Classifying Diverse Farms
Broad descriptions of farms based on U.S. averages can mask variation among different sizes and types of farms. A farm classification—or typology—developed by the Economic Research Service (ERS) categorizes farms into more homogeneous groupings for reporting and evaluation purposes. The classification is based largely on annual gross cash farm income of the farm business, the primary occupation of the operator, and ownership of the farm.
The ERS Farm Typology
The farm typology distinguishes between family and nonfamily farms, where a family farm is a farm in which the majority of the business is owned by a producer and/or any individual related by blood, marriage, or adoption, including relatives who do not live in the producer’s household. Among family farms, farms are divided by farm size, which is measured by annual gross cash farm income—a measure of the farm's revenue (before deducting expenses) that includes crop and livestock sales, payments made under Federal agricultural programs, and other farm-related cash income including fees from production contracts. Small family farms are further divided into categories based on the primary occupation of the principal producer.
- Small family farms (GCFI less than $350,000)
- Retirement farms: Small family farms whose principal operators report they are retired from farming, although they continue to farm on a small scale.
- Off-farm occupation: Small family farms whose principal operators report a primary occupation other than farming. The category also includes farms (about 18 percent of off-farm occupation farms) whose operators do not consider themselves to be in the labor force.
- Farming-occupation farms: Small family farms whose principal operators report farming as their primary occupation. Farming-occupation farms are further divided into two classes:
- Low-sales farms: GCFI less than $150,000.
- Moderate-sales farms: GCFI between $150,000 and $349,999.
- Midsize family farms (GCFI between $350,000 and $999,999)
- Large-scale family farms (GCFI of $1,000,000 or more)
- Large farms: Farms with GCFI between $1,000,000 and $4,999,999.
- Very large farms: Farms with GCFI of $5,000,000 or more.
- Nonfamily farms: Farms where an operator and persons related to the operator do not own a majority of the business.
USDA defines a farm as any place that produced and sold—or normally would have produced and sold—at least $1,000 of agricultural products or has government payments and sales that exceed $1,000 (not adjusted for inflation) during a given year. USDA uses acres of crops and head of livestock to determine if a place with sales less than $1,000 could normally produce and sell at least that amount. The financial thresholds for each farm category were last updated in 2013. For more information, see the ERS report, Updating the ERS Farm Typology (EIB-110, April 2013).
Distribution of U.S. Farms, Value of Production, and Farm Assets
Based on the ERS farm typology and data from the 2024 Agricultural Resource Management Survey (ARMS), 97 percent of U.S. farms are family farms. The remaining 3 percent are nonfamily farms, which produce 14 percent of the total value of agricultural output. Two features of family farms stand out. First, small family farms—those with GCFI less than $350,000—make up 86 percent of all U.S. farms and hold 55 percent of farm assets. Second, most production—69 percent—occurs on the 11 percent of family farms classified as midsize or large-scale. Among small family farm types, moderate-sales farms (GCFI of $150,000 to $349,999) account for the highest share of total U.S. production, at 8 percent.
Contracting
Contracts can potentially provide benefits to both producers and contractors. Farmers get a guaranteed outlet for their production with known compensation, while contractors get an assured supply of commodities with specified characteristics, delivered on time.
A contract is a legal agreement between a farm operator (contractee) and another person or firm (contractor) to produce a specific type, quantity, and quality of agricultural commodity. ERS classifies contracts as either marketing or production.
Marketing contract: Ownership of the commodity remains with the farmer during production. The contract sets a price (or a pricing formula), product quantities and qualities, and a delivery schedule. Contractor involvement in production is minimal, and the farmer provides all the inputs. For crops, the contract is finalized before harvest. For livestock, the contract is finalized before the animals are ready to be marketed.
Production contract: The contractor usually owns the commodity during production, and the farmer is paid a fee for services rendered. The contract specifies farmer and contractor responsibilities for inputs and practices. The contractor often provides specific inputs and services, production guidelines, and technical advice. In livestock contracts, for example, contractors typically provide feed, veterinary services, transportation, and young animals. The contract is finalized before production of the commodity.
In 2024, slightly more than a quarter (26 percent) of total the value of production was under contract production. Production contracts contributed (slightly) more to the total value of production compared with marketing contracts but the use was different among crop and livestock sectors. Production contracts were more commonly used in livestock production, especially in poultry/egg and hog enterprises where a majority of production was under production contracts. Marketing contracts were more commonly used in dairy and crop farms, though there were still differences between crops. Over 40 percent of the value of tobacco and fruits was produced under marketing contracts. In contrast, less than 20 percent of total soybean, corn, and wheat produced was under marketing contracts.
Use of either type of contract varies by farm type. In 2024, about 6 percent of U.S. farms used contracts. Small family farms made up almost 50 percent of farms with contracts but accounted for 22 percent of the value of production under contract. Midsize family farms account for 26 percent of farms with contracts and 21 percent of the value of production under contract. In contrast, large-scale family farms and nonfamily farms contributed a higher percent to the value of production than the percent of farms with contracts. Specifically, large-scale family farms made up 23 percent of farms with contracts and accounted for 43 percent of production value under contract. Nonfamily farms represented 5 percent of farms with contracts and produced 13 percent of the value under contract.
For more information, contact Daniel Bonin.