For over a decade, US farmland prices have soared, making headlines selling at record per-acre prices. While it appears farmland values are beginning to falter, due to declining crop prices, large acreage row-crop farmland still comes with a hefty price tag. If you factor in the start-up costs/cost of operations for large income-producing farms, the price remains out of reach for many beginning farmers and first time investors.
There is an alternative for new farmers and investors who wish to diversify their portfolio by investing in income-producing farmland- the purchase of a small acreage farm. As a general rule, farms that are 10 acres or less do not produce much income, but according to a new report released by the USDA’s Economic Research Service, titled “Working the Land With 10 Acres: Small Acreage Farming in the United States”, small farms can mean big opportunity.
According to the report, 13 percent of U.S. farms (294,000) operated on 10 acres or less in 2007. In that year, 17% of small acreage farms had gross sales of at least $10,000 annually. Over 30,000 small farms had gross sales between $10,000 and $50,000, and 6,000 generated over $250,000 and 3,600 reaped sales of no less than $500,000. Read the full USDA Economic Research Service report here.
Based on the findings, the key to generating income on a small acreage farm is to grow specialty crops that are not widely grown or engage in livestock production as a single-stage producer, with basic inputs produced off-site.
The highest grossing farms in 2007, those grossing no less than $500,000, were active in a highly specialized stage of livestock production, like confined pork or poultry. The 46,000 small-acreage farms that saw returns betweens $10,000 and $500,000, concentrated on speciality crops like floriculture, tree nurseries, and fruits and vegetables. The farms that concentrated on bee-keeping, aquaculture (like farm-raised catfish), and beef production were common in the $100,000 – $499,999 and smaller sales range.
In summation, the report stated that small acreage farms comprise a large percentage of the U.S. farming landscape and while the majority of farms 10 acres have negative net farm income, those with sales of $10,000 or more had positive net farm income.
The model for a successful small farm, one that produces modest sales to sales in excess of $500,000, includes concentration on a high-value niche crop or production process, careful management practices, and aggressive marketing strategy.