Farms with Biggest Financial Risk Get Least Government Support

Only one quarter of America’s farmers participate in federal support programs. Smaller farms that aren’t raising commodities that are part of the farm bill are more likely to be in financial distress.

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Smaller farms that struggle the most to make ends meet are also the ones that are least likely to receive government support from the farm bill, a new report shows.

But even farmers on the lower end of the economic scale are doing better than rural Americans overall, the report says.

One half to three-quarters of smaller family farmers are currently experiencing serious financial risks, according to the report from USDA’s Economic Research Service Only about a third of middle-sized farms are in financial trouble (defined as having an operating margin of less than 10%). For large farms, 42% were at financial risk.

Overall, net farm income is at a five-year low. Projected net income for 2017 is only 49% of the peak earnings year from 2013, when income came to $123.8 billion.

Although small farms aren’t doing as well as larger ones, they are still doing relatively better than low-income rural residents. Only about a third of farm households had less than the 2016 median income for all U.S. households. All but 3% of farm households had had wealth greater 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,” the report stated.

Nearly three-quarters of farmers receive no farm-related government support. Large and mid-sized farms are much more likely to participate in federal farm programs like crop insurance. More than 75% of farm-program support went to moderate-sales, midsize, and large family farms in 2016, roughly proportional to their 80-percent share of acres in program crops. Commodity program support and crop insurance are targeted at production of specific storable commodities, such as corn, soybeans, wheat, cotton and rice.

Moderate-sized and large farms also obtained the majority of working-land conservation payments, such as the Conservation Stewardship Program and Environmental Quality Incentives Program. Thirty-two percent of these payments went to midsize family farms and another 20 percent went to large family farms. These payments are typically for conservation practices that build soil health, reduce erosion, reduce nutrient runoff and protect waterways from potential pollution.

Smaller farms, on the other hand, are more likely to participate in conservation programs that focus on retiring land from production, such as the Conservation Reserve Program. Seventy-six percent of this funding went to small farmers who were paid to support primarily wildlife and habitat restoration.

The report uses a classification system based on gross cash farm income rather than acreage to define small versus large. The report defines “small family farms” as those with less than $350,000 in gross income. Small farmers are further subdivided into the following categories:

  • Retirement farms–Small farms whose principal operators report they are retired, although they continue to farm on a small scale. There are 366,812 farms within this classification representing 17.9% of total farms.
  • Off-farm occupation farms–Small farms whose principal operators report a major occupation other than farming. 860,739 farms fit this category, representing 41.9% of U.S. farms.
  • Farming-occupation farms–Small farms whose principal operators report farming as their major occupation. Farms within this category representing “low-sales” below $150,000 represent 24.7% of all farms (506,001 farms). Moderate sales farming-occupation farms, those with between $150,000 and $350,000 in sales, are 5.4% of all farms (110,524 farms).

A relatively small proportion of farms in the midsize and largescale categories were the largest producers. Small farms, for instance, make up 89.9% of all farmers and own 50.6% of farmland, but they produce only 22.6% of total agricultural sales. Large-scale family farmers produce 45.2% of total agricultural sales though they make up only 2.9% of the total number of farming operations.

Midsize Family Farms, those with gross cash income between $350,000 and $999,999 make up only 6.0% of U. S. Farms among 122,980 farms. Large-Scale Family Farms, those with more than $1,000,000 in farm income represent 2.6% of U.S. farms (53,763 farms). Very large family farms, those with gross farm income of $5,000,000 or more represent 0.3% of U.S. farms (6,449 farms). Farms not classified as family farms, where the principal operator and persons related to the principal operator do not own a majority of the business, make up only 1.2% of U. S. farms (24,992 farms).

Farm size is also related to specific agricultural sectors. For example, 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 grains and soybeans (74 percent). Small farms, though, produce 59 percent of U.S. poultry output and 50 percent of hay. Within the beef sector, small and large-scale farms together account for two-thirds of beef production. Small farms generally have cow/calf operations, while large-scale farms are more likely to operate beef feedlots.

 

Topics: Ag and Trade
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