Economic Research Service 1

United States

Department

of Agriculture

www.ers.usda.gov

Electronic Report from the Economic Research Service

Statistical

Bulletin

Number

974-5

July

2002

Characteristics and Production

Costs of U.S. Wheat Farms

Mir B. Ali 1

In this report... The average cost of producing a

bushel of wheat was $3.97 for producers surveyed in

1998, ranging from about $1.25 to more than $6 per

bushel. The cost of producing wheat generally declined as

farm size increased. Regional differences in production

practices and growing conditions were major influences

on production costs and yields among wheat producers.

Producers in the Prairie Gateway, a major wheat region,

produced wheat at an average cost of $3.63 per bushel,

the lowest cost among regions. Most high-cost farms and

very large farms were in the Southeast region; these

farms tended to be more diversified than farms in other

regions, so wheat contributed a smaller share to their total

farm income.

Keywords: Wheat, costs of production, cost variation,

input use, production practices, farm characteristics,

Agricultural Resource Management Study.

1

Agricultural Economist, Resource Economics Division, Economic

Research Service, USDA
Overview

2 Economic Research Service

Wheat is the principal cereal grain crop used for

food consumption in the United States and most

of the world. In terms of value of production and

planted acreage, wheat is typically the Nation's

fourth largest field crop. Only corn, hay, and

soybeans are more important. Wheat is also a

leading U.S. export crop, with exports

accounting for almost half of total wheat

production. U.S. wheat farmers are facing many

challenges despite a strong domestic market

demand for wheat products. Many wheat

farmers are not able to cover all of their

production costs, even after Government

payments are added to their income.

Wheat land area has dropped from the early

1980s because of declining returns relative to

other crops and alternative options under

Government programs. The price of wheat has

dropped sharply since the 1996 peak and

averaged $2.78 per bushel during the past 4 crop

years (1997/98 through 2000/01). The

elimination of planting restrictions under the

1996 Farm Act facilitated expansion of

soybeans, corn, and other crops in wheat areas.

Also, loss of wheat acreage to row crops was

due to strong genetic improvements in corn and

soybean varieties that could be planted farther

west and north (areas with drier conditions or

shorter growing seasons).

U.S. wheat can be grown under many different

topographic and soil situations and is adaptable

to extreme weather conditions. Wheat

production generally occurs in diversified

farming operations. About a third of farms with

wheat also raise livestock. U.S. farmers planted

wheat on 65.8 million acres in 1998, 6.4 percent

below 1997 acreage levels, and produced 2.55

billion bushels, up 2.8 percent from the 1997

level (USDA, NASS, 2000). Because of

favorable weather, 1998 winter wheat yields

surged to a record 46.9 bushels per harvested

acre, 5 percent above the previous record yield

in 1997. Wheat grown in the United States is

either "winter wheat," or "spring wheat"

depending on the season it is planted (see box

"Six Basic Classes of Wheat" for details).

Winter wheat varieties are sown in the fall and

usually become established before going

dormant when cold weather arrives. In the

spring, they resume growth and grow rapidly

until summer harvest. Winter wheat production

accounts for over three-fourths of the total U.S.

wheat crop. Virtually all hard red winter (HRW)

wheat States planted less wheat in 1998, with

Oklahoma’s wheat area going unchanged. The

1998 wheat area in Kansas was down 700,000

acres from 1997, its lowest level since 1988.

Spring wheat varieties are planted in the spring,

when the ground is workable, and grow

continuously until harvest in late summer or fall.

The 1998 spring wheat crop acreage also

declined--down 18 percent from its 1997

acreage. However, yield improvement almost

offset the sizable reduction in harvested acreage,

and production dropped by only 4 percent to 529

million bushels in 1998. All spring wheat States

reported less planted wheat in 1998 with the

exception of Washington. North Dakota farmers

planted spring wheat on 6.7 million acres in

1998, about 24 percent below the 1997 acreage.

Farm price relationships among the various

classes of wheat favored the shifting of some

other spring wheat area into durum production.

Acreage seeded to durum totaled 3.8 million

acres in 1998, up 15 percent from 1997 and the

largest level since 1982. Between 1997 and

1998, durum yield rose 10 bushels to 37.8

bushels per harvested acre, the second highest

yield ever and only 2 bushels below the record

high yields in 1992. As a result, 1998 durum

production soared to 141 million bushels, a level

exceeded only in 1981 (183 million bushels) and

1982 (146 million bushels).

This report compares selected farm

characteristics and production costs among

wheat producers. Producers were grouped

according to their cost level for wheat

production, production region, enterprise size,

and farm typology (see glossary). Data are from

the 1998 Agricultural Resource Management
Economic Research Service 3

Study (ARMS) of U.S. wheat farms, the only

available source of such comprehensive

nationwide micro-level farm information.

Reponses represented 194,846 farms producing

2.2 billion bushels of wheat on 57.2 million

acres (87 percent of total U.S. wheat acreage)

(USDA, NASS, 2000).
4 Economic Research Service

Six Basic Classes of Wheat

There are many varieties of wheat, all of which can be grouped into six basic classes: hard red

winter (HRW), soft red winter (SRW), hard white (HW), soft white (SW), hard red spring (HRS),

and durum wheat. Each class of wheat is not only recognized by the time of year it is planted, but

also by the hardness, color, and the shape of the wheat kernel. Each class has its own

characteristics, especially as related to milling and baking or other food use.

Hard red winter wheat-- the largest class of wheat used mostly for bread and all-purpose flour;

fall seeded; medium to high in protein; may have either a hard or soft endosperm; used to produce

bread flour; produced in the Great Plains, a large interior area extending from the Mississippi River

west to the Rocky Mountains, and from the Dakotas and Montana to Texas; good milling and

baking characteristics; used to produce bread, rolls, and, to a lesser extent, sweet goods and allpurpose flour.

Soft red winter wheat-- fall seeded; low to medium in protein content with a soft endosperm; used

in making cakes, pastries, flat breads, and crackers; grown in the eastern third of the United States,

east of the Mississippi River; high yield; no subclasses.

