Magazine article Amber Waves

The Revised ERS Farm Typology: Classifying U.S. Farms to Reflect Today's Agriculture

Magazine article Amber Waves

The Revised ERS Farm Typology: Classifying U.S. Farms to Reflect Today's Agriculture

Article excerpt

The USDA definition of a farm covers a broad range of places--from farms with no sales to multimillion dollar enterprises--and statistics portraying the characteristics of the "average farm" are not representative of most farms. ERS originally developed its farm typology in 1998 to group individual farms into more homogeneous categories for which average characteristics might be more meaningful.

Since the release of the farm typology nearly 15 years ago, the U.S. agricultural sector has changed in a number of ways. ERS recently updated the typology to reflect three important trends: commodity price increases, a shift in production to larger farms, and the rapid growth of the use of production contracts among livestock producers (see box, "Revised ERS Farm Typology").

Commodity Price Increases

Farm commodity prices increased 41 percent between 1995-the year of the data used to establish the original typology-and 2010. Inflation-driven increases in farm size (as measured by annual sales) do not reflect changes in physical production, and if they are matched by price increases in farm inputs, they may not reflect any real improvement in the farm operator's standard of living. To compensate for these commodity price increases, ERS increased the original $250,000 small-farm cutoff in the typology to $350,000. The new $350,000 cutoff represents the same physical production generating $250,000 of sales in 1995 but valued using 2010 prices.

The previous and revised typologies each classify small farms into four groups: retirement, off-farm occupation (previously referred to as residential/lifestyle), and farming-occupation low- and moderate-sales. In the revised typology, the threshold between small farms and larger farms was raised as noted above, and the cutoff between low- and moderate-sales farming-occupation farms was raised from $100,000 to $150,000, also to reflect commodity price increases.

Upward Shift in Production

The previous version of the typology included large farms, with sales between $250,000 and $499,999, and very large family farms, with sales of $500,000 or more. However, farm production is shifting to much larger farms. In response to the shift in the scale of production, ERS now uses a midsize category for family farms with sales between $350,000 and $999,999 and two groups for larger family farms: large (sales of $1,000,000 to $4,999,999) and very large (sales of $5,000,000 or more). The definition of nonfamily farms did not change in the updated typology.

Using GCFI Reflects Production Contracts

The original typology measured farm size by gross farm sales; the revised typology uses gross cash farm income (GCFI) to better reflect revenues received by the farm business that it can spend as necessary. …

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