1. Ron Dvergsten, Dean Management Education
Keith Torgerson, NDSCS

3. 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 Operator
Other special sorts based on location, production practices, enterprise selection and size, etc.

4. Farm Management Education Is Concerned With:
Creating an awareness of the need for accurate financial & enterprise records.
Stimulating individuals and families to establish goals and set priorities.
Developing the farm operator’s understanding of the function of management.

5. Farm Management Education Is Concerned With:
Developing fundamentals of resource management (Financial & Human).
Developing student skills in analyzing and interpreting farm business records.
Developing skills in analyzing data to improve the organization and efficiency of the farm business.

6. 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?

7. How Should I Use the Data

8. Total Farm Assets
Total farm assets increased $112,893 over last year. (Cost)
$1,072,106
$1,162,753
$1,319,822
$1,594,701
$1,545,551
$1,843,439
$1,956,332
Should this be a table?

9. Total Farm Liabilities
Total farm liabilities increased $20,148 from last year
$516,592
$543,610
$576,908
$681,055
$683,852
$735,208
$755,356
Should this be a table?

10. Net Worth Change
This year we had a positive Net Worth change of $198,267.
$ 1,326
$96,816
$161,030
$165,651
$6,849
$269,511
$198,267
Should this be a table?

11. Farm Receipts
Gross Farm receipts increased by $173,134 due mainly to higher commodity prices
$599,921
$546,515
$604,651
$729,735
$897,727
$843,024
$931,278
$1,104,412
Should this be a table?

12. Government Payments This includes direct, crp, and disaster payments.
$36,881
$54,301
$29,339
$26,431
$36,533
$23,746
$39,737
$36,606
Table?

13. Farm Expenses Cash farm expenses were up $50,601 2003 $433,152
$433,152
$427,807
$454,623
$508,716
$602,429
$718,042
$651,196
$701,797
$789,890
Table?

14. How the $888,147 was spent including family living and income taxes
How the $888,147 was spent including family living and income taxes. The three largest expense are seed, fertilizer and rent.
Take off the side bar that says “Cash farm expenses” It’s just taking up room, and makes everything smaller

15. Net Farm Income
This is the net cash farm income after being adjusted first for inventory change and than for depreciation
This is the calculated profit for the year
If 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.

16. Net Farm Income For Valley
Net farm income for farms in the Valley averaged $307,053 which was a decrease of $67,589 from 2010.
Net farm income for the low 20% of the farms averaged a positive $41,702
Net farm income for the high 20% of the farms averaged $766,032
Net farm income for the people in the 40%-60% averaged $228,370

17. Net Farm Income (Profit) By Year
Instead of bottom table, would data labels be easier to read?

18. Crops and Feed Inventory Change
This year we had a positive inventory change of $51,949 compared to $200,459 last year

19. $ Expense/$ Income
In 2011 it cost a Valley farmer about 64.4 cents (accrual) compared to 58 cents (accrual) in 2010 to make a dollar’s worth of income. This number is the operating expense ratio and does not include interest or depreciation expense.

20. Acres Farmed Stayed Steady

21. Machinery and Buildings Purchased
Machinery purchased for the year was $163,428 up $32,557 from last year.
Buildings purchased during the year averaged $48,196 per farm.

22. Non-Farm Income and Family Living Information

23. Apparent Family Living
Format the data labels as currency

24. Non Farm Income
Average Non Farm Income was $15,105

25. Net Return for Crops
Does not include Government Transition Payments, Acre Payments, or Disaster Payments
Does include Crop Insurance and RA and CRC insurance

26. Crop Yields, Costs and Returns

27. Spring Wheat Yield
This year the spring wheat yield was down 21 bushel per acre bu bu bu bu bu bu bu bu

28. Spring Wheat Fertilizer Costs Per Acre
Include data labels?

29. Spring Wheat Net Return/Acre
The net return per acre of wheat on cash rented land was positive this year
2011
Average $19.35
Low 20% $95.05
High 20% $113.70

30. Soybeans Yield for 2011 was 31.8 bu per acre

31. Corn Yields & Net Return per Acre
Yield Net Return
bu $11.63
bu $37.54
bu $51.51
bu $140.54
bu $132.49
bu $47.95
bu $196.89
$154.78

32. Corn Fertilizer Costs Per Acre
Data labels

33. Sugar Beet Yield

34. Cost Per Acre for Sugar Beets on Cash Rented Land

35. Current Ratio
What is the 3-d column 4?

36. Current Ratio

37. Average Working Capital Decreased by $7,141

38. Working Capital/Group

39. Rate of Return on Equity/Year (Cost)

40. Rate of Return on Equity/Group

41. Capital Replacement Dollars/Year decreased for each group

42. Capital Replacement Dollars/Group

43. Operating Expense Ratio Increased About 5% for each group from last year

44. Net Farm Income/Year

45. Net Farm Income/Group

46. Conclusions about the ratios
Start 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

47. Flowchart for Assessing and Improving Farm Profitability
Acceptable
If both asset turnover and operating profit are at acceptable levels, then increase size
ASSET
TURNOVER
Needs
Improvement
Acceptable
Look at cost controls. Look for ways to decrease expenses without reducing revenues.
Operating
Profit Margin
Needs
Improvement
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
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 for non-performing/under-performing
assets to cull.
Re-evaluate:
Leasing versus Owning Assets
Custom Work versus Owning
Underutilized Machinery
Sharing Assets (Partnering)
Source: Purdue University

48. Where are we headed? Major increase in the use technology.
Precision agriculture
Biotechnologies (Livestock & Crops)
Internet
Find new Suppliers, products, markets
Evaluating new technologies or products
E-Commerce
Are you working with partners to use capital more efficiently?
Is your business a low cost producer?
How about value added industries???

49. For More Information For more information in Minnesota call
ext Northland Community and Technical College
In North Dakota Call the CTE Agriculture

50. Thank You