Hard white wheat-- the newest white class of wheat to be grown in the United States; closely

related to red wheats (except for color genes), this wheat has a milder, sweeter flavor, equal fiber,

and similar milling and baking properties; used in yeast breads, hard rolls, bulgur, tortillas, and

oriental noodles; no subclasses.

Soft white wheat-- used in much the same way as soft red winter (for bakery products other than

bread); grown mainly in the Pacific Northwest and to a lesser extent in California, Michigan,

Wisconsin, and New York; of low protein, but high yield; produces flour for baking cakes,

crackers, cookies, pastries, quick breads, muffins, and snack foods; subclasses are soft white, white

club, and western white wheats.

Hard red spring wheat-- contains the highest percentage of protein, making it an excellent bread

wheat with superior milling and baking characteristics; chiefly grown in Montana, the Dakotas, and

Minnesota; spring seeded; may have either a hard or soft endosperm; subclasses are dark northern

spring, northern spring, and red spring wheats.

Durum wheat-- the hardest of all U.S. wheats; spring seeded; very hard; a high-protein wheat used

in pasta products (macaroni, spaghetti, and other noodles); grown in the same northern area as hard

red spring wheat--mainly in North Dakota; subclasses are hard amber durum, amber durum, and

durum wheats.
Production Costs Varied Across the United States

Economic Research Service 5

Wheat production costs vary widely across the country because of regional differences in cropping

practices, yields, and costs of land, labor, and capital.

This variation can be shown by ranking the

wheat farms from lowest to highest costs per

bushel to form a cumulative distribution of

farms and production in 1998 (fig. 1). The

cumulative distribution reveals that:

 50 percent of farms in the survey incurred

operating costs (including hired labor) of

$1.40 per bushel or less and 75 percent of

the farms incurred costs of $2.00 per bushel

or less;

 50 percent of farms in the survey incurred

operating and ownership costs of $2.50 per

bushel or less and 75 percent of the farms

incurred costs of $3.65 per bushel or less;

 50 percent of farms in the survey incurred

total costs of $4.10 per bushel or less and 75

percent of the farms incurred total costs of

$6.00 or less.

The operating costs of producing U.S. wheat in

1998 averaged $60 per planted acre; the

operating plus ownership costs averaged $107

per acre; and the total costs averaged $166 per

acre. However, these averages represent only a

single point on the distribution of production

costs and provide only limited information about

the economic performance of U.S. wheat farms.

While planted area has dropped in recent years,

this distribution analysis helps to explain why

U.S. farmers have continued to plant wheat

despite the low prices of recent years. For

example, the average farm-level wheat price in

the 1998/99 marketing year was $2.65. When

the opportunity costs of land, farmers' labor, and

other farm overhead expenses are included, only

15 percent of farmers produced wheat at or

below $2.65 per bushel. The low proportion of

farms covering all their costs raises concerns

about the long-term sustainability of many

The 1998 average farm price covered operating costs on more than 80 percent 

of farms, while it covered operating plus ownership costs on just half of the 

wheat farms. 

$ per bushel

 Source: 1998 USDA Agricultural Resource Management Study. 

0

1

2

3

4

5

6

0 10 20 30 40 50 60 70 80 90 100

Figure 1

Cumulative distribution of wheat farms at different cost levels, 1998

15 56 85

Average farm price ($2.65)

 Operating and

ownership costs

Operating

costs

Total costs

Cumulative percent of wheat farms
6 Economic Research Service

wheat producers. Their resources may be able to

earn a higher return in other uses.

The relationship between prices and production

costs has important implications for farmers'

decisions to plant a crop each year. Planting

decisions are usually based on whether the

grower expects that the price plus Government

payments received for the crop will cover

operating costs, including such costs as seed,

fertilizer, chemicals, fuel, custom operations,

repairs, hired labor, and interest on operating

inputs. Longer term decisions, such as whether

to continue to raise the crop, will be based on

expectations that prices over several years will

cover both operating and ownership costs.

Ownership costs are mainly the costs of

maintaining the capital stock used in production,

including costs associated with asset

depreciation and interest (capital recovery),

taxes, and insurance. Opportunity costs for land

and the labor provided by the operators are not

likely to influence planting decisions in the short

term, but may ultimately affect farmers'

decisions about whether to switch to other crops

or pursue off-farm work.

The lack of profitability in raising wheat is

causing high-cost wheat growers to consider

alternatives. U.S. 2001 wheat planted area was

down 15.5 million acres, or 21 percent, from the

recent high in 1996. At the national level, a large

number of crops are competing with wheat,

including soybeans, cotton, sorghum, and barley.

The farm-level season-average price received for

all wheat averaged $2.65 per bushel in 1998,

compared with more than $4.00 per bushel in the

mid-1990s. The fact that 85 percent of farms

produced wheat at an operating cost of $2.65

per bushel or less in 1998 helps to explain why

U.S. farmers have continued to plant wheat

despite the low prices of recent years. However,

for just over half of U.S. wheat farmers, the

price of $2.65 does not cover both operating and

ownership costs. Farmers cannot grow wheat for

more than a few years if they cannot cover

ownership costs and thus replace capital stock as

it deteriorates. When the opportunity costs of

land, farmers' labor, and other farm overhead

expenses are included, only 15 percent of

farmers produced wheat at or below $2.65 per

bushel in 1998 (see box "ERS Costs of

Production and Returns Accounts" for details).

If wheat prices continue to decline, producers

may look for alternative crops that are offering

higher returns than wheat, such as corn,

soybeans, and sorghum, in areas where they can

be grown. Some farmers may leave their land

fallow, especially in the drier areas.

Although Government program payments are

not included in ERS cost and return accounts,

wheat growers who participated in the program

received an additional average $0.19 per bushel

through loan deficiency payments and marketing

loan gains for the 1998 wheat crop. Also, many

wheat producers received production flexibility

contract payments and emergency assistance.

