How are our family farms doing? The USDA's annual survey reports good news:
As in previous years, the median total income of all U.S. family farm households ($95,418) was greater in 2022 than the median income of all U.S. households ($74,580). The median total household income for all family farms in 2022 increased from $92,239 in 2021.
Not bad! But now take a look at this table, which shows farm income by race:
The median family farmer, no matter their race, reports negative farm income. They make money almost exclusively from non-farm work.
Now, this varies substantially by farm size. Farm income is negative for small farms and about $45,000 for medium size farms. That's still not much. Only at midsize farms does income reach $130,000, and it goes up from there.
Still, for the majority of family farmers, the actual farm itself is at best a break-even operation. I wonder why they bother?
I grew up in a rural area. I now live in the suburbs/city. I like both kinds of life, even though they are quite different.
Making money is net really the point of the family farm, or most family farms. The point is that it's kind of fun to have horses, or chickens, or ducks, or sheep.
Even when I was growing up, I knew a lot of people who live on "farms", but I only knew one family who actually made their living that way. It was a dairy farm, and they had quite the operation, and I'm sure they made decent money at it.
All the other farms were not meant to be moneymakers, they were meant to be a hobby, a comfort, a connection with the "old days". The land I grew up on might be called a farm, we had a couple horses, chickens, ducks, a pond with some goldfish in it, and woods. It was on the land my great-grandfather homesteaded on in 1872 or so. So that's my connection with the "old days".
I like living in the city now, and I enjoy the company, but every once in a while, I get a "wow, city folks don't get it" vibe. This is one of those times.
My favorite uncle, now deceased, lived on the family farm that his father had carved out of the northwoods. His day job was at the paper factory; whenever hd'd saved enough, he'd farm a little, until the money was gone. Never quit that day job, though.
trump also reports losing money, so reporting a loss to the tax man doesn't always mean an actual loss
also, net worths are all over a million dollars which likely includes assets like land, equipment, etc; lots of family farms probably see ownership as an investment play on the underlying assets
i knew people who were retired or worked seasonal/unstable jobs who also ran small family farms during periods of unemployment
plus there's the sentimentality of keeping great grandpappy's farm in the family
I'd argue also that whether the farm makes money or not is not always the point, as well as the fact that if you consume what you produce (and would otherwise have to purchase it) that's another nice net financial benefit. And I'm sure psychological ones - the feeling of making something that you can touch with your hands, that other people also need, is pretty powerful.
But yeah, sure the farms "lose money" - but I also wonder how much of it is actual loss vs. business/tax loss.
There's also the part where people who own farms are generally above the median income (64% of them) - so clearly they make plenty of money as a whole. I note that there's are numbers in the table for off-farm income and how substantial it is, but I want to know what is the typical source of that off-farm income? Is it also farming-related, or is it typically entirely unrelated?
When the small farmer won the lottery he was asked what he would do with his winnings: " I guess I'll just keep farming until the money runs out".
One of the best ways of making a small fortune at farming is to start with a large fortune.
There have always been too many farmers, at least since machines replaced horses. Most people in the 19th century depended on farming but now it is only a small percentage. Farming is still getting more efficient and the number of farmer-owners required is still reducing. Why do so many still persist? Nobody likes to give up a way of life and farmers are told they are (literally?) the salt of the earth.
The real mystery is why farming has so much political power when there are so few of them. Why do farmers get so much in subsidies? Although most of it goes to big farmers.
Another mystery would be why farmers are mostly Republican when it was Democrats who mostly set up the subsidies in the New Deal and later. The food stamp or SNAP program is a Department of Agriculture program which basically buys food from farmers and gives it to poor people, but Republicans would kill it if they could. The Freedom to Farm Act which killed many of the subsidies for small farmers was mostly due to Republicans.
SNAP is now mostly a direct-payment program that allows people to purchase their own groceries. A different program (TEFAP) buys up surplus commodities and distributes them to states for food bank programs and the like. Ironically most of what TEFAP is buying these days is excess supply resulting from Trump's anti-Chinese tarrifs. They sure love Trump, though!
