Structural changes within the farm sector can alter
how benefits from government commodity programs are distributed,
even without changes in government policy. One element
of change, the shift of agricultural production toward
large family-operated farms, has had a sizeable impact
on how government commodity program payments are spread
among farm households. Data from USDA's Agricultural Resource
Management Survey (ARMS) and its predecessor, the Farm
Costs and Returns Survey (FCRS), were applied to a classification
that sorts family farms among five size classes, based
on annual sales expressed in 2002 dollars (using the Producer
Price Index for Farm Products), with all nonfamily farms
assigned to a sixth class.
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Agricultural production is shifting toward larger
farms.
Farms in the largest sales class (at least $500,000 in
2002 dollars) accounted for 43.9 percent of production
in 2002, up from 28.9 percent in 1989, the earliest year
with consistent data. There were 64,000 farms in that
size class in 2002, up from 32,000 in 1989. The trend
to larger farms is sectorwide, with production of poultry,
livestock, and crops all shifting to larger operations.
Large farms have lower costs of production, on average,
and they may realize higher commodity prices as well.
Because large family farms tend to be more profitable,
their share of production is expected to continue to expand.
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Commodity program payments are proportional
to production of certain commodities...
Commodity program payments include all commodity and disaster
assistance payments, and exclude environmental payments
(such as those related to the Conservation Reserve Program).
These payments are closely tied to a farm's production
history for certain commodities. For example, family farms
with sales between $100,000 and $249,999 received 27.2
percent of commodity program payments in 2002, and accounted
for 27.3 percent of the value of production of eight selected
commodities—barley, corn, cotton, oats, rice, sorghum,
soybeans, and wheat.
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...And hence are shifting to larger farms...
Government commodity program payments shifted to the
largest farms as those farms expanded their share of
commodity production. Farms with at least $500,000 in
sales received 27.4 percent of all commodity program
payments in 2002, up from 11.7 percent 13 years earlier
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...And higher income households...
Operators of the largest farms earn higher household incomes,
on average, than operators of other farms, so production
shifts have caused commodity program payments to move
to higher income households. In 1989, half of all commodity
payments went to households with incomes below $46,661
(in 2002 dollars), and half went to households with higher
incomes. The median income among all U.S. households in
1989 was $40,484. But by 2002, the farm household income
that split the distribution of commodity program payments
in half had risen sharply, to $60,580. That growth was
much greater than the corresponding growth in median U.S.
household income ($42,409 in 2002). No explicit change
in farm policy drove this shift; rather, structural changes
in farming altered the link between programs and beneficiaries.
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...with the largest shifts at the highest incomes.
By 2002, farm households with incomes of $200,000 or
more (measured in 2002 dollars) received 14.5 percent
of all commodity program payments, up from 9.3 percent
in 1989, while households with incomes between $100,000
and $200,000, as well as nonfamily operators, also received
larger shares of commodity payments. Households with
incomes under $100,000 saw their shares of total commodity
program payments fall.
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