January 7, 2009

While small farms are still the majority in the US, the number of million-dollar farms is also increasing rapidly, according to a report from the Economic Research Service (ERS).

Small farms, which have annual sales less than US$250,000 each, represented 92 percent of US farms. However, they accounted for only 23 percent of total US farm production.

Million-dollar farms, which have annual sales of US$1 million or more, accounted for 23 percent of total US farm sales in 1982, but had more than doubled to 48 percent in 2002. Still, the numbers of these larger farms are slowing catching up, according to the report.

Averaging operating profit margins increase with sales, reflecting economies of farming sizes. As a result, million-dollar farms and farms growing to that size have a competitive advantage relative to smaller farms.

However, the shift in production may slow down once million-dollar farms' share of the commodities related to large-scale production reach their upper limits.

The report noted that million-dollar farms do not have market power, as the shift in farm production to million-dollar farms reflects a long term concentration of output on fewer farms. There are currently too many million-dollar farms - just over 35,000 - for any single farm to dominate agriculture or the production of certain commodities.

Most million-dollar farms are family operations, and direct ownership of the farms by non-farm corporations is infrequent, though the corporations are frequently involved with million-dollar farms through contracting.