Taylor says low-profit farms inevitably will be found in any representative sampling and that the outlook for such farms in this report isn’t particularly gloomy.

Operators of low-profit farms may not be doing anything wrong, but simply are suffering from events, such as drought or excess moisture, beyond their control, he says.

Whatever a farm’s level of profitability, paying close attention to expenses will be vital, Taylor says.

Expenses generally shot higher in 2007 to ’08 when crop prices surged, but most expenses have remained high even as crop prices subsequently declined, he says.

Farmers shouldn’t expect expenses to drop anytime soon, if ever, Taylor says.

“Most expenses don’t come back down once they’ve gone up,” he says.

Other conclusions of the report include:

n Expenses will increase about 2 percent annually in 2011 to ’19.

n The debt-to-asset ratio for most farms will decline, but will increase for low-profit farms.

n Cropland values and cash rents, which have soared in recent years, will grow at a far slower rate. For instance, the average cash rent in North Dakota is projected to grow from $52.94 in 2010 to $54.64 in 2019.

The report assumes that commodity prices will increase slowly in the coming decade, while commodity yields will rise at their historic trend-line rates.

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