Keith Torgerson, NDSCS

Farms in the Annual Red River Valley Annual Report FINAN, the analysis software, allows us to

take a closer look at the farms in a region or state.

We can create summaries of:Farm Size (based on Gross Income)Type of Farm (based on 70% of gross income)Age of OperatorOther special sorts based on location,

production practices, enterprise selection and size, etc.

Farm Management Education Is Concerned With:1. Creating an awareness of the need for

accurate financial & enterprise records.2. Stimulating individuals and families to

establish goals and set priorities.3. Developing the farm operator’s

understanding of the function of management.

Farm Management Education Is Concerned With:4. Developing fundamentals of resource

management (Financial & Human).5. Developing student skills in analyzing and

interpreting farm business records.6. Developing skills in analyzing data to

improve the organization and efficiency of the farm business.

Ask Yourself these Questions.How do I compare?

With my previous farm history?With local or county information?With area and statewide information?

Is my farm getting the financial returns that I want or need?

How do I go about making my farm business more efficient or profitable?

How Should I Use the DataCompare your financial and crop numbers to

your peer group

Total Farm Assets Total farm assets increased $136,864 over last

year. (Cost)2006 $1,162,7532007 $1,319,8222008 $1,594,7012009 $1,545,5512010 $1,843,4392011 $1,956,3322012 $2,331,8622013 $2,701,7132014 $2,838,577

Total Farm LiabilitiesTotal farm liabilities increased $123,187 from

last yearAnd $301,310 over the last three years

2006 $543,6102007 $576,9082008 $681,0552009 $683,8522010 $735,2082011 $755,3562012 $838,3282013 $1,016,4512014 $1,139,636

Net Worth Change(Cost)

This year we had a negative Net Worth change of

$-72,160. 2008 $165,6512009 $6,8492010 $269,5112011 $198,2672012 $392,7742013 -$45,9112014 -$72,160

Farm ReceiptsGross Farm receipts decreased by $107,871 due

mainly to the decrease in farm prices since 2012.2007 $729,7352008 $897,7272009 $843,0242010 $931,2782011 $1,104,4122012 $1,163,8392013 $1,122,7462014 $1,014,875

Government PaymentsThis includes direct, crp, and acre payments.

2006 $29,3392007 $26,4312008 $36,5332009 $23,7462010 $39,7372011 $36,6062012 $22,1522013 $32,3842014 $17,082

Farm Expenses

Cash farm expenses increased by $17,082

2005 $454,623 2006 $508,716 2007 $602,429 2008 $718,042 2009 $651,196 2010 $701,797 2011 $789,890 2012 $850,730 2013 $806,992 2014 $817,498

0

50000

100000

150000

200000Se

ed

Ferti

lizer

Crop

Ins

Crop

Dry

ing

Inte

rest

Fuel

Repa

irs

Hir

ed L

abor

Land

Ren

t

RE T

axes

Fam

ily L

ivin

g

Inco

me

Tax

Oth

er

Util

ities

Prof

Fee

s

Farm

Insu

ranc

e

Suga

r Lea

se

Chem

ical

Cash Farm Expenses

How the $915,521 was spent including family living and income taxes. The three largest expense are seed, fertilizer and rent.

Net Farm IncomeThis is the net cash farm income after being

adjusted first for inventory change and than for depreciation

This is the calculated profit for the yearIf more money than indicated on net farm

income is spent on family living, personal taxes, and new investments, it must be taken from inventory sales, the capital replacement dollars, new borrowings, or from off farm income. It is also calculated under the cost balance sheet.

Net Farm Income For ValleyNet farm income for farms in the Valley averaged

$12,723 which was a decrease of $49,023 form last year and a decrease of $523,999 since 2012.

Net farm income for the low 20% of the farms averaged a negative -$216,407

Net farm income for the high 20% of the farms averaged $232,417

Net farm income for the people in the 40%-60% averaged $10,220

The large decrease in Net Farm income was due to lower prices, and higher input costs

Net Farm Income (Profit) By Year (Before Living and Taxes)

Crops and Feed Inventory Change

This year we had a negative inventory change of

-$104,417. Over the last two years, we have seen a negative drop in inventory of -$284,075.

$ Expense/$ Income

In 2014 it cost a Valley farmer about 85.8 (accrual) to make a dollar’s worth of income. In 2013 it took 82.6 cents (accrual) and in 2012 it only took 55.4 cents (accrual). This number is the operating expense ratio and does not include interest or depreciation expense.

Acres Farmed Stayed Steady

Machinery and Buildings PurchasedMachinery

purchased for the year was $84,558 down $79,386 from last year and down $102,192 from 2012

Buildings purchased during the year averaged $15,446 per farm.

