Household Income Volatility in U.S. Farm Households

Farm households are subject to several sources of income instability, including yield and production fluctuations, disasters such as droughts or disease, input and output price changes, and varying levels of off-farm income. This paper assesses the income variability of households operating family farms in the continental United States. We find that income volatility varies between farm household subgroups, such as farm size, commodity specialization, and geographic location and that volatility has decreased between 1998 and 2010. Regression analysis shows that households operating crop farms, larger farms, and more highly leveraged farms have higher levels of volatility. Finally, we decompose the sources of income variance and analyze the role of federal agricultural program payments in reducing volatility.