How do you see the future of family farms?
|Can our current farm community structure continue as a viable business model?|
The average size of a U.S. crop farm has changed little during the past three decades. However, this seeming stability masks important structural changes in the farm sector: there are growing numbers of very small and very large farms and declining numbers of mid-sized farms. In 2011, 1.68 million U.S. farms had an average size of 234 acres, according to our USDA. However, 80% of farms were smaller than this average with just 45 acres. On the other hand, most cropland was on much larger farms—those with 1,000 acres or more. How can this be?
Cropland consolidation has occurred across the U.S. with most crops shifting to larger farms. As examples; the midpoint enterprise size for corn rose from 200 acres to 600 acres, from 450 to 1,090 acres for cotton, from 295 to 700 acres for rice, from 243 to 490 acres for soybeans, and from 404 to 910 acres for wheat. In fact, cropland shifted to larger operations in almost all commodities. Based on census of agriculture data the calculated midpoint acreages for 39 crops accounting for berries, fruits, tree nuts, and vegetables also experienced an average increase over 107%.
The evidence is consistent. Cropland shifted to larger farms in most States and for most crops. The increases were persistent over time, and they were substantial.
Among the many factors contributing to cropland consolidation, two have had a particular effect: changes in technology and changes in farm organization. Farmers who want to make a living from farming, and who can operate a larger crop operation, have a strong incentive to expand because larger operations, on average, show better financial performance.
In recent decades, farm equipment has gotten larger and faster, and guidance systems have become more precise and reliable. With available equipment having higher effective speeds, larger capacities, and the ability to cover more of a field with each trip across, farmers can now cover more acreage in a given amount of time than ever before.
Changes in farm organization have also affected consolidation. As late as 1960, most U.S. farms raised at least some cattle, poultry, and swine, and almost all farms raised corn to feed this livestock. By 2011, less than 10% of farms had any swine, poultry, or dairy cattle. As a result, farmers without a livestock enterprise have more time available to devote to crop production, and operate a larger crop enterprise.
Farmers have also pursued organizational changes that limit some of the financial risks faced by larger and more specialized operations. They now rely more on forward contracts to manage input and product price risks, and they rely more on leased equipment and custom service providers to limit the risks associated with major purchases of fixed capital equipment.
In 2011, 96% of U.S. farms with cropland were family farms. Few U.S. industries are as dominated by family businesses as agriculture. To date, family farms continue to dominate U.S. agriculture. If continued innovations enable large, complex operations to overcome the information-gathering, monitoring, and decision-making advantages still clearly held by family farms, then they may be able to make wider use of their ability to finance large-scale operations.
Information for this article was adapted from: Farm Size and the Organization of U.S. Crop Farming, by James MacDonald, Penni Korb, and Robert Hoppe, USDA, Economic Research Service, August 2013
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