A comparison between the severity of 1930s and 1980s North Dakota farming is cited. Study is given into key factors and demographics that led new entrepreneurs into farming during that changing time such as off-farm employment opportunities

Ekstrom, B.L.

Leistritz, F.L.

Mortenson, T.L.

Wanzek, J

NDSU Libraries Institutional Repository

Beginning Farmers in Nort Dakota F. Larry Leistritz, Brenda L. Ekstrom, Janet Wanzek, and Timothy L. Mortenson The decade of the 1980s has been characterized as one of extreme economic stress for many farm and ranch opera­tors. In many respects, the economic conditions facing far­mers have been the most severe since the 1930s (Murdock and Leistritz, 1988; McKinzie et al., 1987; Runge, 1986) . While most attention has been focused on the negative aspects of the restructuring of the agricultural economy that has occurred during the last few years, some have chosen this same time period to launch farming careers. This sum­mary highlights the demographic and economic characteris ­tics of individuals who started farming in North Dakota dur­ing the period 1984- 1988 . STUDY PROCEDURES Information about the attributes of beginning farmers and their families was obtained from a telephone survey con­ducted in March and April 1989. The survey incorporated a series of screening questions to determine if the survey respondents (1) had begun farming as a career since 1984, had re-entered farming since 1984 or taken on substantial financial and management responsibilities after farming with another person; (2) had farmed for at least one year at the time of the survey ; and (3) considered farming to be their primary occupation . Of 481 individuals who were believed to qualify for the survey, 352 were contacted by phone, 178 provided usable questionnaires, 89 did not qualify for inclu­sion in the survey, and 85 chose not to participate. The other 129 could not be contacted for a variety of reasons. FI DINGS Characteristics of beginning farmers are compared in many cases in this summary to those of a statewide longitud­inal farm panel. The farm panel study was initiated in 1985, and values presented here are for 466 farmers who provid­ed data in the 1989 survey (Leistritz et al., 1989). F arm Characteristics Characteristics of the farm units operated by the respond­ents are summarized in Table l. About 57 percent of these operators owned no land, and more than 90 percent rented at least part of the land they farmed in 1988. OveraIJ , these beginning farmers operated slightly more than 1,200 acres . Leistritz is professor, Ekstrom is former research assistant, and Wanzek and Mortenson are research assistants, Department of Agricultural Economics. Table 1. Farm Characteristics of North Dakota, 1988. New Farm Farmers Panel ... average acres -.. Acres owned in 1988 268.6 742.6 Acres rented or leased from others 941.0 848.2 Acres rented or leased to others 6.3 35.1 Total acres operated In 1988 1201.6 1560.2 Ti llable acres in operation 746.2 1085.5 ~•.•.•. percent ....... . Why did previous operator give up the land respondent now operates? Retired 54.3 NA Financial DIfficul ties 26.6 NA Died 12.1 NA Quit farming (not retired) Found alternat ive employment Other 8.7 6.9 12.8 NA NA NA In comparison, established farmers in the North Dakota farm panel operated about 1,560 acres. Producers who had purchased land had most often bought it from a relative ) and almost half of these operators also rented part of the land they farmed from a relative. The land they are farming was most often obtained when the previous operator retired or downsized due to financial diffi­culties . . Sole proprietorships were the type of farm organization most often reported by these producers, but partnerships were more frequent for beginning farmers than for members of the farm panel study (24 percent vs. 17 percent) (Leholm et at., 1985). Family corporations were the business form used by 7 .5 percent of the beginning farmers , compared to 2 .7 percent of farm panel members (Leholm et aI., 1985). Demographic Characteristics Beginning farmers averaged about 20 years younger than established farmers (Table 2), and almost 69 percent were married. Overall , beginning farmers had higher levels of education than established farmers in our farm panel sur­vey. Only 4 percent had not completed high school, com­pared to 22 percent of established farmers. About 46 per­cent had one to three years of postsecondary education, 27 Table 2. Demographic Characteristics, North Dakota. New Farm Farmers Panel .....•.. percent ....... . Age Average 29.2 50.1 Marital status Single 30.3 8.5 Married 68.6 89.3 Separate/divorced/widowed 1.1 2.2 Years of formal education Less than 12 4.0 22.1 12 29.1 35.9 13-15 45.8 27.1 16 14.3 14.9 17 or more 6.9 0.0 and 21 percent had completed college or postgraduate edu­cation. About 89 percent indicated that they had six or more years of farming experience prior to beginning their farm or ranch venture . Growing up on a farm (77 percent) and working for parents or relatives (52 percent) were the forms of experience most frequently cited . More than 97 percent indicated that their family provides at least 50 percent of the labor used on the farm. The percentage of farm labor pro­vided by the family is one common approach for defining a "family farm" (Murdock and Leistritz, 1988). Off-Farm Employment Beginning farmers are much more likely to work on an off-farm job than their established counterparts (Table 3). Precision crafts (for example, mechanics , welders, construc-Table 3. Off· Farm Employment Characteristics, North Dakota. New Farm Farmers Panel Worked off the farm 41.1% 22.2% Years worked at job Average 4.9 8.6 Mediana 3.0 6.0 Days worked off farm Average 100.1 111.2 Median 72.5 100.0 Hourly wage rate Average $7.85 $8.30 Median $6.25 $7.00 Gross earnings from job Average $7,671 $10,908 Median $5,000 $6,300 aThe median Is the midpoint of all responses. tion trades) were the most common occupation group. Pos­sibly reflecting their younger age , lack of experience, and lower seniority, new farmers had worked fewer years and slightly fewer days at their current off-farm job and had received lower average and median hourly wages than farm panel members. With a combination of fewer days of