Posted by: FBRuralDevelopment | 11/09/2012

USDA: Farmers Build Local Economy by Starting Multiple Businesses

Multi-Enterprising Farm Households are a Benefit to the Rural Economy

By Angela Black

As anyone involved in agriculture knows, full-time farm families are becoming increasingly scarcer to the point that almost 75 percent of U.S. farm households have one or more member who works off the farm.  In fact, a new study by USDA’s Economic Research Service found that nearly 1 in 3 U.S. farm households generate income by engaging in off-farm business ventures and on-farm activities that are independent of commodity production.

The study looked at “multi-enterprising farm households” – households where members operated business ventures, such as farmers markets, agritourism or custom work (on-farm diversification), and/or off-farm businesses in other sectors of the local economy (portfolio entrepreneurs) in addition to their farming operation.  These households operate farms of all sizes and, in 2007, produced almost 40 percent of the total value of U.S. agricultural production, adding $26.7 billion to farm household income.

Rural communities have had to find new sources of economic growth as production agriculture has become more concentrated in the last five decades and farmers look outside the community for inputs.  However, this has allowed for more economic diversification.  On-farm diversification attracts visitors – and their money – to the local community, and portfolio entrepreneurs contribute directly to the community by selling goods and services and hiring local workers.

According to the study, off-farm businesses are the largest source of non-commodity-based income for multi-enterprise farm households and create strong ties and stability in local economies, especially in remote, rural communities, as well as in non-farm economies.  In 2007, these businesses added an estimated $111.6 billion in sales of goods and services and $24.5 billion in hired labor income to their local economies, which may have otherwise been imported from other areas.

So who are these multi-enterprising farm households?  Intermediate (where farming is the operator’s primary occupation) and commercial (farms with gross annual sales of $250,000 or more) family farms tend to lean more toward on-farm diversification models.  Some of these households – about 12 percent – have two or more on-farm ventures.

In contrast, rural residence farms (where the operator’s primary occupation is something other than farming) tend to start off-farm businesses.  Portfolio entrepreneurs aren’t about to miss out, though, and about 16 percent of them also engage in multiple on-farm diversification activities.

The study also found that being a multi-enterprising farmer leads to occupational mobility, giving farm operators an opportunity to transition into non-farm employment and those who work off the farm the opportunity to farm full-time as their operations become more successful.

And multi-enterprising is paying off.  These farm households are generally earning incomes greater than those not engaged in alternative income-generating business activities, sometimes up to twice as much for portfolio entrepreneur households.


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