Farm Programs: Information on Recipients of Federal Payments	 
(15-JUN-01, GAO-01-606).					 
								 
Payments to farmers under federal farm programs have reached an  
historic high--more than $20 billion in fiscal year 2000. Nearly 
one-half of U.S. farms are receiving payments for income or price
support purposes and for activities such as land conservation.	 
These payments 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 occuring 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, more than 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, the average payment to small	 
farms was much less than the average payment to medium and large 
farms because payments are generally based on volume of 	 
production. The distribution pattern for 1999 was similar to that
of the other years over the past decade, but the portion of the  
payments that has gone to large farms has increased and the	 
portion to small farms has decreased during the period 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.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-606 					        
    ACCNO:   A01034						        
  TITLE:     Farm Programs: Information on Recipients of Federal      
             Payments                                                         
     DATE:   06/15/2001 
  SUBJECT:   Disaster relief aid				 
	     Farm subsidies					 
	     Federal aid programs				 
	     Loans						 
	     USDA Agricultural Resource Management		 
	     Study						 
								 
	     USDA Conservation Reserve Program			 
	     USDA Program Payments Reporting System		 

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GAO-01-606
     
Report to the Chairman, Committee on Agriculture, Nutrition, and Forestry,
U. S. Senate

United States General Accounting Office

GAO

June 2001 FARM PROGRAMS Information on Recipients of Federal Payments

GAO- 01- 606

Page i GAO- 01- 606 Farm Programs Letter 1

Appendix I Additional Analyses of the Distribution of Farm Payments 29

Appendix II Scope and Methodology 35

Appendix III GAO Contacts and Staff Acknowledgments 38

Tables

Table 1: Major Farm Program Payments 8 Table 2: Payment Limits for Major
Farm Programs 10 Table 3: The Percentage of Major Farm Program Payments

Received by the 12 States Receiving the Largest Amounts, Crop Year 1999 25
Table 4: Description of ERS? Farm Typology 32 Table 5: Percentage of Farms
and Payments and Average Payments

by ERS? Farm Typology, 1993 and 1999 33

Figures

Figure 1: Percentage of Farms and Farm Payments by Farm Size, 1999 3 Figure
2: Percentage of Payments Received by Farm Size,

1991- 99 4 Figure 3: Percentage of Payments by Farm Operators? Age, 1991- 99
5 Figure 4: Percentage of Farms Receiving Payments by Farm Size,

1991- 99 13 Figure 5: Average Farm Payment by Farm Size, 1991- 99 14 Figure
6: The Percentage of Farm Payments, Acreage of Eligible

Crops Planted, and the Value of Production of Eligible Crops, by Farm Size,
1999 15 Figure 7: Percentage of Farm Payments Received by Farm

Operators in Selected Age Categories, 1999 16 Figure 8: Number of Principal
Farm Operators Younger than Age

35, 1991- 99 17 Contents

Page ii GAO- 01- 606 Farm Programs

Figure 9: The Percentage of Payments, Farms, and Acreage of Eligible Crops
Planted, by Operators? Age, 1999 18 Figure 10: Percentage of Farms Receiving
Farm Payments by

Operators? Age, 1999 19 Figure 11: Average Farm Payment in 1999 by Age of
the Farms?

Principal Operator 20 Figure 12: Farm Size by Age Group, 1999 21 Figure 13:
The Financial Position of Farm Operators of Various Age

Groups, 1999 22 Figure 14: Percentage of Major Farm Program Payments, by
Crop,

Crop Year 1999 23 Figure 15: Percentage of Major Farm Program Payments by
Crop,

Crop Years 1990- 99 24 Figure 16: Percentage of Farm Payments by Farms?
Number of

Farm Acres Operated, 1991- 99 30 Figure 17: Percentage of Farm Payments
Received by Large and

Small Farms as Defined by the National Commission on Small Farms, 1991- 99
31 Figure 18: Percentage of Farm Commodity Payments Received by

the Top 10 Percent of Recipients 34

Page 1 GAO- 01- 606 Farm Programs

June 15, 2001 The Honorable Tom Harkin Chairman, Committee on Agriculture,

Nutrition, and Forestry United States Senate

Dear Mr. Chairman: Payments to farmers under federal farm programs have
reached an historic high- over $20 billion in fiscal year 2000. Nearly one-
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. Although the payments averaged about $17,000 for the farms
receiving them in 1999, the level of assistance can range from a few dollars
up to tens of thousands of dollars. Despite this 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 1 percent
per year. According to the census of agriculture, which is conducted every 5
years, the nation had about 1.9 million farms in 1997, down from 2.1 million
farms in 1987. This decline, which has occurred partly as a result of
consolidation, is most pronounced among small family farms. Moreover, the
average age of farm operators continues to increase. For example, the share
of farmers under age 35 decreased from 15 percent in 1954 to 8 percent in
1997, while the share of farmers age 55 or older increased from 37 percent
to 61 percent.

Concerned that farm payments are not being effectively targeted to aid the
survival of small farms and the entry of young people into agriculture, you
asked us 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.

The following information on the distribution of farm payments by farm size
and operators? age is from our analysis of USDA?s annual surveys of U. S.
farm operations. These surveys- called the Agricultural Resource Management
Study- include information on crop and livestock production practices and
the financial and operating characteristics of farms. The information on
payments by crop and state is from USDA?s Program Payments Reporting System,
a national database of payments

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 01- 606 Farm Programs

made under the Department?s farm programs. (See app. II for a more detailed
discussion of the annual surveys and the payments database.)

In recent years, over 80 percent of farm payments have been made to large-
and medium- size farms, while small farms have received less than 20 percent
of the payments. For example, in 1999 (the latest year for which data were
available), large farms- the 7 percent of farms nationwide with gross
agricultural sales of $250, 000 or more- received about 45 percent of the
payments. The 17 percent of farms that are medium- sized (gross sales
between $50,000 and $249,999) received 41 percent of the payments. The
remaining 14 percent of the payments was shared by the 76 percent of farms
that are small (gross sales under $50,000). (See fig. 1.) Small farms
substantially outnumber medium and large farms, but because payments are
generally based on volume of production, the average payment of small farms
that received payments was much less. In 1999, these small farms, on
average, received payments of about $4,141. In contrast, large farms
received payments averaging about $64,737, while medium- sized farms
received average payments of about $21,943. Results in Brief

Page 3 GAO- 01- 606 Farm Programs

Figure 1: Percentage of Farms and Farm Payments by Farm Size, 1999

This distribution pattern for 1999 was similar to that of the other years
over the past decade. However, the portion of the payments that has gone to
large farms has increased and the portion to small farms has decreased
during the period since 1996 (see fig. 2).

