Number Of Million Dollar Farms Increasing

USDA in a new report said there is a growing number of farms with gross sales exceeding $1,000,000, with the number growing more rapidly with higher commodity values, according to AgriMarketing. These farms with sales of $1,000,000 and over, accounting for 2%, or around 35,000, of U.S. farms, are classified by USDA as “large” farms and produce half of U.S. farm commodities. Farms under $250,000, which make up 92% of U.S. farms, are classified as “small.”

USDA’s Million Dollar Farms research indicates that the larger farms have a competitive advantage, and the larger the farm, the greater the chance of growth. And surprisingly, there are too many of them to dominate the market for specific commodities.

Of the million dollar farms, 24% are less than five years old, and only 16% are more than 24 years old. They accounted for 48% of the value of U.S. farm production, and contrary to widespread public opinion, only 16% of government payments went to million dollar farms, primarily because of payment limits.

The USDA economists found that million dollar farms specialize less in cash grains, but more in high value crops and hogs. Because of that, an acreage definition for million dollar farms is not a good indicator, primarily because of some extensive cattle ranches skews the numbers. Regarding ownership and rental, 20% to 30% of farms over $250,000 in sales are wholly owned, including million dollar farms, but when the sales exceed $5 million, 42% are full owners. While 92% of all U.S. farms are sole proprietorships, that organization category decreases as sales volume increases. And only 45% of million dollar farms are sole proprietorships, while most are either partnerships or family corporations.

Family farms make up 97% of all farms, and while the million dollar farms include more ownership organizations, 84% are still family operated. The principal operators are about 52 years of age and report their primary occupation as farming. About 30% are college graduates. 66% of million dollar farms have more than one operator, with the average at 2.1 operators per farm. On 30% of the farms, the spouse is that second operator.

Operating profits switch from negative to positive about the point of $175,000 in gross sales rising beyond that point. For million dollar farms, operating profit averages 20% and household income averages about $152,000. Thirty-one percent of million dollar farms rent farm machinery, and the rental rate goes up with the volume of sales. On average, million dollar farms use 36,500 hours of labor, equivalent to 18.2 full time workers, with 72% hired and 13% contracted.

USDA economists say the shift to million dollar farms will continue, but that shift will slow down once their share of the commodities most amenable to large scale production reaches the upper limits.