Small Farms in the United States: Persistence Under Pressure
by Robert Hoppe
, James MacDonald
, and Penni Korb
Economic Information Bulletin No. (EIB-63) 39 pp, February 2010
Small farms-defined here as those with gross cash farm income
(GCFI) less than $250,000-range from retirement and residential
farms with little or no output to commercially oriented farms with
operators employed full-time in agriculture. At the lower end of
the small-farm size spectrum, farm households rely heavily on
earnings from off-farm work or on retirement income. At the upper
end of the spectrum, farm households earn more from farming. A few
commodities-beef cattle, hay, poultry, and grain/soybeans-account
for most small-farm production.
What Is the Issue?
Small farms account for 91 percent of all farms and 23 percent
of agricultural production. There are large differences among small
farms, however, because USDA statistics are based on a very broad
farm definition. Most small-farm production occurs on small
commercial farms with GCFI of at least $10,000. Most places counted
as small farms, however, are much smaller thanthat-60 percent of
small farms have GCFI of less than $10,000, and 22 percent have
less than $1,000. While there are good reasons to maintain a broad
farm definition, statistics based only on that definition obscure
the performance of small commercial farms. This report examines the
differences between small and large farms and-among small
farms-distinguishes between noncommercial farms (GCFI of less than
$10,000) and small commercial farms (GCFI of $10,000-$249,999).
What Did the Study Find?
U.S. farm production continues to shift to larger operations,
while the number of small commercial farms and their share of farm
sales continue a long-term decline. Larger farms have competitive
advantages over smaller farms in most commodities, reflecting
economies of size in farming. Nevertheless, about 800,000 of the
2.2 million U.S. farms in 2007 were small commercial farm
operations. Their total production-$65 billion in 2007-was greater
than the total agricultural production from all farms in the Corn
Product mix. Small commercial farms have a
product mix distinctly different from that of larger farms: small
commercial farms focus on commodities that do not necessarily
require a full-time commitment of labor-poultry, beef (generally
cow/calf or stocker enterprises), hay, and grain/ soybeans.
High-value crops (vegetables, fruits and tree nuts, and nursery and
greenhouse products) and dairy play a minor role in farm production
on small commercial farms, but make up 44 percent of production on
very large farms (GCFI of at least $1 million).
Farm finances. Average small-farm financial
performance lags well behind that of large farms, suggesting that
production will continue to shift to larger operations. Financial
performance among small farms varies, however, and many are quite
profitable. Other small farms, particularly very small ones, will
remain in business in spite of financial losses because their
operators have other sources of income and operate the farm for
reasons other than profit.
Household income and wealth. Small-farm
households depend heavily on off-farm income, and the nonfarm
economy is important to them. Because of their off-farm income,
median household income for small-farm households is comparable
with the median income for all U.S. households. Farm households,
regardless of the size of their farms, tend to have a high net
worth, with their farms accounting for most of that value.
Ninety-four percent of farm households in 2007 had a net worth
equal to or greater than the median for all U.S. households.
Longrun changes. The number of very large farms grew rapidly
between 1982 and 2007, according to the census of agriculture,
while the number of small commercial farms declined. The share of
sales by very large farms also grew substantially, from 27 to 59
percent. The 2007 census reported more noncommercial farms than
prior censuses, and they now account for well over half of all
farms. The increase in noncommercial farms, however, coincides with
greater efforts by the USDA to count all small farms in the
The future? Because larger farms realize higher
than average financial returns and because many operators of small
commercial farms are over 65 years old-especially those with GCFI
of less than $100,000-competitive forces will likely continue to
reduce the number of small commercial farms and shift production to
larger farms. The number of noncommercial farms is less likely to
fall. In some respects, noncommercial farms exist independently of
the farm economy, so competition from larger farms is less likely
to reduce their numbers.
How Was the Study
Most of the data in this report are from the 2007 Agricultural
Resource Management Survey (ARMS). The ARMS is a detailed, annual
survey of farm businesses and associated households conducted
jointly by the U.S. Department of Agriculture's Economic Research
Service (ERS) and National Agricultural Statistics Service (NASS).
The report also uses data from the 1982, 1987, 1992, 1997, and 2007
Censuses of Agriculture to follow the shift in sales to very large