Page 4 GAO- 01- 606 Farm Programs

Figure 2: Percentage of Payments Received by Farm Size, 1991- 99

In 1999, farmers under age 35 operated about 6 percent of the farms
nationwide and received about 6 percent of farm payments. Those who were
ages 35 through 54 operated 46 percent of the farms and received 56 percent
of the payments; those ages 55 or older operated the remaining 49 percent of
the farms and received the remaining 38 percent of the payments. This
pattern was generally consistent over the 9- year period of 1991 through
1999. The percentage of the payments received by farmers under age 35 was
fairly constant over the past 3 years, although lower than during the first
part of the period. (See fig. 3.) At least some of this decrease can be
attributed to the aging of the recipients and the reduced number of younger
farmers. Of the farmers receiving payments, the average payment in 1999 of
those under age 35 was about $16,544, slightly less than the $16,751 average
for those of all ages.

Page 5 GAO- 01- 606 Farm Programs

Figure 3: Percentage of Payments by Farm Operators? Age, 1991- 99

Farm payments are principally directed at producers of eight major crops:
wheat, corn, barley, oats, sorghum, rice, cotton, and oilseeds (primarily
soybeans). In 1999, corn and wheat accounted for about 64 percent of
commodity payments. All states received a portion of these payments.
However, six states- Iowa, Illinois, Texas, Kansas, Nebraska, and Minnesota-
together received almost half of the payments in 1999.

As the above suggests, large wheat and corn farms run by older operators
tend to receive larger farm payments. These farms receive more primarily
because most of the major farm programs? payments are based on historic or
current levels of production of the eight crops and, among these crops, corn
and wheat have been grown in the greatest quantities. Similarly, the
payments are concentrated in the relatively few states due to the fact that
the eligible crops have been grown in greater abundance in these areas.
Finally, older farmers tend to receive the largest portion of the payments
because they are the largest demographic group and operate more of the
larger farms. For example, in 1999, about 94,000 farmers between the ages of
35 and 54 had farms with at least 1,000 acres. In contrast, only about 9,000
farmers under the age of 35 had farms of this size.

Page 6 GAO- 01- 606 Farm Programs

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.
According to USDA, generally only established farmers are able to acquire
farmland that becomes available when farmers retire and sell their land.
USDA and many states have programs specifically designed to help those
wishing to enter farming. For example, USDA has loan programs to assist
beginning farmers to buy land and other assets and to pay operating
expenses. Nonetheless, the number of young farmers continues to decline.
Some fear that this decline will adversely affect the nation?s food security
and the economic well- being of rural communities. However, USDA maintains
that the changing makeup of the farm sector will not have a severe effect on
the nation?s food supply or rural economies because overall production
levels are not dropping and rural communities are now less financially
dependent on agriculture than in the past.

We provided USDA?s Farm Service Agency and Economic Research Service with a
draft of this report for review and comment. The Farm Service Agency and the
Economic Research Service generally agreed with the information presented in
the draft and provided some technical and clarifying comments, which we have
incorporated as appropriate.

Federal assistance to farmers have been at the heart of federal farm policy
since the early 1930s, when the Congress passed the Agricultural Adjustment
Act of 1933 as one of the first pieces of New Deal legislation. This
assistance began as a means to address the ?farm problem,? low and uncertain
farm prices and incomes in farm and rural communities. Since then, the
Congress has frequently modified or created new farm price and income
support mechanisms in response to changing conditions in the farm sector,
federal budgetary pressures, and shifts in policy goals. However, the
payments? purpose remains essentially the same today, and many of the
program features established in the 1930s and 1940s have been retained.

The most recent farm bill- the Federal Agriculture Improvement and Reform
Act of 1996 (the 1996 farm bill)- substantially revised some farm Background

Page 7 GAO- 01- 606 Farm Programs

payment provisions while retaining others. This legislation, which covers
fiscal years 1996 through 2002, created production flexibility contract
payments 1 to shift toward a more market- oriented farm policy and away from
farm income support tied to crop prices and specific planting requirements.
Under the 1990 farm bill 2 and others dating back to 1973, USDA made
payments to wheat, feed grain (corn, oats, barley, and sorghum), cotton, and
rice producers when average market prices for these commodities fell below
the target price set by law for each commodity. These ?deficiency? payments
were based on a farm?s program yield for a particular commodity multiplied
by its number of eligible acres times the commodity?s payment rate. Whereas
total federal spending on deficiency payments increased when farm prices
went down and decreased when prices went up, the total amount of production
flexibility contract payments for each fiscal year was fixed at generally
declining levels from $5.570 billion for 1996 to $4.008 billion for 2002. In
return, producers could continue to receive payments as they did under the
old program (using the same eligible acreage and crop yields) but have
greater planting flexibility.

In addition to creating production flexibility contract payments, the 1996
farm bill continued several other programs wherein USDA also makes payments
to farmers. The marketing assistance loan program is aimed at helping
producers with the orderly marketing of their crops. In essence, its
provisions effectively guarantee a minimum price or return for the
commodities. The 1996 farm bill also continued several programs whose
primary purpose is aimed at resource conservation and environmental
protection. For example, under the Conservation Reserve Program- the largest
of these programs- USDA pays producers to take certain land out of
production. Since the 1996 farm bill was enacted, the Congress has also
provided substantial emergency assistance in the form of ?market loss
assistance? payments to help farmers deal with continuing low crop prices
and disaster payments for specific natural disasters, such as droughts and
floods. (See table 1 for a brief description of and the dollar amount of the
major types of payments made under farm programs over the past 3 years.)

1 These payments are also known as AMTA payments in reference to the
Agricultural Market Transition Act, which is title I of the 1996 farm bill
and the section that established production flexibility contracts.

