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Production contracts dominate hog and poultry production, while marketing contracts are more widely used in crops and dairy

Monday, February 10, 2020

Contracts are widely used in the production and sale of U.S agricultural commodities. Under marketing contracts, ownership of the commodity remains with the farmer during production, with little involvement from the contractor. By comparison, under a production contract, the contractor usually owns the commodity (e.g., the chicks for poultry operations) during production and often provides specific inputs and services, production guidelines, and technical advice to the grower—who receives a contract fee for raising the commodity. Across all commodities, the value of contract production was nearly evenly split between marketing and production contracts in 2018. However, the use of contract types varies sharply across commodities. Most contract crop production (except for seeds and some processing vegetables) used marketing contracts, as did all contract dairy production. In contrast, production contracts were used extensively for the production of hogs and poultry. Some hogs may be raised under a production contract between a grower and an integrator (an intermediary that coordinates production), and then sold by the integrator under a marketing contract with a processor, who slaughters and processes the animal for sale. This chart updates data found in the July 2019 Amber Waves article, “Marketing and Production Contracts Are Widely Used in U.S. Agriculture.”

Forecast for farm sector profits in 2020 near average levels since 2000

Wednesday, February 5, 2020

U.S. net cash farm income—gross cash income less cash expenses—when adjusted for inflation is forecast to decrease $13.1 billion (10.7 percent) to $109.6 billion in 2020. U.S. net farm income—a broader measure of farm sector profitability that incorporates noncash items including economic depreciation and gross imputed rental income—is forecast to increase $1.4 billion (1.4 percent) from 2019 to $96.7 billion in 2020. If forecast changes are realized, net cash farm income in 2020 would be 0.6 percent below its inflation-adjusted average calculated over the 2000-18 period, while net farm income would be 5.4 percent above its 2000-18 average. The trajectories of the two income measures diverge in 2020 largely because of how net sales from inventories are treated. Net cash farm income records income in the year the sale took place, while net farm income counts it in the year the production occurred. High net sales ($14.9 billion) from crop inventories forecast in 2019 are expected to boost net cash farm income significantly that year. Very low net sales from inventories ($0.5 billion) in 2020 are expected to contribute to a decrease in net cash farm income between the two years. In the net farm income series, net inventory changes are removed from cash receipts and track more closely with the value of annual agricultural production. Find additional information and analysis on the ERS Farm Sector Income and Finances topic page, reflecting data released February 5, 2020.

About a third of beginning farms and half of established farms produced at least $10,000 worth of output between 2013 and 2017

Friday, January 31, 2020

From 2013 to 2017, there were an average of 898,100 operators with no more than 10 years of farming experience. Of these beginning farmers, a little more than half (461,400) were operators of beginning farms, or those farms on which all the operators were beginning farmers. Overall, there were an average of 339,400 beginning farms and 1,691,400 established farms between 2013 and 2017. About a third of beginning farms and half of established farms produced at least $10,000 worth of output. Beginning farms (67 percent) were also more likely than established farms (52 percent) to be very small, generating less than $10,000 worth of output. Although the majority of beginning and established farms were very small, these operations contributed a relatively low share of production—accounting for about 2 percent of output from all beginning farms and 1 percent from all established farms. This chart appears in the ERS report, An Overview of Beginning Farms and Farmers, released September 2019.

ICYMI... Family farm households rely on various sources of income

Thursday, December 19, 2019

The composition of family farm household income varies by the type of farm. For example, households operating commercial family farms earned most of their income on the farm ($225,264 on average in 2017). Residence family farm households relied mostly on off-farm wages and salaries ($69,493 on average). Intermediate family farm households, meanwhile, had relatively high retirement and disability income ($19,222 on average), in part because these households had the oldest principal operators on average. Less than half of all farm households had positive incomes from their farm operations in 2017. Among commercial farm households, 86 percent had positive income from farming, compared to 51 percent of intermediate farm households and 35 percent of residence farm households. At the median, U.S. farm households earned $67,500 from non-farm sources, compared to a median loss of $800 from farming operations. This chart appears in the Amber Waves infographic “Farm Households Rely on Many Sources of Income,” published June 2019. This Chart of Note was originally published June 14, 2019.

Median farm household income in 2018 was greater than the median U.S. household income, except among retirement and low-sales farm households

Friday, December 13, 2019

Farm households often earn higher incomes than other types of households. In 2018, 57 percent of U.S. farm households received incomes at or above the median for all U.S. households, which was $63,179 that year. ERS classifies farm households into 7 types based on their annual gross cash farm income (GCFI), and groups small farms by the primary occupation of the principal producer. Median household incomes for 5 out of 7 farm types exceeded both the median U.S. household and the median income for households with self-employment income. However, the median income for all family farm households is lower than the median among all U.S. households with self-employment income. Overall, only 3 percent of farm households had lower wealth than the median U.S. household. This chart appears in the December 2019 report, America’s Diverse Family Farms: 2019 Edition.

