A Decade of Change in Texas Agriculture Highlights and Trends from the Census of Agriculture

E-590 10/09 A Decade of Change in Texas Agriculture Highlights and Trends from the Census of Agriculture

A Decade of Change in Texas Agriculture Highlights and Trends from the Census of Agriculture Authors Dean McCorkle Extension Program Specialist Economic Accountability Dan Hanselka Extension Associate Gene Nelson Professor, Department of Agricultural Economics The Texas A&M University System Acknowledgments Valuable input to this report was provided by Mark Welch, Assistant Professor and Extension Economist Grain Marketing; Danny Klinefelter, Professor and Extension Economist Management; David Anderson, Professor and Extension Economist Livestock Marketing; and Mark Waller, Associate Department Head, Professor and Extension Program Leader for Agricultural Economics. The Census of Agriculture is the leading source of facts and statistics about agricultural production in the United States. It provides a detailed picture of U.S. farms and ranches every 5 years and is the only source of uniform, comprehensive agricultural data for every state and county in the United States. USDA Census of Agriculture Web site http://www.agcensus.usda.gov For the 2007 Texas data and reports, select Texas from the Census by States dropdown menu.

Texas Agriculture Overview While the Lone Star State has a long history of producing a wide variety of farm products, agriculture in Texas is undergoing major changes. An analysis of data from the three most recent U.S. Department of Agriculture Census of Agriculture reports shows that: The number of farms in Texas has increased by 8.4 percent since 1997. This increase was led by small farms. With the increase in the number of farms came a decrease in the average size of farm, from 587 acres per farm in 1997 to 527 acres in 2007. There were 6,046 farms with gross sales of over $500,000 in 2007, compared to 3,817 in 1997. Farming is a part-time pursuit for many operators in Texas: In 2007, 50 percent worked off the farm for more than 100 days, and 90 percent received more than half of their household income from off the farm. The average age of the principal farm operator has increased in Texas. The average age was 56 years in 1997, 56.9 years in 2002, and 58.9 years in 2007. For the largest category of farms, with gross sales over $1 million, the average age was 54.0 in 2007. More Texas farmers are women 29 percent more. There were 35,011 female principal operators in 2007, up from 27,192 in 2002. The percentage of Spanish, Hispanic, and Latino farm operators has also increased, from 6.2 percent in 2002 to 7.6 percent in 2007. The number of organic farms in Texas increased by 48 percent from 2002 to 2007. Dairy production is experiencing the greatest structural change, with consolidation into an increasing number of large dairies and fewer small dairies. Agriculture in Texas is big, diverse, and dynamic. Because its climate and terrain vary greatly across the state, Texas produces a wide range of commodities from many sizes and types of farms. Around Lubbock, there is cotton as far as you can see. The area north of Dallas has many small farms, while West Texas has vast ranch land. In South Texas, green vegetable crops are grown along much of the Rio Grande River. Table 1. Texas agricultural highlights from the 2007, 2002, and 1997 census. Factor 2007 2002 1997 Number of farms 247,437 228,926 228,173 Land area per farm (acres) Value of agricultural products sold per farm ($) Estimated market value of land and buildings per acre ($) Estimated market value of machinery and equipment per farm ($) Farms organized as family or individual operations (% of total) Principal operator worked off-farm 200 days or more (% of total) Principal operator listed primary occupation as farming (% of total) Average age of principal operator (years) Source: USDA Census of Agriculture, 1997, 2002, 2007 (http://www.agcensus.usda.gov/). 527 567 587 84,874 61,744 61,427 1,270 768 616 64,350 40,553 37,795 88.2% 88.2% 88.2% 39.4% 40.0% 42.5% 39.9% 53.6% 40.4% 58.9 56.9 56 5

Every 5 years, the USDA National Agricultural Statistics Service publishes a Census of Agriculture report to describe the agricultural industry. Analysis of census data from 1997, 2002, and 2007 shows that the value of agricultural products sold per farm has increased in Texas, while the number of acres of land per farm has decreased (Table 1). The USDA census focuses on the farm as the production unit. A farm is 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. The data also show Texas s ranking within the United States in gross sales for several leading commodities and total gross farm sales over the past decade (Table 2). For many years, the Lone Star State has led the nation in the production of cattle and cotton, and it ranks second in gross sales of all agricultural commodities combined. Table 2. Leading agricultural commodities and Texas s rank within the United States. Texas rank in the U.S. (based on gross sales) Commodity 2007 2002 1997 Cattle and calves 1 1 2 Cotton and cottonseed 1 1 1 Grain sorghum (for grain) 2 2 (a) Wheat (for grain) 4 5 (a) Total gross farm sales 2 2 2 This publication examines Texas agriculture from several perspectives: The Structure of Texas Agriculture: How is the size distribution of farms and ranches changing? Are there more large farms? Are there more small farms? Production of Crops and Livestock: Are the food and fiber products increasing in quantity and value? Is the mix of output changing? Is production of some products moving from one part of the state to another? Are the smaller operations responsible for the majority of production, or the larger? Farm Inputs and Expenses: How much have expenses increased? How do farm operating expenses vary by farm size? How is the investment in machinery and equipment changing? Land and Natural Resource Use: What are the types of uses for land in Texas, and how has this changed in recent years? How has the value of farm real estate changed? Has irrigation increased? Farm Operator Characteristics: What are the demographics of Texas farm operators and how have they changed? What are the operators primary occupations, days worked off-farm, and computer and Internet usage? These snapshots of the Texas agricultural industry over the past decade reveal changes in the industry that affect the state s economy. Source: USDA Census of Agriculture, 1997, 2002, 2007 (a) Because of the reporting methods used in 1997 (and prior years), the individual rankings for wheat and grain sorghum are not available. 6

