Million Dollar Farms Surpass 35,000
January 26, 2009 Where does your farm rank in gross sales?
If you are under $250,000, you are part of the 92% of farms classified as “small.” But those with sales of $1,000,000 and over are the 2%, which make up USDA’s “large” farms and produce half of US farm commodities. There are over 35,000 “million dollar” farms, and more are entering that category every year.
USDA’s Million Dollar Farms research indicates they have a competitive advantage and the larger the farm the greater the chance of growth, but to a point. And surprisingly, there are too many of them to dominate the market for specific commodities.
With recent commodity prices, some farm may surpass the $1,000,000 sales category, and not be all that big, based on 2005 prices: 170 acres of lettuce, 125 acres of tomatoes, 120 acres of celery, 35 acres of strawberries
Of the million dollar farms, 24% are less than 5 years old, and only 16% are more than 24 years old. They accounted for 48% of the value of US 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, 20-30% 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 US 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.
31% 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. There are too many million dollar farms currently to dominate production of an individual commodity. Most operations are family farms, organized either as partnerships or family corporations.
Source: Stu Ellis, Univ. of Illinois