Linda Benedict, Mishra, Ashok | 9/9/2014 8:06:57 PM
Ashok K. Mishra and Krishna H. Koirala
The U.S. agriculture population is poised to make a dramatic change because more than 50 percent of current farmers are likely to retire in the next five years. U.S. farmers over age 55 control more than half the farmland, while the number of farmers replacing them has fallen. The need for beginning farmers is paramount both at the national level and in Louisiana.
In 2012, beginning farms, which are those in which the operators have managed a farm or ranch for 10 years or less, accounted for 25 percent of the nation’s 2 million family farms. About 26 percent of farms in Louisiana are classified as beginning farms. Beginning farmers are defined by the U.S. Department of Agriculture Farm Service Agency as “those operators who are responsible for the dayto- day farming decisions, with less than 10 years of experience farming their current farm.”
LSU AgCenter researchers compared beginning farms in Louisiana with those in the Delta region (Louisiana, Arkansas and Mississippi) and the rest of the United States. The source of the data is the 2012 Agricultural Resource Management Survey conducted by the National Agricultural Statistics Service and Economic Research Service. Specifically, the researchers profiled and compared beginning farms and farmers in Louisiana with farmers in other states terms of acres in operation, rental rates, enterprise specialization, farm typology, government payments, net farm income and balance sheets. The researchers also examined the socio-economic attributes of the farm operators and households. This analysis may aid elected officials in evaluating policy that should be revised, extension agents in targeting gaps in their parishes that can be proactively addressed, and farm operators in rightly assessing the landscape of their profession as they look toward the future.
Comparison of Beginning and Established Farms in Louisiana
A comparison of socio-economic attributes and income between established and beginning farmers in Louisiana is provided in Table 1. Most farmers – both established and beginning – own their farms. Most established farms are operated by farmers 65 years old or older; the largest percentage of beginning farms are operated by farmers 45-54 years old. High school graduates tend to be the operators of established farms, and college graduates tend to be the operators of beginning farms. Beginning farms in Louisiana are likely to specialize in beef cattle and field crops, whereas half the established farms – like the national trend – are likely to specialize in beef cattle. About 16 percent of beginning farms in Louisiana receive government payments, an average of $1,421 per household, compared to $3,939 per household for established farms.
Total farm household income for beginning farms is lower ($109,808) than established farms ($114,936). Regarding the source of farm household income, the share of farm income (net farm business income) in total household income is higher for established farms (41 percent) compared to only 6 percent for beginning farms. The off-farm income is much higher for beginning farms (94 percent) than established farms. This is likely due to the fact that beginning farm operators have higher educational attainment (51 percent have graduated college) and are more likely to be engaged in off-farm income-generating activities, such as an off-farm business or off-farm employment for wages or salaries.
Beginning Farm Attributes in Louisiana
Louisiana is home to 7,871 beginning farms, which is 27 percent of all the farms in the state. Figure 1 indicates that the biggest share of these farm operators (37 percent) are between the ages of 35 to 49 years. This compares to 53 percent in the rest of the Delta and 33 percent nationwide. The next largest share in Louisiana of beginning farm operators is over 65 years old (29 percent), compared to 8 percent in the rest of the Delta and 12 percent nationwide. The largest group of beginning farmers nationwide (37 percent) are between 49 and 64 years of age.
Educational attainment of beginning farm operators in Louisiana is unique in that in all cases beginning farm operators are better educated, according to Figure 2. Louisiana has the highest share (51 percent) of beginning farm operators who have graduated college, compared to the Delta region (31 percent) and rest of the United States (34 percent). Perhaps this may indicate that college-educated farm operators are better suited for enterprises that are conducive to a farming lifestyle, but work off the farm for primary sources of income. On the other end of the spectrum, only 0.1 percent of begin ning farm operators in Louisiana have less than a high school education.
