The farming industry has been at the heart of the world since humanity began, and its importance has never changed.
Even though there are new industries that look more attractive nowadays, farming still stands as a very lucrative industry and a business opportunity.
Considering its importance and how lucrative it can be, you might think of owning a farm.
If you are considering owning a farm, it’s quite normal to wonder how much farm owners make and if it’s worth it at all.
The income of farms varies quite a lot based on many factors, but there are some average numbers that you can look at to get an idea about it.
This article will cover all the details about how much farm owners make, the factors affecting the income, and all other details about the income of a farm.
Average Income of Farm Owners
Farms have a variety of income based on their location, the type, and many other factors, so it’s hard to come up with a concrete number.
According to the U.S. Department of Agriculture, farms with over $350,000 in annual gross income provide 90% of the farm sector’s value. And these farms overall take up 50% of the entire farms in the United States.
When we remove the expenses from this gross annual income, the average cash income is forecasted to be $92,400 for 2023.
This means that farm owners if they own 100% of the farm, take about $92,400 annually in income. Depending on your location, this could also be above $120,000 annually.
Average Profit Margin
There aren’t many reports regarding the profit margin of farms because each type has different profit margins, and this makes it harder to know the margins for overall farms.
However, according to the latest report by the U.S. Department of Agriculture, we see that about 70% of all farms have less than a 10% profit margin.
Some farms have more than 20% profit margin, and they account for 20% of total farms.
| Farm Income | No. of Farms Profit Margin Below 10% | No. of Farms Profit Margin Below 10% |
|---|---|---|
| Less than $350,000 | 69.75% | 18.3% |
| $150,000-$999,999 | 48.7% | 39.15% |
| $1 million-$4.9 million | 28.4% | 58.5% |
| Above $5 million | 24.6% | 63.9% |
About 50% of farms making an income between $150,000 to $999,999 annually have a profit margin below 10%. About 40% of the same type of farms have over 20% profit margin.
The number of ones in between 10% and 20% is extremely low. It’s clear that as the farm size goes up, the profit margin also goes up.
Average Money Farm Owners Employees Earn
A farm might have very different roles in helping out for different reasons. That’s why the salaries for people employed in farms also vary based on this and the experience.
According to the U.S. Bureau of Labor Statistics’ latest report, the average annual salary for farm employees was $73,000 in 2021.
Some states have higher or lower average salaries, so you might receive higher or lower depending on where you live.
For example, California is the highest paying state with an average $91,590 annual salary.
Factors Affecting Farm Owner’s Income
A farm owner’s income change depending on several factors, and if you know what these factors are, you can easily increase your income.
These factors are generally about your decisions, and it’s in your hands to change them for the better and economize on several things to increase your income. Here are some of these factors.
Location
As we mentioned above, the state your farm is in, even the county or the region, affects most of your income.
If the farmland is not yours and you are renting it, your rent might change exponentially depending on your location.
In addition, certain items’ prices vary based on the region’s or the state’s economic situation.
For example, California is one of the most expensive states in the United States, so anything you do there will cost higher than cheaper states like Oregon.
Farm’s Size
With the farm’s size going bigger, you will require more things, labor costs will increase, and maintenance will take longer.
All these affect your income as they increase your expenses, putting a dent in your profit margin.
That’s why you need to consider your selling prices based on your farm’s size and buy things that would fit into your farm’s size.
Type of Farm
There are a variety of farms like dairy, crop, hay, and so on. Each type of farm focuses on different points of the farm industry, and your buyers are also different.
Depending on the type of farm, you can have higher or lower profit margins, and you can change the prices to match your profit margin goals if you don’t have a lot of competition.
Generally, the ideal thing is to do more than one type in one farm; this allows you to reduce the risks and have more buyers.
That way, you can earn more with diversity and have more buyers for your products.
Tips to Maximize Farm Income
If you can’t do much on the differentiating factors of your farm’s income, you can use some of the tips to maximize the income from your farm.