work and low'er wage rates, the beginning farmers' gross earnings from off-farm work were also lower , Nevertheless, only about 16 percent planned to look for a different job in 1989. Fourteen percent of the producers who had not worked off the farm in 1988 planned to look for off-farm work in 1989. Most wanted to work 30 hours or more per week, would commute 20 miles or more , and would accept a wage of $5 .00 per hour. About 61 percent of the beginning farmers' spouses had worked off the farm in 1988. Most worked in technical, sales, or administrative support jobs , usually within 20 miles of their residences . While most of the operators appeared to work off the farm only seasonally, many spouses worked year-around or at least for the majority of the year (for in­stance , teachers). Their median levels of both hourly wages and gross earnings were quite similar to those of the farm panel members. Almost 19 percent, however, planned to look for a different job within the next year. Balance Sheet and Sources of Capital Beginning farmers reported an average of $135,117 in total assets at the end of 1988 (Figure 1). Both the average and the median values were about one-third of those for the farm panel. The beginning farmers also reported a much smaller percentage of long-term assets (a majority owned no farmland) and a much higher percentage of intermediate­term assets , which includes machinery and breeding live­stock. Beginning farmers reported debt levels that were roughly half of those for the farm panel members. Their debts, like their assets were concentrated in the intermediate-term category. Almost 9 percent reported that their debts exceed­ed the value of their assets (Table 4), and another 18 per­cent had debt-to-asset ratios exceeding 0.7 , a level often associated with severe financial stress. However, more than 92 percent were current on all their debt payments. .... ~ New Farmers Farm Panel Members New Farmers Farm Panel Members Assels Assets Oebts Debts $135,117 $392,478 $68,364 $128,245 _Long-term o Intermedl to-llIrm DShort" erm Figure 1. Composition of debts and assets, 1988. 28 Table 4. Debt·lo·Asset Ratio as of December 31,1988 For Beginning Farmers and Farm Panel Members in North Dakota. New Farm Farmers Panel Average 53.0 49.2 Median 45.0 31.0 ......... percent ........ . Distribution No debt 13.1 16.3 0.01 to 0.39 33.3 45.0 0.40 to 0.69 26.8 23.6 0.70 to 1.00 17.9 9.4 More than 100 8.9 5.7 Commercial banks and the FmHA were major sources of each type of credit (i.e. , long-term, intermediate, and short­term). Farm Credit Services (FCS) played a much stronger role as creditor for established farmers than for beginning farmers, and relatives (although not a major source for any type of credit) were more important for beginning farmers than for the panel producers. Relatively few (8 percent) had utilized the Bank of North Dakota's beginning farmer pro­gram. Income and Earnings Average gross farm income for new farmers lagged about $40 000 behind that of established farmers (Table 5) , and new farmers' depreciation and interest expenses were about half of the amount taken by established farmers. Govern­ment payments were important to both groups of operators; new farmers received an average of $10,429, while estab­lished farmers received $17,631. Average net cash farm in­come, or the "bottom line," for new farmers was just over Table 5. Selected Income and Expense Items For Begin· njng Farmers and Farm Panel Members in North Dakota. New Farm Farmers Panel .•..•...• dollars .••...... Gross farm income Average 76,263 115,808 Median 56,000 80,979 Depreciat ion expense Average 7,475 16,736 Median 5,600 10,298 I nterest expense Average 5,931 11,741 Median 3,600 7,767 Government farm program payments Average 10,429 17,631 Median 6,650 12,000 Net cash farm income Average 11 ,782 21,422 Median 10,000 15,000 half the amount reported by the farm panel members; new farmers netted an average of $11,782 compared to $21 ,422 for established farms. The total family income and income sources of beginning farmers and farm panel members are compared in Figure 2. The total income for the beginning farmers was conSiderably less than that for the panel members. Earnings from off-farm work made up 35 percent of their total income and appear to be a key factor affecting new producers' ability to become established in the industry. CONCLUSIONS This study reveals that the severe restructuring of agricul­ture during the 1980s may have facilitated some persons' entry into farming . A key factor in becoming established was earnings from off-farm employment. The availability of ade­quate off-farm job opportunities for operators and their spouses may be nearly as important to the ultimate success of these households as the availability of farmland for rent or purchase . Beginning farmers represent a workforce that is highly educated, skilled , and ready to work. ...- Other nonfarm Income Including lease Income ..-Off·farm employment earnings ",-Netcash farm Income New Farmers Farm Panel Members $19,274 $29,024 Figure 2. Composition of fann family income for 1988. REFERENCES Leholm, A.G., F.L. Leistritz, B. Ekstrom, and H.G. Vreugdenhil. 1985 . Selected Financial and Other SOCioeconomic Character­istics of North Dakota Farm and Ranch Operators. Agri. Econ. Rpt. No . 199. Fargo: North Dakota State University. Leistritz, F.L. , B.L. Ekstrom , J . Wanzek, and T.L. Mortensen. 1989. Economic Effects of the 1988 Drought In North Dakota: A 1989 Update of the Financial Conditions of Farm and Ranch Operators. Agr. Econ. Rpt. No . 248. Fargo: North Dakota State University, Department of Agricultural Economics. McKinzie, L., T.G. Baker, and W.E. Tyner. 1987. A Perspective on U.S. Farm Problems and Agricultural Policy . Boulder, Colo .: Westview Press. Murdock, S.H., and F.L. Leistritz, eds. 1988. The Farm Financial Crisis: Socioeconomic Dimensions and Implications for Pro· ducers and Rural A reas. Boulder, Colo.: Westview Press. Runge, C .F. 1986. Technology and Financial Adjustment in A merican Agriculture: Who Will Quit and Why? Staff Paper P86-38. St. Paul, Minn.: University of Minnesota, Dept. of Agr. and Applied Econ. 29 

Beginning Farmers in North Dakota

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