What is in this article?:
- Because the average household income of farm operators typically increases with farm sales, farm households with higher incomes are receiving a larger share of commodity program payments than in the past.
- Barring substantial changes in program design, the shift of commodity program payments toward larger farms and farm households with higher income is likely to continue.
…So, Too, Have Commodity-Related Payments
By 2009, farms with more than $500,000 in constant dollar annual sales received 46 percent of all commodity-related payments, up from 20 percent in 1991. Over the same period, small commercial family farms’ share of commodity payments shrank from 54 to 27 percent.
As a Result, Payments Have Shifted to Higher Income Households
Households operating larger farms tend to have higher incomes than the households operating smaller commercial farms. For example, the median operator household income of family farms with sales between $10,000 and $99,999 in 2009 was about $51,000. (The median is the middle of the distribution—half the households have incomes above the median, and half have incomes below the median.) In contrast, in 2009, the median operator household income of farms with sales between $500,000 and $999,999 was about $127,000, and for farms with sales of $1 million or more, median operator household income was $161,000.
Since operators of larger farms tend to have higher household income, the shift of commodity-related payments to larger farms has resulted in a shift of payments to higher income households. For example, in 1991, half of commodity payments went to households with incomes over $54,940 in constant 2009 dollars (50th percentile) and a quarter of commodity payments went to farm households with incomes greater than $115,000 (75th percentile). By 2009, the distribution of payments had shifted upward considerably, with half of commodity payments going to households with incomes over $89,540 and a quarter going to farm households with incomes greater than $209,200.
According to the U.S. Census Bureau’s Current Population Survey, the median household income among all U.S. households (in 2009 dollars) was $47,453 in 1991, reasonably close to the household income at the midpoint of the commodity payments distribution. In 2009, the median household income among all U.S. households was $49,777, practically the same as in 1991. But because of the shift in commodity payments, half of the commodity payments went to farm households with incomes that were significantly higher than the incomes of most U.S. households.
Current Trends Are Likely To Continue
Production of commodities has been shifting to larger farms because larger farms tend to be more profitable. Larger farms will probably continue to be more profitable, and thus commodity production is likely to continue to shift to larger farms. Since commodity program payments are based on current or historical production, payments will continue to shift to larger farms and higher income farm households unless the design of commodity-related programs changes substantially. Congress has created upper limits on the amount of Government program payments that can be made to an individual, as well as income eligibility caps that restrict eligibility to households with income below specified levels. The current payment limits and income eligibility caps affect few recipients and only a small share of total payments. Research conducted at ERS and elsewhere has shown that recent proposals to lower payment limits or income eligibility caps would still affect only a few recipients in the short term. However, over the longer term, if production continues to shift to larger farms, more farm households and a higher percentage of payments may be affected by payment limits and income eligibility caps.