Alex s Definition of Agriculture Production Agriculture

1
Introduction to US Agriculture Facts Figures
2
Alexs Definition of Agriculture

• Production Agriculture
• Crops
• Row crops, vegetables, tobacco, etc.
• Livestock
• Beef, dairy, hogs, sheep, horses, etc.
• Horticulture
• Nursery, greenhouse, landscape, design, etc.
• Other
• Timber, aquaculture, orchards, vet clinic, etc.

3
Alexs Definition of Agriculture (Cont.)

• Agribusiness
• Supply, transportation, processing
• Marketing, sales, finance, consulting, etc.
• Value-added, micro-processing, customizing, etc.
• Agri-tainment, agri-tourism
• USDA definition of farm
• Greater than 1,000/yr in agricultural sales

4
Trends in US Agriculture
5
US Agriculture is Insignificant?

• Production ag generates 0.95 of US GDP
• Broad definition ?roughly 13 GDP
• Adds 279 billion of value to US economy (2004)
• 1.5 trillion of agricultural assets (2004)
• Real estate 82 of farm assets
• Land asset values increasing
• 207 billion in farm debt
• Employs 1 in 5 Americans, directly or indirectly
• Production, processing, transportation,
  marketing, etc.

6
Current State of US Agriculture

• 20 of farms are profitable, 80 for lifestyle
• US Average ROA is 0.5 (2004)
• Non-family farms 7.1
• Family farms 4.4
• Retirement/Lifestyle farms (1.8)
• Increasingly smaller margins
• Cost control is key!!
• Foreign market expansion competition
• Canada, Mexico, Australia imports
• Canada, Japan, Mexico, EU exports

7
Current State of US Agriculture

• Approx. 60 of US farms have no debt (2004)
• Average debt/asset ratio 8.8
• Average D/A for farms with debts 17.8
• Higher D/A for the larger farms
• Cash (equity) expansion
• Paying cash rather than using debt
• More women becoming involved
• 11 of principal operators

8
Food Purchases

• US consumers spent 789 billion for farm food
  (2004)
• Farm value 156 billion
• Marketing bill 633 billion
• Ave. US household spends 5,781 on food in 2004
• Roughly 2,440 per capita per year (13 of
  budget)
• 3,347 for food at home
• 2,434 for food away from home

9
Farm Size Numbers

• Number of U.S. farms decreasing?
• 1974 - 2,314,000
• 1992 - 1,925,000
• 2004 2,107,000
• Average size of US farms increasing
• 1985 - 426 acres
• 2006 446 acres
• Number of farms - by revenue
• gt 250,000 7.9
• 100,000 to 250,000 7.9
• lt 100,000 84.7

10
Farm Size Numbers

• lt 2 of US farms generate nearly 50
  of gross ag sales
• Mega Farms
• 76 of gross sales generated by lt 8 of farms
• 80/20 rule
• Trend towards more, but smaller, farms in VA
• More on-farm processing, value-added operations
• Niche marketing
• Gentleman Farming or Retiree Farmers

11
3 Farm Types

• Mega farms (gt 250,000 revenue)
• Multiple families or generations
• May be associated with corporations
• Traditional farms (50 - 250,000 revenue)
• Single family units
• Traditionally high dependence on government
  payments
• Get bigger or get out
• Lifestyle farms (lt 50,000 revenue)
• Off-farm income is critical
• In it for the rural lifestyle

12
US Leading Enterprises (by Receipts)

• Livestock 123.5 billion
• Cattle/calves 47.2 bil
• Dairy 27.4 bil
• Broilers 20.4 bil
• Hogs 14.3 bil
• Crops 117.7 billion
• Corn 22.1 bil
• Vegetables 17.2 bil
• Greens/nursery 15.6 bil
• Soybeans 18.4 bil
• Roughly 50 Livestock vs 50 Crops for US over
  the years

13
VA Leading Enterprises (by Receipts)

• 68 Livestock vs 32 Crops for VA
• Poultry eggs
• Cattle calves
• Dairy products
• Greenhouse/nurseries, floriculture, sod
• 46,800 farms (2006)
• 70,000 operators
• 8.5 million acres (2006)
• 182 acres/farm (2006)

