Agricultural & Applied Economics Association

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1 Agricultural & Applied Economics Association Farm Numbers, Farm Size and Farm Income Author(s): Jackson V. McElveen Source: Journal of Farm Economics, Vol. 45, No. 1 (Feb., 1963), pp Published by: Blackwell Publishing on behalf of the Agricultural & Applied Economics Association Stable URL: Accessed: 04/05/ :32 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit organization founded in 1995 to build trusted digital archives for scholarship. We work with the scholarly community to preserve their work and the materials they rely upon, and to build a common research platform that promotes the discovery and use of these resources. For more information about JSTOR, please contact support@jstor.org. Agricultural & Applied Economics Association and Blackwell Publishing are collaborating with JSTOR to digitize, preserve and extend access to Journal of Farm Economics.

2 FARM NUMBERS, FARM SIZE AND FARM INCOME JACKSON V. MCELVEEN* Economics Research Service, USDA** HE 1959 Census of Agriculture revealed a more rapid decline in farm numbers during than for any previous decade. Coupled with this decline was a record rate of growth in size of farm, as measured by the value of farm products sold. The number of farms marketing $10,000 or more increased by three fifths-nearly double their numerical incease in the preceding decade (Table 1). The smaller farms, generally considered the crux of agriculture's "low income" farm problem, declined substantially in number. Annual estimates of farm income published by the Department of Agriculture indicate that appreciable gains were made in average farm income and per capita income of the farm population during the decade of the 1950's.1 Changes of such magnitude in these statistical series have given rise to a popular belief that the continuously decreasing number of farms accompanied by the consolidation and enlargement of farms, has raised the farm incomes of the farmers who remain. This popular belief presents a paradox, for it is patently inconsistent that farmers have become "better off" during a period in which secularly declining net farm income has been widely publicized as one of the nation's major domestic problems. The central purpose of this paper is to dispel this popular belief by developing the following argument: 1. Part of the increase in the number of larger farm businesses probably resulted from a more complete accounting of the value of farm products sold by the 1959 census than in earlier censuses. 2. From the standpoint of farm income, the growth in farm size between 1944 and 1959 was more than offset by the reduced margin of real net income to gross sales of farm products. 3. The very rapid decline in the number of farms has boosted the arithmetic means of a variety of farm income and resource statistics by reducing their common denominator (the number of farms), but it does not necessarily follow that farm incomes of persons remaining in agriculture have improved. In the sections that follow, statistical series relating to the numbers and sizes of farms and the average farm income are examined to demonstrate * The views expressed are those of the author and do not necessarily represent those of the Economic Research Service or the USDA. * * Stationed at Clemson, South Carolina. The Farm Income Situation, FIS 187, ERS, USDA, July

3 2 JACKSON V. MCELVEEN TABLE 1. NUMBER OF FARMS BY VALUE OF FARM PRODUCTS SOLD, COUNTERMINOUS UNITED STATES, SELECTED YEARS, farm ~Value of enumber of farms1 Value of farm products sold Dollars Thousands Thousands Thousands Thousands Thousands 10,000 or more ,000-9, ,500-4, , Less than 2, ,185 3,722 3,2923 2,6813 1,6373 Total... 6,097 5,859 5,379 4,783 3,708 1 Farm numbers for are compiled from published reports of the censuses of agriculture for those years. Data for earlier years appear in Jackson V. McElveen, Family Farms in a Changing Economy, USDA, AIB 171, March 1957, Table 4, p Not fully comparable. The more restrictive definition of a farm used in the census of 1959 resulted in exclusion of approximately 232,000 places that would have qualified as farms under the definition used in the censuses of 1949 and The censuses of 1939 and 1944 used a still more inclusive definition than that used in 1949 and Includes abnormal farms-public and private institutional farms, etc. how misinterpretation of the series has led to false optimism that farm incomes have improved. There is no attempt, however, to determine the actual level of farm income or to appraise its equity vis-a-vis incomes of nonfarm segments of the economy Growth Rate Analyzed On the basis of past relationships, growth in the number of larger farm businesses between 1954 and 1959 (as indicated by the 1959 census economic classification of farms) was much more than would be expected from the increase of 17 percent in the volume of farm marketings estimated by USDA.2 The suspicion of abnormality in the level of farm product sales reported by the census of 1959 led to an examination of this level for possible bias. The total value of sales reported by each census was compared with the estimates of cash receipts from farm marketings published by the Department of Agriculture. The USDA series is based largely on known records of products marketed through regular trade channels and is generally accepted as representing the best available measure of total value of farm products sold. If the USDA series on total cash receipts is accepted as a guide, the 1959 Census of Agriculture made a more complete accounting of the sales of farm products than any census since The value of farm products sold reported in the census of 1959 amounted to 91 percent of the USDA estimate for that year (Table 2). This is a substantial increase in coverage over the censuses of 1939 through 1954, which accounted for 2 Ibid.

