The Economic Research Service (ERS) developed a farm typology which categorizes farms into more homogeneous groups than do classifications based on sales volume alone, producing a more effective policy development tool. The typology is used to describe U.S. farms.Farm Management,

Banker, David E.

Hoppe, Robert A.

Perry, Janet E.

English

Research Papers in Economics

ERS Farm Typology
for a Diverse
Agricultural Sector
Economic
Research
Service
Agriculture
Information
Bulletin
Number 759
September 2000
United States
Department of
AgricultureF
arms vary widely in size and other characteristics, ranging from very small
retirement and residential farms to establishments with sales in the millions. 
A farm typology developed by the Economic Research Service (ERS) categorizes
farms into more homogeneous groups than classifications based on sales volume
alone, producing a more effective policy development tool.
The typology is based on the occupation of operators and the sales class of
farms. In the case of "limited-resource" farmers, the asset base and total house-
hold income—as well as sales—are low. Compared with classification by sales
alone, the ERS typology is much more reflective of operators' expectations from
farming, stage in the life cycle, and dependence on agriculture.
The typology identifies five groups of small family farms (sales less than
$250,000): limited-resource, retirement, residential/lifestyle, farming occupa-
tion/lower-sales, and farming occupation/higher-sales. To cover the remaining
farms, the typology identifies large family farms, very large family farms, and non-
family farms.
The groups differ in their contribution to agricultural production, their product
specialization, program participation, and dependence on farm income.
The Heartland illustrates farm diversity
Percent of region’s farms
Limited-
resource
Residential/
lifestyle
Large
Small family farms
(sales less than $250,000)
Other 
family farms
0
10
20
30
40
50
Retire-
ment
Very
 large
Non-
family
Farming occupation
Lower-
sales
Higher-
sales
ERS Farm Typology for a
Diverse Agricultural SectorDefining the Farm Typology Groups
Limited-resource. Any small farm with gross sales less than $100,000, total
farm assets less than $150,000, and total operator household income
less than $20,000. Limited-resource farmers may report farming, a non-
farm occupation, or retirement as their major occupation. 
Retirement. Small farms whose operators report they are retired (excludes
limited-resource farms operated by retired farmers).
Residential/lifestyle. Small farms whose operators report a major occupation
other than farming (excludes limited-resource farms with operators
reporting a nonfarm major occupation).
Farming occupation/lower-sales. Small farms with sales less than $100,000
whose operators report farming as their major occupation (excludes 
limited-resource farms whose operators report farming as their major
occupation). 
Farming occupation/higher-sales. Small farms with sales between $100,000
and $249,999 whose operators report farming as their major occupation.
Large family farms. Farms with sales between $250,000 and $499,999.
Very large family farms. Farms with sales of $500,000 or more.
Nonfamily farms. Farms organized as nonfamily corporations or coopera-
tives, as well as farms operated by hired managers.
* The $250,000 cutoff for small farms was suggested by the National Commission on 
Small Farms.
Small Family Farms (sales less than $250,000)*
Other Farms
Differences among farm typology groups (e.g., product special-
ization, program participation) are illustrated in the following
pages using 1997 data from the Agricultural Resource
Management Study. The ARMS is an annual survey conducted
by ERS and by USDA’s National Agricultural Statistics Service.Share of Farms, Assets, and Production
Most farms are small, but small farms account for a modest share of production. 
 Ninety-two percent of farms are small, and small farms account for about 70 per-
cent of the assets and land involved in farming.
 Large family farms, very large family farms, and nonfamily farms account for 61
percent of production. 
Farm assets Acres operated
0
20
40
60
80
100
Retirement
Residential/
lifestyle
Percent
Nonfamily farms
Very large family farms
Large family farms
Higher-sales
Lower-sales
Limited-resource
Other 
family farms
Small family farms
(sales less
than $250,000)
Share of farm assets and of acres operated
Value of production
0
20
40
60
80
100
Retirement
Residential/
lifestyle
Percent
Nonfamily farms
Very large family farms
Large family farms
Higher-sales
Lower-sales
Limited-resource
Other 
family farms
Small family farms
(sales less
than $250,000)
Share of total farms and of production
Number of farmsSpecialization and Diversification 
Specialization and diversification vary among the farm typology groups.
 Many small family farms specialize in beef cattle, which often have low labor
requirements compatible with off-farm work and retirement.
 In contrast, two commodity groups—cash grains and dairy—account for nearly two-
thirds of all higher-sales small farms and over half of large family farms.
 Many small farms specialize in a single commodity, but higher-sales small farms,
large family farms, and very large family farms tend to produce multiple commodities.
0
20
40
60
80
100
Limited-
resource
Residential/
lifestyle
Large
Small family farms
(sales less than $250,000)
Other 
family farms