The Structure of Texas Agriculture The structure of Texas agriculture has changed in several ways in the past 10 years: The number of farms in Texas has risen 8 percent, from 228,926 farms in 2002 to 247,437 farms in 2007, the year of the most recent census. Texas has more large farms and more small farms than in 2002 but 1,800 fewer medium-sized farms. Farms that generate annual gross sales of $24,999 or less represent 83 percent of all the farms in the state but generate just 4.1 percent of the gross sales. The farms with annual gross sales of $250,000 or more represented just 4.2 percent of all farms in the state but generate 85 percent of the gross sales. Number and size of farms A farm is 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. For census purposes, the USDA defines 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. Using this definition, the Census of Agriculture estimates that Texas had 247,437 farms in 2007 (Table 3). Table 3. Farm structure statistics for Texas, 1997, 2002, and 2007. Farm parameter 2007 2002 1997 Number of farms 247,437 228,926 228,173 Land in farms (acres) Average gross sales per farm 130,398,753 129,877,666 133,956,359 $84,874 $61,744 $61,427 This number is an 8 percent increase over the 228,000 farms in 1997 and 2002. In 2007, these farms operated 130.3 million acres, which is comparable to the acreage in 2002 but is down 2.6 percent from the 133.9 million acres reported in 1997. Higher commodity prices in 2007 helped boost the average market value of agriculture products sold per farm to $84,874, up from about $61,000 in 2002 and 1997. Gross income includes the sale of crops and livestock, and government payments. The term gross sales is used throughout this report as a shorter descriptor for market value of agricultural products sold. The term gross income means market value of agricultural products sold plus government payments. Table 4 provides more detail, including the number of farms, percentage of farms, and acreage information for farms by seven economic classifications (gross sales). Most of the increase in the number of farms is in the smallest gross sales category those with gross sales of less than $1,000 which increased from 64,572 farms in 2002 to more than 86,279 in 2007. Likewise, the number of farms in the $500,000 to $999,999 range increased from 1,881 to 3,167, while the number of farms with gross sales of $1 million or more doubled, from 1,482 to 2,879. Another indicator of farm size is acreage. In Figure 1, the number of farms in Texas is distributed across seven acreage ranges for 1997, 2002, and 2007. Most of the change in acreage distribution occurs in the ranges of 1 to 9 acres and 10 to 49 acres. The number of farms with 1 to 9 acres increased from 13,669 in 2002 to 21,024 in 2007. The increase of 7,355 farms over that 5-year period was 53 percent. In the same period, farms in the 10-to-49-acre range increased from 61,015 to 72,837 an increase of 11,822 farms, or 19 percent. 7

Table 4. Farms and land in farms, Texas, 2002 and 2007. Economic classification (gross sales) Farms (number) Farms (percent) Land in farms (acres) Average size of farm (acres) 2007 2002 2007 2002 2007 2002 2007 2002 All farms 247,437 228,926 100 100 130,398,753 129,877,666 527 567 $1,000,000 or more 2,879 1,482 1.2 0.6 16,810,758 11,270,181 5,839 7,605 $500,000 $999,999 3,167 1,881 1.3 0.8 13,814,237 9,438,965 4,362 5,018 $100,000 $499,999 11,534 11,301 4.6 5.0 34,559,740 36,255,330 2,996 3,208 $25,000 $99,999 23,984 21,996 9.6 9.6 25,373,318 29,415,834 1,058 1,337 $5,000 24,999 60,356 57,840 24.4 25.3 17,933,790 21,599,670 297 373 $1,000 $4,999 59,238 69,854 24.0 30.5 5,874,063 8,591,593 99 123 Less than $1,000 86,279 64,572 34.9 28.2 16,032,847 13,306,093 186 206 Most of the increase in the number of small farms is probably because of the increasing popularity of living on a small-acreage farm, as well as some modifications by USDA to improve the accuracy of counting small farms in the census. The number of farms in the 180-to-499-acres range has declined slightly since 1997, with most of the decrease occurring by 2002 (Fig. 1). The number of farms of 500 to 1,999 acres also decreased, by just over 1,500 farms (10.2 percent) relative to 2002. The likely reasons for this decline include some farm operators scaling back the size of their operations for economic reasons and relying more on off-farm income, and some farmland being developed for residential and commercial use. The number of farms with 2,000 or more acres increased from 10,513 in 2002 to 11,012 in 2007, an increase of 499 farms, or 4.7 percent. This increase can most likely be attributed to some farm operations expanding to remain competitive and take advantage of economies of scale. Figure 1. Number of farms by size, measured in land area, Texas, 1997, 2002, and 2007. 8

Figure 2. Number of farms by size, measured by gross sales, Texas, 1997, 2002, and 2007. Farms by economic classification The number of farms by economic classification for 1997, 2002, and 2007 is presented in Figure 2 using the data in Table 4. In Figure 2, some of the gross sales ranges have been consolidated for ease of readability. The number of farms in the lower income range less than $5,000 increased significantly compared to 2002 and 1997. The number of farms with less than $5,000 in gross sales rose from 99,186 in 1997 to 145,517 in 2007, an increase of 47 percent. Farms with gross sales of $24,999 or less represented 83 percent of all farms in 2007; this percentage remained basically unchanged since 1997. The number of farms with gross sales between $100,000 and $499,000 increased slightly from 2002 to 2007 (11,300 to 11,500), but was less than the 13,500 farms in this range in 1997. The number of farms in the largest income range ($500,000 or more) increased from 3,363 in 2002 to 6,046 farms in 2007 (3,817 in 1997). These larger farms represented 2.4 percent of all farms in 2007. Another important characteristic is the source of gross sales. In 2007, gross sales the market value of agricultural products sold, not including government payments in Texas was estimated at $21 billion, with 69 percent of the income coming from livestock production and 31 percent from crop production. 4 percent of farms generate 85 percent of gross sales The distribution of gross sales across farm size categories for 2007 is illustrated in Figure 3. The bars represent the number of farms in each gross sales range, while the line plots the cumulative distribution of gross farm sales. For each bar, the corresponding percentage represents the percentage or share of gross sales generated by all the farms in that size range and below (to the left). Therefore, each percentage plotted on the chart is cumulative. For example, the 86,270 farms (34 percent of all farms) in the lowest gross sales range generated just 0.1 percent of total gross sales. For the next range ($1,000 to $2,499), 0.3 percent of all gross farm income was generated by 116,887 farms (86,279 + 30,608). Likewise, there are 205,873 farms that generate annual gross sales of $24,999 or less. These farms represent 83 percent of all farms in the state, but generate just 4.1 percent of the gross sales in the state. The 10,342 farms with annual gross sales of $250,000 or more represent just 4.2 percent of all the farms in the state, but these farms generate 85 percent (100 percent minus 15 percent) of gross sales. The 2,879 farms with gross sales of $1 million or more are responsible for 67 percent of the gross farm income generated across the state, compared with 59.5 percent in 2002. 9

