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Farm debt-to-asset ratio forecast to stabilize in 2017-18

Friday, June 15, 2018

The debt-to-asset ratio compares the farm sector’s outstanding debt relative to the value of the sector’s aggregate assets. An indicator of the farm sector’s level of risk exposure, this ratio provides a measure of the sector’s ability to repay financial liabilities (debt) via the sale of assets. A lower debt-to-asset ratio indicates fewer assets are financed by debt and suggests the sector would be better able to overcome adverse financial events. After reaching a low of 11.3 percent in 2012, the debt-to-asset ratio increased gradually to 12.7 percent in 2016 as the growth rate for debt exceeded the growth rate for assets. ERS forecasts the debt-to-asset ratio to remain relatively unchanged in 2017-18, as farm sector assets stabilized at $3.1 billion (adjusted for inflation) between 2016 and 2018. Still, the ratio remains well below the peak in 1985 (22.2 percent) as farm sector asset values have nearly doubled since 1985. About 80 percent of the value of farm sector assets is attributable to the market value of farm real estate assets, which increased 115 percent from 1985 to 2016 and is forecast to increase 2 percent in 2017 and remain flat in 2018. This chart uses data from the ERS data product Farm Income and Wealth Statistics, updated February 2018.

Public spending on agricultural R&D by high-income countries grew after 1960, but is now in decline

Wednesday, May 30, 2018

On May 30, 2018, the Chart of Note article “Public spending on agricultural R&D by high-income countries grew after 1960, but is now in decline” was reposted to correct an error in the third sentence, which cited the spending peak as $18.7 billion instead of $18.6 billion.

For high-income countries as a group, public agricultural research expenditures (adjusted for inflation) grew rapidly after 1960. However, growth slowed markedly in recent decades and has now turned negative. In constant 2011 dollars, public agricultural R&D spending in these countries grew from $3.9 billion in 1960 to a peak of $18.6 billion in 2009, before declining to $17.5 billion by 2013 (the latest year with complete data). This decline in public R&D spending marked the first sustained fall in agricultural R&D investment by these countries in 50 years, and was most pronounced in the United States and Southern Europe. The United States continues to lead among high-income countries in public agricultural R&D spending, but the U.S. share of the total declined from 35 percent in 1960 to less than 25 percent by 2013. This chart appears in the ERS report Agricultural Research Investment and Policy Reform in High-Income Countries, released May 2018.

Older operators often run small family farms, particularly retirement and low-sales farms

Friday, May 25, 2018

A notable characteristic of principal farm operators (those most responsible for running the farm) is their relatively advanced age. In 2016, 36 percent of principal farm operators were at least 65 years old, compared with only 14 percent of self-employed workers in nonagricultural businesses. Older operators ran 37 percent of all small family farms—those with annual gross cash farm income (GCFI) before expenses under $350,000—including 68 percent of retirement farms and 38 percent of low-sales farms. By comparison, older operators ran 21 percent of large family farms (GCFI of $1 million to $4,999,999) and 23 percent of very large family farms (GCFI of $5 million or more). Improved health and advances in farm equipment enable operators to farm later in life than in past generations. The farm is also home for most farmers, and they can gradually phase out of farming by renting out or selling parcels of their land. Some larger, more commercially oriented farms run by older farmers may have a younger, secondary operator who might eventually replace the principal operator. This chart appears in the ERS report America's Diverse Family Farms: 2017 Edition, released December 2017.

The median income of households operating farm businesses has risen over the past two decades, but remains below that of self-employed households

Wednesday, May 23, 2018

Households that operate farm businesses—which include farmers with commercial farms earning at least $350,000 in gross cash farm income before expenses and those with smaller farms who report farming as their primary occupation—account for two-fifths of U.S. farm households. Since 1996, the median income of these farm business households has remained below the income of self-employed households. However, the median income gap between farm business and self-employed households has varied and has narrowed considerably during this period. Over the past 20 years, after adjusting for inflation, the median income of farm business households has increased substantially. This has occurred both because farms have become more profitable and average off-farm income has risen. In 1996, the median income of farm business households was $35,166, compared to $76,483 for self-employed households. By 2016, the median income of farm business households had increased to $64,929, compared to $84,459 for self-employed households. This chart appears in the ERS topic page Farm Household Well-being, updated May 2018.

