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Majority of farms with debt have loans from a commercial bank

Monday, July 8, 2024

Not all farms use debt to finance their operations, but of those that do, the majority used commercial banks. Researchers with USDA, Economic Research Service examined direct loans reported from five different sources in 2022: the Farm Credit System, USDA Farm Service Agency, commercial banks, trade credit, and other lenders. More than half of each farm type reported loans owed to a commercial bank. Among borrowers, small family farms using debt had the highest proportion receiving financing through other lenders (28 percent). Among all the lending sources, the Farm Service Agency serviced between 8 and 10 percent of farms with loans, making it the least likely to provide a direct loan. Not reflected, however, are actions by the Farm Service Agency to provide a loan guarantee for some of those operations reporting loans from commercial banks and the Farm Credit System. This chart appears in America’s Farms and Ranches at a Glance, published December 2023.

Forecast estimates 2 in 1,000 farm estates created in 2023 likely owed Federal estate tax returns

Tuesday, June 25, 2024

Created in 1916, the Federal estate tax is a tax on the transfer of property to a person’s heirs upon death. In 2023, the Federal estate tax exemption amount was $12.92 million per person, and the Federal estate tax rate was 40 percent. By law, the estate of a person who owns assets above the exemption amount at death must file a Federal estate tax return. However, only returns that have an estate above the exemption after deductions for expenses, debts, and bequests will pay Federal estate tax. Researchers from USDA, Economic Research Service (ERS) estimate that 39,988 estates would have been created from principal operator deaths in 2023. ERS forecasts that 330 (about 0.8 percent) of those estates would have been required to file an estate tax return, and 89 (about 0.2 percent) would likely have owed Federal estate tax. Total Federal estate tax liabilities from the 89 farm estates owing taxes are forecast to be $473 million in 2023. The exemption amount increased to $13.61 million per person in 2024, because of an annual inflation adjustment. This chart appears in the ERS topic page Federal Estate Taxes, published in April 2024.

Wind energy development varies by region

Wednesday, May 29, 2024

As of 2020, large-scale, commercial wind energy development in the contiguous United States has been concentrated in areas with consistent, high wind speeds. Wind turbines are most prominent in the Plains, followed by the Midwest and West. While the regional distribution of wind energy development is influenced by State-level energy policy, one of the most important factors for development is the wind potential in a region. Some regions, such as the South, lack sufficient wind potential for large-scale development. USDA, Economic Research Service (ERS) researchers found that 90 percent of wind turbines in rural areas were installed on agricultural land (crop, pasture, or range land). Because the amount of land cover directly affected by wind turbines was small relative to the amount of farmland, and because farmers and ranchers can typically continue agricultural production near wind turbines after they are installed, land cover changed on only 4.8 percent of sites after installation. Some of this change was from one agricultural use to another, such as from cropland to pasture. The estimated footprint for wind farms was roughly 88,000 acres in 2020. For more about the expansion of wind and solar in rural areas of the contiguous United States, the regional distribution of renewable energy development, and the land cover change associated with development, see the ERS report Utility-Scale Solar and Wind Development in Rural Areas: Land Cover Change (2009–20), released in May 2024.

Following the Sun: solar energy development varies by region

Thursday, May 23, 2024

Solar energy development has been concentrated in the Atlantic and West regions of the United States, especially in California, North Carolina, and Massachusetts. These States are among those with policies that have promoted renewable energy development—much of it occurring in rural areas. Between 2016 and 2020, utility-scale solar capacity in rural areas more than doubled, increasing to 45 gigawatts, 3.7 percent of U.S. electric power capacity, and the number of solar projects increased from 2,316 to 3,364. Roughly 70 percent of the solar projects installed between 2009 and 2020 in rural areas were located on agricultural land. About 336,000 acres of rural land were estimated to have been directly affected by solar development. For more about the expansion of solar and wind in rural areas of the contiguous United States, the regional distribution of renewable energy development, and the land cover change associated with development, see the USDA, Economic Research Service report Utility-Scale Solar and Wind Development in Rural Areas: Land Cover Change (2009–20), released in May 2024.

