The Associated Press State & Local Wire | By JACK SULLIVAN | August 14, 2002
Many producers on small North Dakota farms may have to quit the business without "substantial" off-farm income over the next decade, North Dakota State University economists say.
"They will not be able to make a living off the farm operation, so they need off-farm income to survive," said Won Koo, an NDSU economist who directs the school's Center for Agricultural Policy and Trade Studies.
Robert Carlson, president of the North Dakota Farmers Union, said many North Dakota farms already rely on off-farm jobs. "It's not good news, but I'd have to say it's not unexpected," Carlson said. The report also said the new federal farm law should be better for state farmers than earlier farm programs, although projections show most farmers will clear less money in 2011 than in 2002.
Net income for large farms is projected to fall from $108,000 to $82,000 over the period, while medium-size farms will see a drop from $46,000 to $34,000. The net income for small farms will decrease from $18,000 to $13,000, Koo, Richard Taylor and Andrew Swenson wrote in the report.
The researchers attribute the decline to the nature of countercyclical payments, which aim to support farmers by increasing government payments when crop prices drop. The payments also drop when prices rise.
Koo said the target price that triggers the countercyclical payments will increase for most crops between now and 2007. But the combined revenue from crop sales and the government payments will not be enough to cover increased operating expenses, such as fertilizer and labor, Koo said.
That creates a long-term erosion of net income, he said.
While he acknowledged it may be "utopian," Carlson said a long-term solution to low crop prices could come from international efforts to manage supply by diverting food to starving and malnourished populations.
"It would seem to me that one good way to create a more stable world and a more peaceful world would be to find a way to feed these people," he said.
The NDSU report is based on a review of records kept by 530 farms enrolled in the North Dakota Farm Business Management Education Program, which allows the school to track and regularly report on farm trends.
The study defined small farms as averaging about 550 acres and low-profit farms as those in the bottom 20 percent when all farms in the study were ranked by net income.
"The small producer has to extract more per acre to live than the large producer does," Taylor said. "So right there, there's a disadvantage."
More North Dakota farms lost money last year than in either 1999 or 2000 as subsidies fell, costs rose and crop prices stayed low, a second NDSU report said.
The 2001 median net farm income was $27,729, meaning half of the farms reviewed made more money and half made less. The median was $45,085 in 2000 and $42,009 in 1999.
Despite low crop prices, financial performance during 1999 and 2000 was stronger than in any year since 1993, thanks to "extraordinary" government support and crop insurance payments, strong yields and improved beef cattle prices, Swenson wrote.The Associated Press State & Local Wire:
