Summary of Report

Structural and Financial Characteristics of U.S. Farms, 1994:
19th Annual Family Farm Report to Congress

Contact: Judith Sommer, 202-694-5589, jsommer@ERS.USDA.gov

This report is based on farm operator responses to USDA's Farm Costs and Returns Survey (FCRS), conducted annually in the 48 contiguous states. The report describes the characteristics of farms, farm operators, and farm operator households, and assesses their financial performance. This edition also provides information on farm operators not previously available: their sources of farm business information, the criteria by which they measure business success, and their business goals.

Some highlights of the report:

• More than 2 million U.S. farms produced agricultural commodities that generated an average of $74,000 in gross value of sales per farm in 1994. Still, 73 percent of farms had gross value of sales under $50,000 (noncommercial farms), although they accounted for just 11 percent of total U.S. farm sales.
• Gross cash farm income (adjusted to exclude the share of production accruing to landlords and contractors) averaged near $69,000. However, gross cash farm income for the Nation's largest farms (sales $1 million or more) averaged almost $2 million, so that less than 1 percent of farms accounted for 23 percent of gross cash farm income. Commodity sales accounted for 84 percent of total gross cash farm income, with government payments adding 5 percent and other farm income 11 percent.
• Acreage per farm, which has tripled over the last six decades, averaged 448 acres operated in 1994, but half of all farms were under 180 acres. Livestock farms producing some combination of beef cattle, hogs, and sheep accounted for the largest share of farms grouped by farm type. Even though these farms had larger acreage than the U.S. average, they had lower average gross cash farm income and gross value of sales.
• Half of all farms cash-rented or share-rented some or all of the land they operated in 1994. Farm operators who owned all the land they operated but had a rental arrangement for machinery, buildings, or livestock (5 percent of full owners) had income and sales five times as high as full owners who rented nothing.
• More than 90 percent of farm businesses were legally organized as individual operations, while 6 percent of farms were partnerships and 4 percent were corporations (most of which were family-owned). Farms organized as individual operations averaged more than $50,000 in gross value of sales and had farm assets that averaged more than $350,000.
• While 13 percent of all farm operators reported having some contractual arrangement for production and/or marketing of farm commodities, farms with marketing contracts outnumbered farms with production contracts by more than 4 to 1. Use of contracting arrangements varied by such farm characteristics as sales class and type of production. For example, more than 60 percent of poultry farms had production contracts.
• Net cash farm income averaged $11,696 for farms nationwide, but ranged from negative for farms with sales under $50,000 to over $380,000 for farms with sales of $1 million or more. Farm assets generally increased with sales class, but even farms with sales under $50,000 had farm assets averaging more than $250,000. Farms with gross value of sales of $1 million or more used assets valued at over $3 million to generate $2 million in gross cash income. These large farms also had the highest debt-to-asset ratio (0.25).
• In 1994, 61 percent of farms were in a favorable financial position with a low debt-to-asset ratio (0.40 or less) and positive net farm income. Another 34 percent of farms had a low debt-to-asset ratio but were unable to generate enough income to offset expenses, so net farm income was negative, putting them in the marginal income category. Most of these operations were noncommercial farms. Only 4 percent of farms were in a vulnerable financial position where a high debt-to-asset ratio (0.40 or more) and negative net farm income threatened long-term survival of the business.
• More than a third of farms received income from government payments, averaging $9,306 per receiving farm. Almost two-thirds of commercial farms (gross value of sales $50,000 or more) compared with one-fourth of noncommercial farms received government payments. However, government payments accounted for less than 3 percent of gross cash farm income for commercial farms compared with 41 percent for noncommercial farms.
• Over 40 percent of the Nation's farm operators reported farming or ranching as their principal occupation. Their farms accounted for more than 80 percent of gross cash farm income and gross value of sales. Households of operators with a principal occupation of farming had average total household income that was about 85 percent of the U.S. average. About a third of total income for these households came from earnings from farming activities, and two-thirds from off-farm sources.
• Operators under 35 years old accounted for 9 percent of all operators, while operators 65 years old and over accounted for 24 percent. The youngest operators, however, generated their proportionate share of total U.S. gross cash farm income and gross value of sales based on number of farms, while the oldest group generated about half their proportionate share.
• About 13 percent of all farm operators used electronic information services to get farm business information. Use of this new technology increased with farm size and operator educational attainment level (20 percent of operators who completed college compared with 10 percent of those who completed only high school).
• More than 60 percent of farm operators ranked getting out of debt and improving crop yield or livestock production as very important business goals. Commercial farm operators ranked these goals higher than noncommercial farm operators.
• Mean household income from all sources for farm operator households was near the U.S. average. On average, 90 percent of total operator household income came from off-farm sources. For almost half of farm households, earnings from farming activities (farm self-employment income plus other farm-related earnings) were negative, but total household income was positive because off-farm income exceeded the loss. As farm sales increased, household dependence on earnings from farming activities increased and household income relative to the U.S. average increased. Operator households associated with farms that had a gross value of sales of $500,000 or more had average household income 3.5 times the U.S. average, and earnings from farming activities accounted for 75 percent of total operator household income.
• Noncommercial farm operators worked half their annual working hours on the farm, and their spouses worked about one-fourth of their working hours on the farm. Commercial farm operators worked 88 percent of their total work hours on the farm, while spouses averaged almost half their total work hours on the farm.
• Rankings of eight selected measures of farm business success showed that having farm income sufficient to support the household was more important to operators reporting their principal occupation as farming. More than half of farm operators reported passing the operation on to the next generation as very important.

Page editor: webadmin@ers.usda.gov
Updated: August 20, 1997