Energy development payments to farmers vary by region

Wednesday, May 8, 2024

Energy markets experienced significant shifts beginning in the early 2000s, with price increases and technological improvements leading to a dramatic increase in oil and natural gas production, as well as wind energy development. Research by USDA, Economic Research Service shows that the Plains region had the largest share of farm producers receiving energy payments from energy developers for on-farm energy production, 7.40 percent, and the largest average annual payment, $39,087, between 2011–20. This region includes States with significant oil, natural gas, and wind energy production, such as Texas and Oklahoma, as well as a high proportion of farmers who own the oil and gas development rights to their land. The West and Atlantic regions have a far lower share of producers who received payments on average, 2.18 and 2.82 percent, respectively. Significant oil and gas production in the Atlantic is limited to Pennsylvania and West Virginia, and many producers in the West do not own their land’s oil and gas mineral rights, which can be legally separated from land rights. However, for those receiving payments, the average annual payments in the West and Atlantic regions were $31,821 and $29,015, respectively. These payments were near the national average of $30,482. The lowest proportion of farmers receiving energy payments was in the South, at 1.45 percent. Most Southern States have low potential for large-scale wind energy development and little onshore oil and natural gas development. In the Midwest, where there is little oil and gas production and more wind power, payments were less common, 2.34 percent, and producers received the lowest average payment, $10,953. Read more about the size, frequency, trends, and relative contribution of energy payments to farm operator income in the ERS report The Role of Commercial Energy Payments in Agricultural Producer Income, released in April 2024.

Energy payments to farmers rise and fall with oil prices

Monday, May 6, 2024

The amount of money farmers receive for leasing their land for the production of energy, such as oil, natural gas, or wind, varies significantly from year to year and has typically followed the price of oil. According to data analyzed by USDA, Economic Research Service (ERS) researchers, payments grew from an average of $38,788 in 2011 to $62,944 in 2013, when the price of oil averaged about $110 per barrel (adjusted for inflation), but then fell as low as $14,032 in 2020, when oil was near $40 per barrel. Not all farmers receive energy payments since many farm operators do not own their land, and even for those who do, subsurface mineral rights might have been separated from surface rights so that the farmer would not receive payments from on-farm energy production. For farmers who have historically benefited from energy, development of oil and natural gas have been a more common source of income than wind power, which is a younger industry. In the United States, about 3.5 percent of farm operations received energy payments between 2011 and 2020. Read more about the size, frequency, trends, and relative contribution of energy payments to farm operator income in the ERS report The Role of Commercial Energy Payments in Agricultural Producer Income, released in April 2024.

Crop insurance payments to farmers vary by farm type

Wednesday, April 24, 2024

About 13 percent of U.S. farms participated in Federal crop insurance programs in 2022, with the highest share of participants coming from small family farms. The four types of small family farms (retirement, off-farm occupation, low sales, and moderate sales) accounted for 54 percent of the participants in Federal crop insurance programs and received 12 percent of the insurance payments. Small family farms harvested 26 percent of all cropland acres. On the other hand, midsize and large-scale family farm operators accounted for a slightly lower proportion of Federal crop insurance participants (42 percent) but harvested a majority of the U.S. cropland acres (67 percent) and received 80 percent of payments from Federal crop insurance. Larger farms like these account for 46 percent of agricultural acres operated in 2022. Researchers with USDA, Economic Research Service examined survey data and found that participation rates varied widely across commodity production. In 2022, 62 percent of farms producing row crops (cotton, corn, soybeans, wheat, peanuts, rice, and sorghum) purchased Federal crop insurance, while 9 percent of farms growing specialty crops, such as fruits, vegetables, and nursery crops, did the same. This chart appears in America’s Farms and Ranches at a Glance, published December 2023.