Figure 3. Cumulative distribution of total gross sales by gross sales size category, Texas, 2007. Organizational structure Farms in Texas operate under several types of business structures (Table 5). The most common is a sole proprietorship, which was reported by 88.2 percent of all farms in the state. Sole proprietorships are more common in the middle-to-lower end of the gross sales scale. The use of a partnership varies by farm size as well, with 8.3 percent of all farms operating as partnerships. Among farms with gross sales of $1 million or more, 30 percent are organized as partnerships. Corporations are more common for larger farms. Of farms with gross sales of $500,000 or more, about 14 to 16 percent conduct business as corporations; most of these are family-held corporations. Just over 1 percent of the farms in Texas are organized as other business forms, such as cooperatives, estates, or trusts. Table 5. Types of business organization by gross sales size category, Texas, 2007. Type of organization Family or individual (sole proprietorship) $1,000,000 or more $500,000 to $999,999 Gross sales size categories $100,000 to $499,999 $25,000 to $99,999 $5,000 to $24,999 $1,000 to $4,999 Less than $1,000 All farms 52.6% 64.9% 72.9% 82.6% 89.9% 93.3% 89.1% 88.2% Partnership 30.3% 20.3% 16.2% 12.2% 7.8% 5.0% 7.7% 8.3% Corporation, family held Corporation, other than family held Other: cooperative, estate or trust, institutional, etc. 11.9% 13.0% 8.7% 3.7% 1.3% 0.8% 1.2% 2.0% 3.8% 0.9% 1.0% 0.4% 0.2% 0.1% 0.3% 0.3% 1.4% 0.9% 1.3% 1.1% 0.9% 0.7% 1.8% 1.2% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 10

Production of Crops and Livestock While drought reduced the number of beef cows produced in the Texas by 5 percent over the past 5 years, the number of large dairies has doubled, and swine production has increased by 21 percent. Although livestock numbers are down cattle and calves decreased almost 2 percent, goats are down 4.5 percent, and sheep and lambs dropped 8.2 percent livestock has maintained a 69 percent share of gross farm sales in Texas. The mix of crops produced has also changed. And the weather allowed for excellent production of most crops in 2007 compared to 2002. Total production of wheat is up 79 percent, cotton is up 61 percent, and sunflower seed production has more than doubled. But Texas farmers are producing less of three major crops oats, down 31 percent; rice, dropping 35 percent; and soybeans, 36.5 percent. The number of organic farms increased by 48 percent, from 447 organic farms in 2002 to 660 in 2007. Other notable changes in Texas were: Gross income from agricultural products increased from $14 billion in 2002 to $21 billion in 2007, an increase of 50 percent. Most beef cattle in Texas are raised on large farms. Although farms with up to 49 head represented roughly 80 percent of all farms with beef cows, they accounted for only 30 percent of all beef cows in the state. The number of harvested acres of all crops rose between 2002 and 2007, increasing from 17.8 million to 19.2 million acres. The number of dairies with 1,000 or more cows more than doubled increasing from 48 to 102 between 1997 and 2007. The total number of dairy cows increased from 78,000 in 1997 to 200,000 in 2007. Sales and production of crops and livestock In 2007, Texas farms generated $21.7 billion in gross income, which is the market value of agricultural products sold plus government payments. This total is a 48.6 percent increase from the $14.7 billion reported in 2002. Using the gross sales (excludes government payments) of farms in Texas allows us to show the share of gross sales by commodity. Of Texas s gross agricultural sales in 2007: 50 percent came from the sale of cattle and calves. 11 percent was from grains and oilseeds. 10 percent came from poultry and eggs. 9 percent was from cotton and cottonseed. 6 percent was from milk and other dairy products. 14 percent was from other commodities. As seen in Figures 4 and 5, sales of all commodities increased from 2002 to 2007, with grains and oilseeds, cotton and cottonseed, and cattle and calves having the biggest increases. How gross income from the census compares to other data sources Another source of information for comparison is a Texas AgriLife Extension Service report, Texas: Estimated Value of Agricultural Production and Related Items, 2005 2008. This report includes estimates for the value of production. Although the estimates do not include government payments, the 2002 to 2007 percentage change (50.7 percent) is comparable to that of the census data. Another report, the Food and Fiber System and Production Agriculture s Contribution to the Texas Economy, was also produced by the Texas AgriLife 11

Figure 4. Value of crop sales by crop category in Texas, 2002 and 2007. Figure 5. Value of livestock sales by livestock category in Texas, 2002 and 2007. Extension Service. However, its information is not comparable because it focuses mostly on the contribution to the Texas gross domestic product, not gross income. Also, the report includes information on the value of production (a 4-year average) only for a few selected commodities, not agriculture as a whole. Crop production Between 2002 and 2007, the number of harvested acres of all crops in Texas rose from 17.8 million to 19.2 million an increase of almost 8 percent. Note: These acres are harvested acres, not planted acres, and weather is the biggest factor in determining the extent to which a crop is harvested. Crops that increased in harvested acres in 2007 (relative to 2002) include corn (8 percent increase), sorghum (6 percent increase), and wheat (44 percent increase), as shown in Figure 6. However, harvested acreage was lower in 2007 for peanuts, rice, oats, barley, soybeans, hay, and vegetables. Table 6 shows the total production of selected crops for the past three census periods. Compared to 2002, total production increased in 2007 for six of the 10 crops listed in Table 6. Livestock production Table 7 lists inventory numbers for several species of livestock for 1997, 2002, and 2007. Some of the livestock sectors had significant challenges in the past 5 to 10 years, with extended droughts being a common theme throughout the period. Other influencing factors included cattle price trends, federal price support programs, and environmental concerns. 12