Agriculture and its related industries added over $1 trillion to U.S. GDP in 2016

Tuesday, May 15, 2018

Agriculture, food, and related industries contributed 1.05 trillion to U.S. gross domestic product (GDP) in 2016, a 5.7-percent share. The output of America’s farms contributed $136.7 billion of this sum—about 1 percent of GDP. The overall contribution of the agriculture sector to GDP is larger than this because sectors related to agriculture—forestry, fishing, and related activities; food, beverages, and tobacco products; textiles, apparel, and leather products; food and beverage stores; and food service, eating and drinking places—rely on agricultural inputs in order to contribute added value to the economy. The value added by America’s farms has decreased in each of the last 3 years, from a high of $187.0 billion in 2013. The decline in value added is primarily driven by lower commodity prices for major crops like corn and soy, which were near record highs in 2013. All other agriculture related industries included grew in 2016 relative to a year earlier. The largest growth occurred in the food service, eating and drinking places industries, with 6 percent more value added in 2016 than in the previous year. This chart is updated for 2016 and is from ERS's data product, Ag and Food Statistics: Charting the Essentials.

Midpoint acreage more than doubled for all five major field crops

Thursday, May 10, 2018

Over the last three decades, the midpoint acreage—where half of acres are on farms that harvest more than the midpoint, and half are on farms that harvest less—has shifted to larger farms for almost all crops. In 1987, for example, the midpoint for corn was 200 acres, which increased to 600 acres by 2012. Four other major field crops (cotton, rice, soybeans, and wheat) showed a very similar pattern: the midpoint for harvested acreage more than doubled for each crop between 1987 and 2012. The midpoints also increased persistently in each census year, with the single exception of a decline in cotton in 2012. ERS researchers repeated the analysis for a total of 55 crops in all. Consolidation was nearly ubiquitous, as the midpoint increased in 53 of 55 major field and specialty crops between 1987 and 2012. Consolidation was also substantial, as most of these midpoint increases were well over 100 percent—and it was persistent, as most midpoints increased in most census years. This chart appears in the ERS report Three Decades of Consolidation in U.S. Agriculture, released March 2018.

Average employment grew more rapidly for Value-Added Producer Grant recipients after receiving the grants

Tuesday, May 8, 2018

USDA’s Value-Added Producer Grant (VAPG) program provides grants intended to help farmers and ranchers add greater value to agricultural commodities, such as through additional processing or marketing of new products. For example, producers could adopt organic practices, turn berries into jam, or process meat into sausage. Between 2001 and 2015, the program provided a total of 2,345 grants to farmers and ranchers—totaling $318 million, or about $136,000 per grant on average. ERS researchers investigated the effect of the VAPG program on job creation by comparing employment trends pre- and post-grant for VAPG recipients and similar non-recipients. No significant difference in average employment levels was found between the two groups before the grants were received. However, average employment grew more rapidly for VAPG recipients than non-recipients after receipt of the VAPGs. The researchers found that grant recipients employed five to six more workers on average than non-recipients 1 to 5 years after the grant was received. However, given a 95-percent confidence interval, these job growth numbers can vary between about 2 to 10 jobs. At the time of the grants, these businesses employed around 14 employees on average. This chart appears in the May 2018 ERS report Impacts of USDA’s Value-Added Producer Grant Program and Its Effect on Business Survival and Growth.

Productivity has replaced resource intensification as the primary source of growth in global agriculture output

Tuesday, May 1, 2018

Since the 1990s, productivity growth has driven the growth in global agricultural output of total crop and livestock commodities, helping to make food more abundant and cheaper worldwide. Global output growth initially slowed in the 1970s and 1980s, but then accelerated in the 1990s and 2000s. In the latest period (2001-14), global output of total crop and livestock commodities expanded at an average rate of 2.5 percent per year. In the decades prior to 1990, most output growth came about from intensification of input use, such as using more labor, capital, and material inputs per acre of agricultural land. Bringing new land into agricultural production and extending irrigation to existing agricultural land were also important sources of growth. Over the last two decades, however, the rate of growth in agricultural resources (land, labor, capital, etc.) has significantly slowed. By comparison, improvements in total factor productivity have increased, accounting for about two-thirds of global output growth during 2001-14. TFP growth reflects the use of new technology, efficiency improvement, and changes in management by agricultural producers around the world. This chart appears in the ERS topic page for International Agricultural Productivity, updated October 2017.