Note that farmers did not have to produce wheat

to be eligible for these payments. The average

flexibility contact payment rate was $0.663 per

bushel in 1998. These payments together likely

enabled about 75 percent of producers to cover

their operating and ownership costs in 1998 (for

more discussion, refer to USDA, ERS, 2001a

and 2001b). To analyze the contribution of

Government payments in a more accurate

manner, one needs to construct cumulative

distribution of production costs minus actual

Government payments per unit. Limited

information on the Government payments in the

1998 survey of wheat farms did not allow such

analysis.

Some wheat producers received income from

secondary products, such as grazing and wheat

straw. While these additional revenues varied

widely among wheat growers, these revenues

also helped offset production costs.
Economic Research Service 7

ERS Costs of Production and Returns Accounts

ERS cost-of-production accounts include estimates of both cash and noncash costs (sometimes called

economic, or opportunity, costs). Cash costs are incurred when factors of production are purchased or

rented. Noncash costs are incurred when factors are owned. For example, a farmer who fully owns the

land used to produce a commodity (e.g. wheat) has no cost for land rental or loans to pay for

purchasing land. Yet, an economic cost arises. By owning the land and using it to grow wheat, the

farmer forgoes income from other uses of the land, such as renting it to another producer. If a farmer

uses savings to pay for operating inputs, such as fertilizer, chemicals, and fuel, and thus pays no

interest on operating loans, the farmer still incurs an economic cost because the savings could have

earned a return in another use. Likewise, the farmer has an opportunity cost of his/her labor used in

the production of the commodity because it could have been used on another farm or in off-farm

employment. The opportunity cost of farm operators' unpaid labor was imputed using off-farm wage

equations for U.S. farm operators based on production region, size of farm, and farm type (El-Osta

and Ahearn, 1996). Owned farm inputs are not without costs because they are limited and have

alternative uses. Noncash costs in the ERS accounts are estimated using methods recommended by

the American Agricultural Association Task Force on Commodity Costs and Returns (1998).

Returns above total costs in ERS accounts are consistently negative for several commodities

over many years. Reasons for negative returns are:

Impact of Government program. Because Government payments are excluded from the accounts,

the estimated gross value of production is less than what farmers actually receive for being engaged in

the enterprise.

Exclusion of marketing costs and returns. Accounts include only costs associated with crop

production and end at the point when the commodity is hauled from the field to storage or directly to

market. Production is then valued at the harvest period price. However, farmers often delay sales and

store grain with the expectation that the price in later months will exceed the harvest period price plus

any costs associated with storing the crop.

Noncash costs. Accounting methods and measurement procedures used for noncash costs affect

costs and return estimates. For example, opportunity costs are used to value capital, land, and unpaid

labor. Because of various farm financial arrangements and the unique nature of many farm production

inputs, opportunity cost estimates may not represent exactly individual farmers' true opportunity

costs.
Regional Factors Influenced Wheat Production Costs

8 Economic Research Service

Differences in production practices, acreage, and growing conditions contributed to regional cost and

yield differences.

The national data show that, on average for

1998, wheat returns were enough to cover all

operating costs, but not adequate to cover total

costs. Disaggregating the national data to a

regional level allows inspection of the variation

in costs and returns across the country.

For this report, several of the ERS Farm

Resource Regions were combined because of

either their minor share of U.S. wheat

production or limited sample size. The Northern

Crescent and the Heartland were combined to

form the North Central while the Eastern

Uplands, Southern Seaboard, and Mississippi

Portal regions were combined into the Southeast

(fig. 2). The most important region in terms of

wheat production was the Prairie Gateway,

followed by the Northern Great Plains (table 1).

These two regions accounted for 70 percent of

total U.S. wheat production. Notably, these two

regions had the lowest gross returns per acre in

the country because of low yields.

Per-acre gross returns were higher in the North

Central than in the Plains because of both higher

yields and substantial income from the wheat

straw. Gross returns per acre were highest in the

two far-West regions where irrigation produced

the highest yields in the country. The Southeast

region accounted for the least wheat, less than 5

percent of the total U.S. wheat crop. Of all

wheat farms surveyed in 1998, about 40 percent

were in the Prairie Gateway. Nearly 30 percent

of wheat farms were in the North Central region.

Less than 10 percent of wheat farms were in

each of the Basin and Range, the Fruitful Rim,

and the Southeast regions.

In no region were average returns enough to

cover all costs, indicating that the relatively low

prices of 1998 were below long-term sustainable

levels. The largest shortfalls from covering total

costs were in the two far-West regions, with

losses ranging from $87 to $118 per acre due to

irrigation-related expenses. Producers in the two

Plains regions had the smallest shortfalls in the

country, but these losses were still a very

substantial $36-$47 per acre.

Farm size can influence unit production costs

and farm income. Small farm size is generally

associated with a low volume of production,

increased per unit costs, and low net farm

income. The average size, measured in acres, of

all ARMS wheat farms surveyed in 1998 was

1,237 acres, of which 70 percent was cropland

(table 1). Regionally, average farm size ranged

from 546 acres in the North Central to 2,034

acres in the Basin and Range. Harvested

cropland as a percentage of total operated acres

was much larger in the North Central and

Southeast regions, about 85 percent compared

with some 45-55 percent in other regions. The

Basin and Range and Prairie Gateway regions

had the lowest percentage of cropland harvested,

suggesting a large portion of land was used for

pasture and grazing purposes. Nationwide,

wheat farmers owned half the land they

operated. The remaining acreage was rented

about equally on a cash- and share-rent basis

(with share-rent leasing generally share input

costs). On average, 41 percent of the cropland

was harvested for wheat. Wheat acreage as a

percent of harvested cropland on wheat farms

ranged from 16 percent in the North Central to

about 50 percent in other regions. Among other

crops harvested on farms growing wheat

included corn, followed by soybeans, hay, and

cotton.

Wheat farms tend to have multiple enterprises,

with cattle and pasture also frequently produced.

