MITCHELL — In 2019, farms and ranches enrolled in the South Dakota Center for Farm/Ranch Management program experienced a decrease 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 and there are certainly farms and ranches with higher and lower returns. The data is compiled through a statewide educational program that assists producers with their recordkeeping and management 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 was 19,620,758 prevent plant acres in 2019 with South Dakota having the most at 3,947,988 (FSA-USDA January 2, 2020). The next highest states with substantial amounts only had less than 1,500,000. 2019 was another “buckling down” year as farms and ranches continue on a path of controlling costs and generating income from resources that become available. With so much prevent plant across South Dakota, the replications of the crop enterprises in the Annual Report are lower.
Altogether, 2019’s 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. The program farms in 2019 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 3 years. Farm families showed an average of $22,004 in non-farm income, down from $36,065 in 2018. Keep in mind that the identical farms are not necessarily 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 and/or a draw of equity is supporting the farm/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/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 will be released soon and is available on the South Dakota Center for Farm/Ranch Management’s website at www.sdcfrm.com or by contacting the Center at (605) 995-7191 or firstname.lastname@example.org.