Conservation payments are made to farms based on the characteristics of the operator's land and the particular objectives of the conservation programs, not on the volume of farm production. Together, rural residence and intermediate farms received 65 percent of conservation payments, a combined $1.6 billion in 2009. Participation in conservation programs is attractive for small farms in part because their variable costs of production are higher and return on assets lower than for commercial farms.

• In 2009, among government payment farms, the average net income per acre for rural residence farms was about $20 per acre, compared with $104 per acre for commercial farms.

Government Payments by Type of Farm, 2000-09

The distribution of government payments to farmers has changed over the last 10 years. The shares of government payments have risen for rural residence and commercial farms while they have declined for intermediate farms. This trend has been due in part to the declining number of intermediate farms and in part to more farms receiving conservation program funding being classified as rural residence farms.

• The share of government payments received by intermediate farms declined by half, from 39 percent in 2000 to 19 percent in 2009. The share of value of production accounted for by intermediate farms fell from 28 percent in 2000 to 12 percent in 2009. Over the last decade, increasing economies of scale and greater commodity demand have led to increased farm size and further crop specialization. This process has generated larger per-farm sales of program commodities, pushing over 96,000 intermediate farms into the commercial farm category.

• Even though the value of production among rural residence farms averaged almost 6 percent over this period, their share of government payments rose from 13 percent in 2000 to 19 percent in 2009. Contributing factors to the increased rural residence farms' share of government payments in 2000-09 are:

– The range of farms qualifying for disaster assistance was expanded to include more rural residence farms.

– Beginning in 2005, rural residence farms and quota holders received a disproportionate share of disbursements from the Tobacco Transition Program.

– 15,000 smaller intermediate farms became rural residence farms, either through operator retirements or nonfarm employment recorded as the operator's primary occupation.

Over 2000-09, rural residence farms that received government payments on average received $4,700 per farm, intermediate farms received $10,800 per farm, and commercial farms received $43,700 per farm. The per-farm government payment for commercial farms has fluctuated more than for rural residence and intermediate farms because commercial farms produce the largest share of program crops. Low commodity prices in 2000-01 and in 2005 due to Hurricane Katrina led to the highest average levels of government payments (over $60,000 per farm for commercial farms) while high commodity prices from 2007 to 2009 cut the average per farm payments roughly in half.