Status of Wisconsin Agriculture 2010 - Agricultural & Applied ...

$Billion
70
60
50
40
30
20
10
Assets
Debt
Debt–Asset Ratio (Right Axis)
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
time off-farm jobs, account for
nearly half of Wisconsin farm assets
and less than 30 percent of farm
debt. The 1,400 Wisconsin farms
with 2008 sales exceeding $1 million
had an average year end debtto-asset
ratio of 0.23, more than
double the state average. The 60,000
Wisconsin farms with sales less than
$100,000 had a debt-to-asset ratio of
0.064. These smaller farms with
very strong balance sheets are not at
financial risk. Large farms, with a
much smaller share of assets comprised
of equity, are generally more
vulnerable.
Dairy Farm Balance Sheet1 Wisconsin dairy farms, which were
hit hardest by the drastic fall in net
income in 2009, have a composition
1 This section makes extensive use of data
provided through the Agricultural Resource
Management Survey (ARMS) database maintained
by the Economic Research Service,
USDA. Wisconsin data can be accessed at:
www.ers.usda.gov/Data/ARMS/app/States.aspx.
Wisconsin Farm Assets, Debt, and Debt-Asset Ratio
Source: Economic Research Service, USDA
of assets and debts that is different
and more troubling than that
reported for all farms. Compared to
the average for all farms, large Wisconsin
dairy farms (more than $1
million in sales) hold a larger share
of total assets (20 percent) as well as
debt (37 percent) and had a debt-toasst
ratio of 0.275 in 2008. Dairy
farms with less than $100,000 in
sales held less than 10 percent of
both assets and debt and had a debtto-asset
ratio of 0.09. This suggests
that dairy farms overall are more
financially vulnerable than other
farms and that larger dairy farms
may be particularly stressed in 2010.
However, we need to consider differences
in productivity by dairy
farm size. While the largest Wisconsin
dairy farms held only 20 percent
of total dairy farm assets, they generated
a disproportionately large
share of gross returns to assets (net
farm income before interest
expenses and operator labor returns).
Because of greater asset productiv-
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
ity, dairy farms with more than $1
million in sales accounted for about
35 percent of the total gross returns
produced by all dairy farms in 2008.
Because they held more debt relative
to assets, large dairy farms’ interest
per dollar of gross return to assets
was higher than smaller dairies. The
ratio of interest expense to gross
returns to assets—a financial measure
comparable to the debt-to-asset
ratio—was over 0.15 for dairies in
the largest two size classes and only
about 0.10 for the smallest size class.
While the largest dairies have a
higher ratio of interest expense to
gross returns to assets compared to
that of smaller operations, this ratio
is lower than expected given that
these operators average about 27
cents of debt per dollar of assets.
Normally, these two ratios are similar
in value. This emphasizes the relatively
high rate of returns to assets
that the largest farms were able to
generate.
STATUS OF WISCONSIN AGRICULTURE 2010—THE WISCONSIN FARM ECONOMY 3