Figure 6. Harvested acres of crops in Texas (1997, 2002, and 2007). Note: Other includes oats, barley, soybeans, dry edible beans, forage-land used for all hay, haylage, grass silage, greenchop, sunflower seeds, sugarbeets for sugar, sugarcane for sugar, vegetables harvested for sale, potatoes, sweet potatoes, and land in orchards. Table 6. Production of selected crops, Texas, 1997, 2002, and 2007. Commodity Unit 2007 2002 1997 02 to 07 % change Corn, for grain Bushels 286,386,341 197,109,321 224,990,592 +45.3% Wheat, for grain Bushels 134,643,897 75,131,556 109,796,707 +79.2% Oats Bushels 3,663,002 5,334,886 5,792,388-31.3% Sorghum, for grain Bushels 153,531,033 114,127,221 180,865,739 +34.5% Soybeans Bushels 3,439,765 5,415,147 10,507,744-36.5% Cotton, all Bales 8,147,970 5,060,144 5,197,938 +61.0% Hay Tons 14,477,068 11,407,323 -NA- +26.9% Rice Cwt. 9,472,871 14,590,204 15,728,874-35.1% Sunflower seeds Pounds 45,693,688 20,808,808 -NA- +119.6% Peanuts Pounds 699,723,146 807,510,593 784,266,043-13.3% Table 7. Livestock inventory numbers, Texas, 1997, 2002, and 2007. Classification 2007 2002 1997 02 to 07 % change Cattle and calves 13,709,543 13,978,987 14,504,444-1.9% Beef cows 5,259,843 5,545,824 5,333,740-5.2% Milk cows 404,399 309,058 370,283 +30.8% Hogs and pigs 1,155,790 953,290 615,705 +21.2% Broilers 616,299,999 538,737,966 389,945,303 +14.4% Sheep and lambs 945,164 1,029,813 1,531,614-8.2% Horses and ponies on farms 438,827 372,341 241,981 +17.9% Mules, burros, and donkeys 60,790 22,744 18,638 +167.3% Goats 1,139,962 1,194,289 1,280,431-4.5% 13

More consolidation in dairy industry The dairy industry in Texas has seen significant changes over the last 5 years. Since 2002, Texas has seen more consolidation in the dairy industry, with fewer small dairies and an increasing number of large dairies. Most milk is now produced by dairies with 1,000 or more cows. This trend is evident in Figures 7 and 8, which show that the number of dairy farms with 1,000 or more milk cows rose from 48 in 2002 to 102 in 2007 an increase of 112 percent. The total number of cows managed by these larger dairies rose from 111,075 in 2002 to 270,002 in 2007 an increase of 143 percent. On the other end of the spectrum, dairy farms with less than 500 cows show a steady decline in both the number of farms and the total number of milk cows over the last 10 years. Beef cattle production Cattle and calves, which includes cows and heifers that have calved, beef cows, other cattle, and cattle in feedlots, declined from 13.9 million head in 2002 to 13.7 million head in 2007 (2 percent), while the number of beef cows declined from 5.54 million head to 5.25 million (5 percent) head over the same period. Most of these reductions in 2007 inventories can be attributed to drought-related inventory reductions in 2006. Figure 7. Milk cow herd size by number of farms, Texas, 1997, 2002, and 2007. Figure 8. Milk cow herd size by number of cows, Texas, 1997, 2002, and 2007. 14

Between 2002 and 2007, the number of farms with beef cows and the total number of beef cows did not change significantly. The number of farms with beef cows declined from 5.5 million in 2002 to 5.2 million in 2007. In 2007, farms with less than 50 head represented roughly 80 percent of the farms but accounted for 30 percent of the total number of beef cows in the state, as shown in Figures 9 and 10. This was also the case in 1997 and 2002. In 2007, the average herd size of all the farms in Texas was 40 head. Rise in organic crop production One of the most significant changes in the 2007 Census of Agriculture was in the extent of organic crop production. The number of organic farms increased from 447 in 2002 to 660 in 2007, an increase of 48 percent (Fig. 11). The number of acres in organic production also increased from 33,000 in 2002 to almost 170,000 acres in 2007. As shown in Figure 12, most of the increase in organic crop acres is produced by farms with gross sales of $100,000 or more. Figure 9. Number of farms and cows by beef cow herd sizes, Texas, 1997, 2002, and 2007. Figure 10. Number of beef cows and farms by beef cow herd sizes, Texas, 1997, 2002, and 2007. 15

Figure 11. Number of organic farms by gross sales size category, Texas, 2002 and 2007. Figure 12. Total number of organic crop acres by gross sales size category, Texas, 2002 and 2007. 16

