Not all the financial numbers for South Dakota and North Dakota farms in 2017 were bad.
Median net farm income for farms and ranches enrolled in the South Dakota Center for Farm/Ranch Management Program rose from $6,627 in 2016 and $26,2029 in 2017.
The data was compiled through a statewide educational program that assists producers with their recordkeeping and management offered through Mitchell Technical Institute.
"This amount of net farm income is not likely to spur a big jump in capital expenditures, though, as many operations are trying to catch up with debt obligations that they may have fallen behind on or had to restructure in previous years," says Will Walter, program director of the Farm/Ranch Business Management Program at MTI.
The average net cash farm income was $117,287, a drop from $147,434 in 2016. Net cash farm income does not factor in changes in inventory, depreciation, or capital sales and purchases. It is simply the cash farm income minus the cash farm expenses.
The farms in the South Dakota Farm and Ranch Management Program in 2017 had inventory changes amounting to an increase of $5,693, compared to the 2016 average loss of $95,787. Net farm income is the number used to measure a farm or ranch's true profitability by including the above accrual changes.
The average age of participating operators was 42.1 years old, with an average of 18.3 years farming experience. Cash family living expenses for a family size of 3.5 members on average was $63,409, an increase from $56,557 in 2016. Farm families showed an average of $26,602 in non-farm income, down from $30,845 in 2016.
The average increase in net worth was $40,262. This equates to only 2%, but anything positive has been welcome for operators after the past few years, Walters says.
Liquidity measures, such as working capital and current ratio, both showed a decline from a year ago with $166,159 and 1.40 compared to $256,745 and 1.50 per operation last year.
Working capital to gross income decreased from 26.9% in 2016 to 21.2% in 2017.
Other numbers to note from 2017 data include average total assets of $3,025,493 and equity of $1,986,398. The rate of return on assets was 1.5% and return on equity of -0.4%. Capital debt repayment margin was $10,331 representing a term debt coverage ratio of 1.11.
"This may not seem too exciting, but it is a big improvement from the .33 ratio on average of the farms participating in 2016. Some short-term debt may have been restructured or payment obligations from intermediate loans on machinery are diminishing with fewer capital purchases in the last two years. A negative term debt coverage ratio is unsustainable and measures were taken to rectify that," Walter says.
For more information, see the South Dakota Center for Farm and Ranch Management website at 605-995-7191 or [email protected].
Source: South Dakota Center for Farm and Ranch Management