Photo Credit: Martin Fisch via Compfight
Today the American public seems to have elevated curiosity about farming, and that’s a good thing. They find some accurate information in the media but, unfortunately, they also hear a lot of misinformation.
As someone who has spent most of his life on a farm or working for farmers, I am troubled that misinformation often creates a negative image of farmers. A lot of this misinformation comes from folks who don’t know better, but a fair amount also comes from those with an “agenda.”
Every five years, the U.S. government conducts a Census of Agriculture. The recently released 2012 Census debunks many of these media myths. This report references census results for Farm Credit East’s seven-state region: New York, New Jersey, Maine, New Hampshire, Massachusetts, Connecticut and Rhode Island.
1. The family farm is a dying tradition and agriculture is dominated by “corporate farmers.”
Wrong. 96 percent of farms have “50 percent or more ownership interest held by an operator and/or persons related by blood, marriage or adoption.” Many larger family farms are organized as partnerships, limited liability companies and corporations, a good business practice to gradually transfer management and ownership to the next generation.
2. Farming is dominated by “factory farms.”
Wrong. Virtually all farms meet the Small Business Administration definition of a small business ($9 million or less of gross sales). According to the census, 99.7 percent of Northeast farms have less than $5 million in sales and many of the remaining 0.3 percent are between $5 and $9 million. Full-time family farms have continually grown larger over the years, driven by the need to earn a standard of living similar to their nonfarm neighbors.
3. Agriculture would be better if commercial farms had not grown so large.
Wrong. The growth trend in full-time farms is driven largely by two dynamics:
1. Farmers aspire to the same standard of living as we in the nonfarm sector, including nice homes, college educations, family trips and a comfortable retirement.
2. Farming is almost always a low-margin business that requires tremendous investment in land, equipment and livestock to operate profitably. With plentiful production as the general state of American agriculture, there is strong market pressure to become larger in order to maintain a decent standard of living.
4. Farmers depend on government payments to earn a living.
Wrong. In 2012, only about 19 percent of Northeast farmers received payments from the federal government at an average amount of just over $8,100. Most farmers are not eligible for direct commodity payments and many payments reimburse beneficial conservation and environmental investments.
5. Family farming involves one family operating one farm.
Wrong. This is the “Little House on the Prairie” myth! Many full-time farms involve multiple families and generations farming together within one business unit. For commercial-sized family farming operations of $500,000 gross sales or more, multiple households in the same operation is more the rule than the exception. The trend to multiple families farming together typically results in improved efficiency as various family members specialize in management roles and provide vital backup. Multigenerational businesses are the best way to transfer farming knowledge, responsibility and eventually ownership of farming assets from older to younger generations. These family farmers also enjoy substantial lifestyle benefits, such as attending their kids’ school events and spending an occasional weekend away from the farm.
Number of Households Sharing Net Farm Income of Operation
# # of Farms % of Farms
1, 1,476 ————- 48.0%
2, 887————– 28.8%
3, 432 ————- 14.0%
4, 141 ————- 4.6%
5 or more, 140 ————- 4.6%
TOTAL FARMS 3,076 ———— 100.0%
6. Most farmers are old.
Wrong. You may have read that the average farmer is 57.6 years old and we won’t have enough farmers to operate our nation’s farms in just a few more years. You would think most of our industry is just a few steps away from the retirement home! This is just not so. The fine print in the census indicates that 57.6 is the average age of the “principal operator.” The actual census says it is the age of the “principal operator or senior operator.” “Average age of principal operator” is a fairly meaningless statistic for a farm operated by multiple families and generations. Since commercial farms account for about 70 percent of Northeast farm production and most have multiple generations, there is no imminent danger of “running out” of farmers in the foreseeable future. In multigenerational farms, young family members often return home as employees from college or military and, over time, earn their way into farm management and ownership. Most farm transition consultants recommend a gradual process for growing into the business that starts by transferring ownership when the next generation is in their 30s. (This is similar to nonfarm businesses where recent college graduates typically start in entry-level positions and grow into middle management during their 30s.) A healthy number of younger farmers work side-by-side dad and mom, and increasingly with grandpa on commercial farm operations. As employees, their ages are not captured in census statistics, again substantially biasing upward the oft-quoted average principal operator age. However, the census reported that about 21,671 Northeast farmers, or some 30 percent, are over 65. Some “over 65s” are highly valued members of multigenerational family farming operations. The majority is retired or semi-retired, and choose to continue living on the farm and farming on a limited basis because they enjoy it. One thousand dollars of gross sales annually ensures that the census counts them as farmers. As life spans increase, this expanding demographic significantly biases “average operator age.”
