Defining the "farm": What about multi-family operations?

By Mike Duffy
Associate director and agricultural
economist, and Jay Lillywhite
Graduate research assistant, economics

Every day seems to bring new changes to agriculture and heightened concerns about its structure in the United States. There are changes in the seed and pesticide industries, swine production and decreases in farm numbers.

The structure of agriculture can be viewed from many perspectives, including production, manufacturing, input suppliers and market concentration. Many studies have considered the on-farm production perspective: some interesting shifts have occurred that are worth reviewing.

Concern over the number and size of farms in the United States is not new. Possibly the earliest study was the Rural Life Commission appointed by President Theodore Roosevelt in 1908. There have been a number of commissions and studies since then, including the 1998 Small Farms Commission report.

Early reports: consolidate farms
Early reports concluded there were too many resources, including human resources, devoted to farming and that public policy and efforts should be devoted to improving efficiency and helping move people off the farm. A 1964 report went as far as setting a target to remove a certain percentage of the farms in existence. The argument was that by improving efficiency in agriculture (primarily decreasing the amount of labor involved), the labor force could move to town and contribute to the nation's development.

An early concern about production agriculture was its nature: Should it be done by family farms or corporate farms? Studies as early as Goldschmidt's work in the 1940s showed that the nature of agricultural production surrounding a community influenced the level of social amenities provided. He concluded that communities surrounded by family-owned farms were better off than communities surrounded by corporate farms.

Nationally, concerns about having too many resources devoted to farming began to change with the report commissioned by Secretary of Agriculture Bergland in 1979. This report, A Time to Choose, indicated that perhaps we had gone too far in removing people from agriculture, with negative consequences.

During the 1970s and 1980s, the difficulties facing family farms received a significant amount of attention. The crises led to all sorts of studies looking at the family farm and the structure of production agriculture. The term "family farm" became a flashpoint for people with differing views.

The most recent Small Farm Commission chose to avoid the family/corporate labels and look instead at farms on the basis of size. The commission's 1998 report, A Time to Act, devotes its recommendations to ways of helping small farms. (The report defines a small farm as one with gross sales of less than $250,000 per year.)

Another underlying theme over the past several decades has been the shifting proportion of farmers and the percent of production they represent. Today, the general rule is that 80 percent of the production comes from 20 percent of the farmers, which raises interesting questions about whether policy should be geared toward production or farmers.

All of this leaves groups such as the Leopold Center for Sustainable Agriculture, ISU Extension, and others in the land grant university system grappling with how to determine the appropriate audience and how best to serve that audience. In struggling with these issues, a consideration is that we have many farms where more than one family is involved with the operation. Such multi-family operations are "family farms" by generally accepted definitions, but may not meet the sales criteria used by the Small Farm Commission.

Center polls farmers
To assess the extent and impact of multi-family farms, the Leopold Center funded a 1997 survey of Iowa farmers. The survey, conducted by the Iowa Agricultural Statistics Service, consisted of telephone interviews conducted by trained interviewers.

Farm operators were asked how many families were involved in the management of their farm, as well as their current involvement in any other farms. To be considered "multi-family," the owner of the other farm must be an immediate family member: parent, child, sibling, uncle, aunt, niece or nephew.

We found that 16 percent of Iowa farms have more than one family involved with the management of the farm. Another 19 percent of the farm operators reported working for another operation owned by an immediate family member. Some respondents indicated that more than one family was involved with the management and they were working for another farm owned by an immediate family member. When duplications are removed, more than 25 percent of Iowa farms are multi-family farms.

Further analysis showed statistically significant differences between the multi-family operators and their single-family counterparts in 12 of the 16 individual characteristics examined. Multi-family operators are generally younger in age and consider themselves principally employed in farming more often than their single-family counterparts. Multi-family farms are larger in terms of the acres operated (both owned and rented), show a greater diversity in the number of commodities produced, generate larger farm incomes and have a higher percentage of farms that are legal partnerships or corporations.

Multi-family farm families have a higher gross family income with higher percentages of that income received from the family's farm, and less income from the principal operator's off-farm employment and passive income.

Ways to classify multi-family
Using sales figures to classify farms has been put forward as a means of avoiding the potentially inflammatory term "family farm." However, this approach also can pose problems. The USDA currently has a farm classification scheme based on farm sales: farms with sales of less than $50,000 are classified as "noncommercial" and farms with sales under $250,000 are classified as "small."

Using this classification, the survey shows that 56 percent of Iowa's farms are classified as noncommercial (sales less than $50,000), 37 percent are classified as small commercial (sales between $50,000 and $250,000), and 7 percent would be large commercial farms (sales greater than $250,000). For the noncommercial farms, 21 percent are multi-family farms. Thirty percent of the small commercial farms are multi-family and 35 percent of the large commercial farms are multi-family. Differences similar to those found in the overall population exist when the farms are classified based on farm sales. Due to small sample sizes, however, it is hard to make definitive statements about the differences within the large commercial category.

Farm impacts need more study
What is happening within production agriculture is a widespread concern. There are many different ways to measure the changes, many different interpretations of why the changes are occurring and many views about their impacts. One of the changes that has not been well documented is the extent and impact of multi-family farms. We are continuing to work on the analysis, but the results so far show that using sales level as a policy criterion may eliminate many true family farms from consideration in formation of agricultural public policy.

The Census of Agriculture, which will be released later this year, has been criticized for using $1,000 of agricultural sales to define a farm. However, we feel that such criticism overlooks an important point, namely, the extent of multi-family farms. Our work has shown that, overall, 26 percent of Iowa's farms are operated by more than one family. Even when classified by the amount of agricultural sales, one-third of all farms are multi-family.

No one measure is perfect. We need to do a better job of gathering data that truly represents what we intend it to represent. This is important for making policy, studying the structure of agriculture and gaining a clearer understanding of our audiences.

Return to the Fall 1998 Leopold Letter Index