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Stable Farm Count Masks Turnover
Robert
Hoppe
Penelope
Korb
Ken Hammond, USDA
The U.S. farm count has been relatively stable in recent decades.
The net decline in farm numbers totaled 185,000—or 6 percent—between
the 1974 and 2002 Censuses. The small net change, however, masks
substantial turnover in farms. About 40 percent of U.S. farms exit
the farm sector (that is, go out of business) between agricultural
censuses, which are taken every 5 years. Entrance rates are similar
and also fairly high, between 31 and 37 percent, partially offsetting
exits. ERS researchers examined trends in exit rates using data
from the 1997 Census of Agriculture Longitudinal File.
In creating the longitudinal file, USDA’s National Agricultural
Statistics Service merged data for individual farms from several
censuses. The longitudinal file follows individual farm businesses
associated with farmland, rather than operators. Thus, when an
adult child takes over from a retiring operator, the farm is classified
as a survivor rather than as an exit. Nevertheless, life-cycle
changes can trigger farm exits. In a common pattern, farm operators
become elderly, stop farming, and rent or sell their farmland to
others who incorporate the farmland into their operations. The
original farm business no longer exists.
Exit rates vary substantially by farm size (measured by annual
sales) and by the age of the farmer. Exit rates decline as farm
size increases, but 25-30 percent of the largest farms—those with sales of $250,000 or more—still
exit between censuses. The exit rate hits bottom for farms with operators 45
years old, then increases, and peaks at more than 40 percent for farms with
an operator at least 65 years old. Additional factors (besides the operator’s
age and farm size) may influence a farm’s likelihood of exit, most notably
the operator’s prior farming experience.
Annualized U.S. farm exit rates (not accounting for offsetting farm entry)
are about 9-10 percent per year. These rates are comparable to exit rates for
Canadian farms, after adjusting exit rates for differences in the size distribution
of farms in the two countries. Also, the U.S. farm exit rates are within 1
percentage point of those for all U.S. small nonfarm businesses with no employees.
In general, small businesses have a high exit rate, and most farms are small
businesses.
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