Farm Finance Averages Show Some Light, Despite Concerning Ag Debt

By Tina Barrett

Nebraska Farm Business, Inc. recently completed its financial averages for 2016. These averages represent producers across the state who participate in this financial analysis program.

Nebraska Farm Business Inc. provides producers with a comprehensive analysis of the financial health of their business, including their

•     accrual basis net farm income (the true earnings of the business),
•     an earned net worth change,
•     cost of production,
•     21 financial ratios,
•     and more.

Each year the data collected from these farms’ records is averaged to provide participants with information to benchmark their operations. Taking a closer look at these averages also  indicates shifting trends across these farms and ranches.

The average data shows several surprises including an increase in net farm income from $29,432 in 2015 to $45,703 in 2016. This is the first increase in net farm income since 2011, but it is still lower than any other year (other than 2015) since 2002. In 2015 44% of the operations saw negative net farm income while in 2016 only 30% did with a majority of those being predominately livestock operations. The income for crop operations (more than 70% of their gross income comes from crops) rebounded to the 2014 levels after a drop in 2015, but the operations with a significant beef component saw continued losses.

Table 1. Difference in average debt from 2004 to 2016 for farms and ranches participating in Nebraska Farm Business, Inc. analysis.
 

Not all the surprises were good surprises. The level of total debt carried by each operation jumped 13% from 2015 to 2016. Gross income also increased, possibly indicating that the size of operations increased. However, this continued increase in risk is something operations need to be concerned with. Since 2004 the average debt per acre has more than doubled (Table 1). It should be noted that there is certainly a factor for livestock operations that would have debt without crop acres that this simple comparison doesn’t capture, but the fact remains that the rising total debt must be serviced by the same number of acres. This dramatically increases the risk of not being able to repay the debt.

Not all the surprises were good surprises. The level of total debt carried by each operation jumped 13% from 2015 to 2016. Gross income also increased, possibly indicating that the size of operations increased. However, this continued increase in risk is something operations need to be concerned with. Since 2004 the average debt per acre has more than doubled (Table 1). It should be noted that there is certainly a factor for livestock operations that would have debt without crop acres that this simple comparison doesn’t capture, but the fact remains that the rising total debt must be serviced by the same number of acres. This dramatically increases the risk of not being able to repay the debt.

Source:unl.edu