These tips are generally suitable for most farms, and if you do them well, you can see a great change in your overall income.
- Grow your own feed: If your farm has livestock that focuses on meat or milk production, you can always grow your own animal feed. These include hay, corn, soybeans, or oats. When you grow your own feed, you have the ultimate control over how much you feed your animal and how much you should have in your inventory.
- Research the local planting trends to improve crop yields: Getting better results in profit from your crops is the ultimate income maximizer. Try to follow what’s happening in your state or local neighborhood to improve your techniques. It can help to make your soil healthier.
- Take care of your machinery and equipment well: One of the biggest cost drivers of any farm is the maintenance cost of the machinery and equipment. Make sure that you take care of the machinery well.
- Diversification: As we mentioned before, we don’t have just one type of product. Have livestock, crops, hay, whatever it is you can have; try to have as many different types as you can.
- Manage your debt: As a farmer, you will have debt no matter what you do. Keep track of your debt and know how much you owe. Restructure it if you need it.
How Much Do Farms Cost to Open?
The cost of starting a farm mostly depends on the type and size of the farm and where you want to open the farm. On average, opening a small farm costs between $600 to $10,000.
The type of farm required labor, the inventory of livestock or feed, farm size, and equipment is all factors affecting this cost.
| Type | Cost |
|---|---|
| Farmland | $150-$10,000/acre |
| Equipment | $700-$1000 |
| Machinery | $540/acre |
| Livestock (if applicable) | $2000/animal |
| Seed (if applicable) | $400/80000 seeds |
| Utilities (water) | $1000/acre |
As you can see, the most expensive thing is the farmland and the machinery for the farm.
If you go hard on these and the size of the farm is quite big, you will pay more than $10,000. This cost could shoot up to about $1 million for farms larger than the average.
Conclusion
Farms might seem like they are sort of outdated businesses that are not worth the effort and the cost to own them, but that’s not particularly true.
If you can manage a farm well, the average income of a farm owner is expected to be $92,400 in 2023. This number goes up for larger farms, hitting over $120,000 in annual net profit.
Depending on the farm’s location, size, type, machinery, and overall expenses, the profit margin is generally either under 10% or over 20% for most farms.
That’s why if you can learn about these factors and take the right steps on your farm, it could be a very lucrative business, giving you over $120,000 in net annual income.
FAQ
Are farms risky businesses?
The work of farms requires an extensive amount of work and experience to succeed.
That’s why even though opening a farm might not require as much capital as other businesses, it’s harder to keep the farm going.
They will become risky businesses if you don’t have the necessary experience and education.
How much can I expect to make as a farm owner?
The average farm owner’s income is about $92.400 annually. However, this mostly depends on the size of your farm and where your farm is.
For example, if you are living in a state like California and have a big farm, you will make more than $120,000 annually on average.
Can I fail with a farm?
Farms are businesses just like any other business out there. They are not fail-proof, and it’s possible to fail.
If you can’t manage the farm and keep a profitable operation with good profit margins, your farm will fail, and you will have to shut it down.
Sources
https://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/farm-business-income
https://www.bls.gov/ooh/management/farmers-ranchers-and-other-agricultural-managers.htm
https://www.ers.usda.gov/amber-waves/2015/januaryfebruary/profit-margin-increases-with-farm-size/
https://www.fbfs.com/learning-center/how-to-improve-your-farm-s-profitability#
Amit Gupta is an experienced expert in digital marketing and co-founder of DrFranchises. With more than 11 years of knowledge in franchise digital marketing, SEO, email marketing, and social media marketing, Amit has helped many brands achieve incredible success online. As a passionate entrepreneur and owner of 7 franchises, he continues to study franchise models, looking at costs, revenue, and profitability to guide brands toward profitable growth. When he’s not working on digital marketing, Amit enjoys spending time playing with his beloved dog.