Public agricultural research expenditures as a percentage of agricultural GDP has fallen in high-income countries since 2009

Wednesday, December 4, 2019

One way of comparing research and development (R&D) investment across countries is to measure R&D spending relative to the size of the economy, or as a percentage of Gross Domestic Product (GDP). While the United States spends more on public agricultural R&D than other high-income countries, U.S. expenditures relative to the size of its agricultural sector have been about average. Over time, agricultural R&D spending has tended to rise as a percentage of agricultural GDP in virtually all countries. This tendency reflects the greater technological sophistication of agriculture, as well as the broadening of research agendas beyond production agriculture to include more emphasis on various societal issues, including food safety, rural development, and the environment. In the United States, public spending on agricultural R&D as a percentage of GDP peaked in the mid-2000s at about 3.5 percent of agricultural GDP but significantly declined since 2009. By 2013, public spending fell to 2 percent of agricultural GDP. U.S. agricultural research intensity is now below average for high-income countries. Leading regions, such as Northwest Europe and high-income Asia, have agricultural R&D spending of around 4.5 percent of agricultural GDP. Public agricultural research intensities also leveled off or even fell in the agricultural-exporting countries of Canada, Australia, and New Zealand. Research intensities in Southern European and Mediterranean countries and in Central European countries have been consistently lower than those in other high-income countries. This chart appears in the ERS report, Agricultural Research Investment and Policy Reform in High-Income Countries, released May 2018.

ICYMI... Value of U.S. cropland appreciated faster than pastureland after Great Recession

Thursday, October 31, 2019

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. 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 $3,010 in 2016. Two major uses of farmland are cropland and pastureland. From 2003 to 2014, U.S. cropland values doubled, appreciating faster than pastureland and reflecting a rise in grain and oilseed commodity prices. However, the value of cropland and farm real estate dipped slightly in 2008–09, reflecting the effect of the Great Recession and the downturn in the U.S. housing market. In contrast, average U.S. pastureland values remained relatively flat. This chart appears in the February 2018 ERS report, Farmland Values, Land Ownership, and Returns to Farmland, 2000–2016. This Chart of Note was originally published May 23, 2019.

Contracts are most prevalent in production of poultry, tobacco, hogs, peanuts, and fruits

Monday, October 28, 2019

Contracts are widely used in the production and sale of U.S agricultural commodities. Farmers use contracts to obtain compensation for higher product quality, specify outlets for products, and provide assurance of sales to manage income risk or finance debt. Processors use contracts to gain timely flows of products and greater control over the characteristics and consistency of the products they acquire. Contracts cover relatively small shares of corn, soybean, and wheat production—and those shares have changed little in 20 years. In contrast, most poultry is produced under contract, and what is not produced under contracts between processors and growers is raised in facilities operated directly by processors. These differences between commodities reflect differences in markets and product characteristics. Because corn, wheat, and soybean producers have many potential buyers and can store their crops for long periods, cash markets work well for them. On the other hand, poultry producers make a substantial investment to produce birds that lose value quickly after reaching maturity, and there are usually just one or two local buyers for the product. Facing a risk that, without a contract in place, buyers would be able to force the price down, poultry producers are reluctant to invest in their business without the assurance of a contract. This chart appears in the December 2018 report, America’s Diverse Family Farms: 2018 Edition. It was also highlighted in the ERS’s Amber Waves Data Feature, “Marketing and Production Contracts Are Widely Used in U.S. Agriculture” in July.

ICYMI... More than half of Specialty Crop Block Grant funds were awarded to California, Washington, and Florida between fiscal years 2014–2018

Thursday, October 24, 2019

The 2018 Farm Bill reauthorizes the Specialty Crop Block Grant Program and extends funding levels through fiscal year 2023. Under the program, block grants are awarded to each State to support State and multistate projects that aim to enhance the competitiveness and long-term success of U.S. specialty crop producers. Specialty crops are defined as fruits and vegetables, tree nuts, dried fruits, horticulture, and nursery crops (including floriculture), whereas non-specialty crops include grains and commodities such as rice, wheat, and dairy products. The specialty crop grant program objectives include: broadening domestic and international markets for U.S. producers, supporting producers with research and development related to specialty crops, increasing market availability and access, and addressing challenges confronting specialty crop producers. Grant projects span topics in marketing, research, pest and disease management, food safety, and the like. The amount of grants awarded to a State is based on production value and acreage in specialty crops. Under the 2014 Farm Bill, grants awarded totaled $329.1 million for fiscal years 2014–18. Nearly half of the total went to California, Washington, and Florida—key fruit- and vegetable-producing States. As the leading producer of fruits and vegetables, California, alone, received 32 percent of the total grant amount. This chart appears in the specialty crops section of Agriculture Improvement Act of 2018: Highlights and Implications, released in February 2019. This Chart of Note was originally published March 27, 2019.