Small family farms accounted for half the farmland, but only 23 percent of production

Thursday, April 26, 2018

In 2016, 99 percent of U.S. farms were family farms, where the principal operator and his or her relatives owned the majority of the business. Small family farms—those with less than $350,000 in annual gross cash farm income (GCFI)—accounted for about 90 percent of U.S. farms, half of all farmland, and a quarter of the value of production. By comparison, large-scale family farms—those with $1 million or more in GCFI—made up only 3 percent of U.S. farms and 18 percent of farmland, but contributed 45 percent of production. Nonfamily farms, such as partnerships of unrelated partners and corporations, accounted for just 1 percent of U.S. farms and 10 percent of production. The 19 percent of nonfamily farms with GCFI of $1 million or more accounted for 88 percent of all nonfamily farms’ production. This chart appears in the ERS report America’s Diverse Family Farms: 2017 Edition, released December 2017.

Appreciation in U.S. cropland values varies by region and over time

Wednesday, April 11, 2018

Farm real estate (including farmland and the structures on the land) accounts for over 80 percent of farm sector assets and represents a significant investment for many farms. Two major uses of farmland are cropland and pastureland. From 2003 to 2014, U.S. cropland values appreciated faster than pastureland—with cropland values doubling in real terms. However, cropland appreciation varied over time and by region. Between 2003 and 2008, cropland values appreciated almost uniformly across regions. Between 2009 and 2014, cropland appreciation was highest for the Northern Plains, Lake States, Corn Belt, and Delta States. This reflected the relatively steep rise in commodity prices for the grain and oilseed often grown in those regions, which made the cropland more valuable. However, between 2015 and 2017, the Northern Plains and Corn Belt experienced negative cropland appreciation, reflecting falling commodity prices and farm income. Regional differences in land values may also be due to varying demands for farmland for nonagricultural purposes, such as demand for oil and gas development in shale areas. The leveling or decline of cropland values observed in the Northeast, Southeast, and Pacific regions from 2009 to 2014 was likely a result of the Great Recession, which negatively influenced the value of cropland in close proximity to urban areas. This chart updates data found in the February 2018 ERS report, Farmland Values, Land Ownership, and Returns to Farmland, 2000-2016.

Farm inputs have shifted over time toward less use of labor and land, and more use of capital and intermediate goods

Monday, April 9, 2018

Between 1948 and 2015, total farm output nearly tripled, while farm inputs grew little. However, input composition has shifted considerably toward more use of farm machinery (part of capital inputs) and intermediate goods, such as seed, feed, energy use, fertilizer, pesticides, and purchased services. Inputs of intermediate goods and capital inputs (excluding land) grew by 134 percent and 78 percent, respectively. By comparison, labor inputs declined by 75 percent and land inputs fell by 24 percent. Many factors contributed to these input changes. For example, competing uses for labor and land from other sectors or purposes have raised the costs of those inputs. Technological advancements have also made inputs like machinery and agricultural chemicals more effective and affordable for farmers. This chart appears in the March 2018 Amber Waves data feature, "Agricultural Productivity Growth in the United States: 1948-2015."

Farm debt service ratio forecast to stabilize in 2017 and 2018

Thursday, March 22, 2018

The farm sector debt service ratio measures the share of agricultural production used for debt payments. It provides a way to assess the farm sector’s ability to make scheduled interest and principal payments on farm debt when they are due. A higher debt service ratio implies a greater share of production income is needed to make debt payments, suggesting lower liquidity (the amount of capital readily available as cash). Following record-level agricultural production in 2013, the debt service ratio in 2012 and 2013 was at its lowest level since 1962 at 20 percent. The ratio then increased year-over-year to 26 percent in 2016. ERS forecasts the debt service ratio to increase slightly to 27 percent in 2017 and 2018, as debt payments have increased and the value of agricultural production has declined since 2013. However, the ratio remains well below the peak in 1983 even as farm sector debt approaches levels seen in the 1980s. Declining interest rates have helped to keep debt payments low, and the value of agricultural production has increased 38 percent since 2002, after adjusting for inflation. As a result, the debt service ratio is now near its 2002 value and its 35-year historical average. This chart uses data from the ERS data product, Farm Income and Wealth Statistics, updated February 2018.

