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Wealth is an important indicator of well-being, as it
can be used as productive capital and, depending on its
liquidity, for current capital investment and as a reserve
to sustain the household in periods of low income. Farm
operator households (defined),
in particular, are known to add to or draw down savings
in response to income variability. The farm operator household's
farm wealth is not always equivalent to the wealth of
the farm businesses they operate. Just as individuals
outside of the farm operator household can receive some
of the farm business income, other stakeholders can own
the wealth of farm businesses. Farm operator households
also hold nonfarm wealth in their portfolios. This chapter
focuses on the wealth of
farm operator households. Findings include the following:
- Total farm household wealth includes farm and nonfarm
wealth. Farm wealth is the dominant share of total farm
household wealth.
- Median wealth of farm households is close to five
times the median wealth of all U.S. households.
- The distribution of farm household wealth and the
relative importance of nonfarm wealth vary across farm
households.
- Farm households incur debt secured by both farm business
and nonfarm assets.
See the glossary for definitions
of terms.
Farm Household Wealth
Wealth (net worth) is the difference between assets and
debts. In 2007, the average total wealth of farm households
was $898,179, with about three-quarters of this total
associated with farm assets (see table).
Although operator households typically derive most of
their wealth from farm assets, the share of operator household
wealth associated with nonfarm assets grew from 15 percent
in 1994 to 26.1 percent in 2007. Farm households have
broadened their portfolios to include more nonfarm investments,
particularly real estate and retirement accounts. More
than 50 percent of the nonfarm debt is mortgages for operators'
dwellings not owned by the farm operation and other nonfarm
real estate.
The balance sheet for farm operator households illustrates
the differences in the distribution of wealth by size
of farm operated (see table).
Since three-quarters of farm household wealth is attributed
to farming, wealth increases with the size of the operation.
However, households that operate large farms (with gross
sales of $250,000 or more) have the greatest average nonfarm
wealth as well.
Wealth Distribution of Farm and All U.S. Households
The latest information available on wealth of all U.S.
families is for 2004 (Survey
of Consumer Finances, Federal Reserve System). The
median value of wealth for all U.S. households was $93,100
in 2004, compared with $456,914 for farm households. Thus,
the median wealth of farm operator households was about
five times the median wealth of U.S. families. The median
wealth is the level at which 50 percent of the households
are above and 50 percent are below. Household wealth may
be acquired through savings, inheritance, or appreciation
of household assets. The major share of U.S. household
wealth is in houses and other real estate. In contrast,
farm households have the major share of their wealth in
farm business wealth.
The distribution of household wealth for all U.S. households
was considerably more skewed than for farm households.
For example, if wealth were equally distributed (so that
each 10 percent of households held 10 percent of wealth),
the distribution curves would not be bowed upward but
would be a straight line. Thus, the greater curvature
for nonfarm households indicates that their wealth is
more unequally distributed across households.
Levels of wealth increase with age and education (of
head of household) for both farm and nonfarm households
(see table).
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