Q.
How important is off-farm income to farm households?
A. Farm households today depend more
on off-farm income than farm income for their livelihood.
On average, 90 percent of farm households' income came
from off-farm sources in 1999, mostly from wages and salaries
(sources of income,
1999). Off-farm income has made up a
substantial share of farm household income for decades
(income, 1960 to 1999).
For many farm households, off-farm jobs and the health
of the local nonfarm economy may be more important than
changes in farm income.
In 1999, earnings from farming activities averaged only $6,400
per farm household, which may seem low. The low average, however,
reflects the very small size of most U.S. farms. More
than half of U.S. farm households operated farms with sales less
than $10,000. Most establishments classified as farms are
too small to support a household because the official U.S. farm
definition requires only $1,000 of sales to qualify as a farm.
Dependence on farming varies by farm size. Households operating
very small farms typically depend much less on farm income than
households operating larger farms (income
by sales class). For example, farms with sales less than
$10,000 actually lost an average of $4,800 per farm from farming.
Fortunately, their off-farm income averaged $66,000. Most
operators of farms with sales less than $10,000 reported that
they had a nonfarm occupation (60 percent) or that they were retired
(24 percent). Households operating farms with sales between
$10,000 and $49,999 also lost money farming, but not as much.
In contrast, the share of income from farming for households operating
larger farms ranged from 14 percent for households with sales between
$50,000 and $99,999 to 82 percent for households with sales of $500,000
or more. Nevertheless, households operating farms in the higher
sales classes still may receive substantial off-farm income, which
can help buffer them from adverse conditions in the farm sector.
Government payments are always a focus of farm policy discussions.
For households operating smaller farms, however, government payments
were relatively minor compared with off-farm income (government
payments and off-farm income). Average government payments did
not exceed average off-farm income until sales surpassed $250,000.
Remember also that government payments are part of gross cash farm
income; expenses must be subtracted from gross cash income before
net income can be spent by the operator household. In addition,
net income from farming may be shared with other households, such
as the households of partners. In contrast, all off-farm income
is available to the operator household.
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