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Tim Middagh Forum News Service

Farming is still a family business

With a few exceptions, U.S. farms continue to consolidate. Even so, family farms continue to account for most U.S. food production.

Those are among the conclusions of "Three Decades of Consolidation in U.S. Agriculture," a new report from the U.S. Department of Agriculture's Economic Research Service. James MacDonald, an ERS economist and one of the report's authors, discussed it with reporters during an online presentation March 27.

"Agriculture has been consolidating for many years. Farms have been getting bigger since the 1930s," MacDonald said. "But consolidation has gotten more complicated since 1995. There are more large farms, but there are also more very small farms, too."

Among the report's main findings::

• By 2015, 51 percent of farm production had shifted to farms with at least $1 million in sales. Farms of that size accounted for 31 percent of farm production in 1991, adjusted for price changes.

• Bigger farms account for more acres, too. In 2012, 36 percent of all cropland was on farms with at least 2,000 acres of cropland, up from 14 percent in 1987.

• Consolidation in crop production has been consistent, increasing in every five-year period from 1982 to 2012. In contrast, consolidation in livestock "appears to be episodic, with little change over some periods, interspersed with dramatic changes in farm/industry organizations and farm size."

• Consolidation has slowed after 2007, but "financial considerations still favor larger operations, as their profits (rates on return on assets) considerably exceed those for smaller operations."

• Large corporate firms play a "coordination role in U.S. farming through the use of contracts, primarily in hog and poultry production."

• Family farms — "owned and operated by people related to each other by blood or marriage" — still account for 90 percent of farms with at least $1 million in sales in 2015.

MacDonald said that while family farms are getting bigger, family farmers continue to dominate U.S. ag production. He also said he's uncertain why there's a "misperception" in the general public that corporations' role has grown sharply.

Some people attribute farm consolidation to commodity programs and crop insurance, which they say favor larger farms.

But MacDonald said farm consolidation has been so persistent and widespread that commodity programs and crop insurance do not appear to be driving factors. Technology appears to the key reason, he said.

It's unclear whether technology will continue to favor larger farms, or whether smaller farms will begin to gain proportionately greater benefits, MacDonald said.

Not all U.S. ag sectors have seen consolidation.

One exception is pasture and grazing land. Forty-four percent of pasture grazing land was on ranches with at least 10,000 acres in 2012, down from 51 percent in 1987.

MacDonald, asked by Agweek for the reason, said it's probably because some large Western U.S. ranches have sold small amounts of land to retirees and others who run a few cattle or horses on what they buy.

Cow-calf operations are another exception. They've seen little consolidation, the report said.

Cow-calf operators probably have less incentive to adopt new technology than do livestock sectors such as hogs that have experienced major consolidation, MacDonald said when asked by Agweek for the cause.

For example, cattle's gestation period is longer those than of hogs and poultry, which reduces the potential benefit of technology for cow-calf operations, he said.

Better measures

The report was based primarily on the Census of Agriculture, which USDA conducts every five years, and the annual Agricultural Resource Management Survey, which covers U.S. farming operations and their operators.

The two sources provide for better evaluation than widely used measures such as mean and median farm size, which don't capture the shift of acreage and production to bigger farms, the report said.

Mean is the result of adding up a series of numbers and then dividing by the number of numbers. For instance, the mean of 1, 3 and 14 is 6 (18 divided by 3).

Median is the the middle value in a series of numbers. The mean of 1,3 and 14 is 3.

In this hypothetical case, neither 6 nor 3 provides a particularly good statistical measure of the three numbers.

The report said it used "detailed farm-level" data to "develop more informative measures" of farm consolidation.

To read the complete report, go to www.ers.usda.gov/publications/pub-details/?pubid=88056.