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California Corporate Farms: Myth and Reality Hoy Carman California Corporate Farms: Myth and Reality Hoy Carman farms. As is often the case with gener­ A Comparison of Family alities, some perceptions of corporate California corporate farms have and Corporate Farms farming are not supported by the data. grown in terms of numbers, share A comparison of California corporate of all farms, size, asset values and farms with individual proprietor family Choice of Legal Organization product sales. The average California farms shows that, on average, cor­ corporate farm continues to be larger A farmer’s choice between organiza­ porate farms are substantially larger, than the average single proprietor tional alternatives (single proprietor­ have more assets, and higher product and partnership farm but corporate ship, partnership or corporation) has sales. For example, individual propri­ farms are represented in all of the size, operational, legal, and financial con­ etor family farms had average sales of asset and product sales categories, siderations and implications. Without $162,179 in 2007, they had an aver­ from smallest to largest. Corporate going into detail, the corporate form age of 200 acres of land, the estimated advantages available to large of organization may offer advantages family farms continue to encourage market value of land and buildings incorporation. for inter-generational transfer of farm averaged $1,292,699, and the estimated assets, income tax planning, employee market value of all machinery and benefit programs, and risk manage­ equipment averaged $63,809. In con­ ment. At the same time, corporate orga­ trast, California corporate farms had nizational, operational, and reporting average sales of $2,187,321; their aver­ any agricultural observers requirements require time, legal and age size was 784 acres; the estimated view corporate farms as a seri­ accounting assistance, and other costs market value of land and buildings Mous threat to the survival of not incurred by the sole proprietor averaged $6,315,180; and the esti­ family farms and the communities that or partnership. Detailed discussion of mated market value of all machinery support them, encouraging legislators the pros and cons of the alternatives and equipment was $396,451. Net in nine mid-western states, including are beyond the scope of this article. cash farm income tells a similar story. Oklahoma, Nebraska, North Dakota, The number of corporate farms in Of the 64,001 individual proprietor South Dakota, Wisconsin, Minnesota, California has been increasing over family farms, 24,963 (39%) reported Kansas, Missouri, and Iowa, to enact time. There were 2,601 corporate farms net income averaging $127,443 anti-corporate farming laws. California in California in 1974, more than double per farm while 39,038 reported net agriculture has not shared this view the 1,212 reported in 1969. Note in losses averaging $27,785 per farm. and the proportion of California farms table 1 that corporate farm numbers For the 5,750 corporate farms, 3,399 that have incorporated has increased grew to 5,750 out of a total of 81,033 (59%) reported net income averag­ over time with 5,750 corporate farms California farms in 2007. The increase ing $967,108 while 2,351 reported net (7.1%) out of the total of 81,033 farms in corporate numbers during the most losses averaging $172,014 per farm. in 2007. Just over 80% of California recent two decades was much slower All individual proprietor family corporate farms are classified as family than occurred from 1969 through 1987. farms are not small and not all held corporations and 93.7% of all Cali­ Table 1. Number of California Farms, Number of Corporate Farms, and Corporate fornia farm corporations have fewer Farms Proportion of Total Farms, Census Years 1978 through 2007 than 10 shareholders. This article uses Census Year data from the U.S. Department of Agri­ culture’s 2007 Agricultural Census to 1978 1982 1987 1992 1997 2002 2007 describe the changing organizational Total farms 73,194 82,463 83,217 77,669 87,991 79,631 81,033 structure of California farms over time, Corporate farms 3,871 4,849 5,367 5,067 5,504 5,070 5,750 together with comparisons of charac­ Corporate farm % 5.29% 5.88% 6.45% 6.52% 6.26% 6.37% 7.10% teristics of corporate and non-corporate Source: USDA, Census of Agriculture for each year noted. Giannini Foundation of Agricultural Economics • University of California 9 corporate farms in each subcategory. Figure 1. Acreage Distribution of Single Proprietor and Corporate Farms, The market value of agricultural prod­ California 2007 uct sales varies by farm type. Limited- 40 resource and farming occupation/ lower sales farms have total sales less 35 than $100,000; farming occupation/ higher sales farms have sales between 30 $100,000 and $249,999; retirement Single proprietor and residential/lifestyle farms have Corporation 25 sales of less than $250,000; large family farms have sales between $250,000 20 and $499,999; and very large family Percent of Farms by Type Type by Farms of Percent farms have agricultural product sales 15 of $500,000 or more. Nonfamily farms include nonfamily corporations and 10 farms operated by hired managers. The numbers and proportion of 5 farms by type for each structural cat­ egory make interesting comparisons. 