2 Food, Agriculture, Conservation, and Trade Act of 1990 (P. L. 101- 624).

Page 8 GAO- 01- 606 Farm Programs

Table 1: Major Farm Program Payments Dollars in billions Payment type
Description FY 1998 FY 1999 FY 2000

Production flexibility contract

Producers who, at the time of the 1996 farm bill, had participated in
previous farm price and income support programs for wheat, corn, sorghum,
barley, oats, rice, and upland cotton could enter into contracts to continue
to receive payments. USDA calculates the payments based on the producers?
eligible acreage and yields established for these crops under the previous
programs. The amount of these payments was set at a fixed and generally
declining level for fiscal years 1996 through 2002. Each crop was assigned a
certain share of each fiscal year?s payments. For example, corn?s and
wheat?s shares were 46.22 percent and 26.26 percent, respectively. Unlike
the earlier programs, producers could plant any crop that they wanted to on
these acres, with limitations on growing fruits and vegetables and for
compliance with conservation requirements.

$5.7 $5.5 $5.1 Marketing loan gain/ loan deficiency

Soybean, other oilseed, and extra long staple cotton producers and producers
of wheat, corn, sorghum, barley, oats, rice, and upland cotton who have a
production flexibility contract for at least one of these crops can take out
marketing assistance loans. (For crop year 2000, the Congress suspended the
requirement for producers to have a production flexibility contract to be
eligible for the program.) These loans provide short- term financing to help
farmers pay their bills after harvest and spread crop sales over the entire
marketing year, when prices may be higher. A producer pledges the crop as
collateral and receives a loan based on the crop amount multiplied by a loan
rate for each unit of eligible production. Producers can repay the loan?s
principal and interest within the loan period (usually 9 months), or they
can forfeit the crop to the government when the loan matures and keep the
loan principal as payment. Producers of these crops (except for long staple
cotton) also have the option to repay the loans at the posted county price-
a USDA estimate of the local market price (for cotton and rice, USDA uses
the adjusted world price)- and sell the crop on the market. The difference
between the loan rate and the posted county price is a marketing loan gain
and is considered a cash payment to the producer. To reduce the paperwork
and administrative burden of producers taking out marketing assistance loans
and repaying them the same day to obtain the market gain, producers can
request loan deficiency payments. The rate for these payments is the amount
by which the loan rate exceeds the posted county price on the day the
request for payment is made. This rate provides an amount equal to the rate
available for a marketing loan gain on the same day.

$0.6 $4.4 $8.1 Market loss assistance Because of continuing low crop prices,
the Congress has, since

October 1998, supplemented production flexibility contract payments with
emergency payments. The payments have been made using the same formula for
distributing production flexibility contracts payments.

$3.0 $11.1

Page 9 GAO- 01- 606 Farm Programs

Dollars in billions Payment type Description FY 1998 FY 1999 FY 2000

Crop disaster The Congress has periodically passed legislation to provide
emergency payments to producers with major crop losses due to natural
disasters and disease. These payments have been for various crops as
specified in the applicable appropriation acts.

$1.9 $1.3 Conservation Reserve Program rental

Farmers can voluntarily enter into 10- to 15- year contracts with USDA to
take highly erodible and environmentally sensitive farmland out of
production. The farmers receive an annual per- acre rental payment for the
term of the contract. (USDA will also pay up to half of the cost to plant
these lands in grass, trees, or other approved vegetation.)

$1.3 $1.3 $1.3

Total $7.6 $16.1 $26.9

Although production flexibility contract payments have been declining since
1996, other assistance has increased farm payments to their highest levels
ever. For example, when the 1996 farm bill was passed- and crop prices were
high- it was anticipated that marketing assistance loans would facilitate
the orderly marketing of farm commodities at little or no cost to the
federal government. However, persistent low prices over the past several
years have turned the marketing assistance loan program into a major vehicle
for farm income support payments. In addition to these payments, the
Congress has also provided substantial emergency funding- especially for
market loss payments- to help address low prices. As a result, all these
payments are playing an increasingly critical role in supporting farmers, as
evidenced by the fact that, in fiscal year 2000, the payments accounted for
almost half of net farm income.

The 1996 farm bill, as did earlier legislation, generally limits the maximum
amount of payments that a ?person? can receive in a given year under the
farm programs. 3 (Various appropriations acts have also included certain
payment limits.) Persons for payment limitation purposes may be various
things, including an individual, a limited liability partnership or company,
a member of a joint operation; a corporation, or a participant in a joint
venture. More than one individual may receive payments for a farming
operation. However, no individual may receive payments for more than

3 The payment limitation may be on a fiscal year, crop year, or program year
basis, depending on the program.

Page 10 GAO- 01- 606 Farm Programs

three entities (partnerships, corporations, etc.) in which he/ she holds
substantial beneficial interest. 4 (See table 2.)

Table 2: Payment Limits for Major Farm Programs Type of payment Payment
limitation

Production flexibility contract $40,000 per person. A total of $80,000 per
person for up to 3 entities ($ 40,000 for the first entity, $20,000 for each
of the other two entities). Marketing loan gain/ loan deficiency Usually
$75,000 per person and $150,000 in total

for up to 3 entities. For 1999 and 2000, the Congress raised the limit to
$150,000 per person, with a total limit of $300,000 for no more than 3
entities. Market loss assistance Because these payments were supplemental to

production flexibility contract payments, their payment limitation was
essentially the same. The limitation was adjusted to reflect differences in
the amounts of the two types of payments. Crop disaster $80,000 per person.
Conservation Reserve Program $50,000 per person.

The large amount of marketing loan gains and loan deficiency payments in
1999 had put many large and even mid- sized farms up against the $75,000
limit for the program?s benefits. When farmers reach the payment limit, they
can put the remaining crop under loan and forfeit the stored commodities to
settle the loan. Concerned about the federal government?s expense associated
with storing and disposing of forfeited commodities, the Congress doubled
the payment limit for the 1999 crop. In addition, in February 2000, the
Secretary of Agriculture implemented a statutorily authorized commodity
certificate program that was also intended to discourage forfeitures, in
this case by effectively eliminating payment limits. Under the program,
farmers may purchase certificates at the posted county price for up to the
quantity of grain or cotton under loan, and then immediately trade the
certificates to recover commodities under loan, which can then be sold on
the market. The Congress increased the payment limitation again for the 2000
crop, reducing the need for farmers to use certificates.

4 If an individual owns 10 percent or more of a corporation or other entity
receiving payments, the payment for the individual?s interest will not be
paid to the entity unless the individual designates the entity as one of the
three for which he/ she will receive payments.