Apparent Family Living

53172 5727465323 67600 69521

77,101

91,103 9334583903

0

20000

40000

60000

80000

100000

2006 2007 2008 2009 2010 2011 2012 2013 2014

Non Farm IncomeAverage Non Farm

Income was $23,242

Net Return for CropsDoes not include Acre Payments Does include Crop Insurance and RA and

CRC insurance

Spring Wheat Yield

Wheat yield increased about 3 bushels per acre from 2012

63.9 64.1

45

63.167.9 66.36

01020304050607080

2009 2010 2011 2012 2013 2014

Spring Wheat Fertilizer Costs Per Acre

45.28 48.33

72.36

92.37

74.54

96.04

111.38 111.43100

0

20

40

60

80

100

120

2006 2007 2008 2009 2010 2011 2012 2013 2014

Spring Wheat Net Return/Acre

The net return per acre of wheat on cash rented land was negative this year

2014 Average -$28.35

Low 20% -$140.55 High 20% $67.50

Spring Wheat Total List Costs

Soybeans Yield for 2014 was 37.5 bu per acre up about 3 bushels from 2013

114

83

33

10583

213.14

78.99

6.59

36.31 32.3 31 36.32 31.8 39.63 34.3 37.5

0

50

100

150

200

250

2007 2008 2009 2010 2011 2012 2013 2014

Yield

Return

Corn Yields & Net Return per AcreYield Net Return

2007 131 bu $140.54 2008 155 bu $132.49 2009 132 bu -$47.95 2010 149 bu $196.89 2011 114 bu $154.78 2012 144 bu $331.42 2013 139 bu $62.04 2014 132 bu $77.19

Corn Fertilizer Costs Per Acre

47.7555.56 61.71 68.34

99.81

134.17

95.03

122.74

158.12 157.21

138.88

0

20

40

60

80

100

120

140

160

180

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Corn total costs on cash rented land

Sugar Beet Yield

Cost Per Acre for Sugar Beets on Cash Rented Land

Current Ratio

0

0.5

1

1.5

2

2.5

3

3.5

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Ave.

Low 20%

High 20%

Current Ratio

0

0.5

1

1.5

2

2.5

3

3.5

Ave. Low 20% High 20%

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Average Working Capital

-200000

0

200000

400000

600000

800000

1000000

1200000

1400000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Ave.

Low 20%

High 20%

Working Capital/Group

-200000

0

200000

400000

600000

800000

1000000

1200000

1400000

Ave. Low 20% High 20%

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Rate of Return on Equity/Year (Cost)

-20

-15

-10

-5

0

5

10

15

20

25

30

35

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Ave.

Low 20%

High 20%

Rate of Return on Equity/Group

-20

-15

-10

-5

0

5

10

15

20

25

30

35

Ave. Low 20% High 20%

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Capital Replacement Dollars/Year decreased for each group

-200000

0

200000

400000

600000

800000

1000000

1200000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Ave.

Low 20%

High 20%

Capital Replacement Dollars/Group

-200000

0

200000

400000

600000

800000

1000000

1200000

Ave. Low 20% High 20%

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Operating Expense Ratio increased in all three profit groups

0

20

40

60

80

100

120

Ave. Low 20% High 20%

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Net Farm Income/Year

-400000

-200000

0

200000

400000

600000

800000

1000000

1200000

1400000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Ave.

Low 20%

High 20%

3-D Column 4

Net Farm Income/Group

-400000

-200000

0

200000

400000

600000

800000

1000000

1200000

1400000

Ave. Low 20% High 20%

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Conclusions about the ratiosStart to compare your information to the last

3 to 5 years of data.Determine your own trend lines.Compare your data to the area averages.How does your business stack up?Evaluate possible changes if needed.Consider the following flow chart in making

future business decisions

ASSETTURNOVER

NeedsImprovement

Acceptable

AcceptableIf both asset turnover and operating profit are at acceptable levels, then increase size

Look for ways to increase the revenues generated from existing assets. Re-evaluate: Thruput Crop Mix/Product Mix Marketing Program Yields Resource Use Custom Work Enterprise

Look for non-performing/under-performingassets to cull. Re-evaluate: Leasing versus Owning Assets Custom Work versus Owning Underutilized Machinery Sharing Assets (Partnering)

Re-evaluate: Production Costs Rents Capital Spending Plans Purchasing Practices Family Needs Business Organization Financing Costs Employment Inventory Management Outsourcing Records Control Procedures Management’s Priorities

Look at cost controls. Look for ways to decrease expenses without reducing revenues.

OperatingProfit Margin Needs

Improvement

Source: Purdue University

Where are we headed?Major increase in the use technology.

Precision agricultureBiotechnologies (Livestock & Crops)Internet

Find new Suppliers, products, marketsEvaluating new technologies or productsE-Commerce

Are you working with partners to use capital more efficiently?

Is your business a low cost producer?How about value added industries???

For more information in Minnesota contact Ron Dvergsten Northland Community and Technical College

218-683-8747In North Dakota Call the CTE Agriculture Supervisor @

701-328-3162

For More Information