Diverse family farms continue to dominate ag landscape

posted Feb. 19, 2018 9:15 a.m. (CDT)
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by / Heidi Clausen, Editor | heidi.clausen@ecpc.com

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In many ways, a new report on family farms from the U.S. Department of Agriculture’s Economic Research Service didn’t reveal much that most don’t already know about this overwhelmingly large and important segment of the agriculture industry; anyone involved in agriculture knows how much of a family affair farming often is.

At the same time, the 2017 edition of “America’s Diverse Family Farms,” which provides an overview of U.S. farms, including the latest statistics on production, financial performance and farm household characteristics by farm-size categories, contained some rather enlightening information.

The farming industry is still largely composed of family-owned and -operated businesses. In fact, a key finding of the recent report was that 99 percent of all farms in this country are family farms, or any farm where the majority of the business is owned by the principal operator (the person most responsible for running the farm) and individuals related to that principal operator. Family farms accounted for 90 percent of farm production in 2016, according to the report.

More than a third of farms have multiple operators, and larger farms are more likely to have multiple generations of farm operators.

Most U.S. farms are considered small. Small farms make up 90 percent of the farm count and operate about half of the farmland. However, they only account for 23 percent of production. The largest share of farm production (45 percent) comes from large-scale family farms, although small farms account for about half of all poultry and hay production.

A little background: Small family farms are defined as those with a gross cash farm income of less than $350,000; this category includes many “retirement farms,” farms where the principal operator has a major occupation other than farming and farms with low to moderate sales levels. Midsize family farms report a GCFI between $350,000 and $999,999, while large-scale family farms show a GCFI of $1 million or higher.

Different types of farms account for the production of specific commodities. Large-scale family farms account for half of hog production and two-thirds of both dairy production and high-value crops like fruits and vegetables. Midsize and large-scale family farms dominate cotton (83 percent of production) and cash grains/​soybeans (74 percent). Small farms produce 59 percent of U.S. poultry and half of the hay, while small- and large-scale farms together account for two-thirds of beef production. Small farms generally focus on cow/​calf operations, while large-scale farms are more likely to run feedlots.

As important as family farms are, many of them, especially smaller operations, often face an uphill climb when it comes to turning a profit, according to the report. Despite the hardship, small farms get less U.S. farm support. The survey found that as many as 75 percent of small farms in the U.S. are experiencing serious financial risks, compared to about 30 percent of large farms.

Small farms are much more likely than their larger counterparts to have an operating profit margin of less than 10 percent — an indicator of high financial risk. Half to three-fourths of small farms have an OPM that low, depending on farm type, compared with 31 percent to 42 percent of midsize and large-scale farms.

Households operating small farms often rely on a substantial amount of off-farm income to support their farming operations and living expenses. However, some small farms in each type operate in the low-risk zone, with an OPM greater than 25 percent, as do more than 40 percent of large and very large farms.

Wealth and income are important to farm household well-being, and farm household wealth exceeds that of U.S. households, in general. The report states that farm households are “neither low-income nor low-wealth.” Only 38 percent of farm households had income less than the median for all U.S. households in 2016, and 3 percent had wealth less than the U.S. median. Small-farm households rely heavily on off-farm sources for their income, so general economic policies — such as tax or economic development policy — can be as important to them as traditional farm policy.

Conservation Reserve Program payments go to different farms than a lot of other government payments. CRP targets environmentally sensitive cropland, and payments largely go to retirement farms and those with off-farm income and low sales. In contrast, commodity-related and working-land payments tend to go to family farms with a GCFI of at least $150,000. Most U.S. farms, however, do not receive government payments and are not directly affected by them, although they may be affected indirectly by changes in land values and rents, according to the report.

Federal crop insurance has grown in importance over the past quarter-century, increasing its share of farm financial assistance to more than 30 percent by 2016. Policy emphasis has shifted to a greater reliance on risk management and less reliance on income support through commodity programs.

There’s no denying the importance of family farms — of all sizes — both to our agricultural economy and really, to the fabric of our society as a whole. You simply can’t put a value on generations working together and children growing up on the land, learning the value of a hard day’s labor, working with nature and knowing how their food is produced. This way of life needs to be preserved and supported at every turn.

To view the full ERS report, visit http://www.ers.usda.gov/​publications/​pub-details/?pubid=86197.

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