A greater share of women-only operations are retirement farms

Tuesday, March 26, 2024

Most farms operated only by women are retirement, off-farm occupation, or low-sales farms, according to findings by researchers with USDA, Economic Research Service (ERS). After examining 2017–20 data from the Agricultural Resource Management Survey (ARMS), researchers found that a greater share of farms operated only by women were retirement farms compared with the shares operated only by men or by men and women jointly, 24 versus 11 and 9 percent, respectively. Retirement farms generate annual gross cash farm income (GCFI) of less than $350,000 with principal operators who report they are retired from farming. Three percent of men-only operations were large family farms (with GCFI of $1 million to $4,999,999), compared to 2 and 0.2 percent of farms operated jointly by men and women, or only women respectively. The ARMS data also show that 7 percent of all farms were operated entirely by women from 2017 to 2020, and 44 percent of all farms were operated jointly by men and women, so 51 percent of all farms had at least one woman operator. For more information, see the ERS report An Overview of Farms Operated by Socially Disadvantaged, Women, and Limited Resource Farmers and Ranchers in the United States, published February 2024.

Expiring estate tax provisions would increase the share of farm estates that owe taxes

Tuesday, March 5, 2024

The 2017 Tax Cuts and Jobs Act (TCJA) made significant changes to Federal individual income and estate tax policies, though some policies were temporary. In 2018, the TCJA increased the estate tax exemption amount from $5.49 million to $11.18 million. This increase is set to expire at the end of 2025. The exclusion amount will revert in 2026 to the pre-TCJA level, adjusted for inflation, of $6.98 million per deceased person. For married couples, a portability provision in estate tax law allows the surviving spouse to use any unused portion of the deceased spouse’s exemption. Researchers with the USDA, Economic Research Service (ERS) estimated the expiring increased exemption would be $13.95 million per person at the time of the expiration. Lowering the level of the estate tax exemption in 2026 is estimated to increase the percent of farm operator estates taxed from 0.3 to 1.0. This means that of the estimated 40,883 estates that are expected to be created in 2026, the expiration of the increased exemption would raise the number of estates that owe tax from 120 to 424. Large farms (gross cash farm income between $1 million and $5 million) would experience the largest increase in the share of estates owing estate tax, increasing from 2.8 to 7.3 percent. Total Federal estate taxes for farm estates would be expected to more than double to $1.2 billion if the provision were allowed to expire. The information in this chart appears in the ERS publication An Analysis of the Effect of Sunsetting Tax Provisions for Family Farm Households published in February 2024.

Most small family farms are at high financial risk based on operating profit margin

Tuesday, January 23, 2024

Small family farms were more likely to have greater financial vulnerability than other farms, according to data from the 2022 Agricultural Resource Management Survey (ARMS). Researchers with USDA, Economic Research Service (ERS) calculated the operating profit margin (OPM), one of many financial risk measures, by taking the ratio of profit to gross farm income to find that in 2022, between 52 and 79 percent of small family farms—depending on the farm type (retirement, off-farm occupation, low sales, moderate sales)—were at the high-risk level. If OPM is less than 10 percent, the operation is considered at high financial risk. When OPM is between 10 and 25 percent, the operation is considered at medium financial risk, and if OPM is above 25 percent, the operation is at low financial risk. A majority of small-scale family farms, which have a gross cash farm income (GCFI) of up to $350,000, earn most of their income from off-farm sources. For these farms, farm profitability is not necessarily essential to the survival of the household. Small family farms make up 88 percent of all farms but account for only 19 percent of the total value of production. Large family farms (GCFI of $1 million to $5 million) in 2022 were most likely to have low financial risk at 51 percent and least likely to be at high financial risk at 27 percent. Midsize farms (GCFI of $350,000 to $999,999) were also most likely to be in the low-risk zone at 39 percent and least likely to be in the medium-risk zone at 23 percent. This chart appears in the ERS report America’s Farms and Ranches at a Glance, published December 2023.

