Recent USDA- ERS Reports, Farm Structure, Rural America

The U.S. Department of Agriculture’s Economic Research Service (ERS) has recently released three separate reports that contain a large amount of relevant information that provides interesting perspective on farm structure, and other important variables impacting rural America.

America’s Diverse Family Farms, 2016 Edition

Earlier this month, in a report titled, “America’s Diverse Family Farms, 2016 Edition,” ERS noted that, “In 2015, 99 percent of U.S. farms were family farms, where the principal operator and his or her relatives owned the majority of the business. Small family farms—those with less than $350,000 in annual gross cash farm income (GCFI)—accounted for about 90 percent of U.S. farms, half of all farmland, and a quarter of the value of production.”

The ERS update indicated that, “Since 1991, agricultural production has shifted to million-dollar farms—those with gross cash farm income (GCFI) of $1,000,000 or more—including both family and nonfamily farms. Million-dollar farms now account for half of farm production, up from a third in 1991.”

However, the update pointed out that, “Most million-dollar farms (90 percent) are family farms. Only 3 percent are nonfamily corporations, and 80 percent of these corporations report no more than 10 shareholders.”

These statistics are important to keep in mind, particularly as articles and opinion items often confuse the term “corporate” to imply that there are many large farms in the U.S. that are operated by “corporations” and not families.

For example, this opinion item from last month’s New York Times included this sentence: “Today, there are basically two types of farms in America: giant corporate farms that tend to express their political preferences through lobbying, and smaller-yielding, largely family-run farms, many of whom are operated by owners who take on a second job.”

Similarly, the ERS report also made clear that large size farms tend to get a greater share of federal government commodity program payments, but not because of the arcane insinuation that this is the result of bad farm policy, this happens because they farm more acres:

Commodity program payments are targeted at production of specific commodities and reflect acreage in crops historically eligible for support. Seventy-four percent of these payments went to moderate-sales, midsize, and large family farms in 2015, roughly proportional to their 79-percent share of acres in program crops.

This simple concept also applies to federal crop insurance.

The ERS report plainly pointed out that:

The distribution of indemnities from Federal crop insurance is roughly proportional to cropland. As a result, midsize and large farms received 69 percent of indemnities in 2015.

 The Changing Organization and Well-Being of Midsize U.S. Farms, 1992-2014

Also this fall, ERS released a report titled, “The Changing Organization and Well-Being of Midsize U.S. Farms, 1992-2014,” which stated in part that, “Midsize farms accounted for about 21 percent of total production and 6 percent of U.S. farms in 2014,” and added that, “Midsize farms generated more net farm income and operated with higher levels of financial efficiency in 2014 than in 1992.”

The report added that, “From 1992 to 2012, midsize farm numbers fell by about 5 percent, as noted, declining from about 132,000 to 125,000 farms.”

ERS explained that, “Many midsize cash-grain farms grew in size to large farms from 2007 to 2012, largely due to high grain prices. We note that some large farms will shrink to a midsize farm during periods of lower commodity prices; thus, the exact number of midsize farms is constantly changing.”

With respect to commodity program payments and midsize farm operations, the report pointed out that, “Our results show that midsize cash-grain and oilseed farms that received fixed direct payments in 2007 had a statistically greater probability of survival through 2012 than those that did not receive payments.”

Rural America at a Glance, 2016 Edition

In November, ERS released a brief report titled, “Rural America at a Glance, 2016 Edition,” which indicated that, “Unemployment continued to decline in rural areas in 2015, falling close to levels last seen before the Great Recession, as employment continued to grow. After declining for several years, rural population stabilized.”

The report noted that, “Median earnings are substantially lower in rural areas than in urban areas, although this shortfall is mitigated by rural-urban differences in living costs, especially for housing. Both rural and urban median annual earnings (for adults with earnings) fell markedly during the Great Recession, but the decline in rural earnings was much smaller and relatively short- lived. In 2015, rural median earnings rose by more than 2 percent and exceeded their 2007 level.”

The ERS update noted that, “Although the number of people working has increased since 2010, declines in the unemployment rate have also reflected fewer people seeking work. If participation levels in 2015 had been identical to 2010, then the unemployment rate in 2015 would have been an estimated 8.2 percent in rural areas and 7.4 percent in urban areas, well below recessionary peaks but far above the levels expected in prosperous times.”