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Structure and Finances of U.S. Farms: Family Farm Report, 2010 Edition
Robert A. Hoppe and David E. Banker
Economic Information Bulletin No. (EIB-66) 72 pp, July 2010
Broad descriptions of farms based on U.S. averages can mask variation among different sizes
and types of farms. Small family farms dominate the farm count and hold most farm assets,
including farmland. But large-scale family farms and nonfamily farms account for the bulk of
farm production. Averages such as sales per farm, therefore, can be misleading. Information on
the different kinds of farms—and the farmers who operate them—is important for understanding
the economic well-being of farm households and the impact of farm policy.
What Is the Issue?
Agricultural policymakers require information on how U.S. farming is organized. USDA’s
Economic Research Service (ERS) produces a periodic report with that information. The Family
Farm Report, 2010 Edition, is the most recent in the series, providing agricultural policymakers
with an accurate, detailed, and unbiased source of information on the structure and finances of
U.S. farms, including the relationship of farm size and type to agricultural production, financial
performance, sources of farm household income, and the extent of operators’ off-farm work. The
report provides a sense of the financial position of family farms in general and for different types
of family farms.
What Are the Major Findings?
Small family farms—annual sales less than $250,000—made up 88 percent of U.S. farms in
2007. They also held about 64 percent of all farm assets, including 63 percent of the land owned
by farms. As custodians of the bulk of farm assets—including land—small farms have a large
role in natural resource and environmental policy. Small farms accounted for 76 percent of the
land enrolled by farmers in USDA land-retirement programs, largely in the Conservation Reserve
Program.
Nevertheless, very large family farms and nonfamily farms produce the largest share of
agricultural output. Large-scale family farms (annual sales of $250,000 or more), plus nonfamily
farms, made up only 12 percent of U.S. farms in 2007 but accounted for 84 percent of the value
of U.S. production. Although small family farms produced only 16 percent of agricultural output,
they made more significant contributions to the production of specific commodities: hay, tobacco,
cash grains and soybeans, and beef cattle.
For the most part, large-scale farms are more viable businesses than small family farms. The
average operating profit margin and rates of return on assets and equity for large farms (annual
sales of $250,000 to $499,999) and very large farms (annual sales of $500,000 or more) were all positive in 2007, and most of these
farms had a positive operating
profit margin. Small farms were
less viable as businesses. Average
operating profit margin and rates
of return on assets and equity were
negative for most small-farm types.
Nevertheless, some farms within
each small-farm type (see table
for farm types) had relatively high
operating margins of at least 20
percent.
Small-farm households rely on
off-farm income. Given small
farms’ poor financial performance,
why do so many continue to exist?
Small-farm households typically
receive substantial off-farm income
and do not rely primarily on their farms for their livelihood. Most of their off-farm income is from wage-and-salary
jobs or self-employment. Households operating retirement farms, however, receive most of their off-farm income
from such sources as Social Security, pensions, dividends, interest, and rent.
Farm operator households, generally speaking, cannot be considered low-income, but limited-resource farms
persist. Median household income for only two types of farm households—those operating retirement farms or lowsales
farms (annual sales less than $100,000)—was below the U.S. median in 2007. Limited-resource farms, however,
make up between 3 and 12 percent of all farms, depending on how “limited-resource” is defined. (The definitions are
based on different—but low—levels of farm sales, operator household income, and farm assets or operator household
net worth.)
Different types of Government payments go to different types of farms. The distribution of commodity-related
program payments is roughly proportional to the production of program commodities. Medium-sales (annual sales
of $100,000 to $249,999) and large-scale farms received 76 percent of commodity-related Government payments in
2007. Likewise, large-scale farms received 60 percent of the payments from working-land programs, which target
production indirectly by focusing on land in production. In contrast, land-retirement programs target environmentally
sensitive land rather than production. The bulk of land-retirement payments (73 percent) went to retirement, residential/lifestyle, and low-sales small farms. However, most farms (61 percent) received no Government payments at all
and were not directly affected by farm program payments.
How Was the Study Conducted?
The 2007 Agricultural Resource Management Survey (ARMS) is the main source of data in the Family Farm Report,
2010 Edition. ARMS is an annual survey designed and conducted by ERS and the National Agricultural Statistics
Service (NASS), another USDA agency. In addition to ARMS, various censuses of agriculture and ERS farm sector
income estimates are used in this report, particularly in the analysis of long-term trends. The report uses the farm
classification system developed by ERS to examine farm structure in the United States.
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