The share of large farms without sufficient income to make loan payments increased more than 4 percentage points between 2012 and 2017

Wednesday, October 23, 2019

The income that a household has available to pay its debt, referred to as the term debt coverage ratio (TDCR), is often used to measure loan repayment capacity. A TDCR less than 1.0 indicates the farm household is in a repayment capacity “red zone” and does not have sufficient income to meet its loan payments. ERS researchers found that over the last 20 years, the shares of medium and large farms with a repayment capacity in the red zone have exceeded the share of small farms in that zone. On average, households that operate small farms earn most of their income off the farm and have relatively little farm debt. In the years following the 2012 peak in net cash farm income, the share of medium and large farms in the red zone increased. The increase was particularly steep for large farms—from 8.1 percent in 2012 to 12.4 percent in 2017. In contrast, small farms remained largely insulated from the downturn in the agricultural economy because they relied relatively more on off-farm income. This chart appears in the ERS report, Financial Conditions in the U.S. Agricultural Sector: Historical Comparisons, released October 2019. It also appears in the Amber Waves feature, “Larger Farms and Younger Farmers Are More Vulnerable to Financial Stress.”

Principal operators of beginning farms were more likely to work off-farm than established operators

Tuesday, October 15, 2019

Principal operators of beginning farms have no more than 10 years of experience as a farm or ranch operator and are more likely to work off-farm than more established operators. In 2017, 67 percent of beginning farm principal operators worked off-farm, compared to 45 percent of established farm operators. About 22 percent of beginning farm principal operators worked off-farm part time (1–199 days), compared to 15 percent of established farm operators. And 45 percent of beginning farm operators worked off-farm full time (200+ days), compared to 30 percent of established farm operators. From 2013 to 2017, 47 percent of beginning farms were classified as off-farm occupation farms—with gross cash farm income (GCFI) less than $350,000 per year and a principal operator who reports a major occupation other than farming—compared to 27 percent of established farms. This chart appears in the ERS report, An Overview of Beginning Farms and Farmers, released September 2019.

Productivity of farms in the Heartland increased over time, but more slowly for smallest farms

Friday, October 11, 2019

Recent ERS research examined productivity trends in the Heartland region, which includes all of Iowa, Illinois, and Indiana, and parts of Minnesota, South Dakota, Nebraska, Missouri, Kentucky, and Ohio. Findings show that the smallest crop farms (less than 100 acres) fell further behind larger farms in terms of productivity between 1982 and 2012. Total factor productivity (TFP)—a measure of the quantity of output produced relative to the quantity of inputs used—grew at similar rates across farm-size classes except for the smallest, which had slower growth rates. (However, data for 2012 reflects a severe drought in the Heartland region that year and so does not follow historical trend lines.) While the TFP for farms in the four largest size categories increased by 47 to 59 percent between 1982 and 2012, TFP for the smallest farms increased by only 17 percent. Some technological advances in recent decades, such as very large combine harvesters and precision agriculture technologies, were not as advantageous for the smallest farms to adopt due to cost. This may help explain why the farm productivity growth of the smallest farms has lagged behind that of larger operations. This trend has resulted in a deterioration of the competitive position of farms in the smallest size category, and has likely contributed to a decline in their share of total output. This chart appears in the December 2018 Amber Waves feature “Productivity Increases With Farm Size in the Heartland Region.”

