Median farm household income increased each year from 2008 to 2012. The increase largely reflects greater income from off-farm sources, where most farm households earn all of their income. Given the broad USDA definition of a farm, many farms are not profitable even in the best farm income years. As a result the median household income from farming shows a loss from farming.
Note: The median is the income level at which half of all households have lower incomes and half have higher incomes. Because they are based on unique distributions, median total income will generally not equal the sum of median off-farm and median farm income.
See more financial statistics for farm operator households for recent years.
2012 Income Varies by Farm Typology
ERS has developed a family farm typology that considers gross cash farm income in combination with the occupational characteristics of principal farm operators (see glossary). In the ERS typology, farms with less than $350,000 in gross cash farm income are all considered to be small farms, but are further subdivided into two groups based on the occupation of the farm's principal operator. If a principal operator of a small farm reports being retired or having a major occupation other than farming, the farm is classified as a "residence" farm. If the principal operator of a small farm reports farming as a major occupation and is not retired from farming, their farm is classified as "intermediate." "Commercial" farms are classified as those with $350,000 or more in gross cash farm income, regardless of the occupational characteristics of the principal operator.
In contrast to the general farm household population, households associated with commercial farms derive the majority of their income from farming activities (see table on principal farm operator household finances, by ERS farm typology, 2012). Their median income from farming in 2012 was $159,462, and their total household income was $208,485. Households associated with intermediate and residence farms both experienced losses from farming. However, the substantial off-farm income of residence farms caused them to have much higher total incomes than intermediate farms.
Details on farm operator household incomes are grouped by:
See the glossary for definitions of terms.
Type of Farm Determines Primary Source of Household Income
While the number of U.S. family farms has been relatively stable for the past decade (see table on family and nonfamily farms, by farm size class (gross sales), 1996-2012), the roughly 2.1 million family farms vary significantly in size and by the share of principal operator household income coming from farming.
The role of farm income in household finances can be understood by looking at two complementary statistics: the share of households with positive income from farming and, for them, the median percent of total household income coming from farming. Farm income contributes little to the annual income of farm households operating residence farms, is a secondary source of income for households with intermediate farms, and is a primary source of income for those with commercial farms.
A farm's specialization is determined by the one commodity or group of commodities that makes up at least 50 percent of the farm's total value of agricultural production (see glossary).
In any given year, production and market conditions will vary for farms that specialize in different commodities. Differences in household income across commodity specialization, however, may also stem from basic differences in the types of households that engage in the production of specific commodities. For example, with its large and consistent time demands, managing a dairy farm rarely permits an operator to work many hours off-farm and is a main reason why farm income is a large share of total income for dairy farm households but not for households involved in many other commodities. Consequently, people with a high paying off-farm job, or the potential to obtain one, are more likely to specialize in an activity that, unlike dairy farming, readily permits working many hours off the farm.
High prices for field crops during 2012 contributed to strong incomes for households specializing in those crops. Households associated with farms specializing in cash grains such as corn or soybeans had a median household income of $82,325 in 2012. Median household income was even higher for those specializing in rice, tobacco, cotton or peanuts, at $101,424. In contrast, the median household income of households operating most livestock farms was dampened by losses from farming in 2012. The exception was households operating dairy farms.
Farm Operators' Household Income Compared With U.S. Household Income
Since the 1980s, ERS has reported an income measure for farm operator households comparable to the U.S. Census Bureau's measure for all U.S. households. (The income measure is, generally, money income except farm depreciation is included as an expense. See glossary for more details.) Median total farm household income exceeded the median U.S. household income in every year since 1998. However, the gap between farm and U.S. household income has varied, increasing through the early 2000s, then decreasing for 3 straight years (2006-08) before increasing again in the last 4 years.
Because the broad definition of a farm includes many establishments with little or no agricultural production, the median tends to reflect the situation of these small farms, which is often quite different from that of farms with substantial agricultural production. In 2012, median farm operator household income exceeded median U.S. household income by 33.9 percent ($68,298 compared to $51,017).
A series that compares the disposable personal incomes (see the glossary for definition of this term) of farm and nonfarm residents from 1934 to 1983 (see figure) shows that, in contrast to recent years, mean (average) U.S. household income exceeded that of farm households for most of the previous century (see historic data on mean and median farm operator household income and ratio of farm household to U.S. household income, 1960-2012 ).
Composition of Off-Farm Income
The median farm operator household consistently incurs a net loss from farming activities, which means that most farm operator households rely on off-farm income to sustain them. Of the total off-farm income earned by all farm operator households, the majority comes from wages and salaries, followed by transfers (e.g., Social Security) and nonfarm businesses.