0 For example, limited resource, retire­ 1-9 10-49 50-69 70-99 100- 140- 180- 220- 260- 500- 1000- 2000 139 179 219 259 499 999 1999 or more ment, and residential/lifestyle farms Acreage Category made up 1,166 out of 5,750 (20.3%) corporate farms are large. For example, while 1,318 (23%) corporations also corporate farms; 3,804 out of 9,552 there were 2,954 California farms had total product sales and govern­ (39.8%) partnerships; and 45,557 out with an estimated market value for ment payments of less than $25,000. of 64,001 (71.2%) single proprietor land and buildings of over $10 million In fact, 595 corporations (10.3%) farms in California. While 2,386 cor­ each. Of these, 1,163 were individual had total product sales and govern­ porations (41.5%) are classified as proprietor family farms, 895 were ment payments of less than $1,000. nonfamily farms, single proprietors partnerships, and 805 were corpora­ Each type of legal organization has and partnerships together (with 3,822 tions. In terms of income, there were farms in both the smallest and the larg­ farms) have more farms in the category. 5,693 California farms with 2007 sales est size, income, and value categories. Single proprietors and partnerships and government payments over $1 While the statistical distribution of each have more farms in the large million. Of these, 34.2% were single measured characteristics for each legal and very large family farm catego­ proprietor farms, 33.2% were partner­ type of farm covers the full range of ries than do corporations (table 2). ships, and 30.3% were corporations. measured sizes, incomes and values, the There were 1,365 California farms shape of each distribution differs signif­ Corporate Farm Activities with sales and government payments icantly from a normal distribution. The Corporations are more prevalent over $5 million. Of this highest sales percentage distribution of single pro­ in some production sectors than in category, 25.5% were single propri­ prietor and corporate farms by acreage others. Overall, corporations account etor farms, 34.4% were partnerships, category, shown in figure 1, is typical. for 7.1% of all California farms, but and 37.9% were corporations. they make up 22.0% of all greenhouse, At the other end of the distribu­ Farm Typology nursery, and floricultural operations, tion, 148 corporate farms had a total The Economic Research Service, USDA, 16.1% of vegetable and melon farms, value of land and buildings of less has developed eight farm typology 9.5% of oilseed and grain farms, and than $50,000, and another 133 fell categories. There are two major group­ 9.1% of cotton farms. Corporate fruit in the range of $50,000 to $100,000. ings of farms: five subcategories of and tree nut farms are at the average Looking at products sold and gov­ small family farms with sales of less of 7.1%, as are poultry and egg farms, ernment payments, 42,956 (67%) than $250,000, and three subcatego­ while all other sectors are below the individual-proprietor family farms ries of other farms. The subcategories average. The largest numbers of cor­ had total product sales and govern­ are shown in table 2 with the number porate farms, 2,674 out of the total ment payments of less than $25,000 of single proprietor, partnership, and 5,750, are fruit and tree nut farms. 10 Giannini Foundation of Agricultural Economics • University of California Corporate farms accounted for Table 2. California Single Proprietor and Corporate Farms by ERS Farm Typology, $12.58 billion (36.9%) of California’s 2007. $34.125 billion of 2007 product sales Single and farm payments. Corporate sales Partnership Corporate Total proprietor shares were 72.6% of total greenhouse, Farm Typology nursery, and floricultural sales, 69.9% ------------- number of farms --------------------­ of poultry and egg sales, 49.5% of Limited-resource farms 7,897 654 201 8,752 vegetable and melon sales, 37.0% of Retirement farms 15,532 1,349 328 17,209 cattle and calves sales, 35.5% of cotton Residential/lifestyle farms 22,128 1,801 637 24,566 and cottonseed sales, 34.6% of fruits Farming occupation/lower sales 8,791 975 363 10,129 and tree nuts sales, and only 8.8% of Farming occupation/higher sales 2,245 500 204 2,949 milk and other dairy product sales.
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