CoBank: Off-farm income is important for agriculture and the rural economy

(NDAgConnection.com) – The growing reliance of American farmers and ranchers on off-farm employment and income reveals the growing economic interconnectedness of rural communities and surrounding cities. According to a study by researchers at the University of Missouri, 82% of US farm household income now comes from non-farm sources. The study was commissioned by CoBank and carried out in partnership with CoBank’s Knowledge Exchange.

Most farmers cited reliable income as the main reason for off-farm employment, as half of farm households have negative farm income in a typical year. Health and pension benefits were also cited as the main reasons for off-farm employment in farm households.

One of the key findings of the study is that rural communities have increasingly diversified economies and that success within the agricultural sector of a rural community is largely dependent on other sectors of the regional economy in its together. Today, only 6.5% of workers in rural counties are employed in agriculture, down from 15.4% in 1970. The main source of employment in rural areas is the service sector, which accounts for 57.4 % of all jobs. The majority of residents of agriculture-dependent counties travel to jobs outside of their home county. As a result, rural and urban communities have come closer together economically as workers and businesses interact across multiple counties.

“The rural economy has become more diverse and complex than it was just 15 years ago,” said Dan Kowalski, Vice President of Knowledge Exchange at CoBank. “What this means for those of us who serve rural communities is that we need to evolve our understanding of what drives rural economies and what these communities need to succeed and thrive. In many cases, the historical concept of “rural” no longer applies.

In 2019, the population of non-metropolitan or rural counties was 46 million, or 14% of the US population. The bulk of this population, 30 million or 65%, lived in counties adjacent to metropolitan areas. The close ties between metropolitan and non-metropolitan counties reflect how the country’s urban and rural communities have come closer together economically and geographically over the past 50 years.

Population loss was a challenge for counties that remained dependent on agriculture and were less able to diversify their economies. Counties that relied on agriculture in 2015 had seen their population decline by 4% between 1974 and 2019, on average. Conversely, counties that were not dependent on agriculture in 2015 had increased their population by 55% over the same period.

Off-farm jobs are especially important for young farmers and beginning farmers who are building their businesses. Debt-to-equity analysis and other research show that off-farm employment reduces financial risk, which is especially important for young farmers who face higher debt needs as they grow older. grow their business.

The study concludes that economically resilient rural communities have a regionally connected workforce and diverse industries to support a range of employment opportunities. These communities are better placed to support young farmers and mainholders.

About Keneth T. Graves

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