US family farm ownership makes investment market more liquid

Family-owned farms remain the backbone of the agriculture industry as 97 percent of the 2.1 million farms in the US are family-owned operations, according to a report from the US Department of Agriculture’s National Agricultural Statistics Service (NASS).

Of that percentage, 88 percent of all US farms are small family farms, according to data released recently in the 2012 Census of Agriculture.

For investors, the high majority of family-owned farms actually “increase the odds of deals” and make the market more liquid, according to Paul Pittman, the chief executive of Farmland Partners, the NYSE-listed real estate investment trust.

Pittman said Farmland Partners often acquires these kind of farms while recognising that farmers set the pricing levels, not investors.

“If there is an actual operating person who wants to buy [the land] he will outbid the financial buyers like us because as a strategic buyer he has more synergy in terms of creating value,” Pittman further explained.

Family-owned operations produce 84 percent of all food products in the US. “Most of what we eat and if we are wearing cotton or wool that’s produced in the US, that’s coming from a family-owned operation,” said Ginger Harris, demographer with USDA’s national agricultural statistic service, in an interview with the National Association of Farm Broadcasting.

The typology classifies family farms based on gross cash farm income (GCFI).

West Virginia, Oklahoma, Tennessee and Alabama have the highest concentrations of family-operated farms with about 98 percent of farms family-owned in each state. Nevada, Rhode Island, California and Alaska are the states with a lower concentration at 94 percent, 94 percent, 93 percent and 92 percent respectively.

Midsize family farms, with a GCFI of $350,000 to $1 million, and large family farms, with a GCFI of $1 million to $4.9 million, accounted for less than 9 percent of all US farms, according to the Census, but provided nearly two thirds of agriculture sales during the year.

Read 2012 Census of Agriculture Highlights here.

Read the full typology report here.