To your point, however, farmers big and small continually rage at several things that Democrats support that generally outweigh the fact that Republican policies tend to screw them more: They hate environmental regulations on everything from fertilizers and pesticide application to animal waste disposal and water management. Compliance with those things is often complicated and expensive. They also hate progressive labor laws that have DOL and OSHA people constantly breathing down their necks about paying their migrant workers and making sure people's hands don't get chopped off in a combine and stuff. Finally, Democrats are all in favor of those queers and hoity-toity non-church-going city folk they think "look down on them," which isn't at all true, but it's what Fox tells them.
> Another mystery would be why farmers are mostly Republican when it was Democrats who mostly set up the subsidies in the New Deal and later. The food stamp or SNAP program is a Department of Agriculture program which basically buys food from farmers and gives it to poor people, but Republicans would kill it if they could. The Freedom to Farm Act which killed many of the subsidies for small farmers was mostly due to Republicans.
Class interest trumps economic self-interest, Yet Again. Farmers are also small proprietors, that is to say petit bourgeoisie, that is to say, conservative and on the side of the oligarchs. If that pesky gubmint would just go off and get itself drowned in a bathtub, most farms would do just fine, by their reasoning. Painting with a broad brush, but that's the gist of it.
How many non-farmers could actually grow their own food? And survive.
Singapore seems constantly on the verge of starvation.
Somebody somewhere still has to grow the food.
They have power because they’re just significant enough in numbers to sway electoral politics in small population states that have significant over representation in Congress via the US Senate.
No mystery. Republicans represent rural areas which give farm programs very high priority; Democrats represent urban areas which give food stamps very high priority. So it's a relatively simple political bargain to reach a bipartisan majority in both houses, or at least it has been in the past.
I suspect that anyone in farming with any savy at all knows how to manipulate their books to show a loss, while maintaining their lifestyle and (hopefully) building capital wealth.
Farming is an AMAZING tax break. I have lived in the rural midwest most of my life and a lot of the small "farms" are upper-middle class hobbyists who call it a "business" solely to get tax breaks. Who wouldn't want a tax break for their hobby pony and bit of pasture? The only mystery here is to be found in our mysterious tax code. Get rid of the tax breaks and suddenly the majority of "farmers" would stop bothering to call it a business. Donald Trump owns hundreds of money-losing businesses for tax evasion and I wouldn't be surprised if a few of them are loss-making "farms".
The best chickens I have ever eaten were raised on a doctor's "farm". She got a tax break for producing agricultural products over a certain value on her parcel of land. I got great chicken. We called it "tax dodge" chicken. She sold the farm a while back, and her chickens have yet to be equaled.
I've known a few people who worked factory jobs but farmed a few acres just because they liked it. Doubtful they made any money at it.
This table is possibly an artifact of how the data was acquired. If you only looked at people whose sole income was farming the results might be quite different.
"I wonder why they bother?"
You are only examining the recurring cash flow. A second portion of value creation, is gain on sale. While not universally true, when located near urban centers, farm land can sometimes be converted to a higher use.
We know a family that immigrated to the US from the Philippines in 1965. They had family in the area, so they purchased 120 acres of agricultural land in Sunnyvale, CA. While much of the former farm land has now been sold, they retain some land with Apple as their tenant. Further, they will admit it was dumb luck, versus some wise strategy, that had them buying land in the future silicon valley.
For some businesses there are hidden assets. We know a second family that was in the driven in theater business. Now they are just in the real estate business...
They also bother because it's in their blood. Those farms have been in their families for decades or longer. They grew up with farming and their kids grew up with farming. Yes, there are more lucrative ways to earn a living, but doing what you love matters too.
Art Eclectic - agreed 100%
That's the reason the Portland metro area has an urban growth boundary, though it keeps getting expanded, rendering it mostly useless. Where there were farms, now there are new subdivisions. The only area that is strictly enforced is Sauvie Island. You can't convert any of that land to a different use; it's all farm and homes with farms.