Cropland has shifted to larger farms over the last three decades

Thursday, March 15, 2018

Agricultural production has shifted to much larger farming operations over the last three decades. In 1987, more than half (57 percent) of all U.S. cropland was operated by midsize farms that had between 100 and 999 acres of cropland. The largest farms with at least 2,000 acres operated only 15 percent of U.S. cropland that year. By 2012, midsize farms held 36 percent of cropland, the same share as that held by the largest farms. That shift occurred persistently over time, as the share held by the largest farms increased in each Census of Agriculture after 1987—in 1992, 1997, 2002, 2007, and 2012—while the share held by midsize farms fell in each census. By comparison, the share of cropland held by the smallest farms with less than 100 acres changed little over time, remaining at about 8 percent. Consolidation can occur through shifts in ownership, as operators of larger farms purchase land from retiring operators of midsize farms. However, most cropland is rented, and farms frequently expand by renting more cropland, often from retired farmers and their relatives. This chart appears in the ERS report, Three Decades of Consolidation in U.S. Agriculture, released March 2018.

Energy consumption in agriculture increased in 2016, driven mainly by diesel and fertilizer use

Tuesday, March 13, 2018

In 2016, the agricultural sector consumed 1,872 trillion Btu of energy, accounting for about 1.9 percent of total U.S. primary energy consumption. Farms consume energy in many forms, mainly diesel (44 percent of direct energy consumption), electricity (24 percent), natural gas (13 percent), gasoline (11 percent), and liquefied petroleum gas (7 percent). Diesel and, to a lesser extent, gasoline are used to power farm machinery. Electricity is used mainly for irrigation, cooling, and lighting. Natural gas and LP gas are used in heating and grain drying. Large amounts of natural gas are required in the manufacturing of fertilizer and pesticide, so these amounts are categorized as indirect energy consumption on farms. Overall, about three-fifths of energy in 2016 used in the agricultural sector was consumed directly on-farm, while two-fifths were consumed indirectly in the form of fertilizer and pesticides. Recent increases in diesel and fertilizer consumption come in response to declining oil and natural gas prices. From 2012 to 2015, agriculture became more energy intensive, as energy consumption grew over 10 percent compared with about 6 percent growth in agricultural output. This chart updates data found in the ERS report, Trends in U.S. Agriculture's Consumption and Production of Energy: Renewable Power, Shale Energy, and Cellulosic Biomass, released August 2016.

U.S. agricultural productivity continued to grow over time, while the real price of agricultural outputs tended to decline

Tuesday, March 6, 2018

Productivity growth in the U.S. farm sector has implications for both U.S. and global food markets. The United States is one of the largest consumers and producers in world agricultural commodity markets. Slowing productivity growth that fails to keep pace with increasing food demand may lead to rising food prices. It may also put pressure on low-income households, as these households spend a greater share of their income on food. Transitory events—such as energy shocks or supply shortages due to bad weather—may cause agricultural commodity prices to rise, the long-term growth trend in U.S. agricultural productivity has enhanced food security and benefited consumers by reducing the real (inflation-adjusted) price of agricultural outputs over time. Between 1948 and 2015, total factor productivity increased by 152 percent, while real agricultural output price declined by nearly 65 percent. This chart appears in the March 2018 Amber Waves data feature, "Agricultural Productivity Growth in the United States: 1948-2015."

U.S. farm real estate appreciation has slowed following a decline in U.S. net cash farm income

Friday, February 23, 2018

Farm real estate (including land and the structures on the land) accounts for over 80 percent of farm sector assets and represents a significant investment for many farms. U.S. farm real estate values have been rising since the farm crisis of the 1980s, reaching record high values in 2015. Beginning in the mid-2000s, higher farm incomes and lower interest rates contributed to rapid appreciation. Nationally, average per-acre farm real estate values more than doubled when adjusted for inflation, from $1,483 in 2000 to $3,060 in 2015. Cropland appreciated faster than pastureland (reflecting the relatively steep rise in grain and oilseed commodity prices), while farmland in the Midwest appreciated faster than other areas of the country. However, farmland appreciation slowed considerably from 2015 to 2016, with some regions experiencing small declines caused by falling commodity prices and net cash farm income. This chart appears in the February 2018 ERS report Farmland Values, Land Ownership, and Returns to Farmland, 2000-2016.

