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This chapter presents the latest U.S. farm household
income forecast for 2009 and income estimates for earlier
years. The 2008 estimates are based on the newly released
2008 ARMS data. This chapter includes information on the
composition of income, comparisons of income for farm
households relative to U.S. households, and the distribution
of farm household income.
Income estimates for farm operator households presented
in this briefing room differ 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.
Average Farm Household Income Forecast Down in 2009
In 2009, average family farm household income is forecast
to be $76,065, down 3.5 percent from 2008 and 6.8 percent
below the 5-year average for 2004-08. In 2009, the average
family farm is forecast to receive 8.7 percent of its
household income from farm sources, with the rest from
earned and unearned off-farm income (see table).
Following the general trends in the farm sector, the
2009 forecast for the farm component of the average family
farm income is projected to be down by nearly 38 percent
from the 5-year average for 2004-08. In 2009, the average
off-farm income is forecast to be $69,440, about the
same level as in 2008 and the 2004-08 average. The 2007
farm and off-farm income of family farms were at high
levels relative to the past. So the minor 2008-09 declines
in off-farm income follow a 9.6-percent decline in average
off-farm income from 2007 to 2008. About 72 percent of
off-farm income for the average farm operator household
in 2009 is expected to be from earned sources, such as
wages and salaries and nonfarm businesses.
d
Details on average farm operator household incomes,
with links to tables providing data from 2004 to 2008,
are grouped by:
To place farm operator household income in perspective,
the following information is also provided:
See the glossary for definitions
of terms.
Farm Size
While the number of U.S. family farms has been relatively
stable for the past decade (see table),
the 2.0 to 2.1 million farms operated by farming households
vary significantly in size as do the level and sources
of household income. As such, financial indicators
of the average farm are not very informative. Hence,
this briefing room provides financial indicators by
various classes of farms or distributions of indicators.
There are several ways to measure farm size, such as
by the value of gross sales of agricultural products
or the acres operated. In 2008, the majority of family
farms (60 percent) had gross sales of less than $10,000,
but they accounted for only 2 percent of the total
value of agricultural production. Family farms with
gross sales of $10,000 to $249,999 were 30 percent of
the family farms and were responsible for 18 percent
of production. At the other end of the size distribution,
the 10 percent of family farms that grossed at least
$250,000 accounted for 81 percent of the value of production.
d
ERS has developed a farm typology that considers gross
sales in combination with the occupation of principal
farm operators (see glossary).
Regardless of the approach for classifying family farms—by
a 3-group ERS typology (see table),
a 6-group ERS typology (see table),
or a gross sales classification (see table)—farm
families that operate smaller farms rely more on their
off-farm income sources than do those that operate large
farms.
The 60 percent of farm households with farms grossing
under $10,000 in 2008 had negative average farm incomes,
receiving all of their household income from off-farm
sources, on average. They received more than $70,000 in
income from off-farm sources in 2008, which is generally
more than family farm households operating larger farms.
The 30 percent of farms with gross sales between $10,000
and $249,999 are still considered to be small farms, but
on average the farm families operating these farms earned
positive returns from their operations in 2008 (and earlier
years). They earned less from off-farm sources compared
to the very smallest farms, but with their positive farm
earnings, they had higher total household incomes than
the smallest farms in 2008.
Ten percent of family farms in 2008 were considered to
be large farms, grossing $250,000 or more. While receiving
less in off-farm income than small farms, large family
farm households earned significantly more on the farms
they operated. As a result, they had average household
incomes more than twice the level of smaller farms.
d
Commodity Specialization
A farm's specialization is determined by the one commodity
or group of commodities that makes up at least 50 percent
of the farm's total value of agricultural production (see
glossary).
More farms were classified as beef cattle operations
(31 percent) in 2008 than any other farm specialty (see
table).
With little income from their farming enterprises, beef
farm households rely primarily on income from off-farm
sources. Operators of beef farms usually earn lower than
average household income, but in 2008 several family farm
specialization types had household income within $5,000
of beef cattle producers. A large share of family farms
(more than 40 percent) do not have a single specialty
and are classified as other field crops or general livestock
operations. Like beef farms, they earn little or nothing
from their farming operations, in general, and rely on
their off-farm sources of income.
Wheat, soybeans, hog, and poultry farm households had
average household incomes at or below the average for
all farm households in 2008. While that has generally
been the case for wheat, soybean, and poultry farm households,
it is unusual for hog farm households, who generally have
higher than average household incomes. However, both off-farm,
and especially farm incomes dropped significantly in 2008
from the average 2007 levels.
Distribution of Farm Household
Incomes in 2008
An average household income estimate for all farm operator
households masks the great diversity in incomes. To illustrate
this diversity, many of the well-being indicators in this
briefing room are provided in a variety of classification
schemes. One way to illustrate 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 2008, average (mean)
income was $78,803 compared with a median of $50,971.
A cumulative distribution of 2008 household income by
size of farm (measured as gross value of product) illustrates
their different income performance. The distributions
illustrate that, as farm sizes increase, median farm family
incomes increase. Households that operated large farms
were the most likely to have negative incomes. The distributions
of income for farm households operating the two smaller
farm categories were relatively similar, although households
with less than $10,000 in gross product were more likely
to have negative incomes.
The median income of farm households in 2008 ($50,971)
was greater than the median for all U.S. households ($50,303)
but less than that of the U.S. households of 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.
Farm Operators' Household Income
Compared With U.S. Household Income
Since the 1980s, ERS has reported a money income measure
for farm operator households comparable to the 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 (see figure)
shows that the current situation constitutes a reversal
of the historical situation; 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 ARMS has
been large enough to allow for statistically reliable
estimates of farm and operator household income in 15
major agricultural States. The 15 States account for approximately
half of all farms and two-thirds of all production in
the U.S. Previous surveys did not provide sufficient information
to generate comparable estimates by States.
Farm households in two States had average household
income in 2008 of over $100,000—California
and Illinois (see table).
Family farms in California and four Midwestern States—Nebraska,
Illinois, Iowa, and Minnesota—had the highest
average earnings from farming. These five States
accounted for more than one-third of the value of
production in 2008. In contrast to the average incomes,
Illinois and Kansas had the highest median household
income, of about $65,000. As mentioned above, the
median is the income level at which 50 percent of
the households have a higher income and 50 percent
have a lower income. The fact that California’s
average income ($112,550) is significantly higher
than its median income ($59,900) indicates that California
has farm households with higher incomes elevating
the average level.
d
d
Composition of Operator Household
Income
In 2008, earnings from farming constituted an estimated
11 percent of the average income of farm operator households.
Two-thirds 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 16
percent of farm household income, with most coming from
public sources. Other important sources of income include
interest and dividend income.
d
Many farm households that receive government payments
operate large farms, and so receive a higher 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 their level of government
payment. In 2008, nearly 40 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 slightly higher household incomes than farms
that received farm payments under $10,000. However, farm
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 rather than conservation payments.
Generally, the farms with the highest payments also receive
a higher share of their payments under commodity programs
than under conservation programs.
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