ICYMI... Share of highly leveraged farm businesses is forecast to increase in 2018 and 2019

Tuesday, October 8, 2019

Farm businesses—operations where farming is reported as the operator’s primary occupation or that have at least $350,000 in annual sales—accounted for more than 94 percent of U.S. farm sector production in 2017. That year, farm businesses held 90 percent of all farm assets and 96 percent of farm debt. Debt-to-asset (D/A) ratios measure the amount of assets that are financed by debt, and can indicate a farm’s risk exposure and ability to overcome adverse financial events. The share of farm businesses that are highly leveraged (D/A ratio between 0.41 and 0.70) has fallen since 2015, but is forecast to increase slightly in 2018 and 2019. Farm businesses specializing in crops tend to have higher shares of both highly and very highly leveraged operations (D/A ratio over 0.70) than farm businesses specializing in livestock and animal products. In 2019, ERS forecasts 4.3 percent of crop farm businesses to be very highly leveraged, the highest share since 2002. Lending institutions consider D/A ratios (along with other measures reflecting the likelihood of default) when evaluating the credit worthiness of farms, so some of these highly and very highly leveraged farm businesses may have difficulty securing a loan. This chart updates data from the April 2014 ERS report, Debt Use by U.S. Farm Businesses, 1992–2011. This Chart of Note was originally published April 29, 2019.

ICYMI... Average age of all hired farm laborers is rising, driven by the aging of foreign-born farm laborers

Tuesday, October 1, 2019

Between 2006 and 2017, the average age of hired farm laborers (excluding managers, supervisors, and other supporting occupations) has risen 8 percent—from 35.8 years to 38.8 years. This increase has been entirely driven by the aging of foreign-born farm laborers, who made up between 54 and 58 percent of the workforce over this period. Their average age rose 16 percent, from 35.7 in 2006 to 41.6 in 2017. In contrast, the average age of farm laborers born in the United States (including Puerto Rico) has remained roughly constant. The main reason for the aging of the foreign-born farm laborer population has been the decline (starting in 2008) in the flow of new immigrants, who tend to be younger. One response to the aging of the farm workforce has been to increase the use of mechanical aids, such as hydraulic platforms to replace ladders in orchards and mobile conveyor belts to reduce the distance that heavy loads must be carried in the fields. These changes may enable workers to prolong their careers, and may also make it easier for more women to work in agriculture. This chart appears in the ERS topic page for Farm Labor, updated December 2018. It is also in the Amber Waves article, “U.S. Hired Farm Workforce Is Aging,” published in May 2019. This Chart of Note was originally published May 8, 2019.

ICYMI... Historic Midwest flooding in Spring 2019 severely impacted rural counties in Iowa and Nebraska

Tuesday, September 17, 2019

In March 2019, historic flooding led to a major disaster declaration covering 121 counties in Iowa and Nebraska. The disaster declaration covers nearly half of the population in Iowa and 93 percent of the population in Nebraska. Of the 3.3 million people living in one of the designated disaster counties in 2017, over 37 percent (1.2 million) lived in rural areas. In 2017, Iowa and Nebraska were the second- and fourth-ranked States, respectively, in agricultural cash receipts. Iowa also ranked second in total agricultural exports and was the top exporter of soybeans, pork, corn, and feed grains. Nebraska led the Nation in beef and veal exports, and ranked third among States in corn, processed grain products, and feed grain exports. Based on the 2017 Census of Agriculture, designated disaster counties produced 66 percent of the market value of agricultural products sold in Iowa and 75 percent of those sold in Nebraska. Together, the designated disaster counties accounted for 9.2 percent of the total U.S. market value of agricultural products sold in 2017. This chart uses data from the ERS State Facts Sheet data product, updated March 2019. This Chart of Note was originally published April 25, 2019.

ICYMI... Smaller farms often rely on the principal operators and their spouses for labor, while larger farms rely on hired labor

Thursday, September 12, 2019

Farms of different sizes rely on different mixes of labor. During the 5 years encompassing 2013–2017, the principal operator and the operator’s spouse provided most of the labor hours (75 percent) used on small farms—those with annual gross cash farm income (GCFI) under $350,000. That share fell to 44 percent on midsize farms (GCFI between $350,000 and $999,999), 19 percent on large farms (GCFI between $1 million and $4,999,999), and 2 percent on very large farms (GCFI of $5 million or more). Large and very large farms relied most on hired labor, which provided 64 and 69 percent of the labor hours on those farms, respectively. By comparison, hired labor provided about 12 percent of labor hours on small farms and 39 percent on midsize farms. Small and midsized farms are more numerous, but account for less production overall. Overall, principal operators and their spouses provided 47 percent of the labor hours used on U.S. farms in 2013–17, while hired labor provided 35 percent, and other operators and other unpaid family labor provided another 9 percent of total hours, the same share as contract labor (workers employed by firms hired by the farm). Contract laborers were particularly important on very large farms, contributing over 27 percent of labor hours. This chart updates data found in the March 2018 ERS report, Three Decades of Consolidation in U.S. Agriculture. This Chart of Note was originally published April 15, 2019.

