Land tenure and profitability among young farmers and ranchers

Abstract

PurposeThe purpose of this article is to investigate how land tenure correlates with measures of profitability among young farmers and ranchers in the United States. The authors hypothesize that young producers who own a larger proportion of their operation face different incentives between short- and long-run returns than young producers who primarily rent their land. The authors analyze whether these differing incentives result in observable differences in various measures of profitability.Design/methodology/approachThe authors use state-level data from the Agricultural Resource Management Survey (ARMS) from 2003 to 2018 to estimate fixed-effects panel models correlating land tenure with the value of farm production, expenditures on repairs and maintenance, net farm income, total operator household income from farming, rate of return on assets (ROA) and rate of return on equity (ROE).FindingsThe authors find different correlations for crop farms and livestock farms, as well as different correlations for farms with the lowest and highest gross sales. For crop farms, renting land is associated with higher production, higher income, higher ROA and higher ROE. For livestock farms, renting land is associated with lower production.Originality/valueThis study rigorously investigates the role of land tenure specifically among young farmers and ranchers in the United States. By better understanding how land ownership affects profitability among beginning farmers and ranchers, policymakers will be able to better target public resources to support the next generation of producers.

Beginning farmer status and financial performance differentials

“…When considering the sources of differences in RROA between FGBF and SGBF in detail, it appears that their financial long-term commitment to dairy farming (which may be seen in the differences in share of off-farm income and the positive association between RROA and acreage owned for SGBF) may be one of the fundamental differences between these two types of farms. Previous research indicates that being located in areas with more off-farm income opportunities (Hartarska et al ., 2022) and renting land instead of owning it (Stevens and Wu, 2022) may be positively related to the performance and overall well-being of BF, even though these results may only apply to the “average” BF (SGBF are only 13% of all BF in our sample). Our results indicate that for BF taking over a preexisting farm, such finding may not apply.…”

“…In 2017, 18.8% of US principal operators were beginning farmers (USDA-NASS, 2017), and this group's performance has been studied in a variety of contexts in recent years. The most common source of national data to study BF performance is the USDA Agricultural Resource Management Surveys (ARMS) (Detre et al ., 2011; Jablonski et al ., 2022b; Katchova and Dinterman, 2018; Mishra et al ., 2009; Stevens and Wu, 2022; Williamson, 2016). Other studies combine the Census of Agriculture with other government agency datasets (Ahearn and Newton, 2009; Ahrendsen et al ., 2022; Hartarska et al ., 2022).…”

Do Consumers Support Beginning and Female Farmers?

“…As the agricultural market is historically intervened and supported by government policies, actions from both federal and state levels are increasingly executed in response to the absolute decline in the number of beginning and female farmers. 12 Concomitantly, a focal interest in recent studies is to evaluate program adoption and key factors that are associated with the financial performance of beginning farms (e.g., Ahrendsen et al, 2022;Jablonski et al, 2017Jablonski et al, , 2022Key, 2022;Stevens & Wu, 2022;Williamson & Katchova, 2013), the needs of female farmers in the United States (e.g., Fremstad & Paul, 2020;Horst & Marion, 2018;Schmidt et al, 2021).…”

“…The shrinking trend in agricultural participation signals a decreasing farming interest among the younger generation, due to potential reasons such as steep upfront capital investment and heavy physical demands with inadequate work–life balance (Charlton & Kostandini, 2021; Hertz & Zahniser, 2013; Sharma et al, 2022). Meanwhile, existing beginning farmers are facing greater financial and managerial risks to sustain and grow their farm business, especially in accessing land (Ackoff et al, 2017; Stevens & Wu, 2022), credit (Ahrendsen et al, 2022; Key, 2022), and equipment (Katchova & Dinterman, 2018; Torres, 2022).…”

Guest editorial: Special issue on beginning farmers and ranchers

“…While land access is often cited as necessary for beginning farmers, "Land tenure and profitability among young farmers and ranchers" (Stevens and Wu, 2022) contrasts the benefits from land ownership vs land rental strategies. Using panel data constructed from state-based ARMS summary measures drawn from individual responses collected from 2003 to 2018 (data available at: https://my.data.ers.usda.gov/arms/tailored-reports), Stevens and Wu review how land access strategies correlate with six widely used measures of farm operation and farm household well-being.…”