4 FARM NUMBERS, FARM SIZE AND FARM INCOME 3 TABLE 2. COMPARISON OF USDA ESTIMATES OF TOTAL CASH RECEIPTS FROM MARKETINGS WITH SALES OF FARM PRODUCTS AS REPORTED BY THE CENSUS OF AGRICULTURE, UNITED STATES, Cash receipts from Value of farm prod- Year farm marketings, ucts sold, Census C ensus as p erentage USDA estimate1 of Agriculture2 o UDA estmate Index Million dollars Million dollars Percent 1959 = ,872 6, ,536 16, ,828 22, ,953 24, ,512 30, The Farm Income Situation, FIS 187, ERS, USDA, July From reports of the U. S. Censuses of Agriculture. only about 80 percent of the total farm marketings reported in the USDA estimate for those years.3 The more complete enumeration by the 1959 census could account for a large part of the apparent growth in size of farm business between 1954 and In a size classification based on value of farm products sold, a more complete accounting would have the same effect as an increase in yield or in unit prices for farm products. It would shift the value distribution to the right, increasing the number of farms in the larger value categories. If one assumes that the more complete enumeration was distributed proportionately among size groups, then this enumeration accounted for about a third of the 200,000 increase between 1954 and 1959 in the number of farms with marketings of $10,000 or more.4 The more complete enumeration would have even greater numerical impact on the smaller end of the value scale, where number densities are greatest. Here it would shift about 200,000 farms from below the $2,500 value interval to above it. If this adjustment is made, the size of farms grew at only a slightly greater rate during the last half of the 1950's than during the first half. ' Differences in the census data on value of farm products sold and the USDA estimates of cash receipts from farm marketings are due partly to differences in accounting procedure. For example, census data on sales of crops relate only to those produced during the crop year, while the USDA figure relates to all crops sold during the calendar year and includes inventory change. Part of the difference between the series, however, is believed to be due to under-reporting and to incomplete enumeration by the census. The more complete coverage by the 1959 census appears to be due mostly to a better accounting of the value of livestock sold. 4 These estimates were derived by fitting a curve to the cumulated numbers plotted against the value of product class intervals, shifting the curve to the left along the value scale by 11 percent, and reading off the new numbers thus aligned with the class intervals.

