By Andrew Swenson
North Dakota's spring wheat yield was strong: the fourth highest on record.
The big positive influence on farm financial performance in 2016 was yields.
North Dakota’s farm financial performance exceeded expectations in 2016.
The average net farm income of 531 farms in the North Dakota Farm Business Management Program rebounded to $126,752 in 2016, compared with $28,600 in 2015, which was the lowest in nearly two decades, according to Andrew Swenson, the North Dakota State University Extension Service’s farm and family resource management specialist. Net farm income was $76,404 in 2014 and $133,466 in 2013.
Expectations going into 2016 were tepid because many producers found that projecting positive cash flows was difficult because the sharp drop in crop prices since 2012 had not been accompanied by a commensurate decline in crop expenses.
North Dakota marketing year average cash prices 2012 to 2015 had declined from $14 to $8.49 for soybeans, $6.46 to $3.28 for corn and $8.19 to $4.59 for spring wheat.
“The concern producers and their lenders had about prices has been confirmed by the projected 2016 marketing year average price of spring wheat and corn, which shows a continued, albeit slight, decline,” Swenson says. “However, soybean prices increased.”
The higher price of soybeans was especially beneficial because producers had planted record acreage, surpassing spring wheat as the top North Dakota crop for the first time in history.
The big positive influence on farm financial performance in 2016 was yields. The state average corn yield of 158 bushels per acre shattered the previous record of 132 bushels per acre in 2010, and the soybean yield of 41.5 bushels per acre far exceeded the previous high of 36.5 bushels per acre in 2005. Spring wheat yield was also strong: the fourth highest on record.
Two other factors that bolstered net farm income were a decline in crop production costs and an increase in government payments.
Crop production costs per acre had more than doubled from 2004 to 2013, but then dropped slowly in 2014 and 2015. A further drop in production costs occurred in 2016, led by a decline in fertilizer prices.
Total government payments per farm, including conservation incentive programs, were $45,480 in 2016, compared with $27,301 in 2015 and $15,495 in 2014. A year lag occurs in commodity-based safety-net program payments. Therefore, the payments received in 2016 were based on the low net farm income year of 2015.
The average net return per acre on cash-rented ground was $101 for soybeans, $28 for corn and $1 for spring wheat, according to the 2016 North Dakota Farm Business Management Program state report. Pinto beans had an average net return per acre on cash-rented ground of more than $100, compared with $77 for oil sunflowers, $38 for field peas, $30 for durum wheat and $24 for canola.
“As usual, farm financial performance varied by type of farm and area of the state,” Swenson says. “Parts of the northeast and southwest did not achieve optimal yields because of excessively wet or dry conditions, respectively.”
Beef cow-calf producers had poor returns in 2016. The average profit per cow plummeted to $60 from an all-time high of $660, which was achieved two years prior.
All categories of farm financial performance - profitability, liquidity, solvency, repayment capacity and financial efficiency - declined significantly in 2013, 2014 and 2015 relative to the 2012 year. Performance improved in 2016 but still remains much lower than what was achieved in 2012.
The average farm borrowed $612,159 during 2016 and made principal payments of $600,233, thereby increasing farm debt by about $12,000. However, the relationship between debt and assets (solvency) improved in 2016.
In three years, the average purchases of machinery, equipment and buildings, such as grain and machinery storage and farm shops, declined from $194,064 in 2013 to $76,996 in 2015 because of the sharp drop in net farm income during this period.
“Interestingly, these purchases continued to drop in 2016, to $62,876, despite the increase in net farm income,” Swenson notes.
The average size of farms in the North Dakota Farm Business Management Education program was 2,365 acres in 2016, of which 487 acres were pasture. The average age of the farm operator and number of years farming were 45.5 and 21.3, respectively.
The state farm business management summary is available online at http://www.ndfarmmanagement.com/. Regional summaries also are available. In addition to whole-farm financial information, these books detail costs and returns of livestock and crop enterprises.