Editor’s note: Farm Futures’ exclusive Best Places to Farm report ranks the financial performance of 3,056 counties. By analyzing proprietary data and the recently released results from USDA’s 2022 Census of Agriculture, Farm Futures averaged weighted ranks of the ratios on return on assets, profit margins and asset turnover for each county. How does your county rank? Visit the interactive map to check the ranking of 3,056 counties and browse other stats.
What makes a great place to farm?
Good land — and lots of it — may be your answer if you think bigger is better and sales bring success.
When ag income set a record in 2022, the secrets of size held true. But in some parts of the country, prices meant profits — except where turbulent weather spelled the difference between stunning profits and staggering losses.
That’s just one of the findings from the latest installment of Farm Futures’ two-decade study, Best Places to Farm. Based on USDA Census of Agriculture data published every five years, this project tracks profitability in 3,056 counties across the country. It’s the most detailed look at what makes farm businesses tick — or not.
Farmers in these counties led the country on financial performance.
Released this winter, the results from the 2022 Ag Census covered the most turbulent economic times in two generations. Starting after 2017’s census, the period began with a trade war, only partly recouped by massive government aid. It then was socked by the pandemic of the century, followed by a surge in inflation and supply chain breakdowns. War in Ukraine came next, joined by stalemates in Congress.
Fond memories of 2022
Yet, farm country overall prospered amid the chaos. Sure, interest rates topped 7% at the end of 2022, and production costs for an acre of corn exploded over 20% in a single season. Nonetheless, total U.S. corn profit per acre was the best in a decade with record prices — including over $8 for a single bushel.
But not all shared that prosperity, thanks to disastrous yields caused by opposite ends of the weather spectrum. Record heat and drought on the Plains and Prairies meant the average income per corn farm dropped 5% nationwide, while a hurricane added to historic freeze damage from Texas to Florida.
Prices compounded the calamities. Two stalwarts of the South suffered. Peanut prices were the worst of 15 ag commodities, and cotton income per farm plunged 39% in one year. Record egg prices pushed poultry profits to double-digit gains. But hogs, that Southern staple, ate a 40% drop in income during a volatile year, beset by labor shortages and soaring feed costs.
Despite these factors, or perhaps because of them, the current map of Best Places to Farm isn’t a complete overhaul from previous editions. How farmers in most counties fared in 2022, statistically at least, pretty much followed how they fared in past census years. The five best counties from the 2017 tally placed in the top eight this time.
Kershaw County, S.C. — this round’s best of the Best Places to Farm — came in at No. 15 in 2017 and No. 5 in 2012. What’s the secret of success for counties like it nestled around Revolutionary War battle sites? Agriculture is big, but their farms aren’t huge at about 175 acres, with less than 1 in 5 earning more than $100,000 annually.
Because poultry is plentiful, crops account for just 3% of sales. Centered around chickens and turkeys, Kershaw led the state in poultry sales and ranked 38th nationally.
Pork production is seasoned with poultry in much of the barbecue belt from Arkansas to North Carolina, which dominates the top 500 counties on the list. But some counties in the region were stung by weather and prices. Hog futures soared early in 2022, when producers planned to breed fewer sows as feed costs soared. But by the time seasonal weakness hit in the fall, futures were 40% lower, as expansion again looked inevitable.
Still, pigs and poultry are a winning combination for “Best Places” because they are a financially efficient way to deploy capital, producing a lot of sales and income from fewer assets, compared to crop farms that have high-priced land on their balance sheets. That matters because the rankings focus on performance in three key ratios:
-
Return on assets compares a farm’s income to the value of its assets, including land, machinery and livestock.
-
Profit margin measures how much income is left after expenses are deducted from sales.
-
Asset turnover shows how much revenue a farm’s assets generate.
This helps explain why the traditional Corn Belt in the Midwest was profitable, but not by the margins seen after the high prices caused by the ethanol boom and China’s once-insatiable appetite for U.S. soybeans. Sky-high land prices inflated the left side of balance sheets, a mixed blessing on financial ratios.
While good for managing debt-to-asset ratios, land costs made it harder to squeeze profits from each dollar invested. This raised the bar for return on assets and asset turnover. As a result, the few Midwest counties near the top of the list were big poultry producers, especially turkeys that benefited from a price surge after an outbreak of avian flu.
Counties in California also were victims of forces outside their control. Wildfires and water woes wilted wine country, as the state’s share of U.S. vino production dropped below 80% for the first time.
Other sectors overcame obstacles. High feed and labor costs didn’t curdle the dairy industry across the Upper Midwest and eastward. Record butter prices fattened by 65% and helped the all-milk benchmark to an all-time high. Cheese and other dairy also were strong.
Consolidation was the name of the game for dairy and the rest of farming, as the U.S. lost 140,000 operations from 2017 to 2022, a 6.1% dip. Small farms generating sales of $10,000 or less dropped by 25%.
Yet, some counties dominated by smaller farms thrived, partly because location, even if unlikely, made it a great place to farm.
Take Rockland County, N.Y., with just $4 million in total ag sales in 2022. Barely 10% of its 18 farms have yearly sales above $100,000. But being a terminus of the Hudson River’s Tappen Zee Bridge near New York City offers access to the most concentrated market in the United States for locally grown, farm-to-table foods that bring a premium.
With many of these operations selling direct to consumers, their eggs, vegetables and greenhouse crops turned a profit margin of 45% — performance that looks attractive to those earned in the high-flying technology industry.
Such farms prove that while size does matter in agriculture, it’s far from the only factor making a place great to farm.
Learn more about Farm Futures’ Best Places to Farm study and view the interactive map to see where your county ranks.
Ag census data from 2012 and 2017 show how financial performance migrated across the U.S. Record grain prices in 2012 helped profits surge across the Corn Belt and Prairies, but weather and rising surpluses punished 2017 crop incomes. Poultry saved the day for the Southeast in 2022.
Source: farmprogress.com