The value of wheat production averaged $31,900

per farm in 1998, about 18 percent of the total

value of production on farms growing wheat

(table 2). Wheat accounted for less than 10

percent of total value of production in the North
Economic Research Service 9

Central and Southeast regions and 46 percent in

the Basin and Range region.

A farm's production specialty, the commodity or

group of commodities that represents the largest

portion of its gross income, affects how farmers

allocate their production resources (see

glossary). In all regions except the Southeast,

most wheat farms were specialized in cash

grains. Southeast wheat farms were equally

specialized in other crops, such as cotton and

peanuts. Farms in the Prairie Gateway and

Northern Great Plains regions had particularly

large inventories of beef cattle to take advantage

of extensive pasture, while farms in the North

Central region, primarily in Illinois, had large

inventories of hogs.

Geographical location largely governs the type

of wheat that can be grown. Types of wheat

identified in the survey were winter wheat and

spring wheat (durum and other spring wheat).

All wheat acres in the Prairie Gateway and

Southeast regions were planted to winter wheat

varieties. In the Northern Great Plains, spring

wheat plantings dominated (81 percent spring

wheat and 19 percent winter wheat). About 15

percent of the spring wheat acres in the Northern

Great Plains were planted to durum wheat.

Durum wheat was seldom planted in other

regions.

Production Practices

Production practices varied across regions and

factored importantly in cost differences.

Fallowing to retain soil moisture for the

subsequent year's wheat crop was more

common in the Basin and Range than elsewhere

in the country. Fallow wheat land produces no

crops but its land cost is still included in the

wheat farm's land cost. A deficiency of water

from natural precipitation is the primary

limitation on wheat production in this region.

The North Central and Southeast regions, in

contrast, are typical of an area that depends on

natural precipitation but does not practice

dryland fallowing because of abundant rainfall.
10 Economic Research Service

Double-cropping with wheat to increase total

returns per acre was more common in the

Southeast region than elsewhere in the country.

Double-cropping, usually with short season

soybeans, has several advantages. Farmers get

the revenue from two crops each year and are

able to spread the fixed costs of machinery over

more cropped acres. Also, soybeans fix nitrogen,

which benefits the wheat crop. Nearly a fourth

of Southeast farmers double-cropped wheat with

soybeans.

Grazing livestock on wheat acres or feeding

wheat grain to livestock were common practices

in the Prairie Gateway region. Wheat straw was

an important secondary product in the North

Central because of high straw value. Wheat

straw is frequently used as bedding for livestock,

particularly horses.

Wheat yields generally improve with irrigation.

However, the high costs of irrigation make it

prohibitive unless the returns from the additional

yield are enough to cover the higher costs.

Further, the income potential of irrigating a crop

is dependent on the relative profitability of

different cropping systems, with and without

irrigation. Only 5 percent of ARMS wheat farms

reported irrigation on wheat acreage. Among

regions, the Fruitful Rim region (primarily in

Washington and Oregon) had a large percentage

of farms irrigating wheat (35 percent). Some

irrigation was reported in the northern parts of

the Basin and Range and the Prairie Gateway

regions. The Fruitful Rim wheat growers had the

highest costs per acre because of irrigationrelated expenses.

Fertilizers were applied at higher rates in the

Southeast, primarily due to double-cropping, and

in the North Central region because a large

wheat acreage was harvested for straw. Heavy

fertilizer applications were also reported in the

Fruitful Rim (table 3). Generally, wheat is one

of the least chemical-intensive crops. However,

regions that grow spring wheat used more

herbicide treatments because of more intense

weed pressure. Winter wheat, in contrast, has a

head start on the springtime weeds because the

crop is planted in the fall. More than 80 percent

of the Northern Great Plains wheat farmers

applied herbicides to their wheat crop, compared

with only 40 percent of Prairie Gateway. North

Central wheat growers used considerably fewer

chemicals than growers did in other regions.

The use of custom work influences wheat

production costs by reducing the costs of

operating and owning machines and providing

labor, while increasing the costs of custom

operations. The decision to custom hire some

field operations depends on several factors, such

as the size of the farm and its complement of

machines, availability of capital and labor,

importance of timely operations, and weatherrelated factors. Nearly 60 percent of U.S. wheat

farms used custom operations, with custom

fertilizer or chemical applications being the most

common, followed by custom harvesting and

hauling. The percentage of farms reporting

custom operations ranged from about 80 percent

in the Fruitful Rim to 40 percent in the Basin

and Range. Forty-five to 60 percent of wheat

farms used custom operations in the Northern

Great Plains and Prairie Gateway. Custom

harvesting and hauling were most common in

the Southeast and the Prairie Gateway. The

Fruitful Rim wheat farms also reported more

custom fertilizer and chemical application than

other regions.

Conventional tillage, primarily with chisel and

disk, was the most common practice for U.S.

wheat farmers. Only a third of the surveyed

wheat farms used conservation tillage (table 3).

Among regions, conservation tillage was more

common in the North Central and Northern

Great Plains (45 percent), followed by the Basin

and Range region (35 percent). The type of

conservation tillage practice varied by region. A

no-till system was more common in the North

Central region, while a mulch-till system was

more common in the Northern Great Plains and

Basin and Range.
Economic Research Service 11

The field operations chosen by a farmer have a

major impact on farm costs. The frequency of

field operations varied by region (table 4).

Wheat growers in the North Central and

Southeast regions made fewer trips over their

fields than growers in other regions, primarily

because of fewer tillage operations. Harvesting

costs were higher in the Northern Great Plains

than in other regions because the wheat crop

there is first cut and windrowed to ensure

uniform drying before actual combining. In

other regions, harvesting consists of combining

alone.

Production Costs

Costs of producing wheat varied by region due

to differences in production practices, input use,

and irrigation. Operating costs ranged from $50

per acre in the Prairie Gateway to $115 in the

Fruitful Rim region (table 5). Fertilizer,

chemicals, and fuel accounted for 50-60 percent

of the operating costs across all regions. Input

costs varied widely among regions, reflecting

differences in acreage covered and application

rates.