Off-farm income contributes significantly to households operating farms of all sizes

Friday, January 26, 2018

Most farm households rely on off-farm income, such as wages from a job outside the farm. Typically, only commercial farm households receive a substantial share of their income from the farm. For example, in 2016, the median farm income was negative $2,008 for households operating residence farms (where the operator primarily works off-farm or is retired from farming), while median off-farm income was $83,400. Households operating intermediate farms (smaller farms where the operator’s occupation is farming) also earn the bulk of their income from off-farm sources. In contrast, households operating commercial farms—where gross cash income is $350,000 or more—derive most of their income from the farm (nearly $144,000 in 2016). Changes to their total household income follow profits from farming. Most agricultural production takes place on commercial farms. In 2016, residential and intermediate farms together accounted for over 90 percent of U.S. family farms and one-quarter of the value of production. By comparison, commercial farms accounted for 9 percent of family farms and three-quarters of production. This chart is based on data from the ERS data product Farm Household Income and Characteristics, updated November 2017.

The share of indemnities from Federal crop insurance for each farm type roughly mirrors its share of harvested cropland

Wednesday, January 24, 2018

In recent Farm Acts, emphasis has shifted to a greater reliance on risk management through insurance and less reliance on income support through Government payments from commodity programs. Indemnities—payments from Federal crop insurance to compensate for losses—are roughly proportional to acres of harvested cropland. In 2016, midsize family farms and large family farms together accounted for 66 percent of indemnities and 61 percent of harvested cropland. These farms’ high share of indemnities reflects their high participation in Federal crop insurance. About two-thirds of midsize farms and three-fourths of large farms participated in Federal crop insurance, compared with only one-sixth of all U.S. farms. Grain farms—the most common specialization among midsize and large family farms—accounted for 67 percent of all participants in Federal crop insurance and 64 percent of harvested cropland in 2016. This chart appears in the ERS report America’s Diverse Family Farms, 2017 Edition, released December 2017.

Intellectual property rights for new plant varieties have expanded

Monday, January 8, 2018

Intellectual property rights are intended to offer incentives for innovation by protecting new inventions from imitation and competition. When the modern U.S. Patent and Trademark Office was established in 1836, new plant varieties were considered products of nature and, therefore, not eligible for protection under any form of intellectual property. In 1930, asexually reproducing plants were the first to receive protection through plant patents, which have been issued primarily for fruits, tree nuts, and horticultural species. The remainder of the plant kingdom, including a broad range of commercial crops, became eligible for protection in 1970 with the introduction of plant variety protection certificates (PVPCs). However, PVPCs had exemptions for farmers to save seeds and for research uses. Full patent protection (without these exemptions) arrived in 1980 with the U.S. Supreme Court decision Diamond v. Chakrabarty. This ruling extended utility patent protection—the type of protection provided to most inventions in other areas—to plants. Despite being available for the least amount of time, annual utility patent grants for plant cultivars and lines have rapidly overtaken PVPCs and reached similar levels as plant patents. The rapid rise of utility patents mirrored the rapid rise in private research and development in the seed and agricultural biotech sector over a similar period. This chart updates data found in the ERS report Agricultural Resources and Environmental Indicators, 2006 Edition.

Share of production by type of farm varies across commodities, 2016

Monday, December 18, 2017

Farm production has been shifting to larger farms for many years, but this trend varies by commodity. In 2016, over 45 percent of U.S. farm production occurred on the 3 percent of U.S. farms classified as large-scale family farms—with at least $1 million in annual gross cash farm income before expenses (GCFI). These farms accounted for half of hog production and two-thirds of the production of both dairy and high-value crops like fruits and vegetables. Large-scale farms also contributed 60 percent of cotton’s value of production. By comparison, small family farms—with less than $350,000 GCFI—accounted for 90 percent of U.S. farms, but contributed less than 23 percent to U.S. farm production. These small farms, however, contributed larger shares of production for poultry (59 percent) and hay (50 percent). Nonfamily farms, which accounted for 1 percent of U.S. farms, contributed about 10 percent of U.S. farm production. This chart appears in the ERS report America’s Diverse Family Farms, 2017 Edition, released December 2017.

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