Importance of Off-Farm Income

Cycles of positive and negative returns are nothing new to agriculture. They are just inherent in the sector. Thus, farm households over time have developed means to mitigate income volatility. One of the more common is to secure off-farm income. Not only does off-farm income help stabilize income, it provides ancillary benefits like health insurance or retirement programs for the household.

According to Daniel Munch, an economist with American Farm Bureau, 77% of U.S. farm household income in 2023 came from sources other than farming. The 2022 Census of Agriculture reported that 58% of U.S. farm operators said farming was not their primary occupation. Almost 40% of operators reported working 200 or more days a year off the farm. Nebraska, for the first time in 2022, had more producers (41,031) report “other” as their primary occupation than report “farming or ranching” (39,252). And like the U.S. overall, 40% of Nebraska operators (31,844) indicated they worked more than 200 days off the farm. Both U.S. and Nebraska figures are higher compared to 40 years ago. In 1982, 45% of the nation’s operators said their primary occupation was something other than farming; 21% of Nebraska operators indicated as such.

Munch wrote the most common reasons for off-farm work are to secure more reliable income, seek higher pay than farming, and gain access to key non-wage benefits like health insurance and retirement plans. Research has shown the rise in off-farm income has helped stabilize income for farm households. Steven C. Deller and Mckenzie Boyce, with the University of Wisconsin, wrote last year that while there are periods of downturn, nominal farm household income has trended upwards. Moreover, average farm household income compares favorably to U.S. average household income.

The USDA defines any operation which sells more than $1,000 of agricultural goods as a farm. So, the data includes many small farms one would not necessarily classify as commercial operations. Nevertheless, off-farm income plays a growing role in the financial stabilization of farm households, including commercial farms. This also means that rural economies play an important role in providing jobs to farm households. Deller and Boyce wrote that rural communities “enable the off-farm income that makes farming financially viable.” But challenges are ahead. Declining rural populations and loss of access to goods and services could undermine jobs available to farm families. At the same time, broadband internet access and the growing online business could provide opportunities for farm families not seen before and foster growth in rural communities. Farm and ranch families and rural communities need each other to succeed.