Total production costs ranged from $143 per

acre in the Prairie Gateway to $291 in the

Fruitful Rim region. This wide range illustrates

the differences in capital recovery, labor, and

land costs, which were a result of production

practices such as tillage, irrigation, summer

fallow, and double-cropping.

Regionally, weather conditions adversely

affected wheat yields, especially in the

Southeast, which was experiencing drought

(table 5). Wheat yields ranged from 36 bushels

per acre in the Northern Great Plains to 69

bushels in the Fruitful Rim. The Fruitful Rim

and Basin and Range had the highest yields due

to irrigation. However, among dryland regions,

the North Central reported the highest wheat

yields because of heavy fertilizer applications

and better growing conditions. On average,

national wheat yields in 1998 were slightly

higher than growers expected at planting time.

Yields in the Prairie Gateway and Basin and

Range were 2-4 bushels above growers'

expectations, while those of the Northern Great

Plains and Southeast regions were 2-6 bushels

below expected yields.

On a per-bushel basis, production costs varied

greatly among regions due primarily to

differences in yields. Operating costs ranged

from $1.26 to $2.03, while total costs ranged

from $3.63 to $4.54 per bushel. The Prairie

Gateway had the lowest per-bushel costs among

regions. The Southeast, on the other hand, had

the highest production costs per bushel. To

account for differences between 1998 and a

typical year, costs were also compared on perunit of expected yield. The expected yield

represents the yield normally attained in the

past. When expected yields were used, the

Fruitful Rim had the highest per-bushel costs.

There, relatively high per-acre costs due to

irrigation were not offset by greater yields. The

Prairie Gateway had the lowest costs per unit of

expected yield, indicating this region has a clear

cost advantage among all wheat producing

regions. Specific costs varied widely across

regions, reflecting differences in production

practices and growing conditions.
12 Economic Research Service

Table 1—Land use on wheat farms, 1998

Prairie Northern Fruitful Basin and North Southeast2 All ARMS

Item Gateway Great Plains Rim Range Central1 farms

Percent

ARMS share

 Wheat farms 38 20 5 * 28 7 100

 Wheat acres 41 38 6 5 8 * 100

 Wheat production 39 31 10 8 9 * 100

Acres

Size

Operated acres 1,346 2,002 1,383 2,034 546 718 1,237

Cropland 831 1,314 1,054 1,317 455 578 833

Harvested cropland 604 1,043 761 903 466 625 672

Percent of acres

Land tenure

 Owned 43 54 47 50 46 43 47

 Cash-rent 30 31 31 19 28 47 30

 Share-rent 30 18 24 32 29 11 25

Crops harvested

 Corn 17 7 * * 31 14 15

 Wheat 49 49 42 56 16 19 41

 Soybeans 6 8 0 0 44 33 15

 Hay 9 12 14 10 7 6 10

 Cotton * 0 5 0 0 14 *

 Sorghum 11 * 0 0 * * *

 Barley/oats * 8 10 19 * * *

 Others * 16 24 15 * 8 9

* = 0.1 to less than 5 percent.

1

North Central = Northern Crescent and Heartland resource regions.

2

Southeast = Eastern Uplands, Southern Seaboard, and Mississippi Portal resource regions.

Source: 1998 USDA Agricultural Resource Management Study.
Economic Research Service 13

Table 2—Characteristics of wheat farms, by region, 1998

Prairie Northern Fruitful Basin and North Southeast

2 All ARMS

Item Gateway Great Plains Rim Range Central

1 farms

Size (acres)

 Operated 1,346 2,002 1,383 2,034 546 718 1,237

Planted wheat 327 523 388 507 81 128 294

 Harvested wheat 293 514 320 505 74 121 273

Wheat tenure (percent of acres)

 Owned 47 44 39 35 48 53 45

 Cash-rented 13 31 19 16 33 37 22

 Share-rented 39 25 42 49 19 10 33

Previous crop (percent of farms)

 Wheat 65 33 15 28 7 37 40

 Corn * * 6 * 12 29 6

 Soybeans 5 6 0 0 76 25 18

Production specialty (percent of farms)

 Cash grains 62 73 47 77 84 37 68

 Other crops 10 0 18 * 0 36 7

 Livestock 29 26 30 19 16 19 24

Livestock (percent of farms)

 Hogs * 5 6 5 17 9 8

 Beef cattle 66 45 24 39 54 41 54

 Dairy * 7 6 * 7 8 5

 Other livestock 21 25 16 26 8 15 18

Production practices

 Winter wheat (percent of acres) 100 19 80 80 86 100 67

 Spring wheat (percent of acres) 0 81 20 20 14 0 33

 Irrigated (percent of acres) 6 * 35 8 0 * 5

 Fallow (percent of farms) 22 39 39 58 * * 25

 Double-cropping (percent of farms) * 0 * 0 * 25 *

 Straw (percent of farms) 6 9 22 11 33 16 13

 Grazing (percent of farms) 24 * **** 9

Farm finances (dollars/farm)

 Wheat production value 31,261 55,929 58,760 86,914 8,909 13,961 31,900

 Farm production value 142,681 183,927 434,053 190,793 130,961 290,044 173,681

 Net cash income 30,590 36,367 37,940 34,836 19,213 46,809 30,168

 Government payments 18,011 22,145 23,357 34,879 11,079 13,730 17,402

 Assets 631,294 828,026 1,367,874 966,295 697,166 725,071 742,316

 Debt 116,292 128,784 263,733 123,824 69,733 72,657 110,921

 Debt-to-asset ratio (percent) 18.4 15.6 19.3 12.8 10.0 10.0 14.9

 Favorable (percent of farms) 63 64 53 58 66 61 63

 Wheat crop insurance (percent of farms) 56 88 68 68 51 23 60

Farm operator characteristics (percent of

 Farming as major occupation 80 88 80 89 68 70 78

 Under 50 years of age 33 46 55 41 46 60 42

 Completed college 22 18 44 30 11 26 20

* = 0.1 to less than 5 percent. Total may not add due to rounding or omission of possible categories. 1

North Central = Northern Crescent and Heartland resource regions.