Large family farms faced less risk in 2021 based on the operating profit margin ratio

Thursday, July 13, 2023

Large family farms were more likely to have stronger financial performance than other farms, according to USDA, Economic Research Service (ERS) researchers reporting data from the 2021 Agricultural Resource Management Survey (ARMS). ERS researchers measured financial performance using operating profit margin (OPM), the ratio of operating profit to gross farm income. They categorized farms as low risk if they had an OPM larger than 25 percent. Large-scale family farms, defined as those with gross cash farm income (GCFI) of $1 million or more, were the most likely to have low-risk operating profit margins compared with nonfamily and family farms of other sizes. The share of large-scale family farms considered low risk was 54 percent in 2021, an increase from 48 percent in 2020. The large-scale category includes very large farms, with GCFI of $5 million or more. Large-scale family farms make up 3 percent of U.S. farms but contributed 46 percent of the value of production in 2021. Small family farms, those with GCFI less than $350,000, were less likely to have an operating profit margin over 25 percent. Small family farms represent 89 percent of U.S. farms and contributed 18 percent of the value of production. This chart appears in the ERS report America’s Farms and Ranches at a Glance, published in December 2022, and Examining Financial Risk Measures on Family and Nonfamily Farms, published in Amber Waves in June 2023.

Commercial farms received the highest average Government payments in 2021

Monday, June 26, 2023

In 2021, more than 34 percent of the 1.96 million U.S. family farms received Government payments through four types of programs: countercyclical, marketing loan, conservation, and other programs. These Government payments totaled $14.3 billion based on data from USDA’s Agricultural Resource Management Survey (ARMS). Economists with USDA’s Economic Research Service examined three groupings (commercial, intermediate, residence) of family farms to find that about 75 percent of commercial family farms—those with $350,000 or more in gross cash farm income (GCFI)—received Government payments. For intermediate family farms—those with less than $350,000 in GCFI and a principal operator whose primary occupation is farming—31 percent received Government payments. Finally, Government payments went to 29 percent of residence family farms, defined as those with less than $350,000 in GCFI and where the principal operator is retired from farming or has a primary occupation other than farming. Overall, on average, commercial farms received $66,314, intermediate farms received $12,794, and residence farms received $8,354 in Government payments in 2021. This chart is drawn from data in the USDA, Economic Research Service’s ARMS Farm Financial and Crop Production Practices data product and in the May 2023 Amber Waves article Commercial Farms Led in Government Payments in 2021. For more information on Federal programs, visit the Farm & Commodity Policy topic page.

Less than 1 percent of farm estates created in 2022 must file an estate tax return

Monday, May 22, 2023

Created in 1916, the Federal estate tax is a tax on the transfer of property to a person’s heirs upon death. In 2022, the Federal estate tax exemption amount was $12.06 million per person and the federal estate tax rate was 40 percent. Under the present law, the estate of a person who owns assets above the exemption amount at death must file a Federal estate tax return. However, only returns that have an estate above the exemption after deductions for expenses, debts, and bequests will pay Federal estate tax. Researchers from USDA, Economic Research Service (ERS) estimate that in 2022, 39,534 estates were created from principal operator deaths. Of those estates, ERS forecasts that 305 (0.77 percent) will be required to file an estate tax return, and a further 87 (0.22 percent) will likely owe Federal estate tax. Total Federal estate tax liabilities from the 87 farm estates owing taxes are forecast to be $566 million in 2022. The exemption amount was increased to $12.92 million per person in 2023. This chart appears in the ERS Topic Page, Federal Estate Taxes, published in April 2023.

