Structure and Finances of U.S. Farms: Family Farm Report ... - AgWeb

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ConclusionsThis report has five major findings important to understanding farms andfarm households, today and in the future:1. Large-scale family farms and nonfamily farms now account for aboutfour-fifths of U.S. agricultural production. Million-dollar farms aloneaccount for half of agricultural production. Yet, small farms makesignificant contributions to the production of specific commodities.2. Farming is generally considered a purely rural pursuit. Nevertheless,two-fifths of U.S. farms and agricultural production are located inmetro areas. High-value crops account for a large share of metroproduction, even outside the Fruitful Rim.3. Large-scale family farms are generally viable economic businesses,with favorable financial ratios. Small family farms are less viable asbusinesses, but the households operating them receive substantialoff-farm income and do not rely primarily on their farms for theirlivelihoods.4. There are relatively few limited-resource farmers, regardless of thedefinition used. The number of limited-resource farmers, however, issensitive to any farm asset or household wealth constraints imposedin the definitions.5. Different types of farm program payments go to different types offarms. Most payments from commodity-related and working-landprograms go to large-scale family farms because these programstarget production (directly or indirectly). Land-retirement programs,in contrast, target environmentally sensitive land and go mostly toretirement, residential/lifestyle, and low-sales small farms.Large-Scale Farms Produce the Most OutputLarge-scale family farms reported 66 percent of the value of U.S. agriculturalproduction in 2007, and nonfamily farms contributed another 18 percent ofproduction. Million-dollar farms alone, numbering only 47,600, produced53 percent of U.S. agricultural output in the same period and dominated theproduction of high-value crops, hogs, dairy, poultry, and beef. The largestmillion-dollar farms—those with sales of at least $5 million in a givenyear—accounted for 35 to 45 percent of the production of high-value crops,beef cattle (largely in feedlots), and milk. The large share of these productsproduced by $5 million farms suggests economies of scale still exist evenwhen sales exceed $5 million.Nevertheless, small farms reported significant shares of production ofspecific commodities, including 23 percent of the value of production forcash grains and soybeans, 51 percent for hay, 34 percent for tobacco, and 22percent for beef (largely from cow-calf operations). All these shares werelarger than small farms’ overall 16-percent share of U.S. production.46Structure and Finances of U.S. Farms: Family Farm Report, 2010 Edition / EIB-66Economic Research Service/USDA
Farming in Metropolitan AreasFarming is often assumed to be a purely rural pursuit. But, two-fifths offarms and farm production are located in metro areas, defined as a county orgroup of counties with an urban population concentration of at least 50,000people. The share of farms located in metro areas is particularly high in theFruitful Rim, where it reaches 67 percent.Metro areas—considered as a whole—have a different agricultural productionmix than nonmetro areas. High-value crops and dairy products make upa larger share of output in metro areas, while cash grains and beef make up asmaller share. The commodities that are produced in U.S. metro areas reflectthe production mix in the Fruitful Rim, which accounts for 43 percent of totalmetro production. California alone accounts for 65 percent of metro productionin the Fruitful Rim and 28 percent of total U.S. metro production.Production in metro areas outside the Fruitful Rim looks more like that innonmetro areas. In nonmetro areas and in metro areas excluding the Rim, adiversified livestock sector makes up one-half of production, and cash grainsmake up another 30 percent. The composition of the livestock sector variesbetween non-Rim metro areas and nonmetro areas, however.Nevertheless, the share of production from high-value crops is more thantwice as high in metro counties outside the Rim as in nonmetro counties, 16and 6 percent, respectively. This may reflect shifts by producers in metroareas to commodities that generate returns high enough to compensate forhigher property taxes incurred as land prices increase with local development(Heimlich and Anderson, 2001, pp. 38-42). The larger returns per acre forhigh-value crops relative to other commodities also allow operators to focustheir production on fewer acres, which reduces their need to bid for farmlandagainst competing uses. In the case of California, the climate and irrigationmake farming especially competitive where agriculture and developmentmeet in the State’s large counties.Financial Status of the Family FarmThe year 2007 was above average for farming. Net farm income averaged$35,100 per farm in 2007, 46 percent higher than in 2006. Only 3 percent offarms were classified as vulnerable (negative net cash farm income with adebt/asset ratio greater than 40 percent). Seventy-one percent of the vulnerablefarms were residential/lifestyle farms, however, whose operators—bydefinition—rely on off-farm work for their livelihood.For the most part, large and very large family farms were viable economicbusinesses. Their average profit margin and rates of return on assets andequity were all positive, and the large majority of these farms had a positiveoperating profit margin. Small farms—in contrast—were less viable asbusinesses. For retirement, residential/lifestyle, and low-sales farms, averageoperating profit margin and rates of return on assets and equity were negative.These ratios were positive for medium-sales farms but were substantiallyless than those of larger family farms. Nevertheless, some farms in eachsmall-farm group had an operating margin of at least 20 percent.47Structure and Finances of U.S. Farms: Family Farm Report, 2010 Edition / EIB-66Economic Research Service/USDA
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United StatesDepartment ofAgricultu
Page 3 and 4: United StatesDepartmentof Agricultu
Page 5 and 6: References. . . . . . . . . . . . .
Page 7 and 8: Distribution of farms, total produc
Page 9 and 10: IntroductionThe Family Farm Report,
Page 11 and 12: As in previous issues, the Agricult
Page 13 and 14: came from technological change, suc
Page 15 and 16: percent of the farms in both groups
Page 17 and 18: “point system” assigns values f
Page 19 and 20: Full economic costs of milk product
Page 21 and 22: Cow-calf enterprises offer three ad
Page 23 and 24: Location of U.S. Farms and Producti
Page 25 and 26: Table 4Farms and production by reso
Page 27 and 28: majority of farms in the region, 65
Page 29 and 30: Farm Operators, Principal and Secon
Page 32 and 33: farms. Since these farmers produce
Page 34 and 35: Farm Income and Financial Performan
Page 36 and 37: Defining the Financial MeasuresSome
Page 38 and 39: Operator Household Income and Net W
Page 40 and 41: of operator household net worth, re
Page 42: About three-fourths of medium-sales
Page 45 and 46: ContractingContracts can potentiall
Page 47 and 48: Types of ContractsA contract is a l
Page 49 and 50: per year rather than below the pove
Page 52: general—are overwhelmingly male.
Page 57 and 58: Figure 15Mean operator household in
Page 59 and 60: into the Twenty-first Century. Marv
Page 61 and 62: U.S. Department of Agriculture, Nat
Page 64 and 65: In fact, the number of farms in eac
Page 66 and 67: (version 3). Respondents provide wh
Page 68 and 69: iefing room. Both sets of estimates
Page 70 and 71: • Farm operators forget minor or
Page 72: ecause the sector accounts extend b
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