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 small 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 leveling off in the early 1970s. Falling farm numbers during this period reflected growing productivity in agriculture and increased nonfarm employment opportunities. Because the amount of farmland did not decrease as much as the number of farms, the remaining farms have more acreage, on average—about 440 acres in 2016 versus 155 acres in 1935. About 2.06 million farms are currently in operation.
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 more than doubled between 1948 and 2015.
Gross cash farm income (GCFI) is annual income before expenses and includes income from cash receipts, cash farm-related income, and Government farm program payments. GCFI is forecast at $406 billion in 2017, versus $315 billion (inflation-adjusted 2017 dollars) in 2000, with the increase largely due to higher cash receipts. After declining in 2015 and 2016, GCFI is forecast to be relatively unchanged in 2017.
Gross farm income reflects the total value of agricultural output plus Government farm program payments. Net farm income (NFI)—which reflects income from production in the current year—is calculated by subtracting farm expenses from gross farm income. NFI considers both cash and noncash income and expenses. Inflation-adjusted net farm income for 2017 is forecast to remain relatively unchanged from 2016, at $63.2 billion, after declining in 2014 through 2016. Inflation-adjusted expenses are also projected to remain relatively unchanged from 2016, at $355.8 billion, after declining in the prior 2 years.
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 99 percent of U.S. farms in 2016. Small family farms (less than $350,000 in GCFI) account for 90 percent of all U.S. farms. Large-scale family farms ($1 million or more in GCFI) account for about 3 percent of farms but 45 percent of the value of production.
Median total household income among all farm households ($76,250) exceeded the median for all U.S. households ($59,039) in 2016. Slightly more than half of U.S. farms are very small, with annual farm sales under $10,000; the households operating these farms typically rely on off-farm sources for the majority of their household income. Median household income and income from farming increase with farm size; the typical household operating the largest commercial farms earned $365,069 in 2016, and most of that came from farming.