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This chapter presents the latest household income forecast
for 2008 and estimate for 2007, income estimates for earlier
years, the composition of farm household income, and comparisons
of income for farm households relative to other U.S. households.
Estimates and forecasts of farm
operator household income are based on data from the
Agricultural Resource Management Survey (ARMS).
Income of farm operator households presented in this briefing
room differs from other farm income estimates of the farm
sector or of farm businesses. In particular, principal
farm operator households receive income from a variety
of sources other than their farm businesses, such as wages
and salaries from off-farm jobs, other businesses, dividends
and interest, and other public and private sources that
are included here but not in the farm sector accounts.
Key points in this chapter include:
- In 2008, average farm operator household income is
projected to be $89,434, up 6.3 percent from 2007, and
19.2 percent above the 5-year average of 2002-06.
- The increase in income is the result of increases
in both farm and off-farm sources. The large increase
in farm earnings from 2007 was primarily the result
of continued growth in cash grain and soybean receipts.
- In 2007, average farm operator household income is
estimated to be $84,159, up 8.4 percent from 2006.
- Average farm household income was 16.7 percent higher
than U.S. average household income in 2006 (the last
year for which comparable data exist). In the 15
major agricultural States surveyed in ARMS, average
farm household income exceeded the State average household
income in every State.
- Farm operator household income is more variable than
U.S. household income, and a larger share of farm households
have negative income. Over the last 10 years, 5-6 percent
of farm households had negative income, compared with
1 percent of U.S. households.
- Average household income varies considerably across
farms, by farm typology (based on gross sales and major
occupation of the principal operators), farm commodity
specialization, and geographic location.
Farm Operator Household Income Up in 2008
In 2008, average farm household income is projected to
be $89,434, up 6.3 percent from 2007, and 19.2 percent
above the 5-year average of 2002-06 (see table).
Average off-farm income of $75,805 in 2008, up 4.6 percent
from 2007, accounts for nearly 85 percent of the average
farm operator household's income.
The average income of households from farm earnings is
forecast to be $13,629 in 2008, up from 2007's estimated
average of $11,721. As always, a variety of factors determine
changes in farm
income, chiefly large increases in the forecast value
of cash grain and soybean receipts from 2007 to 2008.
In fact, the value of crop production is forecast to be
at record highs in 2008. While expenses have increased
(especially for feed, seed, fertilizer, chemicals, fuel,
and utilities), the large increase in the value of cash
grain and soybean sales should result in significantly
higher in farm earnings for the average farm household.
The 2008 income forecast for farm operator households
varies significantly across the population. A useful way
to capture the diversity is to categorize households based
on the principal operator's major occupation and the farm's
level of gross sales (see farm
typology). Commercial farm households (7.8 percent
of family farms) rely more on farm income than other farm
households. With farm income contributing 73 percent of
total income, operators of these farms are projected to
average $229,920 in household income in 2008, a 9.3-percent
increase over 2007 (see table).
Operator households of intermediate family farms (27.5
percent of family farms) receive a much smaller share
of their household income from farm sources than do commercial
farm households. With farm income contributing 16.5 percent
of total income, total household income for intermediate
family farms is forecast at $63,604 in 2008, up 7.4 percent
from 2007.
Most U.S. family farms (64.7 percent) are classified
as rural residence farms. These farms produce less than
$250,000 in products, and the major occupation of their
operators is not farming. Rural residence farm households
receive little or no income from farm sources. The total
household income of rural residence farm operators is
forecast to reach $83,443 in 2008, an increase of 4.9
percent from 2007.
d
This briefing room chapter provides information on farm
operator household incomes, with links to tables providing
data from 2002 to 2008F grouped by:
To place the current average farm operator household
incomes in perspective, the following are also provided:
See the glossary for definitions
of terms.
Farm Typology
The nearly two-thirds of farm households classified
as rural residence households receive virtually all their
income from off-farm income sources. On average, they
reported losing money from farming activities in 2007.
In fact, their farm incomes have declined in recent years.
These farms typically generate little gross income from
the sale of farm products, government payments, or other
farm-related sources. Based on an expanded
farm typology, incomes of both retirement and residential
farm households are forecast to increase in 2008 due to
increases in off-farm income (see table).
