Farming is a lot like musical chairs. The music starts after harvest, farms and fields may get new owners or operators, new folks join the procession, others drop out both voluntarily and involuntarily, and then finally the music stops in March and everyone farms their land until the fall. Then it all starts again. Some operations have “Centennial Farm” designation signs on the post at the end of the lane. That’s nice. While it may mean some acres have been in the same family for 100 years, most likely the farm operation has expanded and contracted multiple times, and there have been at least you, Dad, & Grandpa; and that is three comings and goings. When you tally up the number of operators, the number of farms, and the number of different configurations of those farms over time, you suddenly realize farming is a dynamic industry. So what will change in your operation next winter? Are you absorbing your neighbor, or will your neighbor absorb you?

USDA economists Robert Hoppe and Penni Korb say the changes in farming operations generally parallel that of non-farm businesses, with 9-10% turnover each year. But their research findings may come as a surprise in that the number of new operations each year is statistically equal to the number of exits each year. To help policy makers they looked at farm sizes, farmer ages and other demographics, and then published the results as Understanding U.S. Farm Exits. They say a growing demand creates higher profits for owners of resources and a contraction in demand creates financial losses. With both of these scenarios are certain barriers that may necessitate policy changes, as well as involvement of technologies, and impacts on family life cycles.

The USDA researchers tracked specific farms, not the operators, but farms from the 1978 Agriculture Census through the 1997 Ag Census, and also used parallel statistics from Canada’s farm surveys. In essence the study found, “Farm size matters, with the exit rate declining with sales. Nevertheless, even among the largest farms (sales of $250,000 or more), 6 or 7 percent of farms exit per year. The age of the operator also matters. Exits generally decline with age until farmers reach 45-54 years old. After that, exits rise and peak at 12-13 percent for farmers 65 years old or older.”

Between the 1982 and 1987 Ag Census, an average of 6.8% of farms disappeared annually, and between the 1987 and 1992 Ag Census, that number rose to 7.8%. However, between the 1992 and 1997 Ag Census, less than 5% of farms exited, reconciling USDA’s change in the definition of “farm.” The number of exits was softened by an increase in the number of new farms between 1992 and 1997.

Using the historical statistics, the USDA researchers worked forward to calculate the probability of a farm going out of business, based on its size and the age of the operator. For example, a farm with less than $1,000 in gross sales and an operator 65 or older, would have a 57% chance of exiting in any given year. However, there is only a 34% chance of that happening if the farm has more than $250,000 in annual gross sales. But if that same higher volume farm was operated by someone 45 years or younger, the chance of exiting would be 26%.

The USDA study looked at demographic groups and farm commodity specialization for comparison purposes. The findings were:
• “For each age and sales class category, the 1992-97 exit probability was 5-7 percentage points higher for farms with Black operators than for farms with White operators.”
• “The 1992-97 exit probabilities for female-operated farms are 7-9 percentage points higher than those for male-operated farms.”
• “Cash grain farms had higher (5-6%) exit probabilities than beef cattle farms for the last (1992-1997) period, regardless of sales class or operator age.”
• “Hog farms also had higher (2-4%) 1992-97 adjusted exit probabilities than did beef cattle farms.”

Summary:
The face of agriculture may be changing, but according to USDA’s Ag Census, the number of faces in agriculture may not be diminishing very much. When a farm is absorbed into another operation, its identity is lost, but the number of farm exits and the number of new farms is about the same between the 1992 and 1997 Ag Census. The analysis on the 2002 Ag Census is not yet complete to determine if the trend remains. USDA economists have used the data to determine probability of farm exits in the future, and have determined that larger farms have more staying power, as do those with operators in the 45 to 54 year age range. And regarding commodity, beef farms have longer tenure than others, possibly based on lower daily management requirements and lower capital needs.