Page 11 GAO- 01- 606 Farm Programs

USDA also provides considerable other financial assistance to farmers in the
form of loans and crop insurance. The Department makes various types of
direct and guaranteed loans. Farm ownership loans are available for buying
farm real estate and making capital improvements. Farm operating loans are
available for purposes such as buying feed, seed, fertilizer, livestock, and
farm equipment; paying family living expenses; and, subject to certain
restrictions, refinancing existing debt. For fiscal year 2000, USDA was
authorized over $5 billion for these loans. Its losses on these loans during
fiscal year 2000 totaled about $486 million. USDA also subsidizes farmers?
purchase of insurance to protect against crop losses caused by perils such
as drought, floods, and other natural disasters. Premium rates and costs to
the government are determined largely by the program?s loss experience.
Generally, the higher the crop losses, the higher the premiums in future
years. From 1981 through 1998, USDA paid farmers $14.1 billion for insured
crop losses, which was partly offset by the premiums that farmers paid.

Because farm payments have generally been based on the production of major
crops or commodities, larger farming operations generally have received
larger payments than smaller ones. Similarly, older, more established or
experienced farm operators have generally received larger payments than
younger, less experienced ones. Operators under age 35 received slightly
smaller payments than the average for operators of all ages and several
thousand dollars less than operators ages 35 through 54. Although the
younger, less experienced operators were spread across all sizes of farms,
on average, they had somewhat smaller farms and produced somewhat less of
the crops for which payments are generally made. Producers of wheat, feed
grains, rice, cotton, and oilseeds have received most of the farm payments
because the payments are generally based on the production of these crops.
In addition, the bulk of the payments have gone to a relatively small number
of states where the production of these crops has been greater. See appendix
I for a more detailed discussion on defining farm size and additional
analyses of the distribution of farm payments by (1) the number of farm
acres operated, (2) the definition of small farms recommended by the
National Commission on Small Farms, which was established by the Secretary
of Agriculture in 1997 to examine the status of the nation?s small farms,
(3) a new typology developed by USDA?s Economic Research Service that is
based on a combination of gross agricultural sales and the occupation of the
farm?s principal operator, and (4) individual recipients or payees rather
than farming operation. These other analyses produce similar results.
Smaller, Less

Established Farms Generally Receive Smaller Payments

Page 12 GAO- 01- 606 Farm Programs

Smaller farms have consistently received smaller payments than have larger
ones, and this gap has widened. Although small farms (those with less than
$50,000 in gross agricultural sales) made up about 76 percent of the farms
nationwide in 1999, they received about 14 percent of the payments. Their
portion of the payments has fluctuated over the 9- year period of 1991
through 1999, increasing from 23 percent in 1991 to a high of 29 percent in
1995 and then generally starting to decline in 1996 to the low of 14 percent
in 1999. In contrast, large farms (those with gross agricultural sales of
$250,000 or more) made up about 7 percent of the farms, they received about
45 percent of the payments in 1999. Their share of the payments has also
fluctuated but generally increased over the 9- year period, especially since
1996. They received from 28 to 32 percent of the payments in the years from
1991 through 1995 and from 35 to 47 percent in the years from 1996 through
1999.

Small farms have collectively received a relatively small portion of farm
payments for two principal reasons. First, a smaller percentage of them has
received payments. Second, small farms- by generally producing less of the
crops on which the payments are based- have received payments that on
average are smaller than those received by larger farms.

In 1999, about 31 percent of the small farms received payments, while over
70 percent of the large and medium farms did. The percentage of the farms
receiving payments in all three of these size categories has increased since
1991, when about 60 percent of the large and medium farms and about 22
percent of the small farms received payments. (See fig. 4.) Economic
Research Service officials told us that a smaller portion of small farms
produce commodities eligible for payments, which helps explain these
differences in program participation. For example, beef is not one of the
commodities for which farm payments are generally made. According to the
Economic Research Service officials, beef is the primary commodity of about
40 percent of small farms, compared to 20 percent of medium farms and 10
percent of large ones. Smaller Farms Have

Consistently Received Smaller Payments

Page 13 GAO- 01- 606 Farm Programs

Figure 4: Percentage of Farms Receiving Payments by Farm Size, 1991- 99

Average payments remained fairly constant in size over the period of 1991
through 1999, except for 3 years- 1993, 1998, and 1999- when total payments
increased substantially. In these 3 years, the average payment ranged from
$39,167 to $64,737 for large farms and from $14,039 to $21,943 for medium
farms. In contrast, small farms? average payment in these years ranged from
$3,778 to $5,068, about the same as for the years of lower total payments.
In the other 6 years, the average payment ranged from $22,683 to $26,540 for
large farms, from $9,037 to $11, 240 for medium farms, and from $3,776 to
$5,067 for small farms. (See fig. 5.)

Page 14 GAO- 01- 606 Farm Programs

Figure 5: Average Farm Payment by Farm Size, 1991- 99

Farms that produce more of the crops eligible under the farm programs
generally have received larger farm payments. For example in 1999, large
farms received 45 percent of the payments, while accounting for 46 percent
of the planted acreage and 52 percent of the value of production of the
eligible crops. 5 Small farms received 14 percent of the payments and
accounted for 10 percent of planted acreage and 8 percent of the value of
production. (See fig. 6.)

5 These data on the planted acreage and value of production of eligible
crops, which are from the Agricultural Resource Management Study, do not
include minor oilseeds, such as mustard seed and canola. These crops
accounted for less than 1 percent of farm payments in 1999.

Page 15 GAO- 01- 606 Farm Programs

Figure 6: The Percentage of Farm Payments, Acreage of Eligible Crops
Planted, and the Value of Production of Eligible Crops, by Farm Size, 1999

Collectively, farm operators under 35 years of age have received a small and
declining share of farm payments, principally because the number of young
operators receiving payments has been small and declining. Nonetheless, the
percentage of the payments they received in 1999 was about the same as the
percentage of the nation?s farms they operated and their percentage of the
acreage planted in the crops eligible for payments. In addition, in 1999,
they operated farms of all sizes- similarly to other age groups- and a
higher percentage of them received payments. Their average payment of about
$16,544 in 1999 was about the same as the average for all farms and higher
than the average of $12,973 for operators that were 55 or older.