That happened with a lot of Silicon Valley farms. We visited Tudal vineyards in Napa Valley. The guy running it had been a GI in World War II. When he returned, he was going to go to college under the GI BIll, but a friend told him that they were selling war surplus trucks for $20 and he could raise some college money hauling vegetables to market. He bought a truck. He built up his produce business and eventually bought a farm south of San Francisco. The land was good. It was profitable. He sold out when he retired and bought a place up in Napa Valley. By now, he had farming in his blood, and realized that his retirement home was on good land, so he planted grapes. He made really good wine. We still have a bottle or two.
I was briefly acquainted with a retired restaurateur who purchased a house with a few acres of land which he planted with walnut trees. Contractors do all the care and harvesting. He said he knew he would loose money on the trees but the property tax and income tax breaks for an agricultural operation were many times the loss.
Some of them are wealthy hobbyists who keep the farm either because they inherited it, or they like having it as a more secluded area to spend time away from work.
Just as often, it's a tax shelter - a lot of states and the federal government have favorable property tax laws towards farms above a certain size.
You know, several of the folks I knew growing up who lived on farms did inherit them, but they were hardly wealthy. Mostly middle class, a few I would describe as poor. The one prosperous farmer was probably still only upper middle. Not at all a 'rich guy". Kind of equivalent to a guy who had a hardware store or something.
Since we're on the topic of agriculture and money, there was an interesting story the other day in (iirc) the Deseret News (aka the Mormon Times) about the huge (Chinese-owned) Smithfield Foods hanging a bunch of hog farmers out to dry in rural Utah. Pork prices have been falling globally, so after encouraging the development of these large pork operations in rural Utah over the past several years and promising to purchase the product, there's too much pork and they're now backing out and leaving these folks holding the bag, as it were.
Now, perhaps some of us don't have much sympathy for these rather inhumane CAFE operations like these, but the people running them were, more or less, family farmers who placed themselves at the mercy of this gargantuan multinational meat company and got screwed. If there's any one thing a Democratic administration could do to get back on the side of small farmers and rural America, it would be to anti-Trust the shit out of these huge ag companies. Break them up, diversify the marketplace so that one company's decision can't decimate an entire sector, or set prices so low as to keep the farmers in debt and locked into a kind of neo-sharecropping system forever.
On the other hand, paying farmers more would also mean asking consumers to pay higher food prices, and as recent polls have shown, Americans clearly prefer a Nazi dictatorship to paying more than $5/lb. for bacon.
I really like the way you are thinking here. Those are good ideas. I have no idea if they are workable, but I like them.
Interesting idea. Trading the votes of the cheap bacon appreciation society for that of rural farmers. I like it. I like bacon, too. But I don't eat so much of it that price really plays into the equation.
Most farmers in the US are beholden to the processors. It's all on their terms. They sell you the raw materials. They set the prices. They keep you hungry whether you are raising chickens, pigs, cattle or just about anything else. It's not clear that busting the trusts would raise food prices. The only people making a profit are the processors, and they do very well. If they had to compete, they'd have to be more efficient and watch their pricing.
In New Jersey, real estate used as a farm is essentially untaxed. Also, there's a program where people sell development rights to a local government, and afterwards are legally required to maintain a working farm.
My favorite reason for turning a few acres into a Christmsa tree growing farm: Kids who live and "work" on a "family farm" can get driving licenses at 15, everyone else here has to wait until 17.
The main problem with selling development rights is that you then can't mortgage the land for seed money or improving the farm.
I went to look at that report, curious about what was meant by "middle sized" farms that start being profitable. Which turns out to be about level of Gross Cash Farm Income and not acreage, which I suppose I should have guessed.
The middle- and large-size "family" farms together are responsible for producing about 70% of all agricultural product by value. "Nonfamily" farms make up only a tiny fraction of farms, less than 3% of the farms, 7% of the acres, and about 10% of all value. This is a bit of a surprise to me: I guess it must mean that the industrial farming operations I've seen driving around where my grandparents used to live must be almost all "family farms" that take up six or 8 or 10 times the acres that grandpa's did.
I'm with others on the thread that suggest a loss for tax purposes might not mean an actual negative cash flow, though it does suggest that almost 20% of US ag production is very precariously still in business.
Why bother?
