Many of you are familiar with the U.S. Census survey that is taken every ten years to count the number of people living in the country. The Census is a big deal because it determines how many seats each state gets in the House of Representatives and used for the allocation of government funds and programs like schools, hospitals, and roads. However, many people are unaware that there is also an agricultural census. Unlike the decennial U.S. Census, the U.S. Census of Agriculture is conducted every five years. Initiated in 1820, the agricultural census provides a rich history of valuable insights into American farmers and the agricultural economy. Today, it not only tracks the number and location of farmers but also assesses land use and ownership, operator demographics, production practices, and farm income.
The results of the 2022 Census of Agriculture were released in February of this year, carrying significant implications for policy, agricultural decision-making, and investment interest. Farmers and stakeholders in the agricultural industry pay close attention to these results as the census can affect USDA Farm Bill allocations, technological innovation, and the economic outlook for agriculture. The full report can be located here. The USDA also does an excellent job of summarizing key data in a series of highlight reports.
Farms and Farmland
Will Rogers used to say, “Buy land. They ain’t making any more of the stuff.” These words have echoed across the agricultural sector for decades and it has never been truer. As of 2022, there are now 880 million acres of farmland in the United States which may sound like a lot, but it is down 20 million acres, or 2.2%, from 2017 and 40 million acres, or 4.4%, from 2007. Development pressure, renewable energy projects, and conservation programs are driving the reduction in farmland acreage. Consequently, the competition for land use has increased farmland prices which have been further buttressed by growing food demand for the world’s expanding population. The graphic below illustrates the concentration of farmland in the United States, with a significant portion located in the central part of the country.
Not only have the acres devoted to farmland declined but the number of farms continues to shrink due to industry consolidation. It was reported in the 2022 Census that the number of farms fell below 2 million for the first time. Family farms continue to dominate the sector, with 96% of farm operations still classified as family-owned. However, the number of family-owned farms is dwindling as the expensive nature of key inputs such as acreage and equipment needed for modern, efficient operations drive more people to leave rural America in search of job opportunities elsewhere.
Larger producers are eager to take advantage and expand their operations. The industry continues to become increasingly concentrated with the average size of a farm rising 5% from 441 acres in 2017 to 463 acres in 2022. It is important to note that the USDA classifies a farm as “any place from which $1,000 or more of agricultural products were produced and sold, or normally would have been sold, during the census year.” This definition can cause skewness in the data as small backyard gardens selling produce at local farmer’s markets could constitute a farm for the USDA census.
The shift in the concentration of farm ownership means fewer farm operators control a larger percentage of acres. The USDA estimates that 42% of U.S. farmland is controlled by 2% of U.S. farm operators. These large farms dominate agricultural production and income. On the other side of the scale coin, 42% of farms control only 2% of all U.S. farmland. Like other sectors of the U.S. economy, as time goes on the sector has continued to become more concentrated with the largest 10% of farm operators controlling more and more acres. From an efficiency standpoint, this isn’t necessarily a bad thing as large-scale farms are often much more efficient allocators of resources and capital but there will remain concerns over whether these large farms will consistently be good stewards of the land.
Farm Producers
Farm operations are evolving and the producers/farmers running these operations are changing as well. A persistent concern in the agricultural community is the increasing average age of agricultural producers. Consider your own image of a farmer. Do you envision someone young, educated, or perhaps a woman or a person of diverse background? More likely, the image that arises may resemble the figures in Grant Wood’s “American Gothic” painting from the board game “Masterpiece,” one of the most recognizable images in American art.
Wood’s painting actually paints a fairly accurate depiction of what the average farmer today based on the USDA’s findings. The average age of farmers continues to rise, now standing at 58.1 years young, with 95% of producers being white. The concern over the average age of the farmer has persisted for decades. The reason behind this demographic statistic largely stems from the capital intensity of agriculture. The table stakes for land, machinery, and other agricultural resources keep rising for young and beginning producers. Unless facilitated as part of a farm succession and estate plan, it is very difficult for new blood to enter the farming sector. The USDA has tried to facilitate new entrants with several young and beginning farmer programs which have provided some relief.
Farm Economics
Favorable commodity prices and yield trends for agriculture during and after the COVID-19 pandemic translated into strong growth in the value of agricultural production. As of 2022, the USDA reported U.S. farms produced $543.1 billion worth of agricultural crops, up 40% from $388.5 billion in 2017. The share of production value is largely split evenly between crops and livestock, with grains and oilseeds dominating production value on the crop side. Cattle and calves are the top-ranked commodity in agriculture, making up 17% of total US agricultural production by value.
Moving onto state-level data, California dominates agricultural production value. California’s prominence is largely due to California’s favorable year-round weather, overall crop diversity, and ability to produce high-valued specialty products like wine and table grapes, almonds, and pistachios. In 2022, California raised 11% of all US agricultural production with Iowa, Texas, Nebraska, and Minnesota making up the remaining top 5 spots. However, recent legislation in California surrounding trucking emissions and livestock and water management could threaten its standing. The legislation calls for a phasing out of diesel-based trucks and has raised concerns among producers, as most agricultural machinery relies on diesel fuel. Although Tesla is developing the Tesla Semi for the trucking industry, Tesla has no near-term plans to develop harvestors and other ag equipment. Currently, there are few viable or affordable alternatives to replace diesel engines in agricultural machinery.
Agriculture has evolved tremendously over the past several decades and is likely to continue to become more efficient and dependent upon technology. One of the barriers to technological expansion and information dissemination is access to reliable internet services. The internet has made it possible for a tremendous amount of information exchange in everyday life and the same is true for agriculture. As of 2022, 79% of farms had internet access which is up from 70% in 2012. Part of this modest upward trend could be credited to Elon Musk’s Starlink low earth orbit satellite system which has provided millions of people living in rural or remote areas with reliable, high-speed internet. On a personal note, my family farm has licensed Starlink internet services within the last five years. This is the first time we have been able to stream videos and surf the internet with ease. The expansion of high-speed internet services is also providing remote employment opportunities for rural workers. Such technological advancements could have possible repercussions on the average farmer's age and diversity in agriculture.
Implications for Promised Land
The 2022 Census of Agriculture results highlight the attractive opportunity set for Promised Land’s mission of being the leading rural development partner for Opportunity Zones in American farming communities. The future of agriculture continues to be bright as U.S. farming remains one of the largest and most efficient producers in the world. Promised Land is committed to finding strong farmer partners who are seeking to expand their operations while providing for a more sustainable future for their rural communities. Opportunity Zone tax legislation provides a catalyst for growth and innovation in rural communities that may be struggling with stagnant economic activity and unfavorable demographics as the USDA data suggest. With the USDA expected to expand its funding for young and beginning farmers, conservation efforts, Federal crop protection, and broadband initiatives within the next Farm Bill and related legislation Promised Land plans to work alongside its farmer partners to ensure the promise of American agriculture for generations to come.
On the legislative front, OZ extension and Rural OZ proposals remain top of mind for U.S. Rep. Mike Kelly, Republican from Pennsylvania and chairman of the Ways and Means Subcommittee on Tax. In this recent Op Ed in Go Erie, he wrote:
“Moving forward, I want more communities to benefit from this legislation the way Erie has. In September 2023, I introduced the Opportunity Zones Transparency, Extension, and Improvement Act. This bipartisan legislation builds upon the success of the 2017 tax law. It would require mandatory data reporting of Opportunity Zone investments to increase transparency and streamline the reporting process. It also extends the investment and deferral window to provide more time to drive more investment into high-impact projects in low-income communities. We are also finding ways to expand Opportunity Zones to rural communities, as well.”