2

Southeast = Eastern Uplands, Southern Seaboard, and Mississippi Portal resource regions.

Source: 1998 USDA Agricultural Resource Management Study.
14 Economic Research Service

Table 3—Input use of wheat production, by region, 1998

Prairie Northern Fruitful Basin and North Southeast2 All ARMS

Item Gateway Great Plains Rim Range Central1 farms

Field size (acres) 72 72 97 79 30 24 63

Seed

 Rate per acre, one time (bushels/acre) 1.2 1.5 1.5 1.4 2.1 2.0 1.4

 Homegrown seed (percent of seed) 68 70 19 33 41 34 60

Fertilizer use (percent of farms)

 Any fertilizer 91 87 96 92 97 99 91

 Nitrogen 90 85 94 92 95 96 90

 Phosphorus 66 73 41 72 83 75 71

 Potassium 15 13 14 24 76 84 29

Fertilizer application rate (pounds/acre)

 Nitrogen 52 54 92 76 91 94 61

 Phosphorus 20 21 12 16 48 35 22

 Potassium * * * * 55 61 8

Chemical use (percent of farms)

 Any chemicals 39 84 90 95 33 56 58

 Herbicides 37 84 90 95 33 50 57

 Insecticides * 7 9 10 * 17 6

Tillage system (percent of farms)

 Conventional with moldboard plow 6 5 13 19 * * 6

 Conventional without moldboard plow 74 50 76 46 49 74 62

 Mulch tillage 17 36 11 28 11 15 22

 No-till * 9 * 6 36 8 10

Soil surface covered (percent) 18 30 13 20 32 21 25

Tillage/planting (field passes) 4.77 3.54 4.11 4.29 2.35 3.08 3.82

All field operations (field passes) 6.83 7.29 6.99 8.03 4.34 4.83 6.83

Custom operations (percent of farms)

 Any custom operation 60 46 82 42 66 71 57

 Fertilizer/chemical 37 27 64 31 54 26 36

 Harvest/hauling 27 11 24 6 16 32 20

Fuel use (gallons/acre)

 Diesel 4.9 3.6 6.1 5.7 2.9 4.4 4.4

 Gasoline 0.8 1.0 1.2 1.8 1.7 2.1 1.0

* = 0.1 to less than 5 percent.

1

North Central = Northern Crescent and Heartland resource regions.

2

Southeast = EasternUplands, Southern Seaboard, and Mississippi Portal resource regions.

Source: 1998 USDA Agricultural Resource Management Study.
Economic Research Service 15

Table 4—Field operations in wheat production, by region, 1998

Prairie Northern Fruitful Basin and North Southeast2 All ARMS

Item Gateway Great Plains Rim Range Central1 farms

Times-over

All field operations3 6.83 7.29 6.99 8.03 4.34 4.83 6.83

Tillage

 Plowing 2.19 1.11 0.72 0.79 0.20 0.22 1.43

 Disking 0.95 0.16 0.78 0.55 0.64 0.94 0.60

 Cultivating 0.75 1.13 0.51 0.86 0.25 0.29 0.83

 Harrowing 0.25 0.53 1.61 1.67 0.08 0.28 0.49

 Other tillage4 0.07 0.02 0.16 0.14 0.03 0.09 0.06

Fertilizer/chemical applications 0.96 1.98 1.18 2.03 1.01 1.18 1.42

Seeding 0.99 0.94 0.95 0.99 0.98 0.96 0.97

Harvesting 0.64 1.23 0.89 0.95 0.88 0.74 0.91

Mowers/balers 0.01 0.03 0.09 0.03 0.15 0.08 0.03

Other implements 0.07 0.15 0.11 0.02 0.11 0.07 0.09

Total may not add due to rounding.

1

North Central = Northern Crescent and Heartland resource regions.

2

Southeast = Eastern Uplands, Southern Seaboard, and Mississippi Portal resource regions.

3

Excludes custom operations.

4

Includes bedders, shapers, and packers.

Source: 1998 USDA Agricultural Resource Management Study.
16 Economic Research Service

Table 5—Wheat production costs and returns per planted acre, by region, 1998

Prairie Northern Fruitful Basin and North Southeast2 All ARMS

Item Gateway Great Plains Rim Range Central1 farms

Dollars per planted acre

Gross value of production 107.15 102.53 173.65 159.23 144.29 121.50 115.07

 Wheat grain 104.91 100.79 169.59 158.71 127.25 113.71 111.75

 Wheat straw/grazing 2.24 1.74 4.06 0.52 17.04 7.79 3.32

Operating costs

 Seed 5.13 7.64 12.33 10.80 13.26 14.15 7.61

 Fertilizer 14.27 14.78 30.97 29.83 37.55 38.40 18.61

 Chemicals 3.30 10.61 14.49 16.13 3.70 4.50 7.36

 Custom operations 8.07 4.04 13.73 4.36 6.84 12.87 6.77

 Fuel, lube, and electricity 7.03 4.25 13.89 6.68 4.32 5.47 6.14

 Repairs 8.84 8.10 14.41 13.19 7.08 9.65 9.00

 Purchased irrigation water and baling 0.15 0.16 6.04 1.12 0.63 0.21 0.58

 Interest on operating capital 1.12 1.19 2.54 1.97 1.76 2.04 1.34

 Hired labor 1.77 1.45 6.56 5.02 1.22 4.16 2.12

Ownership costs

 Capital recovery (machinery and equipment) 40.66 41.23 63.31 64.10 38.39 45.40 43.34

 Taxes and insurance 3.03 3.76 5.86 7.06 3.33 3.36 3.70

Other costs

 General farm overhead 5.67 6.32 10.12 11.46 7.27 6.06 6.59

 Opportunity cost of land 28.18 35.09 76.64 49.50 63.60 38.26 37.52

 Opportunity costs of unpaid labor 15.80 10.77 20.52 25.41 16.44 19.56 14.85

Total operating costs 49.68 52.22 114.96 89.10 76.36 91.44 59.53

Total operating and ownership costs 93.37 97.21 184.13 160.26 118.08 140.20 106.57

