Summary: Payments to farmers under federal farm programs have reached an historic high--over $20 billion in fiscal year 2000. Nearly half of U.S. farms are receiving payments for income or price support purposes and/or for engaging in activities such as land conservation. These payments, in total, made up almost one-half of net farm income in fiscal year 2000. Despite the annual influx of billions of federal dollars to the farm sector, the U.S. Department of Agriculture (USDA) reports that the number of farms has been declining about one percent per year, with the most notable declines in small family farms and young farmers. GAO reviewed USDA's annual surveys of U.S. farm operations--called the Agricultural Resource Management Study--and state and crop information from its Program Payments Reporting System to (1) determine the distribution of farm payments over the past decade by farm size, operators' age, state, and crop and (2) identify the major barriers that make it difficult for young people to enter farming. GAO found that in recent years, over 80 percent of farm payments have been made to large- and medium-sized farms, while small farms have received less than 20 percent of the payments. Even though small farms substantially outnumber medium and large farms, because payments are generally based on volume of production, the average payment to small farms was much less than the average payment to medium and large farms. The distribution pattern for 1999 was similar to that of the other years during the past decade, but the portion of the payments going to large farms has increased and the portion going to small farms has decreased since 1996. Farmers under age 35 received about 6 percent of farm payments while farmers ages 35 through 54 received 56 percent of the payments. Farm payments are principally directed at producers of eight major crops: wheat, corn, barley, oats, sorghum, rice, cotton, and oilseeds,. All states received a portion of payments, but six states--Iowa, Illinois, Texas, Kansas, Nebraska, and Minnesota--together received almost half of the payments in 1999. The major obstacle facing young people who wish to enter farming is the high cost of acquiring the needed assets, principally farmland and farm machinery. Although farm program payments can help beginning farmers once they have started farming, the payments can also present a hurdle because their value is reflected in a higher price to buy or lease the farmland.
