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Using farm-level panel data from recent U.S. Agricultural Censuses, this study examines how direct government payments influence the survival of farm businesses, paying particular attention to the differential effect of payments across farm-size categories. A Cox proportional hazards model is used to estimate the effect of government payments on the instantaneous probability of a farm business failure, controlling for farm and operator characteristics. Results indicate that an increase in government payments has a small but statistically significant negative effect on the rate of business failure, and the magnitude of this effect increases with farm size.
In the last 25 years, U.S. crop farms have steadily declined in number and grown in average size, as production has shifted to larger operations. Larger farms tend to receive more commodity program payments because most payments are tied to a farm's current or historical production, but whether payments have contributed to farm growth is uncertain. This study uses farm-level data from the census of agriculture to determine whether there is a statistical relationship between farm commodity program payments and greater concentration in production. The analysis indicates that, at the regional level, higher commodity program payments per acre are associated with subsequent farm growth. Also, higher payments per acre are associated with higher rates of farm survival and growth.
This is a summary of an ERS report.
About 717,000 farms in the U.S. went out of business, or exited, between 1992 and 1997, but the total number of farms declined by just 13,400 because the number of entries (703,700 farms) nearly equalled exits. In fact, the farm count has remained relatively stable since the 1974 Census, reflecting exits and entries essentially in balance. This book explores and studies U.S. farm exits, farm survival and the role of commodity payments.