Nationwide and in Louisiana, owners are operating beginning farms – 74.5 percent in the United States and 75.4 percent in Louisiana, according to Figure 3. Conversely, Louisiana has the fewest beginning farms operated by tenants (1.3 percent). About 23 percent of the beginning farms in Louisiana are operated by part-owners. Tenancy rate is the highest in the United States (about 10 percent) followed by Delta region (5 percent).
Value of Farm Sales
A puzzling picture emerges regarding the gross value of farms sales (a measure of total farm sales). Figure 4 shows that about 28 percent of beginning farms in Louisiana and in the nation as a whole do not make any money farming. This could be attributed to two factors: (1) during 2012, the year the data were collected, the farms may not have sold any farm products; (2) many beginning farmers may want to live on the farm but their main source of income may be off the farm. A large percentage of beginning farms have farm sales of less than $10,000.
Farm Assets, Debt and Equity
When comparing total farm assets and liabilities of beginning farms, Louisiana ranks below that of the rest of the country and Delta region, according to Figure 5. Total assets of beginning farms, $456,100 are slightly lower than the national average ($472,600). Beginning farms in Louisiana have the least liabilities, about $17,053, followed by Delta region ($46,585) and the rest of the nation ($51,271). The Delta region has the best balance sheet when it comes to beginning farms. They have the highest assets and second highest liabilities, perhaps a sign they are using the debt efficiently. Farm equity refers to the net worth (or wealth of the farm), and it is highest in the Delta region ($593,206) followed by Louisiana ($439,023). The debt-to-asset ratio, which is the ratio of total liabilities and total assets, is an indicator of borrowing capacity of the farm and is used by bankers to loan money to farmers for farm production. The higher the ratio, the greater risk is associated with the firm’s operation and would lead to higher interest rate charged to the farmer. Figure 6 shows that for beginning farms the debt-to-asset ratio is lowest in Louisiana and the highest in the rest of the country. This implies that Louisiana’s beginning farms have higher borrowing capacity, compared to rest of the Delta region and the nation.
While beginning farm operators in Louisiana may have significant amounts of assets and equity, gross cash income is the lowest when compared to beginning farmers in the Delta region and the rest of the United States, according to Figure 7. Gross cash income of beginning farms in Louisiana lags significantly ($41,254) behind beginning farms in the Delta region ($79,349) and the national average ($47,094). A similar trend is observed with cash expenses, indicating that beginning farms in Louisiana are less efficient when it comes to controlling expenses. Net cash farm income of a beginning farm in Louisiana is higher ($12,623) than in the rest of the country ($6,569). However, it is lower than beginning farms in the rest of Delta region ($14,025). The net farm income, the value taken home as returns to labor and management, earned by beginning farms in Louisiana ($5,383) is significantly lower, about 50 percent, than beginning farms in the Delta region and about a third less than beginning farms in the United States.
The beginning farms in Louisiana are vital to the agricultural economy of the state. Beginning farm operators in Louisiana are highly educated, compared to their counterparts in the Delta and rest of the United States. In accordance, off-farm income contributes more than 94 percent of total beginning farm household income. About 16 percent of beginning farms in Louisiana, in 2012, received government payments compared to 20 percent of established farms. The average government payment received by beginning farm household in Louisiana ($1,421) was 36 percent lower than established farms ($3,939) in 2012. The highest share (37 percent) of beginning farms in Louisiana are operated by operators 35 to 49 years old. In some aspects, beginning farms in Louisiana are leading the nation, such as debt-asset ratio and educational attainment. Unfortunately, beginning farms in Louisiana are lagging behind the national average and the rest of the Delta region in some other categories, including gross cash income, net farm income, farm assets and efficiency.
Ashok K. Mishra is Donald E. Welge Endowed Professor, and Krishna H. Koirala is a graduate research assistant, both in the Department of Agricultural Economics & Agribusiness.
This article was published in the summer 2014 issue of Louisiana Agriculture Magazine.