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Farm Household Economics and Well-Being: Farm Household Income

Contents
 

This chapter presents the latest household income estimates for U.S. family farms and a revised forecast for 2011. The 2010 estimates are based on the latest 2010 Agricultural Resource Management Survey (ARMS) data. The chapter makes income comparisons across time, farm type, and with the U.S. population. It also describes each source of household income, presenting its share of total income and frequency in the farm household population.

Income estimates for principal farm operator households include income from both farm and off-farm sources. Non-farm income includes wages and salaries from off-farm jobs, other businesses, dividends and interest, and other public and private sources. Non-farm sources of income are not included in the farm sector accounts.

Median farm household income up in 2010 and forecast higher in 2011 and 2012

In 2010, median total farm household income was $54,162, up 3.7 percent from 2009 and 0.8 percent above the 5-year average for 2006-10. Median farm and off-farm incomes were $-2,020 and $49,490, respectively, both higher than in 2009. Median total farm household income is expected to increase by 1.8 percent in 2011, to $55,131, and to further increase in 2012 to $55,805. Most farm households earn the majority of their income from off-farm sources and off-farm income is expected to increase by 3.2 percent in 2011, to $51,069, and an additional 3.9 percent in 2012, to $53,037.

Note: The median is the income level at which half of all households have lower incomes and half have higher incomes. Households with exceptionally high or low income affect median income less than mean income. Consequently, the median value more accurately reflects central tendencies in the farm household population.

Median farm income, median off-farm income, and median total income of farm operator households, 2006-12f d

Mean farm household income was $84,440 in 2010, up 9.4 percent from 2009, and was driven by small increases in income from off-farm sources and substantial increases in farm income. Mean income is higher than median income because the farm operator household population contains some households with exceptionally high incomes, which increases the mean more than the median.

See more financial statistics for farm operator households for recent years.

ERS has developed a family farm typology that considers gross sales in combination with the occupational characteristics of principal farm operators (see glossary). In the ERS typology, small farms (those grossing less than $250,000 in sales) are classified into two groups based on the occupation of the farm’s principal operator. If a principal operator 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.” The “intermediate” label does not necessarily indicate a midsized farm; in 2010 only 55 percent of intermediate farms had gross sales more than $10,000. “Commercial” farms are classified as those with $250,000 or more in gross sales, 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. Their median income from farming increased by 11.5 percent in 2010 to $78,466, and their total household income increased by 11.2 percent, to $117,758. Households associated with intermediate farms also saw a substantial increase (10.8 percent) in total income, to $43,134, reflecting greater income from both farm and off-farm sources. Rural residence farm households saw a 5.4-percent increase in income, also from greater income from farm and off-farm sources.

Median farm income, median off-farm income, and median total income of farm operator households, by farm typology, 2009-12f d

See more financial statistics for farm operator households by ERS farm typology.

Details on farm operator household incomes are grouped by:

See the glossary for definitions of terms.

Size of Farm (Measured by Gross Farm Sales)


While the number of U.S. family farms has been relatively stable for the past decade, the roughly 2.0 million family farms vary significantly in size, as do the level and sources of household income of their principal operators. The ERS farm typology includes both the main occupation of the principal farm operator and the size of farm. However, the broad range of annual sales (from negative to $250,000) included among residence and intermediate farms can obscure trends as farm sales increase. In 2010, the majority of family farms (60 percent) had gross sales of less than $10,000. These very small farms had negative average farm incomes, receiving all of their household income from off-farm sources, on average. On average, they received more than $75,000 in income from off-farm sources in 2010, which is generally more than family farm households operating larger farms typically received.

Family farms with gross sales of $10,000 to $249,999 represented 30 percent of family farms in 2010 (see table). Though still considered to be small farms, the households operating these farms earned, on average, positive returns from their operations. They earned less from off-farm sources compared to households operating the very smallest farms, but with their positive farm earnings, they had higher total household incomes than those operating the smallest farms in 2010. Their average household income was $78,716 in 2010.

Ten percent of family farms in 2010 were considered to be commercial farms, grossing $250,000 or more. While receiving less in off-farm income than those operating small farms, commercial family farm households earned significantly more on the farms they operated. As a result, they had average household incomes more than twice the level of smaller farm households. The average household income of farm families operating commercial farms was $185,098 in 2010.

Average household income of family farms, by size of farm, 2007-11f d

Commodity Specialization

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).

Farm operator household income varies by commodity specialization, 2010 d

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 diary farm rarely permits an operator to work many hours off-farm and is a main reason why median farm income is a large share of median 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 have improved the incomes of households specializing in those crops. In 2010 median income for households associated with farms in the rice, cotton, and peanut group was $116,664 and exceeded the median income of households involved in all the other commodity groups. The high household income for rice, cotton, and peanut farms largely reflects high returns from farming; farm income for these households exceeded total income for households from 5 of the 11 commodity groups. At the other extreme, beef cattle farms and general livestock farms had the lowest median household income in 2010, $50,375 and $49,412 respectively.

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 from 2000 to 2010. However, the gap between farm and U.S. household income has varied, increasing through the early 2000s, then decreasing for 3 straight years before increasing again in the last 2 years. For 2010, median farm operator household income exceeded median U.S. household income by 9.5 percent ($54,162 compared to $49, 445).

Average farm operator household income, by source, compared to all U.S. household income, 1988-2010F d

A series that compares the disposable personal incomes of farm and nonfarm residents from 1934 to 1983 (see figure) shows that, in contrast to median income comparisons for the 2000s, per capita disposable income of nonfarm residents exceeded that of farm residents for most of the previous century (see table).

Composition of Farm Operator Household 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 farm operator households, the majority comes from wages and salaries, followed by transfers (e.g., Social Security), and nonfarm businesses.

The share of total off-farm income from one source does not reveal how common it is for a household to receive some income from that source. Much of the nonfarm business income, for example, may be concentrated in few households. Although income from capital gains represents a small share of total off-farm income, it is a very common source of income. Perhaps most interesting is that a third of households had no wage and salary income, even though wage and salary income accounted for the majority of total off-farm income for the farm operator household population.

Sources of off-farm income for farm operator households, 2009 d

 

For more information, contact: Mary Ahearn or Jeremy Weber

Web administration: webadmin@ers.usda.gov

Updated date: February 13, 2012