Farm sector profits forecast to increase in 2019

Friday, August 30, 2019

Inflation-adjusted U.S. net cash farm income is forecast to increase $5.8 billion (5.4 percent) to $112.6 billion in 2019, while U.S. net farm income (a broader measure of farm sector profitability that incorporates noncash items including changes in inventories, economic depreciation, and gross imputed rental income) is forecast to increase $2.5 billion (2.9 percent) from 2018 to $88.0 billion in 2019. The forecast increases are due to a combination of lower production expenses, which are subtracted out in the calculation of net income, as well as increases in government payments and farm-related income. These contributions are expected to more than offset the forecast decline in cash receipts. If forecast increases are realized, net farm income would be 2.3 percent below the 2000–18 average ($90.1 billion), but net cash farm income would be 4.0 percent above its 2000–18 average ($108.3 billion). Find additional information and analysis on ERS’s Farm Sector Income and Finances topic page, reflecting data released August 30, 2019.

Women account for an increasing share of hired farm workforce

Friday, August 23, 2019

Errata: On August 26, 2019, the chart’s vertical axis labels were adjusted to accurately align with their corresponding horizontal lines.

The share of women farmworkers fell during the Great Recession—from 18.7 percent in 2007 to 17.6 percent in 2009—as the nonfarm economy declined and more men moved into agriculture. As nonfarm job prospects improved, however, many men left agriculture and the share of women farmworkers recovered and continued growing steadily, reaching 25.0 percent in 2017. This rising share may have been facilitated in part by labor-saving technologies that decreased the physical burdens placed on farmworkers. As wages rose, some growers adopted mechanical aids, such as hydraulic platforms (which replace ladders in tree-fruit harvesting) and mobile conveyor belts (which reduce the distance heavy loads must be carried). These aids may have allowed more women and older workers to perform tasks historically performed by younger men. The average age of all farmworkers also rose from 36.2 years in 2007 to 38.8 years in 2017. This chart appears in the ERS topic page for Farm Labor, updated June 2019.

ICYMI... 2018 Farm Act mandates spending of $428 billion over 5 years

Thursday, August 8, 2019

The Agriculture Improvement Act of 2018 (2018 Farm Act) was signed into law December 20, 2018, and will remain in force through the end of fiscal year 2023, although some provisions extend beyond 2023. The Congressional Budget Office (CBO) projected that the new Farm Act would mandate spending of $428 billion dollars over the next 5 fiscal years (2019-2023). A large majority of projected spending—76 percent ($326.02 billion)—would fund nutrition programs, with most going to the Supplemental Nutrition Assistance Program (SNAP). Crop insurance ($38.01 billion), farm commodity programs ($31.44 billion), and conservation programs ($29.27 billion) accounted for nearly all of the remaining outlays. Approximately 0.8 percent ($3.54 billion) would fund all other programs, including trade, credit, rural development, research and extension, forestry, energy, horticulture, and miscellaneous programs. Overall, the 2018 Farm Act made fewer changes to food and farm policy than the 2014 Farm Act. Nutrition policy, particularly SNAP, continued with minor changes. Crop insurance options and agricultural commodity programs continued largely as under the 2014 Farm Act. All major conservation programs continued, although some were modified significantly. This chart appears on the USDA Website page, “The Agriculture Improvement Act of 2018: Highlights and Implications,” dated December 20, 2018. This Chart of Note was originally published January 28, 2019.

ICYMI… More time spent working on the farm leads to less off-farm labor across different commodities

Thursday, August 1, 2019

Survey data show that the more time a household allots to its farm operation, the less time is available for off-farm employment. Many farm operations require primarily part-time or seasonal work, which can allow household members to work off-farm with little interruption to the farming operation. Across all farms by commodity type, average onfarm hours worked by the principal operator in 2016 ranged from 16 hours per week for general crop farms (where no one crop accounted for a majority of the value of production) to 64 hours per week for dairy farms. Time spent working on the farm limits the time available not only for off-farm employment but also for housework, family, sleep, and leisure activities. Accordingly, the amounts of time spent working on and off the farm are negatively correlated across all commodity types. For example, dairy farmers, who tend to have the most rigid farm schedules, work only 6 hours per week off-farm on average. By comparison, beef cattle farmers tend to have highly flexible schedules and, consequently, spend an average of 20 hours per week working off-farm. This chart updates data found in the August 2018 ERS report, Economic Returns to Farming for U.S. Farm Households. Survey data is drawn from the 2016 Agricultural Resource Management Survey (ARMS), jointly administered by the National Agricultural Statistics Service and the Economic Research Service. This Chart of Note was originally published February 14, 2019.

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