In 1999, operators under age 35 received about 6 percent of the farm
payments compared to 56 percent for operators that were 35 to 54 years old
and 38 percent for those who were 55 or older. (See fig. 7.) As a Group,
Young

Operators Have Received a Smaller Portion of Farm Payments

Page 16 GAO- 01- 606 Farm Programs

Figure 7: Percentage of Farm Payments Received by Farm Operators in Selected
Age Categories, 1999

As shown in figure 3, the percentage of farm payments that has gone to
operators under age 35 has generally declined over the period of 1991
through 1999. At the same time, the percentage to those 35 through 54 years
of age generally increased, while the percentage to those ages 55 or older
has generally stayed about the same. For example, operators younger than 35
were receiving about 10 percent of the farm payments in the years 1991
through 1993. The percentage then decreased to 6 in 1999.

The number of farms whose principal operator is under age 35 has decreased
substantially over the last decade. In 1991, about 9 percent, or 197,151, of
the operators were younger than 35. 6 The number of young principal
operators declined to 120,612, or about 6 percent, in 1999. (See fig. 8.) In
comparison, the number of principal operators who were 55 or older increased
from 993,810, or 47 percent, in 1991 to 1,063,233, or about 49 percent, in
1999.

6 These data somewhat understate the number of young farmers. The
Agricultural Resource Management Study survey data are for farms? principal
operators. Other operators, such as a son working for a father, are likely
on some of the farms.

Page 17 GAO- 01- 606 Farm Programs

Figure 8: Number of Principal Farm Operators Younger Than Age 35, 1991- 99

Young operators? percentage of farm payments in 1999 was about the same as
their percentage of the farms operated and of the acreage of the eligible
crops planted (see fig. 9).

Page 18 GAO- 01- 606 Farm Programs

Figure 9: The Percentage of Payments, Farms, and Acreage of Eligible Crops
Planted, by Operators? Age, 1999

In 1999, 46 percent of the operators under 35 years old received farm
payments. This percentage was greater than that of the other age categories.
(See fig. 10.) It was also higher than in previous years. During the period
of 1991 through 1999, the percentage of young farmers receiving payments was
in the 30s each year, except for 27 percent in 1994, 29 percent in 1996, 42
percent in 1993, and the 46 percent in 1999.

Page 19 GAO- 01- 606 Farm Programs

Figure 10: Percentage of Farms Receiving Farm Payments by Operators? Age,
1999

The average payment made in 1999 to farms whose principal operator was less
than 35 years old was about $16,544, a little less than the average of
$16,751 for all farms receiving payments. Their average payment was also
several thousand dollars less than the average of $20,898 for those that
were age 35 to 54 but more than the average of $12,973 for those 55 or
older. (See fig. 11.)

Page 20 GAO- 01- 606 Farm Programs

Figure 11: Average Farm Payment in 1999 by Age of the Farms? Principal
Operator

In 1999, young farmers operated farms of all sizes, just like older farmers.
For example, operators age 25 to 34 had a percentage of the largest farms
equal to or greater than other age groups and a lesser percentage than other
age groups of the smallest farms. (See fig. 12.)

Page 21 GAO- 01- 606 Farm Programs

Figure 12: Farm Size by Age Group, 1999

Note: Data were insufficient to provide similar information on operators
younger than age 25. The random sample used for the Agricultural Resource
Management Study survey did not include a sufficient number of these
operators to make these estimates. Available data indicates that there are
only about 10,000 farmers in this age category, less than 1 percent of all
operators.

For the most part, farmers under age 35 appear to be in a financial position
similar to other farmers. For example, according to USDA, about 43 percent
of operators from age 25 to 34 were on farms in a favorable financial
position, similar to the percentage for other age groups. The percentage of
their farms considered to be in a vulnerable financial position was
relatively small at 10 percent, although more than twice the average for all
farms. (See fig. 13.)

Page 22 GAO- 01- 606 Farm Programs

Figure 13: The Financial Position of Farm Operators of Various Age Groups,
1999

Favorable: These farms have a debt- to- asset ratio of no more than 0. 40
and a positive net farm income. They are generally considered financially
stable.

Marginal income: These farms? debt- to- asset ratio is no more than 0. 40,
but they have negative net farm income. Periods of negative income may not
pose financial difficulties if the farm is carrying a low debt load and can
either borrow against equity or obtain income from off- farm sources.

Marginal solvency: These farms have a debt- to- asset ratio greater than
0.40 and positive net farm income. A high debt to asset ratio may be
acceptable if the farm can generate enough income to service its debt and
meet other financial obligations.

Vulnerable: These farms? debt- to- asset ratio is greater than 0.40 and they
have a negative net farm income. They are generally considered financially
unstable.

For the 1999 crop year, two crops- corn and wheat- accounted for about 64
percent of the payments under the farm commodity programs. Five crops- corn,
wheat, oilseeds (primarily soybeans), cotton, and rice- accounted for almost
93 percent of the payments. (Collectively, these five crops constitute about
two- thirds of the value of U. S. production of field and miscellaneous
crops and over half of the value of production of all crops, including
fruits, nuts, and vegetables.) These payments were made for production
flexibility contracts, marketing loan assistance, market Most Payments Are
Made

for a Small Number of Crops and to Producers in a Few States

Page 23 GAO- 01- 606 Farm Programs

loss, and disaster assistance. As previously discussed, producers with
production flexibility contracts do not have to grow the eligible crops to
receive payments for them. (See fig. 14.)

Figure 14: Percentage of Major Farm Program Payments, by Crop, Crop Year
1999

The percentage of the payments that have been made for the different crops
has varied from year to year. Nonetheless, the crops receiving the most
payments in 1999 have generally received the most payments over the decade.
For example, the payments for corn have fluctuated from a low of about 22
percent in 1993 to a high of 54 percent in 1997 but more often the
percentage has been in the 40s. Similarly, wheat has ranged from about 17
percent in 1992 to about 37 percent in 1996 but has generally been in the
20s. The major exception has been oilseeds- primarily soybeans- which
accounted for very little, if any, of the payments in the years until 1998
and 1999. Oilseeds? eligibility for payments is generally limited to
marketing loan gains and loan deficiency payments. These two

Page 24 GAO- 01- 606 Farm Programs

types of payments increased substantially in 1998 and 1999 because of low
farm prices. (See fig. 15.)

Figure 15: Percentage of Major Farm Program Payments by Crop, Crop Years
1990- 99

Although all states received some commodity payments for crop year 1999, six
states- Iowa, Illinois, Texas, Kansas, Nebraska, and Minnesota- each
received over a billion dollars in payments. These states collectively
accounted for about 48 percent of the total payments. Six other states each
received over $500 million in payments. These 12 states together accounted
for about 71 percent of the payments. (See table 3.)