Total costs 143.02 149.39 291.41 246.63 205.39 204.08 165.53

Returns above

 Operating costs 57.47 102.53 173.65 159.23 144.29 121.50 115.07

 Operating and ownership costs 13.78 5.32 -10.48 -1.03 26.21 -18.70 8.50

 Total costs -35.87 -46.86 -117.76 -87.40 -61.10 -82.58 -50.46

Bushels per planted acre

Actual yield 39.4 34.7 68.6 65.0 51.8 45.0 41.7

Expected yield 36.7 36.2 69.0 60.9 52.2 50.5 41.1

Dollars per bushel

Price at harvest 2.66 2.91 2.47 2.44 2.46 2.53 2.68

Costs per bushel of actual yield

 Operating costs 1.26 1.50 1.68 1.37 1.47 2.03 1.43

 Operating and ownership costs 2.37 2.80 2.68 2.47 2.28 3.12 2.56

 Total costs 3.63 4.31 4.25 3.79 3.97 4.54 3.97

Costs per bushel of expected yield

 Operating costs 1.35 1.44 1.67 1.46 1.46 1.81 1.45

 Operating and ownership costs 2.54 2.69 2.67 2.63 2.26 2.78 2.59

 Total costs 3.90 4.13 4.22 4.05 3.93 4.04 4.03

1

North Central = Northern Crescent and Heartland resource regions. 2

Southeast = Eastern Uplands, Southern Seaboard, and Mississippi Portal resource regions.

Source: 1998 USDA Agricultural Resource Management Study.
Farm Characteristics and Production Costs by Cost Group

Economic Research Service 17

Differences in wheat acreage, per-acre costs, and yields distinguished low- and high-cost producers.

Costs vary considerably among producers

because production practices, yields, and

management practices vary by individual wheat

growers. To identify various production factors

affecting costs, wheat farms were grouped into

low-, mid-, and high-cost groups according to

their level of operating and ownership costs.

Estimated operating and ownership costs were

converted to a per-bushel basis and ranked from

lowest to highest to form a weighted cumulative

distribution of farms and production. The lowcost group was the 25 percent of farms with the

lowest operating and ownership costs, and the

high-cost group was the 25 percent of farms

with the highest operating and ownership costs

(fig. 3).

Low-cost farms had per-bushel operating and

ownership costs of $1.86 or less and accounted

for a third of total U.S. wheat production in

1998. Thirty-five percent of Prairie Gateway

wheat farms were in the low-cost group,

compared with about 10 percent of Northern

Great Plains and Southeast farms (fig. 4). At the

other end of distribution, high-cost farms had

operating and ownership costs of $3.62 or more

per bushel and accounted for 12 percent of U.S.

wheat production. Forty percent of the Southeast

wheat producers were in the high-cost group,

followed by Northern Great Plains and Prairie

Gateway farms with about 30 percent.

Differences between low- and high-cost farms in

1998 were primarily attributable to yield

differences, location, and enterprise size. Low

yields combined with heavier input use raised

per-bushel costs on high-cost farms

considerably. Low-cost farms had average

operating and ownership costs of $82 per

planted acre, compared with $125 per acre for

high-cost farms (table 6).

Per-bushel operating and ownership costs varied

greatly between cost groups, ranging from an

average $1.51 for low-cost producers to $5.43

per bushel for high-cost producers, due primarily

to differences in yields. Differences between

actual and expected per-acre yields indicate the

effect of uncontrollable factors, such as weather,

on yields. Actual yields for high-cost producers

were 14 bushels below expected levels, while

low-cost producers surpassed their expected

yield in 1998 by an average of 12 bushels per

acre (table 6). The per-acre costs of each group

suggest a significant cost advantage for low-cost

producers. Total operating and ownership costs

were about $42 per acre lower for low-cost

farms, a result of lower input use. High-cost

producers spent about $10 per acre more for

chemicals and fuel than low-cost producers

(table 7). On an expected yield basis, per-bushel

costs were $1.50 more for high-cost producers.

Regardless of the poor yields experienced by

many high-cost producers, greater per-acre costs

and expected per-bushel costs suggest that many

of these producers would be high-cost producers

even under more favorable weather conditions.

Farm size and the importance of wheat to a

farm's enterprise mix also varied among lowand high-cost wheat farms. The average lowcost farm had larger wheat acreage than highcost farms, as well as a larger overall farm size.

High-cost farms were more diversified than lowcost farms, which resulted in wheat contributing

less to their total farm income. Only half of

high-cost farms indicated that their farm

operations were primarily cash grain farms,

compared with 80 percent of low-cost farms

(table 8). A larger percentage of high-cost farms

specialized in other crops and livestock,

compared with low-cost farms. Also, more highthan low-cost producers had a major occupation

other than farming and had a higher proportion

of older operators.
18 Economic Research Service

 

1

Low-cost = The 25 percent of producers with the lowest operating plus ownership costs.

2

Mid-cost = The 50 percent of producers in the midrange of operating plus ownership costs.

3

High-cost = The 25 percent of producers with the highest operating plus ownership costs.

0

1

2

3

4

5

0 20 40 60 80 100

High-cost

producers Low-cost 3

producers1

Mid-cost

producers2

Production

Farms

Figure 3

Cumulative distribution of wheat operating and ownership costs per bushel, 1998

Cumulative percent of wheat production and farms

$ per bushel

High-cost farms produced wheat for $3.62 or more per bushel but accounted for only 

12 percent of total wheat production.

Source: 1998 USDA Agricultural Resource Management Study.
Economic Research Service 19

1

Low-cost = The 25 percent of producers with the lowest operating plus ownership costs.

2

Mid-cost = The 50 percent of producers in the midrange of operating plus ownership costs.

3

High-cost = The 25 percent of producers with the highest operating plus ownership costs.

