DEBT TO ASSET RATIOS ON THE RISE 



The debt to asset ratio measures the economic health of the farming 

 and ranching business. A comparison of debt to asset ratios from 1979 to 1984 

 shows a steadily worsening financial balance sheet for Montana farmers. The 

 average debt to asset ratio based on results of this survey was 28.2. This 

 means the average farm debt was 28.2 percent of total farm assets. This statis- 

 tic isn't alarming in itself, but closer examination of the data shows that 24 

 percent of those surveyed had ratios exceeding 50 percent and 7 percent reported 

 debts exceeding 70 percent of assets. 



OTHER FACTS ABOUT DEBT TO ASSET RATIOS: 



--Ratios were highest in the south central and eastern districts of 



Montana. 

 --Farms with higher gross income had higher ratios than lower income 



g roup s . 

 --Farmers who are over 54 years of age had significantly lower debt/ 



asset ratios. 

 --Farms smaller than 1,000 acres have higher debt to asset ratios. 

 --Mostly crop and mostly livestock types of operations have higher 



debt to asset ratios than 'pure' cash grain or livestock farms. 



FORTY-FIVE PERCENT WON'T SURVIVE OVER 5 YEARS 



Assuming current trends in farm income and expenses, only 55 percent 

 of Montana's farmers and ranchers wil 1 be able to stay in business over 5 years. 

 Over 9 percent say they can only survive one more year, but 48 percent wil 1 farm 

 until they retire. 



When asked about the major cause of farm problems today, the number one 

 answer was low market prices followed by high interest rates. Lenders often said 

 lack of management knowledge and skills was a major problem. 



MONTANA FARM NUMBERS, ASSETS and DEBT COMPARISONS 



YEAR 



NUMBER AVG. VALUE AVG. FARM AVG. TOTAL DEBT/ASSETS 

 OF FARMS PER ACRE ASSETS DEBT DEBT 



SOURCE: 1979-1983 from: USDA, Economic Research Service; 1984 

 from: Survey of Montana Farmers, October 1984. 



WHAT IS THE MAJOR CAUSE OF FARM PROBLEMS TODAY? 



ALL FARMERS 

 i RANCHERS 



CASH 

 GRAIN 



LIVESTOCK 

 PRODUCERS 



COMMERCIAL 



BANKS FmHA 



FED LAND 

 PCAS BANK 



-Pe rcent-- 



Bought Land Too 



High 3.7 

 High Cost of 



Equipment 12.9 



High Interest Rates 22.3 

 Gove rnment Farm 



Prog rams 4 . 8 



High Input Costs 10.0 



Low Market Prices 35.0 



Natural Disasters 8.7 



Other 1/ 1.6 



3.1 



4.3 



5.0 



100.0 100.0 100.0 



1/ Poor management, over-mechanized and all other. 



100.0 



100.0 100.0 100.0 