Farm Inputs and Expenses The cost of producing crops and livestock has skyrocketed in Texas over the past 5 years, as fuel costs rose 97 percent, fertilizer increased by 68 percent, and purchased feed rose by 57 percent. The use of other inputs by Texas farms also changed between 2002 and 2007: Farms hired fewer workers in 2007 than in 2002. Wages for farm labor, however, surpassed the $1 billion mark for the first time, 21 percent higher than 2002. The cost of livestock and poultry purchases rose 33 percent in 2007 compared to 2002. Most of those purchases were for non-breeding livestock, such as stocker cattle and feeder cattle. Higher feed grain prices in 2007 contributed to the increase in the cost of feed of 57 percent compared to 2002. Farms spent 43 percent more on chemicals such as herbicides and insecticides. Farm input costs continue to rise Texas farmers spent $19.2 billion to produce their crops and livestock in 2007, an increase of $5.4 billion (40 percent) from 2002 (Table 8). Not surprisingly, the input cost that showed the highest percentage increase from 2002 to 2007 was fuel. Although fuel prices didn t reach their high until 2008, prices in 2007 were significantly higher than in 2002. The Energy Information Administration shows that the average price of gasoline in Texas more than doubled from 2002 to 2007, increasing from $1.27 to $2.65 per gallon, a 108 percent increase. Much of the increase in farm production expenses was driven by the rise in energy prices. The distribution of total farm expense for 2002 and 2007 is presented in Figure 13, where farms with gross sales of $1 million or more had $11.7 billion of the $19.2 billion (61 percent) in total production expenses statewide. Although these farms also Table 8. Production expenses for Texas farms, 1997, 2002, and 2007. Livestock and poultry purchased 2007 2002 1997 02 to 07 % change $6,017,794,000 $4,524,369,000 $3,257,339,000 33% Feed purchased $4,226,444,000 $2,700,281,000 $2,949,085,000 57% Fertilizer, lime, and soil conditioners Gasoline, fuels, and oils $931,140,000 $555,239,000 $548,517,000 68% $1,053,222,000 $533,321,000 $554,841,000 97% Hired farm labor $1,169,767,000 $969,979,000 $816,590,000 21% Interest expense $676,379,000 $523,438,000 $527,989,000 29% Chemicals $492,500,000 $345,210,000 $364,471,000 43% Total production expenses $19,223,099,000 $13,734,706,000 $12,036,327,000 40% 17

Figure 13. Total production expense by gross sales size category, Texas, 2002 and 2007. incurred most of the increase in expenses since 2002, some was due to the growing number of farms in this size category. This also applies to several other gross sales categories. Total expenses as a percent of gross sales In 2007, total production expenses for Texas farmers amounted to 91.5 percent of gross farm sales, not including government payments. This was a significant improvement in overall profitability compared to 2002, when the percentage was 97.2 percent. This percentage varies considerably across farm size (Fig. 14). For the farms with over $1 million in gross sales, expenses were 84 percent of gross sales, and for the next smaller category ($500,000 to $999,999) the percentage was lower at 71 percent. For farms with gross sales of less than $5,000, expenses exceeded gross sales by a large margin. (The smallest farm size categories are not included in Figure 14.) Fertilizer and chemical expenses Census data allow for converting the costs of fertilizer and chemicals to a per-treated-acre basis. In Figure 14. Total production expenses as a percent of gross sales by gross sales category, Texas, 2002 and 2007. 18

Table 9, the percentage change in these costs from 2002 to 2007 is summarized by gross sales range. Although fertilizer prices didn t reach their high until 2008, prices in 2007 were significantly higher than in 2002. For all farms in 2007, total fertilizer expenses per-treated-acre were up 66 percent from 2002 levels. Except for farms in the gross sales range of less than $1,000, the increase ranged from 53 to 64 percent. Over the last 5 years, the cost of chemicals such as herbicides and pesticides per treated acre for all farms increased by 19 percent. The largest increase occurred in mid-size farms with gross sales of $1,000 to $24,999. Table 9. Percentage changes in fertilizer and chemical costs per-treated acre by gross sales size category in Texas, 2007. Size category (gross sales) Fertilizer and other conditioners Chemicals All farms +66% +19% $1,000,000 or more +53% -4% $500,000 $999,999 +59% +2% $100,000 $499,999 +60% +3% $25,000 $99,999 +57% +13% $5,000 $24,999 +62% +26% $1,000 $4,999 +64% +43% Less than $1,000 +20% -3% Machinery and equipment investment Texas farms own $15.9 billion worth of machinery and equipment, up from $9.2 billion in 2002. On a per-farm basis, the average value of machinery and equipment increased from $40,552 in 2002 to $64,350 in 2007, a 59 percent increase. Figure 15 shows the market value of machinery and equipment per farm by gross sales category for 2002 and 2007, where the value per farm ranges from a low of $31,000 (in the $1,000 to $4,999 category) to a high of $647,000 ($1 million or more category). Interest expense and use of debt Total interest paid by all farms in Texas increased from $523 million in 2002 to $676 million in 2007 (Table 10). Although the census data do not include information about the amount of debt, interest expense information indicates that the use of debt capital is more common with larger farms than with smaller farms. In 2007, 68 percent of the farms with gross sales of $1 million or more had an expense for interest on debt, and this percentage declines as farm size shrinks. For farms with gross sales of $5,000 to $24,999, only 22 percent had interest expense. For all farms in Texas, the percentage with interest expense declined from 26.6 percent in 2002 to 21.8 percent in 2007. Figure 15. Estimated market value of machinery and equipment per farm, Texas, 2002, and 2007. 19