7. Too many senior farmers.
Wrong. Some writers seem to view this substantial group of older farmers as a problem. Senior farmers should be regarded as having earned the right to retire as they see fit. They are a valued component of our farming community, often a major investor in their own family’s farming operation and an important source of rented land to other farmers. While staying involved in a scaled-back, post-retirement way may not be common in the nonfarm world, it is embedded in our farm culture. When I read somber discussions about sources of limited capital to agriculture, I find it remarkable that most fail to mention the important role of 65+ farmers in providing the necessary equity capital to agriculture. With a lifetime of accumulated farming equity, this group is critical to financing their family’s middle and younger generations for success. Pundits often overlook the senior generation’s valued contributions. For example, most commercial family business transition plans involve the younger generation purchasing equity over time, providing the senior generation a retirement income while gradually transferring ownership. Many plans gift some farm assets from the senior to the next generation(s), consistent with federal and state tax provisions. Finally, in many multifamily farm businesses, upon the passing of the older generation, a significant amount of the estate may pass to the next generation through inheritance.
8. No one gets started in agriculture anymore.
Wrong. The census reports a significant rate of entry of new farmers into the industry. any Farm # of Farms % of Farms
2 years or less, 1,763 ————– 2.4%
3 or 4 years, 3,229 ————– 4.5%
5 to 9 years, 9,090 ————– 12.6%
10 years or more, 58,065 ————– 80.5%
TOTAL FARMS 72,147 ————- 100.0%
With nearly one fifth (19.5%) of today’s farmers having entered the industry within the past nine years and an average of 1,248 new farmers per year in the most recent four years, this speaks to a continuing healthy influx of new farmers. This number substantially underrepresents the reality of “new talent” entering the industry since it includes only those who identified themselves as principal operators. Younger family employees in multigenerational commercial farms would add substantially to this number. (See Myth 5.)
9. Farming is a man’s world with few women farmers.
Wrong. The census reports 16,348 female principal operators, or 23 percent of the total. The reality is that this statistic may be understated since spouses are often equal business partners, sharing substantial management responsibilities and ownership. While not in the census data, the farm population mirrors evolving gender workplace roles to the nonfarm population. For Baby Boomers, dual careers are common in the farm population. In addition to couples who work together within a business, often one spouse works off-farm for regular paychecks and benefits. With Gen X and Millennials, a growing number of women farm while their spouses work off-farm.
10. Operating a small farm is a wonderful way to earn an easy living.
Wrong. Most small farmers are motivated by reasons other than earning a living from farming, such as lifestyle, passion for new ways of farming, supplementing nonfarm livelihoods and retirement. Also, young farmers often start small intending to grow into a larger operation that supports a full-time standard of living. The U.S. Department of Agriculture defines a small farm as having $250,000 gross sales or less. The census indicates that 35 percent of small farms operated in the black while 65 percent lost money in 2012. Put another way, the average small farm operated at a loss of $4,035 in 2012. This means that the operator’s standard of living, repayment of debt principal and/or investment in additional land or equipment came from nonfarm sources or healthy savings accounts.
11. Farmers no longer own much of the land.
Wrong. Northeast farmers own about 74 percent of land on which they farm and rent the other 26 percent, of which about 4 percent is rented from other farmers and 22 percent from nonfarmers. Farmers control the majority of their land base. Land rented from nonfarm owners is critical, because it enables many to leverage tractors and field equipment for additional production nearby their own farmland. Renting farmland helps young and beginning farmers get started until they have the experience, savings and credit history to qualify for mortgage financing.
Conclusion
This is a great time in Northeast agriculture, full of optimism and promise for the future. While farming has never been an easy business, don’t fall for negative myths that make good headlines and handwringing. At Farm Credit East, we are positive about the future of Northeast agriculture and the thousands of successful family farm businesses that we serve. We are as proud to serve young and beginning farmers who keep the future of Northeast farming bright.
Farm Credit East
Knowledge Exchange Program
Prepared by:
Jim Putnam 860.741.4380
Robert Smith 518.296.8188
Chris Laughton 860.741.4380
More information can be found at FarmCreditEast.com
