Agricultural Economy

(Selected research findings from FY17)

After 3 consecutive years of decline, farm sector profits are forecast to be relatively stable in 2017.

ERS provides authoritative information on the financial health of the farm sector, including the performance of farm businesses and well-being of farm households. In August 2017, ERS forecast that net farm income, a broader measure of profits, to increase $1.7 billion (2.7 percent) from 2016 to $63.2 billion in 2017 and net cash farm income to increase $3.7 billion (3.9 percent) to $96.9 billion. The median income of farm operator households is expected to rise 1.7 percent in 2017. Published three times a year, these core statistical indicators provide guidance to policy makers, lenders, commodity organizations, farmers, and others interested in the financial status of the farm economy. ERS’s farm income statistics also inform the computation of agriculture’s contribution to the Gross Domestic Product (GDP) for the U.S. economy in the U.S. Bureau of Economic Analysis (BEA) statistics. 

Large commercial farm households experience far greater income variability over time than comparable nonfarm households.

Farm income is highly variable, and this variability can affect household welfare, agricultural production, and environmental quality. ERS researchers used 18 years of the USDA’s Agricultural Resource Management Survey (ARMS) data to provide new information about the extent of farm household income variability, focusing on larger scale commercial farms (those having at least $350,000 in gross cash farm income) that produce most U.S. agricultural output. For these commercial farm households, the median change in total income between years is about eight times larger than for nonfarm households. Statistical analysis also reveals crop farms have more volatile household income than livestock farms on average, and that all categories of farm program payments (direct, counter-cyclical, conservation, crop insurance, and other) reduce household income volatility. The study was highlighted in a presentation at the USDA’s Agricultural Outlook Forum; a webinar for the Council on Food, Agricultural and Resource Economics; and has been cited by numerous media sources including Farm Policy News, AGFAX, and The Progressive Farmer.

USDA’s Direct Farm Operating Microloan program provided better targeting and drew a larger number of new borrowers compared with traditional loan programs during 2013-2015.

The Farm Service Agency’s (FSA) Direct Farm Operating Microloan program, launched in January 2013, aims to provide credit to small farms, beginning farmers/ranchers, veterans, and farmers from historically socially disadvantaged groups (women and minorities). These loans are designed to be more convenient and accessible to nontraditional producers, with a shortened and streamlined application and relaxed criteria for managerial experience, production history, and collateral. ERS found that a larger share of Microloans (compared with traditional micro-sized Direct Operating Loans) went to the groups that are targeted by the program. Also, Microloans attracted a larger number and higher share of borrowers who are new to FSA direct loans. The report’s findings have been cited in several media outlets, and led to briefings for senior policy officials and the USDA New and Beginning Farmer Working Group.

Enrollment in new crop insurance programs for upland cotton is tied to the market share of cotton at the county level.

In years prior, cotton was a covered commodity and eligible for support payments, but currently, cotton producers must also purchase one of the shallow-loss insurance policies to be eligible for basic Government support. An ERS report explains the mechanics of the two shallow-loss programs and provides estimates of how these programs could reduce the revenue risk of cotton producers. The report analyzes how different realized yields, harvest prices, subsidy levels, and program guarantees affected the outcomes of shallow-loss programs under expected yields and projected prices for 2014. Findings show that at the county level higher revenue risk is closely associated with lower expected revenues. Consequently, high-revenue risk counties should receive relatively lower payments from the new shallow-loss programs. ERS economists briefed senior government officials on the report’s findings.

New Noninsured Crop Disaster Assistance Program (NAP) policy can mitigate risk more than the basic coverage.

Before 2014, producers could only purchase catastrophic coverage under the Noninsured Crop Disaster Assistance Program (NAP). Now, producers can pay a premium to purchase coverage for up to 65 percent of the approved yield at 100 percent of average market price. ERS research examined the effects of this change on producer income and revenue risk, as well as the makeup of NAP enrollment. Findings indicated that the new NAP policy could mitigate yield risk more than the NAP basic coverage under the previous program.

The U.S. organic sector continues to expand rapidly, with U.S. organic farm sales topping $7.5 billion in 2016—more than double 2011 sales—and tracked U.S. organic imports and exports at record highs.

ERS published research and analysis that examined trends in the U.S. organic sector, including production and marketing characteristics. A wide segment of U.S. consumers now include organic food in their diets, and analysis shows that the organic market share has increased for major retail food categories in recent years. For example, top organic fruits and vegetables increased from a 3-4 percent market share in 2009 to a 6 percent market share in 2014, and the organic milk share increased from 11 percent to 14 percent. Although the organic sector still shows substantial regional and commodity concentration, all 50 States now have some organic production and processing. In addition, ERS added a subsample targeting organic dairy operations to the USDA Agricultural Resources Management Survey that farmers received in 2017 to examine structural and other changes that have taken place in the U.S. organic dairy sector over the last decade. ERS researchers responded to numerous media requests for interviews and information on U.S. organic sector trends, including requests from The Wall Street Journal, NPR and others.