I am sure there are a host of reasons including lifestyle, distant neighbors, family history, and so on. It can be hard work, sometimes frustrating but also rewarding. Tax structures at local, state and federal levels can be generous - and as many have noted - abused. I used to cut hay for income and one client (a well to-do dentist), wanted me submit invoices much higher than actual to assist with his taxes.
My parents bought some property in Tennessee which they operated as a tree farm, but they bought it because they liked the property, not because they thought it would be particularly profitable. For them, the relevant comparison was between operating a tree farm vs. buying property in Tennessee and not deriving any revenue from it.
The chart provided by Kevin Drum shows that median farm income was negative in 2022, but more information would be required to show that farmers are losing money. My parents' tree farm would show a profit in years when they hired a logger to cut timber. More commonly the farm would have zero income and nonzero expenses, for a net loss. If you look at a bunch of tree farms that are profitable over the long term, the median annual income will be negative if the majority of farms aren't cutting trees that year.
The farm itself is valuable, some people like being farmers, tax breaks are good, and they can subsidize hobbies/lifestyle.
If you already own the farm, and you like farming, why not do it? It also makes you part of the local culture, and gives you a connection to your neighbors.
Wind turbines! In the upper midwest farmers are making bank by letting utilities put wind turbines on their land. They can still farm that land - the actual footprint of the turbine towers is tiny - and the income they generate is steady and significant. My cousin, who farms in NW Iowa, said he has had a couple recent years where his largest single source of income was the turbines. Technically, that's not "farm income" so it wouldn't show on Kevin's chart.
i've seen the same thing with gas/oil leases
Farming used to require people and farming towns used to have people in them. Not so much now. However the farm states still have 2 senators and are over represented by way of population in the Electoral College too. I not strongly against that--I mean they make the food for the populous states. But that gives "Big Ag", not so much the "family farmer" way too much power. I don't know who the "family farmer" is today and how that compares to the 1950's.
I think it's largely a selection effect. Circa 1800 more than 90% of the population were farmers; today less than 2% are. Everybody who was even slightly ambivalent about farming moved into other occupations long ago. The only people still doing it are the true diehards who can't imagine themselves doing anything else, who stick it out even when it doesn't make sense.
I live in a rural part of northern New York. We are surrounded by dairy farms. I don't know of any farm families around here who make their living exclusively from farming -- one or more family members work other jobs to supplement their income.
(Also, multiple posts have commented on tax advantages that come with farming. I'm very confident that that is not the issue here.)
Why else would Devin Nunes' family have a farm, if not for the tax breaks?
Why they bother?
To keep the land and to keep it in an agricultural state. Not just for themselves, for the family. Forever and ever. If their kids prefer money to the land, they'll keep working it after their retirement rather than sell. If the bank forces them to sell, they'll hang on to whatever they can.
Still, for the majority of family farmers, the actual farm itself is at best a break-even operation. I wonder why they bother?
If it breaks even—if farm revenue at least covers costs—it's not surprising that many farmers in this situation would like to refrain from selling: 1) many people enjoy living in a rural area, and, 2) many rural landholdings are appreciating in value over the long term, so, there's no great pressure to sell. This is especially true if the farm isn't too far from a major urban center. Nearly all the country's large metros—and certainly all the priciest blue ones—abutt rural lands that are at most 90 minutes away by car.
"Still, for the majority of family farmers, the actual farm itself is at best a break-even operation. I wonder why they bother?"
This is surely Learning Moment of the sort that every American frequently needs? The lesson being OTHER PEOPLE ARE NOT LIKE ME!
I (who lived on a farm for a few years in my childhood) hate everything to do with the rural life. BUT it's clear that the America "family farmer" has options and money, and has made the specific choice to live the farmer life. Good for them.
Like other choices I would not make (owning a boat! living in Alaska!) I think we need a whole lot more acceptance than other people want different things out of life, and a whole lot less insistence that there is only one life worth living.
Some portion of expenses of maintaining the property get transferred from personal to business expenses when you own a farm. That doesn't just have tax implications. It means that the zero points are different. Profiting $20K farming and having paid $5K of your property expenses is the equivalent of $25K from other sources. It's still a terrible business to try to make a living at though.