USDA says net cash farm income is expected to decline by $18 billion or nearly 22 percent to $65 billion in 2006 because of higher crop stocks, lower crop prices, and a modest decline in livestock and livestock product receipts compared to 2005.

 

This is average for the period of 1995 to 2005. With higher stocks to work off, reduced farm-gate prices, and lower livestock and product receipts, USDA is forecasting that 2006 farm marketing will decline about $7 billion from the $239 billion achieved in 2005. Two-thirds of the decline will occur in the row crop sector. Farm household income is also expected to decline for the first time in seven years. However, $83,000 is still 20 percent higher than 2003 and well above the average of all U.S. households.

 

 

The latest Purdue study, which was conducted with USDA's Economic Research Service shows that growers can be classified according to income source in three main groups.

 

The “ruralpolitan” group represents 47 percent of all U.S. farm households. A typical double-income ruralpolitan earns an income of about $85,000 a year but posts close to a $3,000 loss on the farm. The single-income ruralpolitan earns about $67,000 a year and posts close to $2,000 loss on the farm.

Those who own “commercial and traditional farms” represent 15 percent of U.S. farm households. Commercial farm households earn more than $70,000 a year, with nearly $50,000 from farming. Traditional farm households earn about $47,000, with $30,000 earned from the farm.

 

Households in the third group are defined as a farm operator with a spouse working off the farm, or a senior who is near retirement but is still active on the farm. This group makes up 38 percent of U.S. farm households. The farm operator and spouse working off the farm earn a combined household income of about $70,000 with just $20,000 from the farm. Growers in the active senior group earn only about $13,000 a year with less than $5,000 from the farm.

 

Although traditional commercial farmers think they may control the farm market, the ruralpolitan group can't be dismissed. This group has plenty of disposable income to spend on farming and doesn't require a profit. Expect to see more products, retail outlets, services and even magazines change to capture this growing segment that has the potential to rule the market.

 

 

Why can’t farms be the size they were in the early 1970’s, and why can’t family farms be successful at that size? Here’s why:

 

In 1974, the average farm size in South Central Minnesota comprised of 261 acres of cropland, 25 dairy cows, and 23 sows in a farrow-to-finish swine enterprise. This farm generated an estimated $23,000 of net farm income per year. The average amount spent by farm families on family living needs (all non-farm expenses) in 2004 was slightly over $56,000 per year. So what size of farm do you need today to cover family living expenses (assumes no off-farm income):

 

Commodity	Average Return Per Acre/Head	Acres/Head Required
Corn	$45.73	1,266
Soybeans	$38.30	1,464
Corn/Soybean Rotation	$41.72	1,344
Farrow-To-Finish Hogs	$11.63	4,821
Finish Feeder Pigs	$8.90	6,300
Contract Finished Hogs	$4.13	13,577
Dairy Cows	$461.81	121
Beef Finishing	$85.60	655
Beef Cow/Calf	$61.90	121

 

 

Rural High-speed Internet Service Expands

 

While rural America continues to trail the rest of the nation in high-speed internet service connections, it has shown fast growth during the past two years. According to a Pew Institute study, 24 percent of rural Americans have a high-speed internet service connection compared to 39 percent of urban and suburban dwellers.

 

While the gap is still large, it is important to note that only 9 percent of rural Americans had a high-speed internet connection in 2003. However, this does not mean rural Americans are not connected. Twenty-nine percent indicated that they have a dial-up internet service connection for a total of 53 percent with internet access, which compares to 60 percent of urban and suburban residents. A recent USDA study conducted in 2005 stated that more than 50 percent of rural Americas have a computer with internet access.

 

One reason for the gap in broadband access is availability. The cost to wire rural America for high-speed access is expensive. However, there are several wireless (satellite) services available in rural America compared to two years ago. Another possibility is the higher average age of rural Americans compared to their urban and suburban counterparts.

 

 

The Economic Research Service recently released information from a study on farm structure. The study indicates that in 2003, 98 percent of U.S. farms where family farms,  defined as operations organized as proprietorships, partnerships, or family corporations that do not have hired managers.

 

• Large family farms with annual sales over $1 million, account for only 9 percent of total farms in 2003, but produced 73 percent of all production by value.
• Small family farms accounted for 91 percent of the farms in the United States in 2003. They also held approximately 71 percent of all farm assets, including 70 percent of the land owned by farms.
• Small farms accounted for roughly 82 percent of the land enrolled by farmers in the Conservation Reserve and Wetlands Reserve Programs.
• The share of total agricultural production under contract grew only 5 percentage points, from 34 percent to 39 percent, between 1994 and 2003. However, during the same time period, the share of tobacco production covered by contracts increased from 1 percent to 55 percent, while the contracting share of hogs increased from 31 percent to 57 percent.
• Small family farms were defined as those with less than $250,000 in sales, large family farms had $250,000 to $499,000 in sales, and very-large family farms had more than $500,000 in sales.

 

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