Making Money

Parity, but at What Cost?

At the turn or the 21st century, American farm families finally achieved what they had sought for almost a century – roughly the same standard of living as their urban cousins. But ironically, all but the largest farm operators had to rely on jobs in town to achieve “income parity” between rural and urban residents. In the process, farms either got very large or very small, farm communities got smaller, farm women took over more economic responsibilities and farming was controlled more by the government.

In his 2002 book, American Agriculture in the Twentieth Century, Maryland distinguished professor Bruce L. Gardner wrote:

“In the 1990s farm households attained, on an average basis, income levels equal to or exceeding those of the nonfarm population.”

This fight for income parity lasted through most of the 20th century. Historians say that in the boom years between 1910 -1914, urban and rural incomes were roughly equal, or “at parity.” But that gradually dropped until, in the 1930s, farmers were earning only 70 percent of what their urban cousins were earning.

The USDA has graphed the recent growth in farm and urban incomes in the chart at right. The figures show that a surge in farm income produced a boom in agriculture in the early 70s. The government urged farmers to plant “fencerow to fencerow,” and many took on debt to expand their operations.

Then, a slowdown in 1977 frightened over-extended farmers and produced cries for a Farm Strike. A grain embargo and other economic factors produced an economic bust beginning in 1980.

In 1985, a new farm bill doubled government price supports for agricultural commodities. Between 1985 and 1987, government spending for price and income supports increased from $17.8 billion to an estimated $35 billion. But that support was volatile, and the experience of the next few years illustrated that farmers were becoming almost totally dependant on the government.

Finally, in the 1990s, average farm income caught up to and then surpassed average U.S. household income. But if we take a closer look at the numbers, it becomes apparent that most farm families make most of their money off the farm. On average for most farmers, fully 90 percent of farm income comes from “off-farm” sources. In other words, almost all farm families have to have at least one member holding down a job in town.

In the chart above, only the largest commercial farms make most of their income from farming operations. The top 3 percent of farms – those that make gross sales of over $500,000 – earned profits of $177,200 on average in 2003. The next 4 percent of top farms – those making between $250,000 and $499,999 in gross sales – earned an average of $63,330 in agricultural related profits. But those commercial farm families still supplemented their income with almost $60,000 in income from off-farm sources.

The smallest three categories of farms in terms of gross sales – those making gross sales up to $249,999 – account for 93 percent of the total number of farms but only 13.75 percent of total sales. Most of these farms get the majority of their income from off-farm sources. The smallest farms pay for an average of $5,560 in farm losses with their income from off-farm sources. These farms that sell less than $10,000 a year in agricultural produce account for 58 percent of the total number of farms in the U.S.

In other words, most of the nation’s 2.2 million farm families are small operators who earn almost 90 percent of their household income from jobs off the farm. Only the largest commercial operators might be considered full-time, successful farmers.

Farmers themselves know these trends.

Heather Derr (left) says she and her husband David have a “moderate” size operation of between 1,000 and 2,000 acres. “I watch some neighbors, and they are great. They are great at what they do. And they continue to grow, and that’s fine for them,” she says. “I do feel sorry for … the small farmers that now – they’re under 1,000 acres – they’ve got to go find an additional job to help support their farming habit.”

Heather is related to one of the largest family farming operations in York County, the Kaliffs.
Mark and Valerie Kaliff (right) are one of four families who have built their operation to over 10,000 acres. “We needed to have more acres, more bushels to be able to continue to grow,” Mark says. “There’s a lot of people that have jobs in town. It’s a nice fit for them to have weekends or evenings to farm. And I think there’s opportunities for them… [But] if we weren’t growing, we were going backwards.”

Hank Kobza (left) of David City Nebraska was forced off of his farm during the farm recession of the mid-80s. He now runs an auction business, and his son John is farming 1,600 acres. John is facing pressures to expand his operation. “You know, $200,000 for a combine, $200,000 for a tractor – and we’re not talking about new,” Hank says. “We’re forcing these people to get bigger because they have to justify the equipment that they’re using to do the farming.”

Troy Otte (right) has a college degree in agriculture, and his wife has a good job in town. Troy farms over 1,000 acres in York County and sees the logic for growing larger. “I love the small farm, but reality says that as things become more efficient there’s going to be less and less people doing the same job,” he says. “In 1920, if there was 200 people making automobiles, there’s three now. Same way with farming.”

Suzanne Ratzlaff (left) was a city girl who married a farmer, and she had to get used to a different way of handing money. “I’ve never experienced having that income like once a year – where you choose when to sell something when the price is right. I can tell you my first fear was not having a savings account,” she says. “My husband said, ‘You need to realize, honey, that the land is our savings account.’”

Elaine Stuhr (left) says it was difficult for their son to get started in farming. “There are very few young people that [can start farming] unless they have … a relative of some sort. I think the investment is just too great.” But Elaine says that most farmers choose to farm for more than economic reasons. “There’s just that love of land that you enjoy so much, and the smell of the soil and the fresh air. All of those things that you really can’t put a price tag on.”

The love of the land may be why so many farmers are struggling with their small operations, working town jobs to struggle to make a go of it. So, income parity with urban workers may not be the only factor – or even the major factor – in deciding to become a farmer.

Written by Bill Ganzel, the Ganzel Group. First published in 2009. A partial bibliography of sources is here.

Boom of the 70s