14
Virginia Agriculture

• 23.3 billion of land buildings
• 2.4 billion in farm debt
• Farm Credit System
• Commercial Banks
• Owner Financing
• Debt/Asset ratio 9.9
• Skewed by hobby farms?
• Cash expansion

15
Virginia Agriculture

• Average age of farmer 57 yrs (2006)
• 1 of principal operators are lt 25 yrs old
• 23 are lt 45 yrs old
• 50 are gt 55 yrs old
• 2,213 Megafarms (2006 data) - 4.4
• 3,557 Traditional farms - 7.6
• 41,836 Lifestyle farms - 88
• 14 of principal operators -- female

16
Virginia Agriculture

• Ave. value of farm RE 2,850/acre
• 2.4 billion/yr in production (2006)
• 2.05 billion/year in expenses
• Costs roughly 0.87 to produce 1 of ag sales
• 503 million in Net Farm Income
• About 10,600/farm

17
Misc. Info

• GMOs use em or not?
• Corn 40 of planted acreage
• Soybeans 75
• Cotton 73
• Certified Organic (US)
• 6,949 growers
• Crops
• Hay/Silage
• Wheat
• Soybeans

• Livestock
• Turkeys
• Milk cows
• Beef cows

18
Legal Organization of Farms

• Sole proprietorships
• Individuals or families
• 90 of farms
• 52 of gross sales
• Partnerships
• 6 of farms (and dropping)
• 18 of gross sales
• Corporations (C S-corps)
• 4 of farms
• 28 of gross sales

19
Government Payments

• Percent of net farm income from government
  supports
• Over 50 red zone
• 20-50 yellow zone
• Less than 20 green zone
• EPA replacing USDA in importance

GovernmentPayment Twilight Zone
20
Age Wave

• 70 land transfer in next 15 years
• Own and rent / lease
• Strategic alliances
• Granny landlords - 1st wave
• Non-farm children - 2nd wave
• Retirement planning
• Social Security aint gonna cut it
• Maximum of approx. 25,000/yr from SSA
• Consider investing 5 - 10 of net farm income
  outside of agriculture
• Lowers taxes, free loans, lower risk exposure,
  etc.

21
Age Wave

• 60-80 of lifetime health care cost during last 6
  months of life
• Life expectancy after age 65
• 1995 2001
• Male 15.6 16.4
• Female 18.9 19.4
• Transition planning is critical to longevity of
  farm
• Ownership of assets
• Management responsibilities

22
Median Farm Household

• Net worth 339,000
• For non-ag self-employed 329,000
• For non-farm 73,400
• Living expense of 43,000 annually including
  income tax
• Increasing by 7 annually
• 15 to 20 hidden in farm expenses
• Insurances, fuel, food, etc.
• 125 to 150 greater for the older generation
• Medical expenses, elder care, travel, leisure

23
Going Home?

• So you want to return to the family farm, eh?
• To generate 40,000 disposable income
• Assuming 85 expense/receipt ratio
• You need to generate 267,000 of GROSS income
• How many cows is that? Acres? Orchids?
• If you have a 20,000/yr off-farm job
• Need to generate 133,500 of gross income per
  year!

24
Farm Household

• 31 lack health insurance
• Never, NEVER go without health ins.
• Disability insurance
• Yeah, right!!
• Emergency savings?
• Yeah, right!
• Retirement investments?
• What is the typical retirement plan?

25
Todays Agriculture

• Requires creative thinking
• Color outside the lines
• Cash flow is king!!
• Treat it like a business!!
• Business side vs. production side?
• Marketing will be crucial
• Use the tools, strategic alliances
• Technology - use it or not?
• Nothing wrong with low-tech!

26
Todays Agriculture

• Salary farming increases
• Farm owner hired manager
• Off-farm employment
• 55 of principal operators work off the farm
• For living income and benefits!!
• Labor issues
• Where will the labor come from?

27
Todays Agriculture

• Environmental concerns!!
• Nutrient management plans
• Waste management (hazardous, non-)
• Urban pressure
• Land and resources
• Votes (check out the electoral map)
• Water
• Availability and quality

28
Sources of Information

• Statistical Abstract of the United States 2005.
  www.census.gov/statab/www
• Virginia Agricultural Statistics
  www.nass.usda.gov/va/bulletin99.htm
• National Agricultural Statistics Service
• www.usda.gov/nass/