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Andrew Swenson, a North Dakota State University Extension Service farm management specialist, says some 235 enrollees in adult farm management programs in the Red River Valley saw a 30 percent average pay cut in in 2017 compared to 2016. Profits of the median farmer in the program were about half of 2016. Photo taken April 30, 2018, Fargo, N.D. (Forum News Service/Agweek/Mikkel Pates)

RRV farms see income cut 30% in '17

FARGO, N.D. — Red River Valley farmers enrolled in adult farm management programs in 2017 saw a mean average income decline of 28 percent from 2016 while the median "midpoint" farm declined 49 percent, according to a North Dakota State University report.

Andrew Swenson, NDSU Extension farm management specialist, says the Red River Valley counties report is based off data from both the North Dakota and Minnesota farm business education programs. An overall state report that includes counties outside the valley in North Dakota will be analyzed and released later in May. The valley tends to be a region of about 35 miles on either side of the Red River, but widens as it goes north.

Farms in the program saw a big run-up in profitability from 2007 to 2012, but figures have declined since then with the exception of one big yield year in 2016. Here is a list of important 2017 facts:

• Mean median: The "mean average" net farm income was $102,783 among participants, down from $143,489 in 2016. The median average was $53,694, down from $104,932 in 2016.

• 20-60-20: The analysis shows a big difference between the top 20 percent for net profit per farm and the bottom 20 percent. "Typically, the higher 20 percent have better yields and often have lower costs in getting those better yields," Swenson says. "I think management has a big impact." Typically, the higher-profit farms are larger.

• Gross revenue: Swenson compared three cash gross revenue groups: 1) less than $500,000 2) $500,000 to $1 million, and 3) over $1 million. The middle group averaged 1,400 acres and had an average farm income of $48,000. The biggest group had an average of 3,400 acres and average farm income was $208,000.

• Crops alone: With little livestock in the valley, soybeans, corn, sugar beets and wheat account for 94 percent of the farm income. Soybeans and corn account for about two-thirds of the gross crop sales for 2017. Corn and soybeans had a drop in average yields, and corn had a drop in price. "Actually, wheat was a positive in 2017," Swenson says. "Yields were higher than in 2016 and there was a 15 percent bump in price." Average valley yield in 2016 for corn was 190 bushels per acre and 47 bushels per acre for soybeans. The yields were still good in 2017, but not as high as 2016.

• Corn pain: Average cash sales of the farms was up 20 cents per bushel for soybeans but down over 30 cents per bushel for corn — about a 10 percent decline. Sugar beet farms did fairly well in 2017, although things have been more difficult in the far southern valley. Soybean and wheat prices dropped by one-third from 2012 to 2014. Corn prices dropped by half. "Cost of production has come down but not at the same rate," Swenson says.

• Inputs up: Cost of production increased slightly in 2017 after three years of slight declines. "We did have savings in fertilizer," Swenson says. But they saw fuel prices edge upward. Chemical expenditures increased as farmers have to apply more and different herbicide combinations to counter herbicide resistance.

• Bimodal: Generally, the number of large farms have been increasing as has the number of small hobby farms. The "middle group" declines as some shift into the larger farm group. The mean average acreage of farms in the program is stable at about 1,900 crop acres. There is about a 10 percent turnover in participants.

• Slim Sam: Government payments were down in 2017 compared to 2016. The payments received in 2017 were based on the 2016 crop. "There were such high yields in 2016, and most of the crops are enrolled in ARC (Agriculture Risk Coverage) a revenue protection program. That brought up how they calculate a payment. It is too soon to know whether the new farm bill will change formulas that might shift farmers toward another program called PLC (Price Loss Coverage)," Swenson says.

"Going into the 2018 year, it's going to be another challenging year," Swenson says. "I don't know if I'd say it's a 'make-or-break' year, but for some producers it is."