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Virginia Cooperative Extension -
 Knowledge for the CommonWealth

Can I Make Money Farming?

Farm Business Management Update, October/November 2005

By Keith Dickinson, (Keith.Dickinson@vt.edu), Extension Agent, Farm Business Management, Northern District

One of the most common questions by random folks calling local extension offices these days always seems to begin with the phrase "I just bought X (number) acres of land..." This initial phrase is followed with several options such as

"... and it has a pond on it, and I don't how to manage it."

"... and I want to find someone to farm it for me."

"... and I'd like to create a horse pasture on it."

Any of the above statements / requests for information is pretty easy to handle. The one that makes most Extension Agents cringe is the one that goes something like this:

"...and I want to become a farmer... and I'd like to make $50,000 per year doing it... and I can spend up to 15 or 20 hours a week working on the farm... and I need half the acreage for my house, my horse pasture, and half the rest is wooded."

For a variety of reasons, it seems that folks with wide-eyed dreams of a simpler lifestyle, are moving to the more rural places in the Northern Piedmont of Virginia and buying pieces of land.

Table 1: Average Net Cash Income for Farm Operations and Operators in N. Piedmont Region
County Net Cash Income Per Farm (Operations1) Net Cash Income Per Farm (Operators2)
Albemarle -$2006 -$1,818
Culpeper $7115 $7,571
Fauquier -$2126 -$3,995
Fluvanna -$1098 -$2,656
Greene $7835 $6,234
Loudoun $3123 $3,592
Louisa $2609 -$179
Madison $2964 $2,242
Nelson -$312 $53
Orange $15,041 $11,129
Rappahannock -$2,985 -$2,837
Source: 2002 United States Census of Agriculture
1Net cash farm income of the operations. This concept is derived by subtracting total farm and farm related expenses from total sales, government payments, and other farm-related income. Net cash farm income of the operation includes the value of commodities produced under contract by the contract growers. For publication purposes, farms are divided into two categories: 1. Farms with net gains (includes those operations that broke even) and 2. Farms with net losses.
2Net cash farm income of the operators. This value is the operators' total revenue (fees for producing under contract, total sales not under contract, government payments, and farm-related income) minus total expenses paid by the operators. Net cash farm income of the operator removes the value of contract commodities produced and acknowledges the income the operators received for services performed for the contractor. Net cash farm income of the operators is a new concept for the 2002 census. For publication purposes, farms are divided into two categories: 1. Farms with net gains (includes those operations that broke even) and 2. Farms with net losses.

Unfortunately, these people are often quite disappointed when reality sets in. Farming is not a business with abundant profit opportunities, particularly on a small scale. According to the most recent U.S. Census of Agriculture, about two-thirds of the farm operations and individual farm operators in the Northern Piedmont Region have an annual net loss (Tables 1-3), and the vast majority of farms in the region have annual sales of less than $10,000 (Figure 1).

Table 2: Average Net Gains and Average Net Losses of Farms Operations in N. Piedmont Region
County Farms with Net Gains Average Income per Farm: Farms with Net Gains Farms with Net Losses Average Loss per Farm: Farms with Net Losses
  Number Percent $ Number Percent $
Albemarle 285 31 17,121 632 69 10,631
Culpeper 237 35 38,527 431 65 10,158
Fauquier 414 31 23,758 923 69 13,737
Fluvanna 99 30 14,115 230 70 7,646
Greene 116 54 18,229 99 46 4,344
Loudoun 616 41 26,815 901 59 13,075
Louisa 165 35 26,339 310 65 10,022
Madison 211 40 21,468 321 60 9,199
Nelson 164 36 9,331 293 64 5,710
Orange 209 43 54,629 282 57 14,299
Rappahannock 157 36 11,021 285 64 10,700
Source: 2002 United States Census of Agriculture

Table 3: Average Net Gains and Average Net Losses of Farms Operators in N. Piedmont Region
County Farm Operators with Net Gains Average Income per Operator: Operators with Net Gains Farm Operators with Net Losses Average Loss per Operator: Operators with Net Losses
  Number Percent $ Number Percent $
Albemarle 301 33 16,429 616 67 10,734
Culpeper 238 36 39,568 430 64 10,139
Fauquier 426 32 17,026 911 68 13,825
Fluvanna 99 30 9,034 230 70 7,688
Greene 118 55 14,891 97 45 4,297
Loudoun 643 42 26,835 874 58 13,508
Louisa 183 39 16,583 292 61 10,684
Madison 211 40 19,640 321 60 9,195
Nelson 183 40 8,952 274 60 5,890
Orange 208 42 46,673 283 58 14,996
Rappahannock 170 38 10,516 272 62 11,184
Source: 2002 United States Census of Agriculture

While opportunities in small scale agricultural operations can provide a rural landowner some "back to nature" experiences as well as a modest income, they generally require a great deal of hard work, skill, and investment of time, labor, and capital. The opportunities that provide a consistently high income (>$25,000 / year) are rare. That magical enterprise that can provide a profit of several thousand dollars per acre with little up front investment, no experience, and with little labor requirements simply does not exist.

Some may ask why so many farms in this region are losing money. Several factors contribute to this issue; however, an easy trend to spot is that sales per farm for most counties in this region have not increased significantly, while the cost of production has increased (Figures 2 and 3).

There are, of course, exceptions to every trend, which can be seen when reviewing the trends in the previous tables and figures for Culpeper and Orange counties. These two counties show a higher average net income than surrounding counties and have had a significant increase in the average sales per farm. These trends can be directly attributed to the influence of a handful of large greenhouse and nursery operations that have been established in these counties recently. Before everyone draws the conclusion that starting a greenhouse business is "the answer," be sure to take a close look at Figure 3. While these two counties showed a substantial increase in sales, it should be noticed that they also showed a substantial increase in cost of production. One should also note in tables 2 and 3 that these two counties have the same relative breakdown on the percentage of farms with gains and losses.

Questions that a rural landowner needs to ask before considering an agricultural enterprise include

If landowners can spend time thinking over and even answering a majority of these questions, an extension agent or farm consultant could help guide them through the process of choosing a direction for the management of their land. Landowners need to be realistic in their expectations for what they can do with their land and what sort of income it will provide. If farming was a high return industry, more than 2 percent of our nation's population would be involved in it!

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