Household incomes of residential farms are usually higher
than those of retirement farm households. Retirement farm
households are less likely than residential farms to lose
money farming but receive significantly less income from
off-farm sources.
d
Operators of farming occupation/lower sales farms are
projected to realize almost all of their income from off-farm
sources in 2008. Since their off-farm income is projected
to increase by 4.6 percent during 2008, their household
incomes increased. In contrast, households with farming
occupation/higher sales operations realize about half
of their income from farming. With higher farm incomes
expected in 2008, the average on farming occupation/higher
sales farms is also expected to be higher than in 2007.
Large family farms are expected to see large increases
in farm income in 2008, on average. Households with large
farms are expected to average $159,163 in total income,
an increase of 22.4 percent. Nearly 60 percent of total
income is from farm earnings. At the same time, very large
farms are expected to see little increase in farm income.
Households with very large farms are expected to average
$314,744 in total income, an increase of 2.7 percent.
About four-fifths of total income is from farm earnings,
but these very large farms tend to specialize in commodities
other than cash grains and soybeans.
Farm Production Regions
In 2008, average operator household incomes are expected
to be highest in the Pacific and lowest in the Northeast,
a different ranking than in 2007 with average incomes
the highest in the Pacific and lowest in the Delta (see
table).
Northern Plains households are expected to realize the
largest increase in average household incomes at 15.3
percent in 2008, with Corn Belt households close behind
at 14.7 percent. Farm households in the Northern Plains
are expected to average the highest earnings from the
farm, followed closely by farm households in the Corn
Belt.
In 2008, more farm operator households (18.5 percent
of all farm households) were located in the Corn Belt
than in any other production region (see a map
of the production regions and description). Farm household
income in this region is expected to average $99,438 in
2008, 32.4 percent above the 2002-06 average.
d
Commodity Specialization
A farm's specialization is determined by the 1 commodity
or group of commodities that makes up at least 50 percent
of the farm's total value of agricultural production (see
glossary).
Farm household incomes are forecast to increase in 2008
for most specialities (see table).
For the second consecutive year, cash grain and soybean
farms are expected to experience large increases in household
income. The operators of cotton farms are expected to
experience their third consecutive year of declines in
household income. These trends are all attributed to changes
in income from farm sources.
More farms are classified as beef cattle operations (34.3
percent) than any other type of farm. Operators of beef
farms consistently earn lower than average household income.
They are expected to realize a 1.8-percent increase in
household income in 2008. With little income from their
farming enterprises, beef farm households rely primarily
on income from off-farm sources.
In contrast, dairy farm households rely heavily on the
farm for income, and they are expected to see a significant
decline in their farm (-30.7 percent) and, hence, household
income in 2008. Smaller declines in income are expected
for hog and poultry farm households in 2008.
Distribution of Farm Household
Incomes
Incomes of farm operator households vary widely. For
example, in 2006, 6 percent of farm households had negative
incomes and 7 percent had incomes of $200,000 or more.
Many of the farm operator households that had negative
incomes operated large farms which experienced heavy farm
losses in 2006. Generally, as the income level of farm
operator households increases, both average farm and off-farm
income increase, as does the share of income from farming.
An average household income estimate for all farm operator
households masks this great diversity in incomes. That
is why many of the well-being indicators in this briefing
room are provided in a variety of classification schemes.
One way to illustrate this diversity of incomes is to
chart the distribution of income, or the cumulative share
of households whose income is less than or equal to a
particular level. At the median, for example, 50 percent
of households have less income and 50 percent have more.
For farm operator households, average income exceeds median
income because of the large share of high-income households
in the population. In 2006, average (mean) farm income
was $77,654, compared with a median of $54,835.
A cumulative distribution of 2006 household income by
residence farms, intermediate farms, and large farms illustrates
their different income performance. Households that operated
residence farms were the least likely to have negative
incomes and those that operated large farms were the most
likely to have negative incomes. The distributions of
income for residence and intermediate farm households
were relatively similar. Their median 2006 household incomes
were $58,268 and $41,467, respectively. More than 90 percent
of these households had incomes under $200,000. In contrast,
the median household income for operators of large farms
was $98,888 in 2006, and about a quarter of them received
more than $200,000 in household income.
