The trend toward increasing amounts of total agricultural-sector sales being generated by larger farms has been going on for some time. So I wasn’t planning on being surprised when I looked at Table 41 of the 2017 Census of Agriculture. The table reports on the concentration of sales in the farm sector. But I must say I was surprised that only 374 farms were required to produce 10 percent of the sector’s sales in 2017. Those 374 farms average more than $103 million in sales.

While a small number of farms is required to produce 10 percent of all farm sales, it takes 105,453 farms to produce 75 percent of all sales. In other words 5 percent of all farms produced 75 percent of total sales. The average sales for that group was $2.76 million per farm.

Figure 1 shows the percentage of farms required to produce 75 percent of the market value of agricultural products as reported in the past four censuses of agriculture. That percentage has decreased slightly since 2002. At that time it took 6.7 percent of farms to produce 75 percent of sales while currently it is just 5.16 percent. Another way to look at the result is that it required the remaining 1.93 million farms to generate the other 25 percent of farm sector value of production.

Look beyond sales

There are a few other interesting results in Table 41. The estimated market value of all machinery and equipment in the sector is $272 billion. If we look at the fewest farms required to produce 75 percent of total sales, they account for $101 billion of the equipment. In other words farms that produce 75 percent of sales own only 37.2 percent of machinery and equipment in the sector. That likely provides one source of efficiency for the farms. It also tells us there is a significant machinery investment made by the remaining farms.

It’s also interesting that the largest farms have significant interests in organic production. Of the largest 374 farms, 43 had organic sales that totaled $1.3 billion. If including the 27,738 firms that accounted for 50 percent of total agricultural sales, 945 of them had organic sales at a total of $4.6 billion. That was 63 percent of the total organic sales of $7.27 billion.

Another interesting case is total farm production expenses. In 2017 those were estimated at $326.39 billion. The fewest farms required to produce 75 percent of sales had production expenses of $226.75 billion – or 69 percent of total farm production expenses. So those farms had a slightly lesser percentage of total expenses than sales. Combined with the equipment savings, that operating-expense advantage is another source of advantage when it comes to total profitability.

Wrapping it Up

The farm sector continues its march toward consolidation. It’s surprising that so few farms account for 10 percent of total sales. Through the years I have frequently heard the discussion that 20 percent of farms produce 80 percent of total sales. Based on the new data it would appear it would require less than 20 percent of all farms to produce 80 percent of total sales. The farm sector continues to become more bifurcated around larger farms and smaller farms.

As that trend continues to play out it will be important for those who are involved with the sector to continue to think about how it will impact them. That would include everyone from farmers to policymakers, to those in rural communities and to agribusinesses. Businesses will need to continue to refine their marketing strategies toward the sector so as to be able to be relevant to the various segments in the sector.

The sector continues to bifurcate around lots of smaller farms – and fewer and fewer large farms. It will be interesting to see how smaller farmers continue to evolve. One strategy that has been widely employed is to work off the farm while farming. The census reports that almost as many primary producers work more than 200 days off the farm – 749,311 – as those who don’t work off the farm at all – 859,347. Clearly there are challenges of operating a farm while working that significant amount of time off the farm. That will likely bring opportunities for people who can provide time-saving services to those farms. That would include everything from traditional agricultural input suppliers to custom farming operations.

The challenges of policymaking in the current environment are also substantial. Developing policy that is relevant and meaningful for all farms will become increasingly difficult.

The larger farms are also likely to face significant challenges in that economic environment. It will be interesting to see how much consolidation occurs among that group in the coming years.

Postscript – beware of Table 41

I am convinced that Table 41 is perhaps the most often misinterpreted table in the Census of Agriculture – at least it’s the one I am the most prone to misinterpret. I always look at it and want to use it, but then remember that it isn’t quite the data that I want. My initial thought was to look at the concentration across different commodity groups. For instance, how many of the 451,716 grain farms are required to produce 10 percent of all grain sales. I think it would be interesting to compare that number to dairy farms or cotton farms. But that’s not what is found in Table 41. Instead the 10 percent column in Table 41 tracks the largest 374 farms vertically through the remainder of the table. For instance it reports that 102 of those 374 grow grains, etc. That’s information, but unless I want to know more about those 374 farms I don’t really think it’s all that useful. Again that doesn’t mean it takes only 102 grain farms to reach 10 percent of total grain sales. I’ve seen it reported that way more than a few times.

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Brent Gloy is an agricultural economist with Agricultural Economic Insights.