Number of U.S. farms continues to decline, but farm size grows slightly

Tuesday, April 25, 2023

After peaking at 6.8 million farms in 1935, the number of U.S. farms and ranches fell sharply through the early 1970s. Rapidly falling farm numbers in the mid-20th century reflect the growing productivity of agriculture, increased mechanization, and increased nonfarm employment opportunities. Since 1982, the number of U.S. farms has continued to decline, but much more slowly. In 2022, there were 2.0 million U.S. farms, down from 2.2 million in 2007. Similarly, the acres of land in farms continue a downward trend with 893 million acres in 2022, down from 915 million acres 10 years earlier. The average farm size in 2022 was 446 acres, only slightly greater than the 440 acres recorded in the early 1970s. This chart appears in the ERS data product Ag and Food Statistics: Charting the Essentials, updated March 2023.

Since 2015, total household income has risen for commercial farms

Thursday, January 12, 2023

From 2015 to 2021, the median total household income for commercial U.S. farms rose an estimated 16 percent, to $278,339 from $238,994. Commercial farms earn more than $350,000 gross cash farm income regardless of the principal operator’s occupation. In 2021, the median total household income for commercial farms remained above the median income of $75,201 for all U.S. households. Farm households rely on a combination of on-farm and off-farm sources of income. On-farm income is determined by farm costs and returns that vary from year to year, and in any given year a majority of farm households report negative farm income. Off-farm sources—including wages, nonfarm business earnings, dividends, and transfers—are the main contributor to household income for most farm households. Because households operating commercial farms rely mostly on on-farm sources of income, they experience the largest shocks in household income when farm sector income rises or falls. This chart uses data from the new USDA, Economic Research Service and USDA, National Agricultural Statistics Service’s Agricultural Resource Management Survey (ARMS) webtool, released in December 2022, as shown through the ARMS Farm Financial and Crop Production Practices data product.

Wages and salaries are largest contributors to off-farm income

Monday, January 9, 2023

For most U.S. farm households, off-farm sources are the main sources of income. In 2021, earnings from farming accounted for an estimated 23 percent of the average income of farm operator households. Of the off-farm income, 57 percent came from wages earned by farm operators and their spouses. The rest is income from other nonfarm businesses, interest and dividends, transfers, and other miscellaneous nonfarm sources (43 percent). Transfer income, such as retirement benefits, makes up 25 percent of off-farm income, with most coming from public sources. For farm households, off-farm income can help manage risks associated with farm income variability. This chart appears in the USDA, Economic Research Service’s topic page Farm Household Well-being, reflecting data released December 1, 2022.

Farm operator households had higher median income compared with all U.S. households in 2020

Thursday, August 18, 2022

In 2020, the median value of farm operator household income was $80,060, almost a fifth greater than that of all U.S. households ($67,521) but lower than the median among U.S. households reporting self-employment income ($89,492). Median total household income increased with farm size according to classifications by the USDA, Economic Research Service. Two types of small family farms had median household income below both the median for U.S. households and U.S. households with self-employment income: low-sales farms, those with gross cash farm income (GCFI) less than $150,000 and a principal operator who farms as a primary occupation, and retirement farms, GCFI less than $350,000 and a principal operator reporting having retired from farming. Low-sales and retirement farms account for about 45 percent of the 2 million farms in the United States. On the other hand, large family farms, GCFI of $1 million but less than $5 million, had a median income of almost $375,000, far exceeding the median for both all U.S. households and U.S. households with self-employment income. Very large family farms, GCFI of $5 million or more, had the highest median income at more than $1 million. Large and very large family farms account for about 3 percent of farms. Most farm households earn the majority of their income from off-farm sources such as wages, which are used to offset farming costs. This chart appears in the ERS report America’s Diverse Family Farms, 2021 published December 2021.

