Reports look at ND ag in 2001 to ’10 and 2011 to ’20North Dakota farms generally ended the past decade stronger financially than they began it.
By: Jonathan Knutson, Agweek
North Dakota farms generally ended the past decade stronger financially than they began it.
Most farms in the state likely will be a bit stronger financially when the next 10 years end, too, although rising costs could change that.
That’s the conclusion of two reports from North Dakota State University.
One report, prepared by Andrew Swenson, of NDSU’s Department of Agribusiness and Applied Economics, looks at financial characteristics of North Dakota farms from 2001 to 2010.
The other report, prepared by Swenson, Richard Taylor and Won Koo for NDSU’s Center for Agricultural Policy and Trade Studies, examines the financial outlook for North Dakota farms from 2011 to 2020.
Keep in mind that the outlook for the next decade is just an educated guess.
“We don’t know what’s going to happen tomorrow,” much less what’s going to happen years in the future, says Taylor, who’s been working on such reports for 15 years.
What the past brought
The past decade was the tale of two distinct periods. The first, 2001 to 2006, included mediocre net farm income and rates of return. The second, 2007 to 2010, brought much higher net farm income and rates of return. That reflects strong crop prices in 2007, 2008 and 2010.
Median net farm income for 700 farms that participated in the North Dakota Farm Business Management Education program ranged from $27,729 to $49,912 between 2001 and 2006, and $47,547 to $174,010 between 2007 and 2010.
Median is the middle number is a series of numbers organized by size.
Median debt-to-asset ratios have been trending lower, too. They ranged from 53.3 percent to 57.5 percent from 2001 and 2006 and 46.7 percent and 51.2 percent from 2007 to 2010.
Thought debt has increased, assets have risen even faster, pushing down the debt-to-asset ratio.
The report notes one trend that concerns some in agriculture: the aging of the state’s farmers. Forty-three percent of farmers were 50 years or older in 2010, up from 19 percent in 1996.
What the future holds
The report for 2011 to 2020 notes that record high commodity prices in 2010 “will be difficult to maintain, but most price forecasts remain firm into the future,” with higher price levels benefitting most farms in the state.
Annual net farm income over the next decade will remain “in a narrow band between $392,000 and $400,000, while net farm income for medium-size farm will edge higher, from $175, 000 to $183,000, the report says.
Debt-to-asset ratios likely will decrease slowly through 2020, for all but the smallest farms, according to the report.
Small farms often are operated by part-time producers, typically people with off-farm jobs, so it’s not unexpected that they would be less efficient, Taylor says.
Both land prices and cash rents are expected to move higher over the next decade. The two are estimated solely on returns to cropland and not the recent market run-up. the report says.
Taylor says he’s concerned about farm expenses over the next decade, something the report doesn’t examine closely.
The cost of many essential inputs, such as ag equipment, have risen sharply in recent years and are unlikely to decline, he says.
“It’s long supply chain. It’s very difficult to go back,” he says.
Many people, organizations and resources typically are involved in moving a product or service from supplier to farmer. Once higher costs are built into the supply chain’s many components, they’re likely to remain in place, Taylor says
Expenses such as taxes, insurance and utilities also are unlikely to decline after they rise, he says.
“Expenses are a concern,” Taylor says.