Page 25 GAO- 01- 606 Farm Programs

Table 3: The Percentage of Major Farm Program Payments Received by the 12
States Receiving the Largest Amounts, Crop Year 1999

State Dollar amount

(in $ billions) Percentage of total payments

Iowa $1.59 9.8 Illinois 1. 47 9. 0 Texas 1. 24 7. 7 Kansas 1.21 7.5 Nebraska
1.17 7.2 Minnesota 1. 07 6. 6 Arkansas 0.72 4.4 North Dakota 0.71 4.4
Indiana 0. 71 4. 4 South Dakota 0.56 3.5 Missouri 0. 51 3. 2 Ohio 0.51 3.1

Total $11.47 70.8

The number of young entrants to farming lags far behind that of retiring
farmers. For those who want to enter farming, the major obstacle is the cost
of acquiring land, machinery, and other needed capital. Although farm
program payments can help beginning farmers, the payments can also make it
more difficult to get started because their value is reflected in a higher
price for the farmland. While USDA and many states have programs intended to
help those wishing to enter farming, the number of young farmers continues
to decline. Although some fear that this decline will adversely affect the
nation?s food security and the economic well- being of rural communities,
USDA maintains that it will not likely affect food production or rural
economies.

According to USDA, more than 500,000 farmers will retire between 1992 and
2002. In contrast, during this period, only about half as many are expected
to enter farming. Being able to afford farmland is the foremost obstacle
facing those who wish to enter farming. Even finding available land can be
difficult. The turnover of the land is slow and in many areas, expanding
suburbs are reducing the amount of farmland available. Due, in part, to its
scarcity, acquiring farmland is an expensive proposition. After a sharp
downturn in the early 1980s, land values have since rebounded. For example,
according to USDA?s National Agricultural Statistics Service, the value of
agricultural real estate reached an all- time high of $1,050 per acre as of
January 1, 2000. This value is 75 percent above the low- point of $599
Acquiring Land Is the

Major Obstacle for Those Wishing to Enter Farming

Page 26 GAO- 01- 606 Farm Programs

reached in early 1987. According to USDA, it takes an average of $500,000 in
assets to fully support a farm household. The amount of assets required,
according to Economic Research Service officials, can vary based on factors
such as the type of farm and the region in which the farm is located.

Farm program payments are helpful to new farmers once they grow eligible
crops. On the other hand, the payments can also pose a barrier to
prospective farmers wishing to acquire farmland. Once a farmer becomes
eligible for payments, the assistance can help in paying off debts, covering
operating expenses, acquiring additional land, and providing a financial
buffer during periods of low prices and/ or production. However, because
most payments are tied to production, as we said earlier, a significant
amount of the subsidies go to relatively few, large, established operators.
Further, the value of the payments causes sellers to ask higher prices or
prospective purchasers to bid up the price of the limited farmland on the
market. According to USDA, generally only established farmers are able to
acquire farmland that becomes available when farmers retire and sell their
land. Accordingly, many young farmers acquire farmland from family members
through inheritance or as a gift.

The federal government and states have a number of policies and programs
that directly or indirectly help beginning farmers. For example, the
Agricultural Credit Improvement Act of 1992 created a beginning farmer down-
payment farm ownership loan program. Under this program, USDA makes direct
and guaranteed operating and ownership loans available to beginning farmers
and ranchers. Since the beginning of this program in fiscal year 1994, USDA
has made over 38,000 loans totaling $2.9 billion. The act also directed USDA
to create Federal- State Beginning Farmer Partnerships. Under these
programs, USDA enters into memoranda of understanding with interested states
to provide joint financing for beginning farmers and ranchers. According to
USDA?s Farm Service Agency, as of May 2000, the Department has entered into
agreements with 16 states and has provided $87 million in down- payment farm
ownership funds to help more than 2, 000 beginning farmers get started in
agricultural careers. Although these loans are helpful in getting started,
repaying the loans increases the new farmers? debt and expenses, which make
it more difficult for them to earn an adequate income. The Taxpayer Relief
Act of 1997 also helped some beginning farmers by making it easier to
transfer family farms across generations by reducing estate tax liabilities
on farms.

Page 27 GAO- 01- 606 Farm Programs

In addition, several states have programs in place to assist new and
beginning farmers? entry into farming. For example, Iowa established the

?Farm On Program.? Similarly, Nebraska?s Center for Rural Affairs Land Link
project includes a computerized clearinghouse for matching prospective and
beginning farmers with landowners willing to help new farmers; educational
programs for beginning farmers; and a farm management service that provides
specialized services to landowners who want to lease land to beginning
farmers. A fund for financing beginning farmers is also being developed.
Other farm states have established similar programs.

Despite these policies and programs, USDA anticipates that the imbalance
between retiring and beginning farmers may continue over the next decade.
Although some fear this imbalance threatens the nation?s food supply and the
economic well- being of rural America, USDA maintains that the fewer,
larger, more productive farms will provide adequate food supplies. Moreover,
USDA maintains that the nonagricultural economy in rural communities has
grown steadily and agriculture?s? relative importance as a source for jobs
and income in rural communities is declining. As a result, rural areas have
been able to maintain a constant non- farm share of the population.
Nonetheless, farming is a primary source of income and jobs in some areas-
especially the low- populated areas of the nation?s heartland. While these
areas shared in the nation?s economic growth during the 1990s, they did not
fare as well as other rural areas.

We provided the Farm Service Agency and the Economic Research Service with a
draft of this report for review and comment. The Farm Service Agency and the
Economic Research Service generally agreed with the information presented.
In addition, they provided several technical and clarifying comments that we
incorporated into the report as appropriate.

To determine the distribution of payments by farm size and farm operators?
age, we analyzed Agricultural Resource Management Study data provided by
Economic Research Service officials for the years 1991 through 1999. USDA?s
National Agricultural Statistics Service collects these data for the
Economic Research Service through an annual survey of the nation?s farm
operations. To determine the distribution of payments by crop and by state,
we analyzed information from the Farm Service Agency?s Program Payments
Reporting System. We discussed the results with Economic Research Service
and Farm Service Agency officials. Agency Comments

Scope and Methodology

Page 28 GAO- 01- 606 Farm Programs

To identify the major barriers facing young people to enter farming, we
reviewed available literature and interviewed knowledgeable officials of the
Economic Research Service and the Farm Service Agency. Through our
literature review and interviews, we also identified USDA?s and states?
programs and initiatives aimed at assisting new and beginning farmers. (App.
II contains a more detailed discussion of our scope and methodology.)

