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David E. Banker and James
M. MacDonald, editors
Agriculture Information Bulletin No. 797,
March 2005
 Background
Farms
in the U.S. are extraordinarily diverse, ranging from very
small retirement and residential/ lifestyle farms to establishments
with sales in the millions of dollars. Farming continues
to be a distinctive industry in part because most production,
even among very large farms, is carried out on family-operated
farms whose operators often balance farm and off-farm employment
and investment decisions. The organization of farming affects
the efficiency and competitiveness of the farm sector,
the well-being of farm households, the design and impact
of public policies, and the nature of rural areas.
What Is the Issue?
Agricultural policy analyses require an accurate source
of basic information on how farming in the United States
is organized. Analysts need to know how many farms there
are, and of what sizes; the degree to which farms specialize
in certain commodity combinations; the importance of
families in farm operation and land ownership; the commercial
methods that farmers are using to obtain inputs and sell
farm products; and the sources of income received by
farm households. This Congressionally mandated report
provides current information and explores trends in the
organization of farming.
What Did the Study Find?
Most farms in the U.S. are family farms (97 percent
in 2001). Family farms are defined as farm operations
organized as proprietorships, partnerships, or family
corporations that are not run by hired managers. Even
the largest farms tend to be family farms. For example,
86 percent of the farms with sales of $1 million or more
in 2001 were family farms. Large family farms are often
organized as family corporations, and these account for
a growing share of farm sales. The share of farms and
sales accounted for by nonfamily corporations is small
and has been relatively stable since 1978.
Small family farms accounted for 90 percent of the farms
in the U.S. but produced a modest share (28 percent)
of farm output in 2001. Large (sales of $250,000 to $499,999)
and very large family farms (sales of $500,000 or more)
accounted for only 7 percent of farms but 58 percent
of the value of production in 2001. Nonfamily farms accounted
for another 3 percent of farms and 14 percent of the
value of production.
Small farms made higher proportionate contributions
to the production of specific commodities, including
oats, tobacco, hay, wheat, soybeans, corn and beef cattle.
Small farms also held about 68 percent of all farm assets,
including 60 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.
Census of agriculture data show that the number of large
farms (sales of $250,000 or more after adjusting for
price changes) increased by almost 50 percent from 5
percent of all farms in 1987 to 8 percent of all farms
in 1997. The share of sales attributed to large farms
also increased significantly, from 51 percent in 1982
to 72 percent in 1997. The largest share increases occurred
in farms with sales of $1 million or more. These farms
accounted for about 21 percent of agricultural sales
in 1997, compared with about 12 percent in 1982.
Farm program payments go to different types of farmers,
depending on the program. In 2001, three-fourths of commodity-
related payments went to high-sales (sales of $100,000
to $250,000) small farms, large family farms, and very
large family farms. In contrast, over 50 percent of payments
from the Conservation Reserve and Wetlands Reserve Programs
went to retirement and residential/lifestyle farms.
In general, farm households are not a low-income group.
Farm household income has been at or above the average
for all U.S. households in recent years but varies substantially
across households. Household income averaged $64,500
for farm operators in 2001, 11 percent higher than the
average for all U.S. households. Operators of residential/
lifestyle farms, large family farms, and very large family
farms had average incomes well above the average for
all U.S. households. Operators in the limited-resource,
retirement, and low-sales groups had average incomes
that were below the national average.
Farm households received most of their income (91 percent)
from off-farm sources. The importance of off-farm income
varies widely among farm operator households. Residential/
lifestyle farms account for nearly half of all U.S. farms,
and they dominate average income measures because of
their number and high income from off-farm work. At the
other extreme, another major group-primarily very large
family farms and non-family farms-specializes in farm
activities and receives little or no income from off-farm
employment.
Contracts have governed much of the production and marketing
of some commodities-like broilers and processing vegetables-since
the 1950s. Over the past 40 years, the overall growth
in contract-governed production has been slow and steady,
reaching 36 percent of all agricultural production in
2001. However, rapid changes in market organization can
and do occur for individual commodities. Contracts covered
two-thirds of hog production in 2001, up from one-third
just 5 years before. Virtually nonexistent in tobacco
marketing in 1999, contracts covered half of production
in 2001.
While the overall number of farms dropped by 8 percent
from 1978 to 1997, the number of farms operated by women
rose by 58 percent from 5 percent of all farms in 1978
to 9 percent in 1997. Nearly half of that increase was
due to growth in animal specialty farms and general livestock
farms. Once primarily focused on beef cattle, women farmers
have diversified in the last 20 years to specialize in
other kinds of livestock such as horses, aquaculture,
and fur bearing animals.
How Was the Study Conducted?
The report relies extensively on data from the Agricultural
Resource Management Survey (ARMS), its predecessor the
Farm Costs and Returns Survey, and the census of agriculture.
The ARMS collects financial and operational data on U.S.
farm businesses and information about farm operators
and their households. The ARMS is designed and conducted
each year by the Economic Research Service (ERS) and
the National Agricultural Statistics Service (NASS),
both agencies of the U.S. Department of Agriculture.
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