Shrinking in the middle

Written by TF Staff on .

Several years ago, as it became apparent that high commodity prices would give way to much leaner times in agriculture, ag economists predicted an increase in smaller and larger farms. Growth in these segments, they said, would come at the expense of midsized farms. These predictions look to be accurate but complex.

In USDA terms, a midsized farm has an annual gross cash farm income between $350,000 and $1 million. This range represents the typical “family farm.”

According to a report from USDA’s Economic Research Service, between 1992 and 2012, the number of U.S. midsize operations declined by some 6,100 farms—about 5 percent. There are several factors for the reduction, including technological advances in crop production, higher costs of production and increasing profitability of larger farms. These factors, in particular, led the theory that farm-level economics drives consolidation.

However, demographics are at play, too. According to a report by Christopher Burns and Ryan Kuhns, economists with USDA’s Economic Research Service, “Evidence suggests that much of the decline in midsize farms stemmed from farm exits. More midsized farms exited than entered farming during 1992-97 and 2007-12, which kept overall midsize farm numbers down. Many farm exits were linked to the age of the principal operator, as older farmers were more likely to exit farming. A smaller number of farms exited for other reasons, such as business failure.”

Some of the attrition at the midsized-farm level is because the operation moves into another category, shrinking into “small farm” designation or growing to “large.” Higher prices during most of the past decade encouraged some midsized farms to expand rental acres, increasing the size of the operation. The reverse has been at play recently.

And while the farm economy of the past year has been disappointing, the longer trend for farm household income is encouraging. “Between 1992 and 2014, midsize farms doubled their household income and tripled their off-farm income, in real (adjusted for inflation) terms. Household net worth of midsized farms also increased dramatically over the period, driven by greater farmland values throughout the mid-2000s,” reported Burns and Kuhns. Net worth is another trend that has headed the other direction, however.

According to the most recent data compiled by USDA, midsize farms account for about 21 percent of total U.S. farm production and 6 percent of U.S. farms.

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