Farming and Farm Income
American agriculture and rural life underwent a tremendous transformation in the 20th century. Early 20th century agriculture was labor intensive, and it took place on many small, diversified farms in rural areas where more than half the U.S. population lived. Agricultural production in the 21st century, on the other hand, is concentrated on a smaller number of large, specialized farms in rural areas where less than a fourth of the U.S. population lives. The following material provides an overview of these trends, as well as trends in farm sector and farm household incomes.
After peaking at 6.8 million farms in 1935, the number of U.S. farms fell sharply until the early 1970s. Rapidly falling farm numbers during the earlier period reflected growing productivity in agriculture and increased nonfarm employment opportunities. Since then, the number of U.S. farms has continued to decline, but much more slowly. In the most recent survey, there were 2.02 million U.S. farms in 2020, down from 2.20 million in 2007. With 897 million acres of land in farms in 2020, the average farm size was 444 acres, only slightly greater than the 440 acres recorded in the early 1970s.
Technological developments in agriculture have been influential in driving changes in the farm sector. Innovations in animal and crop genetics, chemicals, equipment, and farm organization have enabled continuing output growth without adding much to inputs. As a result, even as the amount of land and labor used in farming declined, total farm output nearly tripled between 1948 and 2019.
Gross cash farm income (GCFI) is annual income before expenses. It is the sum of cash receipts, farm-related cash income, and Government direct farm program payments. GCFI is forecast at $510 billion in 2021 and $512 billion in 2022, versus $362 billion (inflation-adjusted 2022 dollars) in 2001, with the increase across time mainly due to higher cash receipts. GCFI in 2021 is forecast to increase 6.6 percent relative to 2020 (reaching the highest level since 2014), and it is forecast to grow another 0.4 percent in 2022.
Gross farm income reflects the total value of agricultural output plus Government farm program payments. Net farm income (NFI) reflects income after expenses from production in the current year and is calculated by subtracting farm expenses from gross farm income. NFI considers both cash and noncash income and expenses. In 2021, inflation-adjusted NFI is forecast to reach $123.4 billion, increasing 20.1 percent relative to 2020. It is then forecast to decline 7.9 percent to $113.7 billion in 2022 yet remain above its 2020 level. These NFI levels would be the highest since 2013 (inflation-adjusted 2022 dollars). Farm production expenses are projected to increase by 5.1 percent in 2021 relative to 2020 and then increase another 1.5 percent in 2022 (inflation-adjusted 2022 dollars).
Gross cash farm income (GCFI) includes income from commodity cash receipts, farm-related income, and Government payments. Family farms (where the majority of the business is owned by the operator and individuals related to the operator) of various types together accounted for nearly 98 percent of U.S. farms in 2020. Small family farms (less than $350,000 in GCFI) accounted for 89 percent of all U.S. farms. Large-scale family farms ($1 million or more in GCFI) accounted for about 3 percent of farms but 46 percent of the value of production.
Median total household income among all farm households ($80,060) exceeded the median total household income for all U.S. households ($67,521) in 2020. Median household income and income from farming increase with farm size and most households earn some income from off-farm employment. About 89 percent of U.S. farms are small, with gross cash farm income less than $350,000; the households operating these farms typically rely on off-farm sources for most of their household income. In contrast, the median household operating large-scale farms earned $402,780 in 2020, and most of that came from farming.