Farm Households' Alternative Businesses Boost Rural Economies

Farm Households' Alternative Businesses Boost Rural Economies

Nearly one-third of farm households operate an off-farm business or on-farm enterprise not related to commodity production

A new USDA Economic Research Service report finds that alternative enterprises run by farm owners boost rural economies, generating about 80% of a farm household's non-commodity business income.

Two categories of farm household enterprises were studied: off-farm business ventures and on-farm activities independent of commodity production, or "on-farm diversification activities."

Diversification activities represent agritourism operations, by-product suppliers, direct to consumer businesses and others. Off-farm businesses can be anything unrelated to the farm.

Nearly one-third of farm households operate an off-farm business or on-farm enterprise not related to commodity production

The ERS found that nearly one-third of farm households operated a business in either category in 2007 – creating $26.7 billion in household income. Off-farm businesses had the largest impact on the local economy, the report said.

Additionally, non-commodity entrepreneurial activities accounted for nearly 40% of the total value of U.S. ag production.

ERS reports that more than 290,000 farm households engaged in on-farm diversification earned $14,400 per farm from those activities. On-farm diversification operation owners devoted about 50% more work time to the farm than households not engaged in such activities.

Off-farm businesses earned about $140,200 per year – nearly twice the average for farms without such businesses. ERS figures show off-farm enterprises also contribute an estimated $54.6 billion in value added income to the gross regional products of their local economies. The enterprises employed 853,100 people and paid out $24.5 billion in wages in 2007.

ERS notes that the different types of on-farm and off-farm alternative ventures offer "unique community linkages."

The report said that commodity production, which generates demand for farm inputs and processing and marketing channels, has become more concentrated in past years, developing new outlets for economic growth in the non-farm businesses sector.

The report also notes that, in contrast, multi-enterprising farmers create local opportunity through generating visitor dollars from u-pick attractions and farm stores or general farm recreation.

View the full report by clicking here.

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