For comparison, data from the 2006 USDA Agricultural Resource Management Survey (ARMS) show that less than 40 percent of U.S. farms had farm debt. Also, the ARMS data indicate that the percentage of farms with no debt has been increasing. Using the census data for the farms that paid interest in 2007, the average interest expense per farm ranged from a low of $6,371 for farms with gross sales of $5,000 to $24,999, to a high of $91,459 for farms in the highest gross sales category. One measure of financial efficiency is to calculate interest expense as a percentage of gross sales. This measure is called the interest expense ratio. A lower ratio indicates that the business is in a stronger financial position in its use of resources. Table 10 includes the interest expense ratio for all farms, including those that did not pay interest. Farms with less than $5,000 in gross sales are not included, partly because in some cases the interest expense exceeds gross sales. The smaller the farm is, as measured by gross sales, the larger the average interest expense ratio from 1.3 percent for the largest farms to 12.4 percent for farms with gross sales of $5,000 to $24,999. These interest expense ratios are considered very low (strong). From a business sense, an interest expense ratio above the 15 percent range is cause for concern. However, most farms in the smaller categories have off-farm income to supplement farm income. Because of their interest expense ratios, the Texas farms with gross sales of $100,000 or more appear to be able to withstand some economic downturns. Of course, these are averages, and some farms in this size range would not fare as well during difficult economic times. Table 10 also shows the estimated interest expense ratio for only the farms that paid interest in 2007. On average, interest-paying farms with gross sales of $100,000 or more were still in a comfortable position in terms of their interest expense ratio as the highest ratio was 8.6 percent (gross sales of $100,000 to $499,999). For the two farm size categories with gross sales of less than $100,000, interest as a percent of gross sales climbed to 21.8 percent and 55.9 percent. Since these farms are on the smaller end of the farm size scale, debt servicing was likely supported with off-farm income. Hired farm labor In 2007, 45,000, or 18.2 percent of the farms in Texas, hired labor (Table 11). This was down from 21.5 percent in 2002. These farms hired 154,000 workers or 3.4 workers per farm that hired labor in 2007. In 2002, a total of 166,117 workers were hired, which resulted in the same average number of workers per employing farm (3.4 workers). Of the total number of workers hired in 2007, 35 percent worked 150 days or more on the farm with the other 65 percent working less than 150 days. This compares to 32 percent working 150 days or more and 68 percent working less than 150 days in 2002. Table 10. Percent of farms with interest expense, interest expense ratio, Texas, 2007. $1 million or more $500,000 $999,999 $100,000 $499,999 $25,000 $99,999 $5,000 $24,999 Percent of farms with interest expense 68.1% 61.2% 49.1% 33.1% 22.2% Average interest expense per farm with interest expense Interest expense as a percent of gross sales (all farms) Interest expense as a percent of gross sales (farms with interest expense) $91,459 $32,530 $20,231 $10,408 $6,371 1.3% 2.8% 4.2% 7.2% 12.4% 1.9% 4.6% 8.6% 21.8% 55.9% 20

The number of workers hired by farms in each gross sales category decreased between 2002 and 2007 except for the largest group, which increased from 30,000 to more than 41,000 workers (Fig. 16). Table 11. Farms hiring labor and total workers by days worked, Texas, 2002 and 2007. 2007 2002 Total farms (number) 247,437 228,926 Farms with hired farm labor 45,081 49,206 Percent of farms hiring labor 18.2% 21.5% Hired farm labor (number of workers) 154,793 166,117 Hired labor per farm (average number of workers) 3.4 3.4 Hired farm labor working 150 days or more (number of workers) 53,829 53,820 Percent of total workers working 150 days or more 34.8% 32.4% Hired farm workers working less than 150 days (workers) 100,964 112,297 Percent of total workers working less than 150 days 65.2% 67.6% Figure 16. Number of workers hired on farms by gross sales size category, Texas, 2002, and 2007. 21

Land and Natural Resource Use Almost 78 percent of Texas land is used for farming and ranching. The uses of this farmland have changed over the past few years: The state has more land in small farms (with gross sales of less than $1,000) and more in farms with gross sales of $500,000 or more. It has less land in medium-sized farms with gross sales of $5,000 to $499,000. The total estimated market value of land and buildings increased from $100 billion in 2002 to $165 billion in 2007. Only 8 percent of Texas farmland is irrigated, and the largest user of irrigated land almost 35 percent is cotton. The total land area of Texas is 167.55 million acres. Of that total, 130.40 million acres, 78 percent, were farms and ranches in 2007. Across the state, 247,437 farms and ranches controlled these 130.4 million acres with an average of 527 acres per operation in 2007 (Table 12). That is a decrease from an average of 567 acres in 2002 and 587 in 1997. The total acreage in farms and ranches has changed relatively little; the primary reason for the decrease in average farm size is the increase in number of farms. The average Texas farm is bigger than the U.S. average of 418 acres. The average farm size across the nation has decreased over the past 10 years. Since 2002, the total amount of land being farmed has increased, albeit modestly. Harvested cropland increased by 8 percent (Table 13). Some of this increase was a result of fewer acres of failed crops; in other instances, pastures were converted to cropland. Overall, however, total cropland acres declined, with increases in woodlands and permanent pasture. Table 13. Total land in farms and by various uses, Texas, 2002 and 2007. Land type Harvested cropland 2007 2002 Percent Acres change 19,174,301 17,750,938 8.0% Pastured cropland 7,832,896 12,937,991-39.5% Cropland with failed crops, idled, or fallow 6,659,980 7,968,781-16.4% Woodland 7,099,790 5,651,181 25.6% Permanent pasture House lots, ponds, roads, wasteland Total land in farms 87,217,416 83,402,865 4.6% 2,414,370 2,165,910 11.5% 130,398,753 129,877,666 0.4% Table 12. Land in farms and average farm size in Texas and the United States, 1997, 2002, and 2007. Total land in farms (million acres) Texas United States 2007 2002 1997 2007 2002 1997 130.40 129.88 133.96 922.10 938.28 954.75 Total number of farms 247,437 228,926 228,173 2,204,792 2,128,982 2,215,876 Average farm size (acres) 527 567 587 418 441 431 22

Figure 17. Total land in farms by gross sales size category, Texas, 2002 and 2007. The smallest farms those with less than $1,000 of gross sales controlled 16.0 million acres in 2007 (Fig. 17). This was an increase of 2.7 million acres compared to 2002. At the other extreme, farms with $1 million or more gross sales controlled 16.8 million acres, an increase of 5.5 million acres over 2002. The largest acreages were farms in the $5,000 to $499,999 gross sales categories; however, these acreages decreased between 2002 and 2007. The average number of acres per farm in Texas tends to increase with gross sales (Fig. 18). Except for the farms with the lowest gross sales, the average land area per farm increases with the increase in gross sales per farm. Comparing 2002 and 2007, the average land area per farm declined for all size categories. For the largest farms, with $250,000 sales and over, this was due to the increase in the number of farms. Another contributing factor was that prices received were higher in 2007 than in 2002. Higher prices led to higher gross sales, which shifted some farms into the next highest gross sales category. Land productivity by size class Gross income the market value of agricultural products sold, plus government payments per acre varies greatly across the size categories (Fig. 19). In 2007, the smallest farms generated an average of only Figure 18. Average acres per farm by gross sales size category, Texas, 2002 and 2007. 23