Family farm households received an estimated $2,167 on average from Economic Impact Payments in 2020

Wednesday, November 10, 2021

In 2020, U.S. family farm households received $4.3 billion in Federal assistance during the Coronavirus (COVID-19) pandemic from Economic Impact Payments (EIP) (also known as stimulus payments). USDA, Economic Research Service (ERS) researchers used data from the most recent available 2019 Agricultural Resource Management Survey on farm households’ adjusted gross income and household composition to estimate the average EIP disbursed. The estimated average was $924, $2,408, and $2,466 for single, head of household, and joint filers, respectively. This disparity partly reflects the lower income thresholds for single households, which resulted in some not receiving the maximum EIP and others not receiving EIP at all. Additionally, since unmarried people with dependents were assumed to file as head of household, these households were estimated to have received an additional $500 per dependent. Among family farm households, ERS researchers estimated that 18 percent of single filers did not receive EIP, compared with 17 percent of head of household filers, and 13 percent of joint filers in 2020. In April and May 2020, U.S. households of all types—farm or otherwise—received more than $266 billion from the EIP program. This chart appears in the Amber Waves feature “U.S. Agriculture Sector Received an Estimated $35 Billion in COVID-19 Related Assistance in 2020,” released September 2021.

In 2020, crops sector received 65 percent of Paycheck Protection Program loans for agriculture

Wednesday, October 27, 2021

Errata: On November 9, 2021, the chart and text were revised to clarify that the Paycheck Protection Program eligibility simulation was carried out on both commercial and intermediate farm operations. No other data or findings are changed.

As part of its response to the Coronavirus (COVID-19) pandemic, the U.S. Federal Government implemented the Paycheck Protection Program (PPP). Agricultural producers could use forgivable loans from this program to help keep employees on payroll and offset some of their operating costs. The maximum PPP loan amount was 2.5 times the monthly average profit plus payroll and eligible overhead expenses, such as the employer’s share of insurance payments and unemployment taxes. If used on eligible expenses within the first 24 weeks of disbursement, PPP loans were fully forgiven. According to data from USDA’s 2019 Agricultural Resource Management Survey (ARMS), 72 percent of all farm businesses (operations with gross cash farm income of more than $350,000 or smaller operations where farming is reported as the operator's primary occupation) had either positive net income or positive payroll, which met the two most important eligibility requirements to apply for PPP loans. Individual Small Business Administration (SBA) loan data indicated that almost 121,000 farm operations applied for a total of $6.0 billion in PPP loans in 2020. That accounted for 17 percent of presumed-eligible farm businesses based on the 2019 ARMS. Out of the total PPP loans that was disbursed to farm operations in 2020, $3.9 billion (65 percent) went to crop operations, and the remaining $2.1 billion (35 percent) went to livestock operations. This chart appears in the Amber Waves finding “U.S. Producers Received Almost $6.0 Billion From the Paycheck Protection Program in 2020,” released October 2021.

Gap between H-2A positions certified and H-2A visas issued grew during COVID-19 pandemic

Wednesday, October 20, 2021

The H-2A Temporary Agricultural Workers Program attracts foreign farmworkers on temporary work visas to fulfill short-term labor contracts. All positions to be filled with H-2A workers are first certified by the Department of Labor, then U.S. consulates issue corresponding visas. The number of positions certified each year generally exceeds the annual number of visas issued, in part because an H-2A worker may fill multiple positions on the same visa. At the onset of the Coronavirus (COVID-19) pandemic, temporary changes to H-2A program rules provided visa extensions to H-2A workers already in the country and allowed them to more easily switch to certified positions with other employers. In the first few months of the pandemic, the gap between positions certified and the number of visas issued grew. Position certifications typically peak in March, while visas issued peak a month later as workers begin work. In March and April 2020 combined, a record 81,000 positions were certified, and 57,000 visas were issued during the corresponding months of April and May. This difference is larger than previous years and suggests that proportionally fewer certified positions were filled with new H-2A entries in 2020. This chart first appeared in the USDA, Economic Research Service (ERS) report, Farm Labor Markets in the United States and Mexico Pose Challenges for U.S. Agriculture, published in November 2018, and has been updated through 2020. For more information on how H-2A visas have fulfilled seasonal labor requirements, see the ERS report Examining the Growth in Seasonal Agricultural H-2A Labor, published in August 2021, and the Amber Waves feature “Use of H-2A Guest Farm Worker Program More Than Triples in Past Decade,” published in September 2021.