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Vegetable farms account for 14% of U.S. crop receipts.

Vegetable farms generated 14 percent of all cash receipts for U.S. crops in 1990.

Economists John Jinkins and Gary Lucier of USDA's Economic Research Service developed a financial profile of U.S. vegetable farms, using information from USDA's annual Farm Costs and Returns Survey.

"It's important to understand the financial status and characteristics of vegetable farms in order to assess current trends," Jinkins says in a recent issue of the Agriculture Department's FARMLINE magazine.

Among the factors that could have significant effects on U.S. vegetable farming, Jinkins says, are consumer concerns about agricultural chemicals, increasing urban competition for water, and potential regional and worldwide trade agreements.

Jinkins and Lucier define a vegetable farm as a farm receiving at least half of the total value of its production from vegetables (including melons). Some vegetable farms also grow other crops, such as grains or cotton.

The study identifies three farm sizes, based on value of production. Large farms have annual production valued at $250,000 or more, medium or mid-sized farms $40,000 to $249,999, and small farms less than $40,000.

"About 22 percent of vegetable farms were in the large-farm category," Jinkins says. They accounted for 62 percent of the total value of vegetable production.

More than 50 percent of all vegetable farms were in the small-farm category, but accounted for just 1 percent of the value of vegetable production.

Debt Ratio Is Relatively High

In 1990, large vegetable farms averaged $28 of debt for every $100 of farm assets. This compares with $19 of debt per $100 of assets for other types of large U.S. farms and ranches.

"Farm businesses with strong incomes may be able to handle relatively high debt-to-asset ratios easily," Jinkins says. "Large vegetable farms needed 3 percent of their 1990 net income for debt service, the same proportion as on other types of farms and ranches in the same size group."

Fifty-four percent of all vegetable farms were classified as being in favorable financial condition in 1990. "Favorable" is defined as having positive net cash farm income and a debt-to-asset ratio of 40 percent or less.

Large vegetable farms produced $8 of farm income for every $100 of assets, while small vegetable farms lost $3 for every $100 of assets. The comparable totals for other types of farms and ranches were $7 in income for large operations and minus $2 for small operations.

In 1990, mid-sized vegetable farms generated $19 in profits for each $100 worth of commodity production. In comparison, other kinds of farms and ranches in the mid-sized group had profit margins of $6 for each $100 of production.

However, large vegetable farms had profit margins of $13 for each $100 of vegetable production, while other types of large farms reported profit margins of $18 per $100.

Large vegetable farms spent $81 on inputs (including labor, seed, and chemicals) for every $100 of income they earned. This was about the same as for all other large farms and ranches.

Sixty-six percent of large vegetable farms were in the favorable category, compared with 67 percent of other large farms and ranches. Seventy percent of mid-sized vegetable farms and 42 percent of small vegetable farms were in the favorable category.

A Labor-Intensive Sector

"Vegetable farming is labor intensive, and labor accounted for 43 percent--the largest share--of total variable costs on large vegetable farms in 1990," Jinkins says. "This compares with 17 percent on all other large farms and ranches in 1990." (Variable costs are those that rise as the amount of production increases.) Hand labor is often used on vegetable farms for such operations as thinning, cultivating, irrigating, and harvesting.

Expenditures for fertilizers and chemicals--17 percent of variable costs--were the second largest variable cost on large vegetable farms. This category accounted for just 6 percent of variable costs on other farms and ranches in the large size group.

Vegetables are not eligible for direct Government payments, but many vegetable producers receive such payments for other crops, like wheat and cotton, that they also grow on their farms. Large vegetable farms received an average of $9,717 in direct Government payments in 1990, compared with $14,823 for other large farms and ranches.

Gross cash income from all sources averaged $899,300 for large vegetable farms in 1990, compared with $527,344 for other large farms and ranches. The average for mid-sized vegetable farms was $129,376 and for small vegetable farms was $11,314.

Vegetable farms sold 52 percent of their vegetables through marketing contracts and 13 percent through production contracts in 1990. Under a production contract, the contractor pays the farmer to produce vegetables, sometimes specifying how the crop should be grown and providing some of the inputs. Under a marketing contract, the producer agrees to provide the contractor with vegetables for a specified price, but usually maintains control over production methods.
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Publication:Frozen Food Digest
Date:Jul 1, 1993
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