The median income of farm households in 2006 was greater
than for all U.S. households, but less than for just those
U.S. households that included self-employed persons. Nevertheless,
farm operator households are still more likely to have
negative household incomes than either self-employed or
all U.S. households.
d
Farm Operators' Household Income
Compared With U.S. Households
Since the 1980s, ERS has reported a money income measure
for farm operator households comparable to U.S. Census
Bureau's measure for all U.S. households. Farm household
income is highly variable through the years, primarily
due to the volatility of farm income. Nonetheless, for
every year since 1996, average income of farm households
has exceeded average U.S. household income. In fact, the
off-farm income component (of average farm operator household
income) alone has exceeded average U.S. household income
from all sources since 1998.
d
A comparable income series is not available for earlier
years, but USDA developed another series that compared
the disposable personal
incomes of farm and nonfarm residents for 1934-1983.
This series shows that the current situation constitutes
a reversal of the historical situation. The persistent
low incomes of farm residents in earlier years helped
to motivate government intervention in the farm sector.
In 1934, the average per capita disposable income of farm
residents was 33 percent that of nonfarm residents, approaching
half by 1959. By the early 1970s, farm resident income
was 70 percent or more of nonfarm incomes.
Farm Operators' Household Income
for 15 Principal Farming States
Starting in 2003, the sample size of USDA's Agricultural
Resource Management Survey (ARMS) has been large enough
to allow for statistically reliable estimates of farm
and operator household income in 15 major agricultural
States. Previous surveys did not provide sufficient information
to generate comparable estimates by States.
Family farms in California realized the highest average
farm household income ($120,698) in 2006 (see table).
They also realized the highest average farm income. High-value
crop farms comprised more than half of California family
farms, and crop production contributed about two-thirds
of the State's total value of production. Farm operator
households in California have average incomes above the
average for all households in the State. But California
is not unusual in that regard. Average income of farm
operator households exceeds the average income of all
households in each of the 15 States for which State-level
estimates are available. Because high incomes can have
a strong impact on averages of a population, we also compare
the median incomes of farm operator households to all
households in the State (see table).
The median income of farm operator households in California
was very similar to the median income of all California
households in 2006 ($55,388 and $55,002, respectively).
d
Missouri and Arkansas had the lowest average farm operator
household income among the 15 States in 2006. Farm households
in both States had below-average off-farm sources of income,
and Missouri had low farm income as well. Farm operator
households in four States—Florida, Iowa, Kansas,
and Washington—had above-average farm and off-farm
incomes in 2006. The average incomes of farm households
in all four States, plus Texas, exceeded $85,000 in 2006.
d
Composition of Operator Household
Income
In 2006, earnings from farming constituted an estimated
10.8 percent of the average income of farm operator households.
Sixty-five percent of income is considered earned off-farm
income—most is earned from off-farm wages and salary
jobs and the rest from nonfarm businesses (see table).
Retirement and other transfer income makes up about 13
percent of household income, with most coming from public
sources. Other important sources of income include interest
and dividend income.
The sources of farm operator household income vary considerably
across this very diverse population. Not surprisingly,
larger farm households realized more income from farm
sources than smaller farm households. The small farm households
for whom farming is not the operator's major occupation
(residential/lifestyle farms) have very high average earned
off-farm incomes. Since 2004, their average off-farm incomes
have exceeded $89,800, mostly from off-farm work.
d
Many farm households that receive government payments
operate large farms, and so receive a highest share of
their household income from farming sources. Government
payments cannot easily be described as a share of farm
operator household income because payments and business
farm income are sometimes shared by multiple households—more
likely the case with larger farms—and because receipt
of payments often requires that farms incur costs. For
example, receipt of conservation payments often requires
farms to incur costs to adopt conserving practices.
d
However, it is interesting to consider farm operator
household income sources by the level of government payment.
In 2006, 42.4 percent of family farms received government
payments, and most of those received less than $10,000
in payments (see table).
Households operating farms that received no payments actually
averaged higher household incomes than farms that received
less than $10,000 in farm payments. However, the farm
operator households operating farms that received $10,000
or more in farm payments had above average household incomes,
as a result of their greater farm incomes. Most farm payments
are commodity-related payments rather than conservation
payments. Generally, the farms with the highest payments
also receive a higher share of their payments under commodity
programs rather than conservation programs.
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