As reported by USDA data and recently highlighted by the American Farm Bureau Federation (AFBF), more than three-fourths of household income for farm families comes from off the farm.
Per USDA data, in 2023, 96% of farm households earned money from off-farm sources, making up 77% of household income. Family farms accounted for about 96% of total farms and 83% of total production in 2023.
Daniel Munch, economist at AFBF, analyzed the USDA data to discern six main takeaways in recognizing the dual reliance to support farm families economically and what policy can help ensure the long-term viability:
1. Off-Farm Income Keeps Farms Afloat.
USDA defines a farm as any operation with more than $1,000 in ag product sales.
A majority of off-farm income comes from earned income — wages, salaries, etc. — accounting for 72% of total income for farm families.
As detailed by Munch, “At the median, the point where half of households earn more and half earn less, farm-related income was a loss of $900. Over the past five years (2019 to 2023), median farm income has never exceeded just $296. In sharp contrast, median off-farm income was $79,900. Off-farm income peaked in 2021 at over $82,800 and has since declined only slightly.”
While passive income (Social Security, veterans’ benefits, pensions, dividends and interest) account for 28% of farm household income, they are seen as a stabilizing factor, particularly for retired or semi-retired farmers.
2. Farms With Lower Cash Recipients Use Off-Farm Income to Bridge Financial Gaps.
Across all farm sizes when farm income varies year-to-year, diversification with off-farm income stabilizes the household finances.
However, for farms with gross annual sales less than $100,000, more than 60% of those business operators work off the farm. For farms with more than $500,000 in gross sales, only 45% of the principal operator had off-farm work.
3. Younger Farmers and Beginning Farmers Are More Likely to Rely on Off-Farm Income.
While 40% of all farmers say they exclusively work on the farm, only 20% of young farmers (35 years and younger) and 24% of beginning farmers (less than 10 years experience) only work on the farm.
As Munch says, “This trend reflects the steep financial climb facing new entrants to agriculture. Without inherited land, equipment or equity, it’s difficult to rely solely on early farm earnings. Off-farm jobs help cover startup costs and personal expenses and provide access to health insurance and other benefits. Just as importantly, these roles offer opportunities to build credit, acquire valuable skills and develop professional networks that can support long-term success in farming.”
4. Different Types of Farms Vary on Reliance of Off-Farm Income.
By farm type, trends emerge of what operations are more reliant on the farm sales and receipts for income.
- For dairies, 81% of household income comes from farming activities.
- For corn farmers, 58% of income comes from on-farm sources.
- For cattle producers, 10% of household income comes from on-farm sources.
- Other field crop farms, 9% of income comes from farming activities.
Munch highlights the workload by seasonality and nature of the work directs how farmers are available with time to work off-farm for income diversification.
5. Off-Farm Work is Necessary for Three Reasons.
Citing 2018 USDA data, there are three common reasons for farmers citing off-farm income: more reliable/steady income, higher pay rates than farming, and access to benefits such as health insurance and retirement investments.
6. Farmers Travel Farther For Off-Farm Income.
“In today’s economy, the ability to farm often depends on the ability to commute,” Munch says.
Citing nationwide statistics, Munch reports, “Between 2002 and 2022, the share of commuters leaving their county for employment rose more than 10 percentage points in both nonmetro and farm-dependent counties, with 64% of farm-dependent county residents commuting out — higher than both nonmetro (56%) and metro counties (46%).”
He says this underscores the need for farm household financial status to be viewed within a context of regional labor markets not just on-farm sales. This is a result of local manufacturing jobs or jobs within agriculture shifting more to industries such as healthcare, education and retail.
Read more in Munch’s report: The Other Paycheck: How Off-Farm Income Keeps Farmers Farming