We performed our work from August 2000 through May 2001 in accordance with
generally accepted government auditing standards. We did not independently
assess the accuracy and reliability of the ARMS database and the Program
Payments Reporting System.

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days from
the date of this letter. At that time, we will send copies of this report to
the congressional committees with jurisdiction over farm programs; the
Honorable Ann M. Veneman, Secretary of Agriculture; the Honorable Mitchell
E. Daniels, Jr., Director of the Office of Management and Budget; and other
interested parties. We will also make copies available to others on request.

If you have any questions about this report, please contact me at (202) 512-
3841. Major contributors to this report are listed in appendix III.

Sincerely yours, Lawrence J. Dyckman Director, Natural Resources

and Environment

Appendix I: Additional Analyses of the Distribution of Farm Payments

Page 29 GAO- 01- 606 Farm Programs

Although the dollar value of gross agricultural sales is widely used, farm
size can be expressed in various other ways, such as the number of farm
acres operated (planted in crops). In addition, assigning farms to size
categories, such as large or small, is somewhat arbitrary and can be done
using various definitions or cutoff levels. For example, the National
Commission on Small Farms recommends that farms be considered small if they
have gross agricultural sales of less than $250,000. Because this definition
includes practically all farms- about 93 percent of them in 1999- we further
divided the group into small and medium farms, with large farms being those
with sales of $250,000 or more. The Economic Research Service has often used
$50,000 in sales as the cutoff for defining a small farm and we chose this
amount to define small farms for our analysis. We then considered farms with
sales of $50,000 to $249,999 to be medium farms. Recognizing that farm size
can be defined in other ways, we also analyzed farm payments by (1) the
number of farm acres operated, (2) the National Commission on Small Farms?
definition of a small farm, (3) a new farm typology developed by USDA?s
Economic Research Service, and (4) the size of payments received by
individual recipients or payees. The Economic Research Service?s new farm
typology, which is based primarily on farm size (the dollar value of
agricultural sales) and the occupation of a farm?s principal operator, is
designed to put the diverse farming sector into more homogenous groups than
just large and small farms. Payments for a farming operation can be made to
more than one individual, and an individual can generally receive payments
for his/ her interests in up to three entities.

In 1999, farms of 1,000 or more acres made up about 8 percent of all farms
and received about 52 percent of farm payments. Farms ranging in size from
250 acres to 999 acres comprised 20 percent of the farms and received 37
percent of payments. The remaining 72 percent of the farms operated less
than 250 acres; they received 11 percent of the payments. The share of the
payments received by farms of 1,000 or more acres declined through 1995 and
then increased through 1998, before declining to slightly less than their
share in 1991. In contrast, the share of the payments received by farms of
less than 250 acres increased to their highest level in 1994 and 1995 and
then decreased to the approximate levels they experienced in the years 1991
through 1993. (See fig. 16.) Appendix I: Additional Analyses of the

Distribution of Farm Payments Farm Acres Operated

Appendix I: Additional Analyses of the Distribution of Farm Payments

Page 30 GAO- 01- 606 Farm Programs

Figure 16: Percentage of Payments by Farms? Number of Farm Acres Operated,
1991- 99

Under the National Commission?s definition, about 93 percent of farms in
1999 were small. As a result of the large number of these farms, they have
received most of the farm payments. However, their share of the payments has
been decreasing. For example, from 1991 through 1995, they received about 70
percent of the payments. In 1999, their share was about 55 percent. (See
fig. 17.) The National

Commission on Small Farms? Definition

Appendix I: Additional Analyses of the Distribution of Farm Payments

Page 31 GAO- 01- 606 Farm Programs

Figure 17: Percentage of Farm Payments Received by Large and Small Farms as
Defined by the National Commission on Small Farms, 1991- 99

The Economic Research Service?s new farm typology categorizes the nation?s
farms into five groups of small family farms and three groups of other farms
(see table 4). ERS? Farm Typology

Appendix I: Additional Analyses of the Distribution of Farm Payments

Page 32 GAO- 01- 606 Farm Programs

Table 4: Description of ERS? Farm Typology Type of farms Definition

Small family farm types Farms with gross agricultural sales of less than
$250, 000 that are organized as sole proprietorships, partnerships, or
family corporations. Limited resource Any small family farm with gross sales
less than

$100,000, total farm assets less than $150,000, and total operator household
income less than $20,000. Limited resource farmers may report their income
as from farming, a nonfarm occupation, or retirement. Retirement Small
family farms whose operators report that they are

retired (excludes limited resource farms operated by retired farmers).
Residential/ lifestyle Small family farms whose operators report a major

occupation other than farming (excludes limited resource farms with
operators reporting a nonfarm major occupation). Farming occupation/ lower
sales Small family farms with sales less than $100,000 whose

operators report farming as their major occupation (excludes limited
resource farms whose operators report farming as their major occupation).
Farming occupation/ higher sales Small family farms with sales between
$100,000 and

$249,999 whose operators report farming as their major occupation. Other
farm types Farms that are not small family farms. Large family farms Farms
with sales of $250,000 to $499,999. Very large family farms Farms with sales
of $500,000 or more. Nonfamily farms Farms organized as nonfamily
corporations or

cooperatives, as well as farms operated by hired managers.

The mix of farm types in 1999 changed from 1993, the first year for which
these data are available by the farm typology. For example, the limited
resource, farming occupation/ lower sales, and farming occupation/ higher
sales farm types decreased as a percentage of total farms from the 1993
levels. At the same time, the retirement, residential/ lifestyle, large,
very large, and nonfamily types increased. The largest increases were in the
residential/ lifestyle and retirement farms.

The portion of farm payments received by the individual farm types has also
changed from the 1993 levels. For example, the percentage of payments
received by the large, very large, and nonfamily farm types increased from
1993 and decreased for the other farm types. These farms also experienced
substantial increases in the average payment that they received in 1999,
when total payments to all farm types were over 50 percent higher than in
1993. The average payment for farms receiving

Appendix I: Additional Analyses of the Distribution of Farm Payments

Page 33 GAO- 01- 606 Farm Programs

payments either went down or increased only slightly for the limited
resource, retirement, residential/ lifestyle, and farming occupation/ lower
sales farms. (See table 5.)