5 4 JACKSON V. MCELVEEN The Relation of Gross Sales to Real Net Cash Farm Income The increase in the number of larger farms (measured by the gross value of farm products sold) has been interpreted in some quarters to mean that farm incomes have improved. It is held that (a) the larger economic classes of farms, for example, those with market sales of $10,000 or more, usually provide an "adequate" level of income to farm operator families and (b) since these farms have increased both in number and as a proportion of all farms, there are now more farm families with "adequate" incomes and fewer families with "substandard" incomes. This otherwise logical conclusion, however, embodies an implicit assumption that the ratio of real net farm income to gross sales of farm products did not change appreciably during the time period-an assumption that does not hold. Changes in the number of farms classified by the gross value of farm products sold are quite inadequate as a measure of real net farm income because of changes in (a) the farm input mix, (b) the cost-price relationships and (c) the purchasing power of the dollar. During the last 15 years these changes have brought about a steady decline in the real net farm income realized from any given level of gross sales of farm products. A brief explanation of these changing relationships follows: (a) The growth in farm business size came about largely from application of increased amounts of purchased inputs such as fertilizers, seeds and feeds. Mechanization of farm operations has also meant greater cash outlays for petroleum fuels and electricity.5 While these changes have increased, the total farm output per unit of total input, a larger share of the gross income has been used to pay for nonfarm produced supplies and services. As a result, even if cost-price relationships had not changed, net income to farmers would be a declining proportion of gross income from farm marketings. (b) However, rising costs of farm supplies relative to prices received for farm products have created the well-known "cost-price squeeze." This has further reduced the net income realized from a given amount of gross farm marketings (Table 3). (c) In addition to becoming a smaller proportion of gross income, the purchasing power of any given amount of net farm income has declined due to the general rise in the cost of living. When these diverse trends are taken into account, real net cash farm income has decreased from two fifths to a fourth of gross farm sales during the last decade alone (Table 4). Stated another way, between 1949 and 1959 a farmer had to increase the physical volume of his farm marketings by two thirds just to maintain his real net cash income from farm- ' R. A. Loomis and Glen T. Barton, Productivity of Agriculture, United States, , USDA, Tech. Bul. 1238, April 1961.

6 FARM NUMBERS, FARM SIZE AND FARM INCOME 5 TABLE 3. SELECTED INDICES OF PRICES RECEIVED AND PRICES PAID BY FARMERS, UNITED STATES, Selected indices, 1959=100 Year Prices by Prices paid by farmers Prices paid by farmers Year Prces received for all commodities for all commodities farmers for all bought for use in bought for use in farm products sold production family maintenance Source: Converted to 1959 base from data contained in Agricultural Statistics, USDA, 1960, Table 682 and 1947, Table 681. ing and between 1944 and 1959 he had to more than double his marketings to realize the same real net cash income from farming. Thus, a farm business grossing $10,000 in 1959 yielded only about the same real net cash farm income as one that grossed $6,000 in 1949 or $4,300 in If changes in the number of farms by economic class are used to determine income, the pertinent question is: Has the shift to larger farms been fast enough to compensate for the reduced margin of real net cash farm income? In an attempt to answer this question, commercial farms in each census year were divided into three real net cash farm income groups as determined by the gross farm sales required to return equal net incomes. Using the 1959 economic classification as a base, three groups of com- TABLE 4. RELATIONSHIP OF PHYSICAL QUANTITY OF FARM MARKETINGS TO FARM OPERATORS' REAL NET CASH INCOME FROM FARMING, UNITED STATES, SELECTED YEARS, Cash receipts Operators' net Net income as Cash receipts required from farm mar- ca. in a percentage of for each dollar of Year ketings at farming, pur- cash receipts net income 1959 prices1 chasing power in (Col. 2 Col. 1) (Col. 1 Col. 2) (1) () (3) (4) Million dollars Million dollars Percent Dollars 1959= ,879 6, ,013 14, ,706 11, ,222 10, ,512 8, The Farm Income Situation, FIS 187, ERS, USDA, July Cash receipts from farm marketings, deflated by index of prices received by farmers for all farm commodities. For index used, see Table 3. 2 Ibid. Includes government payment. Adjusted to include inventory change and net capital investment. Deflated by index of prices paid by farmers for all commodities bought for use in family maintenance.

