Q. What is "farm structure" and how has it
changed?
A. Farm structure is variously defined,
but discussions of the topic frequently cover:
Number and Size of Farms
The number
of U.S. farms has declined dramatically since its peak in 1935, dropping
by two-thirds between 1935 and 1974, from 6.8 million to 2.3 million.
This decline reflected growing productivity in agriculture and increased
off-farm employment opportunities. Since 1974, farm numbers
have been more stable. The remaining farms averaged 487 acres in
1997, compared with only 155 acres in 1935.
Averages can be deceiving, however. The remaining farms are
diverse, and most are very small.
About 56 percent of U.S. farms had sales less than $10,000 in 1999,
and these very small farms accounted for only 2 percent of the value
of agricultural production (sales
class). At the other extreme are farms with sales in the millions. The diversity
of the remaining farms suggests that there is unlikely to be a "one-size-fits-all"
farm policy.
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Concentration of Production
Concentration of production is now considered a more critical issue
in farm structure discussions than the decreasing number of farms.
Current policy debate about farm structure relates to how rapidly
the largest farm units will come to dominate production and marketing
of key commodities within commercial agriculture.
Concentration can be measured by determining the smallest number
of farms necessary to produce a particular amount of product. For
example, only 2 percent of farms produced half of the sales of agricultural
products in 1997. Farm production has become more concentrated over
time, but some concentration already existed 100 years ago. For
more information, see How concentrated
is U.S. agricultural production?
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Specialization and Diversification
Farms tend to be specialized, rather than diversified. About half
of U.S. farms produce just one commodity (number
of commodities). Smaller farms are the most likely to produce
one commodity, but even large farms produce a limited number of
commodities. For example, three-fourths of the farms with sales
of at least $500,000 produce no more than three commodities. The
commodities in which farms
specialize also differ by farm size. Farms with sales less than
$50,000 frequently specialize in beef cattle, for example, while
farms with sales between $50,000 and $499,999 often specialize in
grains.
Most of the operators of farms with sales less than $50,000 report
a nonfarm occupation or are retired. Thus, they are unlikely to
have the time or the inclination to produce multiple commodities.
Many of these operators also specialize in beef cattle—particularly
cow-calf enterprises—that have relatively low labor requirements.
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Tenure
Farmland rental is extensive and is central to the way agriculture
operates today. During the 1990s, farms rented about two-fifths
of the land they operated. Most operations are full owners, but
part owners and tenants have larger farms. The shares of the value
of production accounted for by part owners and tenants are disproportionately
large relative to their share of farms (tenure).
Tenure
differs by sales class, with smaller farms most likely to be
full owners.
Land leasing has changed from a way for beginning farmers to enter
agriculture to a way of gaining access to additional land.
Farm operations now expand by renting land to avoid debt and the
risks associated with landownership and to be able to respond more
quickly to changing market conditions. For more information, see
How has farmers' use of rented land changed
over time?
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Farm Organization
The news media frequently express concern over a perceived increase
in the number of corporate farms and a corresponding decline in
family farms. Data from the census of agriculture, however, show
that family-owned farms (individual operations, partnerships, and
family corporations) are not losing their share of U.S. agriculture
to nonfarm corporations. For more information, see Are
family farms disappearing?
As in the past, U.S. farms are most commonly organized as individual
operations, but farms organized as partnerships and corporations
are much larger than individual operations. Partnerships made up
only 5 percent of U.S. farms in 1999, but accounted for 15 percent
of the value of production (farm
organization). Similarly, family and nonfamily corporations
together were only 3 percent of U.S. farms, but accounted for 23
percent of gross sales.
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Contracting
Over the past 40 years, farmers have become less dependent on terminal
markets and spot pricing to market their goods, and more reliant
on production and marketing contracts. Most farms (90 percent) had
no contracts in 1999 (contracting).
The remaining 10 percent of U.S. farms had at least one marketing
or production contract, but these farms accounted for about 52 percent
of production. For more information, see "Agricultural
contracting."
Contracting can lead to reduced marketing and production risk for
producers. The actual distribution of risk between farms and the
contractors, however, depends on the terms of the contract and the
bargaining strength of the farmer and the contractor. The use of
contracts is likely to continue to increase, with potential positive
and negative consequences for U.S. agriculture. For example, increased
contracting could lead to more efficient production. On the other
hand it could lead to the weakening of open-market price signals
and a lessening of independence for the family farm.
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Operator Characteristics
About 38 percent of all farm operators reported farm or ranch work
as their major occupation in 1999, and they operated most of the
farmland (72 percent) and accounted for most production (78 percent)
(operator
occupation). Although hired managers ran only 1 percent of farms,
their farms produced 9 percent of the value of production.
Retired operators and operators reporting a major occupation other
than farming made up 61 percent of all farms, but their farms accounted
for only 13 percent of the value of production. Census data
show that farmers have been combining off-farm
work with farming to some extent since at least the 1930s. Census
data also show that the average age of farm operators has increased
from 48 in 1940 to 54 in 1997. For a discussion of farmers' age,
see How does the age of farmers differ from
that of other members of the labor force?
These operator characteristics have implications in farm policy
discussions. For those operators who report a nonfarm major occupation
or work off-farm, the health of the local economy, nonfarm job growth,
and the level of nonfarm wages may be as important as farm programs.
The status of retirement programs and returns on investments are
also important to older or retired operators. The advancing age
of farm operators raises concerns about the future structure of
farming and the concentration of agricultural production.
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Operator Households
Like their nonfarm counterparts, many of today's farm
households are dual-career,
with operators and/or spouses combining farm and off-farm
work. Even households running larger farms as commercial
enterprises may be dual-career, with a spouse working
off the farm and an operator farming (generally without
off-farm work). In addition to off-farm work that generates
wages and salaries, some operators also earn net income
from operating a nonfarm business, a second farm, or some
other pursuit.
All these pursuits are reflected in farm household's sources of
income. Farm operator households typically receive income from several
sources, and 90 percent of their total household income came from
off the farm in 1999 (sources
of income). The relative importance of farm and off-farm
income, however, varies widely by sales class. For more information,
see How important is off-farm income to farm
households?
More information on farm structure can be found in Structural
and Financial Characteristics of U.S. Farms: 2001 Family Farm Report.
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