Table 5: Percentage of Farms and Payments and Average Payments by ERS? Farm
Typology, 1993 and 1999 Farm type Percentage of

farms in 1993 Percentage of farms in 1999

Percentage of payments in

1993 Percentage of

payments in 1999

Average payment in

1993 (in dollars)

Average payment in

1999 (in dollars)

Limited resource 14 6 3 1 4, 026 3,924 Retirement 11 14 5 3 7,457 5,061
Residential/ lifestyle 33 43 10 9 5, 715 5,016 Farming occupation/ lower
sales 25 22 19 15 8,517 8,833 Farming occupation/ higher sales 10 8 31 25
20,268 27,022 Large 3 4 18 21 34,674 50,790 Very large 2 3 13 22 50,763
85,208 Nonfamily 1 2 3 4 17,934 34,128

Over the last decade, a relatively small portion of recipients has received
the bulk of farm payments. For example, from 1990 through 1999, 10 percent
of the recipients generally accounted for between 49 and 60 percent of farm
crop or commodity payments. (See fig. 18.) Moreover, 20 percent of the
recipients generally received from about 69 percent to about 79 percent of
the payments. Individual Recipients

Appendix I: Additional Analyses of the Distribution of Farm Payments

Page 34 GAO- 01- 606 Farm Programs

Figure 18: Percentage of Farm Commodity Payments Received by the Top 10
Percent of Recipients

Appendix II: Scope and Methodology Page 35 GAO- 01- 606 Farm Programs

To determine the distribution of farm payments over the past decade by farm
size, the age of farm operators, crop, and state, we analyzed data from
USDA?s Agriculture Resource Management Study (ARMS) surveys (formerly the
Farm Costs and Returns Surveys) and its Program Payments Reporting System
(PPRS). The ARMS surveys are USDA?s primary vehicle for collecting data on a
wide range of issues about agriculture resource use and costs and farm
financial conditions, while the PPRS is its main database on farm program
payments.

The ARMS is an annual survey of U. S. farm operations (excluding
institutional operations, such as prisons and Indian reservations) in the 48
contiguous states that is designed and administered by USDA? s National
Agricultural Statistics Service. The National Agricultural Statistics
Service compiles the survey results and transfers them to USDA?s Economic
Research Service (ERS) to maintain and analyze. The surveys are carried out
through personal interviews of the principal operator of a random sample of
farms selected to be representative of farms nationwide. (Landlords, who
under certain circumstances may receive farm payments, are not included in
the surveys.) Participation in the surveys is voluntary, and all individual
responses are confidential. Survey coverage includes the financial and
operating characteristics of farms and their crop and livestock production
practices in a given year. For example, it includes data on such aspects as
acres operated; crop and livestock production; rents paid and received;
income from crops and livestock; other farm income, such as government (farm
program) payments; off- farm income; production expenses; assets; debt; the
farm operator; and the farm household.

At our request, ERS provided us with summary data from the ARMS surveys for
9 years, 1991 through 1999. The data for 2000 will not be available until
later in 2001, and data for the years prior to 1991 were not comparable to
these years. In 1992, the National Agricultural Statistics Service revised
the procedures that it uses to expand the ARMS sample to create national
estimates in order to more accurately account for coverage of farms and
nonresponses to the survey. The Service used the new procedures to adjust
and resummarize the data for 1991, but not for earlier years.

To determine the distribution of farm payments by farm size, we analyzed the
ARMS data provided on the amount of government payments that farms received,
the dollar value of their gross agricultural sales, the number of farm acres
they operated, and how ERS classified them according to its farm typology,
which is based, in part, on gross Appendix II: Scope and Methodology

Appendix II: Scope and Methodology Page 36 GAO- 01- 606 Farm Programs

agricultural sales. As part of our analysis, we also reviewed ARMS data on
the percentage of farms receiving payments, average payments per farm,
farms? percentage of the acreage planted and value of production of the
crops for which farm program payments are made, payments as a percentage of
gross cash income, and farms? financial position.

To determine the distribution of farm payments by the age of farm operators,
we analyzed the ARMS data on the age of the farms? principal operators and
the amount of payments received by their respective farms. This information
also included data on the number of farms reporting payments, the percentage
of planted acreage and the value of production of crops eligible for farm
payments, payments as a percent of gross cash income, average payments, and
the farms? financial position.

The ARMS surveys ask for the amount of payments received by farms under all
federal and state agricultural programs. According to ERS staff, very
little, if any, farm payments are made by states.

We used the PPRS to determine the distribution of farm payments by crop and
state. The PPRS, which is maintained by the Farm Service Agency, contains a
record of the individual payments made under the federal agricultural
programs. These data include the payee?s name, the amount of the payment,
the program, a farm identifier, the farm?s location, and the crop for which
the payment was made. Farm Service Agency officials provided us with
electronic files of the PPRS data for the last decade, 1990 through 1999. We
limited our analysis to the four major farm program payments-( 1) production
flexibility contract payments (deficiency payments before 1996), (2)
marketing loan gain/ loan deficiency payments, (3) crop disaster payments,
and (4) market loss payments. Payments under the Conservation Reserve
Program are based on the number of acres enrolled in the program rather than
the production of a crop or commodity.

To identify the major barriers that make it difficult for young people to
enter farming, we reviewed available literature and interviewed
knowledgeable Farm Service Agency and Economic Research Service officials.
Through our review of the literature and our interviews, we also identified
various programs and initiatives of USDA and the states to assist new and
beginning farmers.

Appendix II: Scope and Methodology Page 37 GAO- 01- 606 Farm Programs

We performed our work from August 2000 through May 2001 in accordance with
generally accepted government auditing standards. We did not independently
assess the accuracy and reliability of the ARMS or PPRS databases.

Appendix III: GAO Contacts and Staff Acknowledgments

Page 38 GAO- 01- 606 Farm Programs

Lawrence Dyckman (202) 512- 3841 Gregory Kosarin (202) 512- 6526

In addition to those named above, Raymond H. Smith, Jr.; Nancy S. Bowser;
Mitchell B. Karpman; Arthur L. James, Jr.; and Charles W. Bausell, Jr., made
key contributions to this report. Appendix III: GAO Contacts and Staff

Acknowledgments GAO Contacts Acknowledgments

(150198)

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