Sept DBL.balance sheet

In 2019, farms and ranches enrolled in the South Dakota Center for Farm and Ranch Management program experienced a drop in net farm income from 2018, according to data compiled for analysis.

The median net farm income in 2019 was $40,415 compared to $53,888 in 2018. This information is based on averages. Some farms and ranches had higher and lower returns. The data is compiled through a statewide educational program that assists producers with their record keeping and management skills, offered through Mitchell Technical Institute.

Although the net farm income in 2019 is lower than 2018, it is still a positive number from a year that included many perils with excess moisture and flooding.

In the U.S. there were 19,620,758 prevent plant acres with South Dakota having the most at 3,947,988, according to the Farm Service Agency data from Jan. 2. The next highest states with substantial amounts of prevented planting had less than 1.5 million acres.

It turned out that 2019 was another “buckling down” year, as farms and ranches are continuing on a path of controlling costs and generating income from what resources become available. With so much prevent plant across the state, the replications of the crop enterprises in the annual report are lower.

The 2019 average farm gross cash income of $942,451 – less $801,846 average cash expense – equals a net cash farm income of $140,605. This is an increase from $90,396 net cash farm income in 2018. Net cash farm income does not factor in changes in inventory, depreciation or capital sales and purchases. Rather, it is simply the cash farm income less cash farm expenses.

Farm and ranch management program farms had inventory changes amounting to a decrease of $27,462. Crop insurance payments and Market Facilitation Payments were represented in cash farm income, but the result from fewer crops planted and harvested is reflected in decreased ending inventories. 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 45.2 years old, with 21.5 years of farming experience. Cash family living expenses reported for a family size averaging 3.2 members was $62,636. This has been consistent the past three years.

Farm families showed an average $22,004 in non-farm income, down from $36,065 in 2018. But identical farms are not replicated in the report each year. Since cash family living expenses and debt service must come from the net farm income amount, it can be assumed that off-farm income or a draw of equity is supporting the farm or ranch household.

The liquidity measures have improved slightly from a year ago with an average working capital of $224,879 and a 1.43 current ratio.

The increase in the average farm or ranch net worth in 2019 was $63,599. This equates to 4%, not a windfall by any means, but anything positive has been welcome for operators after the past few years.

Working capital to gross income increased to 24.4% from 16.4% in 2018. All of the liquidity measures are still in the cautionary status for the “average” net income group. This would indicate that there are some in the “vulnerable” status, which is not a secret. Capital debt repayment margin was a slight negative representing a term debt coverage ratio of 0.99.

More information on the 2019 South Dakota Annual Report is available on the South Dakota Center for Farm and Ranch Management’s website at www.sdcfrm.com or by contacting the center at 605-995-7191 or sdcfrm@mitchelltech.edu.