Structure and Finances of U.S. Farms: Family Farm Report, 2007 Edition
by Robert Hoppe
, Penni Korb, Erik O'Donoghue
, and David E. Banker
Economic Information Bulletin No. (EIB-24) 58 pp, June 2007
U.S. farms are diverse, ranging from very small retirement and
residential farms to enterprises with annual sales in the millions
of dollars. Farms are operated by individuals on a full- and
part-time basis, by multiple generations of a family, by multiple
families, and by managers of nonfamily corporations. Some
specialize in a single product, while others produce a wide variety
of products. Some have full control over their farming processes
while others produce commodities under contract to strict
specifications. But despite their diversity, most U.S. farms are
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, 2007 Edition is the most recent in the series, providing
agricultural policymakers with an accurate, detailed, and unbiased
source of information on how farming in the United States is
organized, including the relationship of farm size and type to
agricultural production, financial performance, sources of farm
household income, and the extent of 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?
Most U.S. farms-98 percent in 2004-are family farms, defined as
operations organized as proprietorships, partnerships, or family
corporations that do not have hired managers. Nonfamily
corporations make up a small and stable share of farm numbers and
sales, accounting for less than 1 percent of farms and 6-7 percent
of farm product sales in each agricultural census since 1978.
Small family farms account for most U.S. farms and farm
assets. Small family farms (sales less than $250,000)
accounted for 90 percent of U.S. farms in 2004. They also held
about 68 percent of all farm assets, including 61 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 82
percent of the land enrolled by farmers in the Conservation Reserve
and Wetlands Reserve Programs (CRP and WRP).
Large-scale family farms and nonfamily farms produce the
largest share of agricultural output. Large-scale family
farms, plus nonfamily farms, made up only 10 percent of U.S. farms
in 2004, but accounted for 75 percent of the value of production.
Nevertheless, small farms made significant contributions to the
production of specific commodities, including hay, tobacco, wheat,
corn,soybeans, and beef cattle.
The number of larger farms is growing. The number
of farms with sales of $250,000 or more grew steadily between the
1982 and 2002 Censuses of Agriculture, with sales measured in
constant 2002 dollars. The growth in the number of these larger
farms was accompanied by a shift in sales in the same direction.
The most rapid growth was for farms with sales of $1 million or
more. By 2002, million-dollar farms alone accounted for 48 percent
of sales, compared with 23 percent in 1982.
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
and very large family farms were all positive in 2004, and most of
these farms had a positive operating profit margin. Small farms
were less viable as businesses. Their average operating profit
margin and rates of return on assets and equity were negative.
Nevertheless, some farms in each small farm group had an operating
margin of at least 20 percent. In addition, a majority of each
small farm type had a positive net farm income, although the
average net income for each small-farm type was low compared with
Small farm households rely on off-farm income.
Small farm operator 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. Because of their off-farm work, small farm
households are more affected by the nonfarm economy. Households
operating retirement or limited-resource farms, however, receive
well over half of their income from such sources as Social
Security, pensions, dividends, interest, and rent, reflecting the
ages of operators on such farms.
Payments from commodity-related programs and
conservation programs go to different types of farms. The
distribution of commodity-related program payments is roughly
proportional to the harvested acres of program commodities. As a
result, medium-sales ($100,000-$249,999) and large-scale farms
received 78 percent of commodity-related government payments in
2004. In contrast, CRP, which pays the bulk of environmental
payments, targets environmentally sensitive land rather than
commodity production. Retirement, residential/lifestyle, and
low-sales small farms received 62 percent of conservation program
payments in 2004. However, most farms-61 percent in 2004-receive no
government payments and are not directly affected by farm program
A growing number of farms operate under production and
marketing contracts to guarantee an outlet for their
production. About two-fifths of U.S. agricultural
production is produced or marketed under contract, although the
share varies by commodity and type of farm. Relatively few small
family farms use production and marketing contracts, while 64
percent of very large family farms use contracts and, as a group,
produce 61 percent of the value of production grown under
How Was the Study Conducted?
The 2004 Agricultural Resource Management Survey (ARMS) is the
main source of data in the Family Farm Report, 2007 Edition. ARMS
is an annual survey designed and conducted by ERS and the National
Agricultural Statistics Service (NASS). Various censuses of
agriculture, ERS estimates of farm productivity, NASS estimates of
the number of farms, and labor force data from the Bureau of Labor
Statistics are also used in this report, particularly for long-term
trends. The report uses the farm classification system (see table)
developed by ERS to examine farm structure in the United