7 6 JACKSON V. MCELVEEN TABLE 5. COMPUTATION OF GROSS VALUE OF FARM SALES REQUIRED TO RETURN THE SAME LEVEL OF FARM OPERATORS' REAL NET CASH INCOME FROM FARMING, UNITED STATES, SPECIFIED YEARS, Year Cash receipts Operators' ad- Cash receipts per dollar Census sales as Index of value from farm js usted real net of adjusted real net cash percentage of used to determine marketings cash income from income from farming USDA cash equivalent census (excludes govern- farming, purchas- receipts gross sales groups ment payments)1 ing power in 1959 Col. Col., Index Index Index 1mentpayments)1 dollars2 1959= = =1004 (1 (92) w (4) (5) (6) Million dollars Million dollars Dollars Percent Percent Percent ,872 6, , , , , ,953 10, ,512 8, The Farm Income Situations, FIS 187, ERS, USDA, July 1962, Table 10H, p Ibid. Farm operators' net cash income from farming, Table 20H (includes government payments); plus net inventory change, Table 11H; plus net investment in farm plant and equipment, Table 18H; deflated to 1959 purchasing power (index, Table 3). ' From Table 2. This adjustment corrects for differences in the level of reporting of farm products sold between Bureau of Census and USDA. 4 Column 4 multiplied by column 5. This index is multiplied by specified levels of gross sales in 1959 to determine the equivalent levels of gross sales in earlier censuses required to return the same real net cash income from farming. See Table 6. mercial farms were set up as follows: Highest income group-farms with gross sales of $10,000 or more; Middle income group-farms with gross sales of $5,000 to $9,999; Low income group-farms with less than $5,000 gross sales. For earlier years, this study determined the gross sales required to provide, on the average, a similar level of farm operators' real net cash income from farming, and estimated the number of farms in these class intervals. The computations involved in setting up these groups are as follows:6 (1) Farm operators' net cash farm income,7 adjusted to include inventory change and net capital investment, was deflated by the index of prices paid by farmers for family living items (Table 5). (2) This was divided into gross cash receipts from farm marketings to obtain the level of marketings required to return a dollar of real income, and expressed as an index (1959 = 100). (3) The index was adjusted to take account of different levels of census enumeration and multiplied by the appropriate value groupings in 1959 to compute the groupings for earlier years (Table 6). (4) Numbers of farms in these groups were determined by interpolation within the value groupings published by the census of agriculture. The author wishes it clearly understood that these data do not represent an attempt to estimate the number of farms grouped by net farm 6 For additional details of procedure see Jackson V. McElveen, Family Farms in a Changing Economy, USDA, AIB 171, March 1957, pp The Farm Income Situation, FIS 187, ERS, USDA, July The measure of net cash farm income used would be technically termed operators' net cash income from farming, including government payment (appearing in table 20H, page 58) adjusted for change in farm inventory and net cash investment and further adjusted for change in the purchasing power of the dollar. The measure used was believed to represent income that could be made available for family living expenses on a continuing basis.

8 FARM NUMBERS, FARM SIZE AND FARM INCOME 7 income. For such an estimate, the gross sales groupings of the census are not an ideal base from which to make such computations. The study does try to demonstrate the type of adjustment that is implicit and the trend that prevails after the adjustment is made when gross sales groupings are used to measure change in net farm income. TABLE 6. GROSS SALES GROUPS REQUIRED TO RETURN THE SAME LEVEL OF FARM OPERATORS' REAL NET CASH INCOME FROM FARMING, AND NUMBER AND PERCENTAGE DISTRIBUTION OF COMMERCIAL FARMS IN THESE GROUPS, UNITED STATES, SPECIFIED YEARS Commercial farms' Year Highest income Middle income Lowest income Tota group group group Intervals of gross value of farm products sold2 Dollars ,860 or more 1,430 to 2,860 Less than 1,430 o ,080 or more 1,540 to 3,080 Less than 3 1, ,420 or more 2,710 to 5,420 Less than 2, ,830 or more 3,415 to 6,830 Less than 3, ,000 or more 5,000 to 10,000 Less than 5,000 Number of farms4 Thousands , 920 4, ,450 1,000 1, 250 3, , ,280 3, ,120 2, ,413 Percentage distribution of farms Percent Noncommercial farms (part-time and part-retirement farms) were excluded because (a) the reduction in number of farms resulting from the more restrictive definition of a farm used in the 1959 census was principally among the noncommercial categories, creating difficulties in obtaining trend; (b) the noncommercial farms, by definition, are semiretirement units of farmers who are not dependent primarily on farm income. If included, however, the noncommercial farms would all be contained in the lowest farm income group. 2 The intervals for each year are those estimated to return a real net cash farm income equal to that received by farm operator families in these groups in Estimates are based on the ratio of real net cash farm income (adjusted for inventory change and net capital investment) to gross receipts from farm marketings. The 1959 intervals were multiplied by the Index of Value, appearing in Table 5, column 6, to obtain the intervals for earlier years. 3 Commercial farms, as defined by the 1959 Census of Agriculture, include all farms having sales of farm products valued at $2,500 or more and farms with sales of $50 to $2,500 provided the farm operator (a) was less than 65 years old, (b) did not work off the farm as much as 100 days during the year and (c) reported a value of farm products sold greater than the income of the family from off-farm sources. 4 Number of commercial farms contained in the intervals of value for the specified group and year. Numbers were determined by interpolation from the classifications of number of farms by value of farm products sold (United States Censuses of Agriculture). 5 The numbers of commercial farms for years prior to 1959 are estimates by the author from a forthcoming manuscript on changes in the number of farms by economic class.

