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Wednesday, January 04, 2006

USDA’s Yardstick Will Measure Your 2005 Growth



 

“Keeping up with the Joneses” is fraught with peril, if the Joneses buy a new combine or pick-up truck every year. But how do you compare with the average US farmer, not just your neighbor who relishes the opportunity to stay ahead of you. Since it is that time of year to take stock, let’s not just look at how you did financially, but examine your management team and explore the corporate culture of your operation. (And, yes, you have both of those!)

USDA’s Economics Research Service peered into farm households and issued a variety of year-end reports on such issues as demographics, income, net worth, and well-being of US farms.

Painting a picture of the typical farmer may yield something close to artist Grant Wood’s “American Gothic.” Demographically speaking, ERS says, “The householder (or principal farm operator) of farm households is generally older, has less formal education, is less likely to be nonwhite or female, and more likely to live in the South than the average US householder. More than one-quarter of farm operators are 65 years of age or more. The average age of operators has been greater than 50 years since at least the 1974 Census of Agriculture. Part of the reason for the advanced age structure of farmers is likely because the farm is not just a place of business, it is the family home. About 15 percent of farm operators report they are retired.”

Over the past 40 years, the education level of farmers has radically changed. In 1964, 67% had not finished high school and less than 4% had been to college. Today, 40% have college experience and 15% have a degree. It is more likely that both the farm operator and spouse have off-farm employment than neither would work off the farm. Those extra jobs were taken to cover farm expenses or repay debt, increase income, or have better access to health insurance.

And how do you measure up to the income level of the typical farmer? ERS says, “The income earned by farm operator households in 2005 is expected to continue a 5-year string of increases. Average farm household income for 2005 is forecast at $83,660, up 2.7% from 2004. In 2005, average farm gross cash income is forecast to be $90,813, 4.9% higher than in 2004. Declines in crop cash receipts are projected to be offset by increases in livestock cash receipts, government payments, and other farm related income. However, higher farm expenses are expected to result in lower net cash income for farm operator households. Still, the 6.6% decline in farm income is expected to be partially offset by a 4.6% increase in off-farm income.”

For corn and bean farmers, the average household income is expected to decline 1.7% in 2005, resulting from a 13% reduction in farm income. The average income of households that operated cash grain and soybean farms was $91,392 in 2004, with 36.1% of this income attributed to farming. ERS says, “Most of the cash income of farm operator households comes from their off-farm wage and salary earnings. Since 1998, the off-farm income sources of farm operator households alone exceeded the average income of all U.S. households.”

If farm income was high in 2005 (good 2004 yields and prices), what did farmers do with that money? Retire debt? Increase Net Worth? USDA’s Economic Research Service says, “On average, nonfarm assets accounted for about 29% of farm household assets in 2003, while borrowing for nonfarm purposes was 44% of farm operator household debt. About 27% of the average farm household's net worth could be attributed to nonfarm sources. Two additional statistics further illustrate the interrelationships between farm and nonfarm components of farm household balance sheets. First, nearly 38% of farm operator households reported debt balances for their farm operations at the end of 2003, while more than 53% had incurred debt for nonfarm purposes. Second, two-thirds reported loan balances on either farm and/or nonfarm debt.”

Finally, let’s look at the overall well being of the typical farm household. In its report ERS says, “For the majority of farm households, income from off-farm work remains the dominant contributor to the economic well-being measure. Farm households specializing in dairy tend to receive about 50% of their composite measure of well being from farming. Those specializing in poultry and other general livestock receive about 50% of their composite measure of well being from off-farm wages and/or salaries. Farm operators 65 years or older rely the least on income from off-farm wages and salaries, and tend to rely the most on income from annuitized marketable wealth. Both trends start in the 55-64 year old age group. Farm households whose operators have attended graduate school had negative income from farming in 2003 and tended to rely on income from off-farm sources and on annuitized marketable wealth as their main sources of income.”

Summary:
American farmers are growing older, not only individually, but on the average. As a few new farmers replace the retiring ones, they are more educated than their predecessor. Farm income for 2005 is at a high level, due to good 2004 yields and higher prices being offered when commodities were sold, however a significant part of that household income is from off-farm employment. That income has allowed some farm debt to be retired, family assets to increase, and for farmers to have better access to health and retirement benefits. On the whole, farm families are depending more heavily on that off-farm income.

Posted by Stu Ellis on 01/04 at 04:15 PM | Permalink

Comments

Those of us who have a program, economic, social, cultural interest may wish to take a close look at the ERS rural hispanic growth. RURAL HISPANICS AT A GLANCE Rural Hispanics at a Glance provides the latest information from the 2000 Census and other Federal data sources about Hispanics living in Nonmetro counties. This six-page brochure highlights growth and geographic dispersion, demographic characteristics, and the most recent indicators of social and economic conditions for this population. It emphasizes rapid Hispanic population growth, particularly in new rural destinations of the Midwest and Southeast, and it illustrates differences in age structure between Hispanics and non-Hispanic Whites. The report also provides data on important demographic, labor market, income, poverty, and social service indicators for nonmetro Hispanics. Using a visually interesting format that incorporates text bullets with charts and maps, it quickly provides information on key indicators of the rural Hispanic population to assist public officials, community organizations, private decision makers and others in their efforts to enhance the economic opportunities and quality of life for this rapidly growing population. Released Friday, December 30, 2005 See http://www.ers.usda.gov/Publications/EIB8/ ********************************

Posted by: Juan Marinez at January 5, 2006 2:02PM

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