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

Small-farm households typically receive substantial off-farm income, largelyfrom wage and salary jobs or from self-employment. Because many smallfarmhouseholds receive a large share of their income from off-farm work,macroeconomic and monetary policies affecting the nonfarm economy areimportant to them. The provisions in the tax codes allowing farmers to writefarm losses off against other income (Durst, 2009, pp. 4-6) are also importantto operators of residential/lifestyle farms with substantial off-farm earnedincome. Finally, the status of retirement programs is important to operatorsof retirement farms and to older operators in other farm types as theyapproach retirement.Limited-Resource Farms: Few in NumberThe number of limited-resource farms is sensitive to the asset or wealthconstraints used in the definitions. Under the three definitions with either ofthese constraints, the count of limited-resource farms falls within a relativelynarrow range, from 65,800 to 143,000 farms (between 3 and 7 percent of allU.S. farms). Under the sole definition without an asset/wealth constraint—theone currently used by USDA—the number of limited-resource farms reaches255,000, or 12 percent of all farms. In other words, there are relatively fewlimited-resource farms, regardless of the definition used.Limited-resource farms have some common characteristics under all thedefinitions. Limited-resource operators are generally male and married. Theyhave lower levels of education, however, than farmers who are not classifiedas limited-resource. Limited-resource farms are generally small, whethersize is measured in acres or sales, and the households operating these farmstypically lose money farming. Overlap among the farms identified as limitedresourceunder the four definitions helps explain these common characteristics.The overlap also implies that many of the same farms will be identifiedregardless of the definition used.The number of limited-resource farmers declined from 200,300 in 1988under the original definition (Perry and Ahearn, 1993) to 143,000 in 2007under the updated original definition, the definition most comparable to theoriginal definition. Both definitions have a household income constraintbased on the poverty level, a sales constraint consistent with a commerciallyviable operation, and an asset constraint based on median assets for farmsmeeting the sales constraint.Increasing household income helps explain the decline in the number oflimited-resource farms over time. Average household income grew morerapidly for farm households than for U.S. households in general—particularlyafter 1995—resulting in a growing gap between farm and other households,in favor of farm households (fig. 15). Most of the growth in farmhouseholds’ income came from off-farm sources. Farming’s contribution tofarm household income has never exceeded 17 percent since 1988.48Structure and Finances of U.S. Farms: Family Farm Report, 2010 Edition / EIB-66Economic Research Service/USDA