Figure 19. Gross income per acre by gross sales size category, Texas, 2002 and 2007. $8 per acre compared to $844 per acre for the largest farms. This difference may reflect less intensive land use by the smallest farms, as well as less productive land controlled by these operations. Irrigation In 2007, 19,713 farms 8 percent of the total number of farms in Texas irrigated 5 million acres (Table 14). Of this total, 92 percent is irrigated cropland. Table 14. Total irrigated land, irrigated harvested cropland, and irrigated pastureland and other land, acres, and percentage change, Texas, 2002 and 2007. Use Irrigated harvested cropland Irrigated pastureland and other land 2007 2002 Percent Acres change 4,621,445 4,571,339 1.1% 388,971 503,299-22.7% Total irrigated land 5,010,416 5,074,638-1.3% Less farmland is being irrigated in Texas. In 2007, the number of irrigated acres had declined by 64,222 acres, or 1.3 percent compared to 2002. Compared to 1997, the total land irrigated in Texas decreased by 753,879 acres. Between 2002 and 2007, the amount of irrigated harvested cropland increased by 1.1 percent, while irrigated pastureland and other land decreased by 22.7 percent. Although the total acreage of harvested cropland increased in Texas, the percentage that was irrigated decreased to 24.1 percent in 2007, compared to 25.8 percent in 2002. For 2007, comparing across the gross sales categories in Figure 20 shows that the percentage of harvested cropland that was irrigated was highest for farms with gross sales of $1 million or more (40 percent irrigated), and lowest for farms with $1,000 to $24,999 gross sales (less that 4 percent irrigated). For all farms, except the very smallest with less than $1,000 gross sales, the percentage of harvested cropland that is irrigated declined. The largest decline was for the farms with the highest gross sales. The crops grown by Texas farmers vary in their dependency on irrigation (Table 15). Cotton has the most harvested acres under irrigation. These irrigated acres account for almost 35 percent of the total harvested acres of cotton. The crop with the second largest total of irrigated harvested acres is corn, followed by wheat and sorghum. For corn for grain, 43 percent of the total acres are irrigated. For wheat and sorghum, it is 16 percent and 20 percent, respectively. 24

Figure 20. Irrigated harvested cropland as percentage of total harvested cropland in Texas, 2002 and 2007. Table 15. Total harvested acres and irrigated acres by crop, Texas, 2007. Total area (acres) Irrigated (acres) Irrigated as % of total Barley for grain 2,090 936 44.8% Corn for grain 1,963,640 846,750 43.1% Corn for silage or greenchop 151,091 102,392 67.8% Cotton, all 4,674,229 1,626,181 34.8% Dry edible beans, excluding limas 6,675 2,946 44.1% Oats for grain 92,653 5,461 5.9% Peanuts for nuts 192,291 156,066 81.2% Rice 145,006 145,006 100.0% Sorghum for grain 2,427,580 480,510 19.8% Soybeans for beans 93,453 16,269 17.4% Sunflower seed, all 35,309 12,806 36.3% Wheat for grain, all 3,844,241 595,275 15.5% Hay, haylage, grass silage, and greenchop Field and grass seed crops, all 5,264,287 424,623 8.1% 13,397 3,009 22.5% Land in vegetables 122,205 74,538 61.0% Land in orchards 215,794 69,461 32.2% Land ownership Farm and ranch operators in Texas own close to 60 percent of the land they operate. The rest is rented in and out. The percentage of land owned is highest for the operators in the two smallest gross sales size categories, ranging from 70 to 80 percent of their land resources (Fig. 21). The percentage of land owned declines with increasing farm size (gross sales), except for the two largest size categories over $500,000 in gross sales. For these two largest categories of farms in 2007, over 50 percent of the land was owned. For the largest group, over $1 million of gross sales, the percentage of land owned declined from 67 percent to 55 percent, contrary to the trend for all the other size categories. However, this was likely influenced by the shifting of some farms from the $500,000 to $999,999 gross sales range to the $1 million or more gross sales range due to higher commodity prices in 2007. Market value of land and buildings The total estimated market value of agricultural land and buildings in Texas was $165.6 billion (Table 16). This extensive economic resource has been increasing in value. The 2007 average value per acre increased by 65.4 percent compared to 2002 and by 106.2 percent compared to 1997. 25

Table 16. Total estimated market value of land and buildings, average per acre, average per farm, Texas, 1997, 2002, and 2007. Market value 2007 2002 1997 Total for state (billion) $165.8 $100.5 $82.6 Average per acre $1,270 $768 $616 Average per farm $669,154 $439,066 $361,821 The relationship of the value of land and buildings per acre to the size of the operation as measured in terms of gross sales is illustrated in Figure 22. The value per acre was highest for farms with $1,000 to $4,999 gross sales. That value declines across the subsequently larger categories until the largest size category of farms with $1 million of gross sales or more, which shows an increase in the per-acre value compared to the next smaller size category. Between 2002 and 2007, the value per acre increased for all size categories. Figure 21. Owned land as a percentage of total land in farms by gross sales size category, Texas, 2002 and 2007. Figure 22. Estimated market value of land and buildings per acre, by gross sales size category, Texas, 2002 and 2007. 26