9 8 JACKSON V. MCELVEEN The adjustment is based on national average relationships of real net cash farm income to gross sales of farm products, and these relationships undoubtedly vary substantially among different sizes and types of farms and between different geographic areas of the United States. It is recognized that net income is a higher proportion of gross on the smaller commercial farms than the national average relationship would indicate. Many of these farms are small because they did not make the investments necessary to increase the volume of marketings.8 Since the primary aim, however, was to determine trend rather than absolute number, it is believed that these differences do not exert undue bias for the purposes used here. The percent of farms in the highest income group declined successively during each five-year period between 1944 and These comprised a third of the commercial farms during the decade, having declined from two fifths of the commercial farms in The lowest income group declined in number of farms during the decade of the 1950's but accounted for approximately the same proportion (two fifths) of the commercial farms. It appears that the rapid growth in size of farm businesses has not increased the farm incomes of remaining farmers. The failure of net farm income to rise during a period of general farm business expansion is not without adequate theoretical explanation. The explanation supports the argument that farmers, as a group, are unable to improve their incomes by farm business expansion because their collective efforts to do so increases the supply of farm products. Taken in conjunction with a relatively inelastic demand for farm products, this increased supply depresses prices and incomes unless offset by comparable gains in efficiency through reduction in cost. The individual farmer who increased the size and efficiency of his farm operation is undoubtedly better off than he would be if he had not done so (or not as bad off). For in an industry comprised of numerous small firms, an individual's decision to produce or not to produce has no appreciable effect on the total supply and, hence, on the prices he receives for his products. But for agriculture as a whole, the apparent futility of increasing size of farm business as a means of increasing farm income seems to liken the process, as one economist said, to the proverbial "treadmill."9 Increasing the size of farm is usually associated with gains in labor productivity, resulting both from mechanizing farm operations and ap- 8 Numerous studies have indicated that purchased inputs, particularly for such items as hired labor and feed, are a lesser proportion of total inputs on the smaller farms. For example, see U. S. Census of Agriculture, 1954, Vol. III, Special Reports, Part 9; Farmers and Farm Production in the United States, a cooperative report of USDA and U.S. Bureau of the Census, CPO, Washington, D.C., 1956, Chapters I-IX. 9 Willard W. Cochrane. "Farm Prices, Myth and Reality," The Agricultural Treadmill, University of Minnesota Press, 1958, Chapter 5.

