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Farming and Farm Income

American agriculture and rural life underwent a tremendous transformation in the 20th century. Early 20th century agriculture was labor intensive, and it took place on many small, diversified farms in rural areas where more than half the U.S. population lived. Agricultural production in the 21st century, on the other hand, is concentrated on a small number of large, specialized farms in rural areas where less than a fourth of the U.S. population lives. The following material provides an overview of these trends, as well as trends in farm sector and farm household incomes.

After peaking at 6.8 million farms in 1935, the number of U.S. farms fell sharply until leveling off in the early 1970s. Falling farm numbers during this period reflected growing productivity in agriculture and increased nonfarm employment opportunities. Because the amount of farmland did not decrease as much as the number of farms, the remaining farms have more acreage—on average, about 430 acres in 2012 versus 155 acres in 1935. Roughly 2.1 million farms are currently in operation.
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Technological developments in agriculture have been particularly influential in driving change in the farm sector. Advances in mechanization and the increasing availability of chemical inputs led to ever-increasing economies of scale that spurred rapid growth in the size of the farms responsible for most agricultural production. As a result, even as the amount of land and labor inputs used in farming declined, total farm output more than doubled between 1978 and 2011.
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Over 97 percent of U.S. farms are family farms (where the majority of the business is owned by the operator and individuals related to the operator). Most are small family farms (having less than $350,000 in gross cash farm income, or GCFI)—these account for 90 percent of all U.S. farms. Large-scale family farms—with $1 million or more in GCFI—account for about 2 percent of all farms, but have a disproportionately large share of the value of production (35 percent).
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Gross farm cash income includes income from farm receipts, farm-related income, and government payments. Since 2000, gross farm cash income has increased from $227 billion to $411 billion in 2011. This reflects increasing cash receipts from farming. While government payments fluctuate from year to year, they declined in 2010-11.
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Crop cash receipts totaled $208 billion in 2011. Receipts from corn and soybeans accounted for nearly half of total crop receipts and for over half of all harvested acreage.
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Livestock receipts totaled $166 billion in 2011. Beef receipts accounted for over one-third of total livestock sales. Dairy sales were slightly higher than poultry and egg sales and nearly double the sales from hogs.
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Median total household income among all farm households ($57,050) exceeded the median for all U.S. households ($50,054) in 2011. More than half of U.S. farms are very small, with annual sales under $10,000; the households operating these farms typically draw all of their income from off-farm sources. Median household income and income from farming increase with farm size; the typical household operating the largest commercial farms earned about $380,000 in 2011, and most of that came from farming.
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While gross farm income roughly measures the total value of agricultural output, it does not reflect the farm sector’s contribution to that value, nor does it measure the income earned by farm operators and other farm sector stakeholders. Net farm income—which reflects income from production in the current year—is calculated by subtracting farm expenses from gross income. Net farm income is forecast to be $113.2 billion in 2014, down 13.8 percent from 2013’s forecast of $131.3 billion. If realized, the 2014 forecast would be the lowest since 2010, but would still remain more than $25 billion above the previous 10-year annual average.
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The debt-to-equity ratio and the debt-to-asset ratio are major indicators of the financial well-being of the farm sector. Lower ratios signify that farmers are relying less on borrowed funds to finance their asset holdings. The steady decline in both ratios since the mid-1980s is due to relatively large growth in the value of farm assets (driven principally by increases in farm real estate values), while farm-debt levels increased at a much slower pace.
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Last updated: Friday, November 08, 2013

For more information contact: Kathleen Kassel

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