Characteristics of Texas Farm Operators Texas farmers are predominantly Caucasian (88 percent), male (86 percent), and nearing 60 years of age (average age: 58.9). Since 2002, several changes have occurred in the characteristics of Texas farmers: More women are farmers in Texas. The numbers rose from 27,192 female principal operators in 2002 to 35,011 in 2007 a 29 percent increase (Fig. 23. Texas has a higher percentage of Spanish, Hispanic, and Latino farm operators, up from 6.2 percent in 2002 to 7.6 percent in 2007. More farmers a total of 60 percent are getting most of their income from nonfarm jobs. The number of farms with 100 percent of the household income from farming dropped from 11,179 farms in 2002 to 4,341 in 2007. Most of the decrease came from the smaller farms. Analysis of the agriculture census, which is taken every 5 years, reveals transitions in farm owners across the nation and state including changes in demographics, Internet use, and income sources. Principal operator characteristics in Texas agriculture The 2007 Census of Agriculture shows a continuation of several trends regarding Texas farm operators. Their average age increased from 56.9 in 2002 to 58.9 in 2007 (Table 17). However, for multigeneration farms, the census includes the age of only the principal operator (usually the oldest person), which may partially account for this higher average age. Although operators of the larger farms on average are younger 54 years for farms with gross sales of $1 million or more the average age increased across all categories at about the same rate. The number and percentage of female farm operators increased since 2002. There were 29 percent more female principal operators in 2007; this number increased from 27,192 in 2002 to 35,011 just 5 years later. For all farm operations, the percentage of operators who are women increased from 11 percent in 2002 to 14 percent in 2007. The largest percentage these increases occurred in farms with gross sales of $100,000 or less. Table 17. Demographics of average age and gender of primary farm operators in Texas in 2002 and 2007. Economic classification (gross sales) Average age Male (%) Female (%) 2007 2002 2007 2002 2007 2002 All farms 58.9 56.9 85.85% 88.12% 14.15% 11.88% $1,000,000 or more 54.0 52.3 95.76% 95.82% 4.24% 4.18% $500,000 to $999,999 55.1 52.5 96.02% 95.64% 3.98% 4.36% $100,000 to $499,999 57.2 53.7 94.10% 95.22% 5.90% 4.78% $25,000 to $99,999 60.7 57.4 89.97% 92.23% 10.03% 7.77% $5,000 to $24,999 60.4 58.5 87.73% 89.64% 12.27% 10.36% $1,000 to $4,999 58.2 56.7 86.03% 87.74% 13.97% 12.26% Less than $1,000 58.5 56.4 81.46% 84.14% 18.54% 15.86% 27

Figure 23. Percentage of women operators by gross sales size category, Texas, 2002 and 2007. For Internet access, rural areas are often at a disadvantage when compared to urban areas. Even so, the farms with Internet access have increased modestly. The percentage of farm operations in Texas with Internet access increased from 49.6 percent in 2002 to 52.5 percent in 2007 (Fig. 24). A higher percentage of the larger farms (with gross sales of $100,000 or more) had Internet access than did smaller farms. This suggests the importance of Internet access to these businesses. Of the 247,437 principal farm operators in Texas in 2007, 148,745 (60 percent) reported their primary occupation as being something other than farming. Of these farms, 91 percent have gross sales of $24,999 or less. Except for farms with gross sales of $500,000 or more, every farm size category showed an increase in the percentage of farm operators whose primary occupation was something other than farming (Fig. 25). Nearly 171,000 principal operators, about 69 percent, reported working off the farm during some days of the year. Most of these operators (86 percent) are from farms with gross sales of $24,999 or less (Fig. 26). The smaller the farm, the more likely the operator is to work some days off the farm. From 2002 to 2007, farms of every gross sales range had about the same increase in percentage of operators working some days off the farm: 10 to 15 percent. Of the operators who reported working some days off the Figure 24. Percentage of farms with Internet access by gross sales size category in Texas in 2002 and 2007. 28

Figure 25. Percentage of operators reporting a primary occupation other than farming by gross sales size category, Texas, 2002 and 2007. Figure 26. Percentage of farm operators working any days off the farm, Texas, 2002 and 2007. farm in 2007, 57 percent worked 200 or more days off the farm. The number of farms with 100 percent of the household income from farming dropped from 11,179 in 2002 to 4,341 in 2007, with most of the decrease in the smaller farms. For farms with gross sales of $500,000 or more, 23 percent reported 100 percent of their household income from farming in 2007, down from 30 percent in 2002. Figure 27 plots the percentage of farms within each gross sales range that reported less than 50 percent of their household income from farming. For all gross sales categories, this percentage increased in 2007 relative to 2002. For farms with gross sales of $24,999 or less, more than 90 percent of the farms reported that less than half of their household income came from farming in 2007. The percentage declines as farms get larger, with 28 percent of the farms with gross sales of $1 million or more reporting less than 50 percent of their household income from farming, up from nearly 18 percent in 2002. Of the 247,437 farms in Texas in 2007, about 88 percent of the principal operators were Caucasian. The number of principal operators of all races and ethnic backgrounds increased 8.4 percent from 2002 to 2007. As a percentage of the total farm operators, the Spanish, Hispanic, and Latino operators increased from 6.2 to 7.6 percent from 2002 to 2007 (Fig. 28). 29

Figure 27. Percentage of farm operators with less than 50 percent of total household income from farming by gross sales size category, Texas, 2002 and 2007. Figure 28. The number of farm operators by selected race and ethnicity as a percentage of total farm operators, Texas, 2002 and 2007. References Average Prices of Gasoline in Texas, U.S. Energy Information Administration. Retrieved on June 18, 2009 from http://tonto.eia.doe.gov. Census of Agriculture, National Agricultural Statistics Service. Retrieved on February 12, 2009, from: http://www.agcensus.usda.gov Covey, Ted, Mary Ahearn, Jim Johnson, Mitch Morehart, Roger Strickland, Steve Vogel, Larry Traub, Dennis Brown, Chris McGath, Bob Williams, Peter Stenberg, Robert Green, Ken Erickson, and Mike Harris. Agricultural Income and Finance Outlook (AIS-85), United States Department of Agriculture (USDA)-Economic Research Service (ERS), December 2007. Retrieved on July 13, 2009 from http://usda.mannlib.cornell.edu/usda/ers/. Norton, S., and C. Anderson. Texas: Estimated Value of Agricultural Production and Related Items, 2005-2008. Texas AgriLife Extension Service, Department of Agricultural Economics, The Texas A&M University System, College Station, Texas, April 2009. Prices Paid and Received: All Farm Index by Year, U.S. United States Department of Agriculture (USDA) - National Agricultural Statistics Service (NASS). Retrieved on May 12, 2009, from http://www. nass.usda.gov/. Stenberg, Peter, and Mitch Morehart. Internet on the Range. Rural America Findings: Amber Waves. United States Department of Agriculture (USDA) Economic Research Service (ERS), February 2006. 30