10 FARM NUMBERS, FARM SIZE AND FARM INCOME 9 TABLE 7. CHANGE IN NUMBER OF FARMS AND VALUE OF FARM PRODUCTS SOLD FOR FARMS GROUPED BY THE VALUE OF FARM PRODUCTS SOLD, UNITED STATES, 1949 AND 1959 Value group Number of farms Value of farm products sold Net change Net change Dollars Thousands Billion dollars 10,000 and over ,000-9, ,500-4, Less than 2,5001 3,292 1,637-1, Totall 5,879 3,701-1, Not fully comparable. The more restrictive definition of a farm used in the census of 1959 resulted in exclusion of approximately 232,000 places that would have qualified as farms under the definition used in the census of By definition, the farms excluded were small places selling less than $250 worth of farm products. Their exclusion affects total number of farms much more than the total value of farm product sold. For a discussion of the change in the census definition of a farm, see Introduction, Vol. II, 1959 Census of Agriculture. plying a variety of yield-increasing techniques. The shift to larger farms has undoubtedly made agriculture more efficient. But it does not necessarily follow that these gains have increased farm income. The Impact of Fewer Farms on Statistical Averages The total number of farms in the United States serves as the divisor for computing the arithmetic mean of a wide variety of income and resource data. As a result of decreases in the total number of farms, these averages, for the most part, have risen substantially.10 Average operators' net cash income per farm increased by a fifth during and showed a slight gain even after an adjustment for changes in the cost of living.1l These and related averages, however, convey the false impression that incomes of individual farmers have made similar gains. The rationale for this interpretation is that fewer farmers mean a larger farm resource base for those who remain in agriculture; thus, the farm income "pie" can be divided into fewer pieces. Actually, the income and farm resources that were contained in the farms that went out of agriculture, even if transferred to the farmers that remain, are too meager to affect appreciably either their farm resource base or their net income. To illustrate this point, the decrease of more than 13 million in the number of farms marketing less than $2,500 of farm products during was associated with a decrease of only $1 billion in the value of farm products sold from this group (Table 7). The decline in number of farms in all economic classes of less than $10,000 0 This may be due partly to failure to make a full correction for changes in the definition of a farm. " The Farm Income Situation, ibid.

11 10 JACKSON V. MCELVEEN decreased the value of farm products sold from these economic classes of farms by only $2.5 billion. Due to the wide range and extreme right skewness of the farm income distribution, reductions in number of smaller farms over time can cause the mean income to increase even though incomes of the remaining farmers declined. All that is required is a greater proportionate decrease in number of farms (the denominator) than in farm income (the numerator). Income from off-farm sources has been an increasing component of the total income of farm people. During , real income of the farm population from nonagricultural sources (purchasing power in 1959 dollars) increased by nearly 10 percent ($7.1 billion in 1959). As a source of cash income to farmers, this increase has become almost as important as farm income. Taken in the aggregate, the increase in off-farm income offsets the decline in farm income, but this trend is also specious from the standpoint of income to commercial agriculture. An increase in offfarm income benefits only those farm families who are recipients, and then only in the proportion it comprises of their total income. For the farm operator families that depend primarily on agriculture for their livelihood, a large proportionate increase in off-farm earnings might be offset by a relatively small decline in their farm income. On the other hand, the increase in off-farm income indicates the lessening dependence of many farmers on farm income alone. Nevertheless, the reductions in the number of farms and of the farm population represent a measure of progress. Presumably, those who gave up farming found more profitable job alternatives elsewhere, although the current level of unemployment leaves some doubt that this presumption is fully warranted. The fact that fewer people now depend on agriculture for their livelihood probably tempers the magnitude of future adjustments faced by the farm population. What might be considered a general measure of progress for the agricultural industry, however, must not be misinterpreted as progress in income improvement by individual farmers. Income by Economic Class of Farm What has happened to incomes of farm operator families cannot be determined from changes in the mean income of all farm families or by changes in the number and size distribution of farms. While these statistical series, if correctly interpreted, are useful tools for gauging the probable direction of change, the question can be answered only by a comparison of income data for the various segments of agriculture. There are no published time comparisons of income of farm operator families by economic class; however, separate estimates are available for both 1949 and Since the estimates were derived from different sources