Retire-
ment
Non-
family
Farming occupation
Lower-
sales
Higher-
sales
Very
 large
Based on 26 commodity groups.
Percent
Share of farms, by number of commodities produced
1 commodity group  2 or 3 groups  4 or more groups
Limited-resource
Retirement
Residential
Lower-sales
Higher-sales
Large
Very large
Nonfamily farms
0 2 04 06 0
Cash grains 
Beef
Dairy
Percent
Share of farms specializing in cash grains, beef, and dairy
Small family farms
(sales less 
than $250,000)
Other family 
farms
Farming
occupation
Commodity accounts for at least half the farm’s value of production. Estimates of dairy farms were 
suppressed for selected groups, due to insufficient observations.Government Program Participation
All farm typology groups participate in government farm programs to some
extent, but the relative importance of the programs varies.
 Transition payments are most important to higher-sales small farms and large 
family farms. 
 The largest portion of government payments goes to higher-sales small farms.
 Retirement and residential/lifestyle farms account for half of the acreage in the
Conservation Reserve and Wetlands Reserve Programs (CRP and WRP).
0
20
40
60
80
100
Percent of payments/acres
Distribution of total farm program payments and of conservation 
program acreage
Small family farms
(sales less
than $250,000)
Other family farms
Total farm 
program payments
Acres in CRP
or WRP
Retirement
Residential/
lifestyle
Nonfamily farms
Very large family farms
Large family farms
Higher-sales
Lower-sales
Limited-resource
Farm program payments include payments from the Conservation Reserve and Wetlands Reserve Programs,
transition payments, agricultural disaster payments, Environmental Quality Incentive Program payments,
and state and local program payments.
Limited-resource
Retirement
Residential
Lower-sales
Higher-sales
Large
Very large
Nonfamily farms
0 2 04 06 08 0
Percent of farms
Small family farms
(sales less
than $250,000)
Other family 
farms
Farming
occupation
Share of farms receiving transition payments and payments from
the Conservation Reserve or Wetlands Reserve Program
* Payments made to commodity-program participants under 1996 Farm Act.
Receive transition 
payments*
Receive CRP or 
WRP paymentsCost Control
"Top performing" farms are defined as the top 25 percent of each typology
group, ranked by returns to operators' labor and management.
 Top performers in each group control expenses, resulting in a 30- to 50-percent
gross cash margin (the expense ratio subtracted from 100 percent).
 Regardless of group, there are farms earning positive returns.
Household Income
Dependence on farm income varies by farm size.
 Households operating very large farms, large farms, and higher-sales small farms
receive a substantial share of their income from farming.
 The remaining small farm households derive virtually all income from off-farm
sources.
Percent
The operating expense ratio measures percentage of gross cash income absorbed by cash 
operating expenses.
0
50
100
150
200
Limited-
resource
Residential/
lifestyle
Large
Small family farms
(sales less than $250,000)
Other 
family farms
Retire-
ment
Non-
family
Farming occupation
Lower-
sales
Higher-
sales
Very
 large
100 percent
Operator expense ratio for top performing farms
Income exceeds expenses 
when the ratio is less than 100 
(returns are positive)
Top performing farms  Other farms
$1,000 per household
-50
0
50
100
150
200
250 Farm earnings Off-farm earnings Total household income
Limited-
resource
Residential/
lifestyle
Large
Small family farms
(sales less than $250,000)
Other 
family farms
Retire-
ment
Farming occupation
Lower-
sales
Higher-
sales
Very
 large
Average operator household income, by source
U.S. average household
income: $49,692P Po ol li ic cy y   I Im mp pl li ic ca at ti io on ns s   R Re ev ve ea al le ed d   
b by y   t th he e   F Fa ar rm m   T Ty yp po ol lo og gy y
 Production is concentrated among large family farms, very large family farms,
and nonfamily farms. The nation relies on larger farms for most of its food and
fiber, despite the high number of small farms.
 As custodians and managers of the bulk of farm assets—including land—small
farms play a major role in natural resource and environmental policy.
Retirement and residential/lifestyle farms account for half the land in the
Conservation Reserve Program and Wetlands Reserve Program. 
 Transition payments are most relevant to higher-sales small farms and large
family farms. These farms tend toward specialization in cash grains, which are
covered by transition payments.
 Households operating large and very large farms rely heavily on farm income.
Although these households receive substantial off-farm income (on average), they
derive most of their income from farming.
 The nonfarm economy is critically important to households operating small
farms. Except for the higher-sales group, most households with small farms rely
on off-farm sources for virtually all their income.
For further information contact:
Robert A Hoppe (202) 694-5572   rhoppe@ers.usda.gov
Janet E. Perry (202) 694-5583   jperry@ers.usda.gov
David Banker (202) 694-5559    dbanker@ers.usda.gov
United States Department of Agriculture
Economic Research Service
www.ers.usda.gov
THE UNITED STATES DEPARTMENT OF AGRICULTURE IS AN EQUAL OPPORTUNITY PROVIDER AND EMPLOYER

ERS Farm Typology for a Diverse Agricultural Sector

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