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 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 444 acres in 2017 versus 155 acres in 1935. About 2.05 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 nearly tripled between 1948 and 2017.
Gross cash farm income (GCFI) is annual income before expenses and includes cash receipts, farm-related income, and Government farm program payments. GCFI is forecast at $431 billion in 2020, versus $333 billion (inflation-adjusted 2020 dollars) in 2000, with the increase across time largely because of higher cash receipts. Since 2016, GCFI has been relatively stable.
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. Inflation-adjusted net farm income is forecast to increase 21.7 percent in 2020, to $102.7 billion. Inflation-adjusted farm production expenses are projected to decrease 2.1 percent in 2020.
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 2018. Small family farms (less than $350,000 in GCFI) accounted for 90 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 ($72,481) exceeded the median for all U.S. households ($63,179) in 2018. Median household income and income from farming increase with farm size and most households earn some income from off-farm employment. 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. In contrast, the typical household operating large-scale farms earned $348,811 in 2018, and most of that came from farming.