12 FARM NUMBERS, FARM SIZE AND FARM INCOME 11 TABLE 8. AVERAGE CASH INCOME OF FARM OPERATOR FAMILIES BY SOURCE OF INCOME FOR FARMS GROUPED BY THE TOTAL VALUE OF FARM PRODUCTS SOLD FROM THE FARM, UNITED STATES, 1949 AND 1959 Average cash income of farm operator families, purchasing power in 1959 dollars Farms grouped by the value of farm Net cash income Off-farm Total cash products sold from farm income income Dollars 10,000 or more 9,200 6,636 1,148 1,978 10,348 8,614 5,000 to 9,999 3,965 2, ,567 4,762 3,782 2,500 to 4,999 2,196 1, ,077 3,088 3,865 Less than 2, ,545 2,884 2,243 3,100 1 Computed from E. W. Grove, "Per Capita Income by Economic Class of Farm, 1949," Agricultural Economics Research, Vol. 8, No. 2, April 1956, pp Net income from nonfarm businesses or professional practice is included in farm income and excluded from offfarm income for As an indication of the probable effect of this on the comparability of the data, the average income from off-farm business or self-employment was $371 in 1955 for farms with gross sales of $10,000 or more. See H. G. Halcrow, "Part-time Farming," 1954 Census of Agriculture, Chapter VIII, Part 9, Vol. III. 2 From Food and Agriculture, A Program for the 1960's, USDA, January of data and by somewhat different methods, it is doubtful that they are fully comparable. Grove developed estimates of farm operator family income by economic class of farm for 1949 by matching a sample of agriculture and population schedules from the 1950 census.l2 Estimates for 1959 were developed in the Department of Agriculture from returns of the 1960 Sample Census of Agriculture.l3 The 1949 income estimates were converted to dollars of 1959 purchasing power and compared with the 1959 income estimate (Table 8). Real net cash farm income per farm declined for each major size group of farms between 1949 and On the other hand, average real income from off-farm sources increased for each category of farms. The increase in off-farm income more than offset the decline in farm income for farms with less than $5,000 of farm products sold. A rather substantial improve- ' Ernest W. Grove, "Per Capita Income by Economic Class of Farm, 1949," Agricultural Economics Research, Vol. 8, No. 2, April 1956, pp See also E. W. Grove, "Income of Farm Operator Families," Farms and Farm People, a cooperative report of the USDA and the Bureau of Census, June 1953, Chapter 3, pages In the latter mentioned publication, Grove devoted a large part of his analysis to the under-reporting of farm income in 1949 as revealed by the matching of schedules of the 1950 Censuses of Agriculture and Population. This analysis was carried forward in the subsequent publication by adjusting the farm income upward to agree with estimates of the Department of Agriculture and to be more consistent with the level of farm sales and farm expenditures reported by each economic class of farms. "3 Food and Agriculture, A Program for the 1960's, USDA, January 1962, page 50. Data are from the 1960 Sample Census of Agriculture.

13 12 JACKSON V. MCELVEEN ment in total cash income was registered by families on farms having less than $2,500 value of farm products sold. Most of these were classified as part-time and part-retirement farms by the 1959 census. For farm operator families on farms that sold products of $5,000 or more, the increase in off-farm income was not sufficient to offset a rather drastic decline in farm income. Families on these farms, comprising the large bulk of commercial agriculture, have apparently borne the brunt of the secular downward trend in aggregate net cash farm income. This is logically consistent with the argument presented in the preceding sections of this paper. Summary and Conclusion During , neither the substantial decline in the number of farms nor the rapid growth in business size of the remaining farms increased real net cash farm incomes. Real income shrank from two fifths to a fourth of gross receipts because of increased inputs and the decreased value of the dollar. Merely to maintain their farm incomes, farmers had to increase output by two thirds. Thus, despite the increase in farm size, real net income probably declined for all classes of farms. On smaller farms this decline was apparently offset by the increase in all off-farm incomes; but the total income of operator families on farms that marketed products valued at $5,000 or more probably declined sharply. Clearly, unadjusted statistical series on the number of farms of different economic classes are not always reliable indicators of farm income. As this article interprets the data, real net cash farm incomes on the larger commercial farms have decreased rather than increased.