4

North Central = Northern Crescent and Heartland production resource regions. 

5

Southeast = Eastern Uplands, Southern Seaboard, and Mississippi Portal production resource reg

Source: 1998 USDA Agricultural Resource Management Study. 

0

20

40

60

80

Prairie

Gateway

Northern

Great Plains

Fruitful Rim Basin and

Range

North Central4 Southeast

5

 Low-cost

1 Mid-cost2 High-cost3 Percent of farms

Figure 4

Distribution of cost groups, by region, 1998

Nearly half of the Southeast wheat farms were in the high-cost group.
20 Economic Research Service

Table 6—Wheat production costs and returns, by operating plus ownership cost group, 1998

Low-cost Mid-cost High-cost

Item farms1 farms2 farms3

 Dollars per planted acre

Gross value of production 147.62 120.39 66.08

 Wheat grain 143.83 117.25 62.85

 Wheat straw/grazing 3.79 3.14 3.23

Operating costs

 Seed 6.45 8.07 7.77

 Fertilizer 15.06 20.12 18.8

 Chemicals 3.97 8.36 8.65

 Custom operations 6.82 7.34 5.31

 Fuel, lube, and electricity 4.23 5.64 9.49

 Repairs 6.76 8.85 11.86

 Purchased irrigation water and baling 0.23 0.74 0.58

 Interest on operating capital 1.04 1.42 1.50

 Hired labor 1.22 2.39 2.45

Ownership costs

 Capital recovery (machinery and equipment) 33.16 43.32 54.61

 Taxes and insurance 3.41 3.80 3.77

Other costs

 General farm overhead 6.33 6.84 6.27

 Opportunity cost of land 35.50 39.52 34.81

 Opportunity costs of unpaid labor 11.78 14.33 19.53

Total operating costs 45.78 62.93 66.41

Total operating and ownership costs 82.35 110.05 124.79

Total costs 135.96 170.74 185.40

Returns above

 Operating costs 101.84 57.46 -0.33

 Operating and ownership costs 65.27 10.34 -58.71

 Total costs 11.66 -50.35 -119.32

 Bushels per planted acre

Actual yield 54.7 43.5 23.0

Expected yield 43.2 42.0 36.7

 Dollars per bushel

Price at harvest 2.63 2.69 2.74

Costs per bushel of actual yield

 Operating costs 0.84 1.45 2.89

 Operating and ownership costs 1.51 2.53 5.43

 Total costs 2.49 3.93 8.06

Costs per bushel of expected yield

 Operating costs 1.06 1.50 1.81

 Operating and ownership costs 1.91 2.62 3.40

 Total costs 3.15 4.07 5.05

ARMS share Percent

 Wheat farms 25 50 25

 Wheat acres 24 54 22

 Wheat production 32 56 12 1

Low-cost = The 25 percent of producers with the lowest operating and ownership costs. 2

Mid-cost = The 50 percent of producers in the midrange of operating and ownership costs.

3

High-cost = The 25 percent of producers with the highest operating and ownership costs.

Source: 1998 USDA Agricultural Resource Management Study.
Economic Research Service 21

Table 7—Input use of wheat production operations, by operating plus ownership cost group, 1998

Low-cost Mid-cost High-cost

Item farms1 farms2 farms3

Field size (acres) 65 65 56

Seed

 Rate per acre, one time (bushels/acre) 1.3 1.4 1.5

 Homegrown seed (percent of seed) 59 59 62

Fertilizer use (percent of farms)

 Any fertilizer 93 93 87

 Nitrogen 91 92 84

 Phosphorus 69 74 67

 Potassium 25 31 30

Fertilizer application rate (pounds/acre)

 Nitrogen 56 64 58

 Phosphorus 19 24 21

 Potassium 7 10 6

Chemical use (percent of farms)

 Any chemicals 44 62 63

 Herbicides 42 61 61

 Insecticides * 7 5

Tillage system (percent of farms)

 Conventional with moldboard plow 5 6 6

 Conventional without moldboard plow 56 61 69

 Mulch tillage 21 23 22

 No-till 18 10 *

Soil surface covered (percent) 28 24 22

Tillage/planting (field passes) 3.71 3.86 3.84

All field operations (field passes) 6.34 7.07 6.79

Custom operations (percent of farms)

 Any custom operation 63 60 47

 Fertilizer/chemical 41 36 33

 Harvest/hauling 27 22 9

Fuel use (gallons/acre)

 Diesel 3.6 4.3 5.5

 Gasoline 0.7 1.1 1.4

* = 0.1 to less than 5 percent.

1

Low-cost = The 25 percent of producers with the lowest operating and ownership costs.

2

Mid-cost = The 50 percent of producers in the midrange of operating and ownership costs.

3

High-cost = The 25 percent of producers with the highest operating and ownership costs.

Source: 1998 USDA Agricultural Resource Management Study.
22 Economic Research Service

Table 8—Characteristics of wheat farms, by operating plus ownership cost group, 1998

Low-cost Mid-cost High-cost

Item farms1 farms2 farms3

Size (acres)

 Operated 1,148 1,375 1,075

 Planted wheat 273 326 256

 Harvested wheat 260 318 208

Wheat tenure (percent of acres)

 Owned 47 45 44

 Cash-rented 10 25 28

 Share-rented 43 30 28

Production practices

 Winter wheat (percent of acres) 88 60 59

 Spring wheat (percent of acres) 12 40 41

 Irrigated (percent of acres) * * 10

 Fallow (percent of farms) 24 28 19

 Double-cropping (percent of farm) * * 6

 Straw (percent of farms) 14 13 11

 Grazing (percent of farms) 6 7 17

Previous crop (percent of farms)

 Wheat 36 38 51

 Corn 6 7 6

 Soybeans 25 17 *

Production specialty (percent of farms)

 Cash grains 79 70 56

 Other crops * 5 14

 Livestock 18 23 30

Livestock (percent of farms)

 Hogs 7 8 10

 Beef cattle 62 51 53

 Dairy 6 5 *

 Other livestock 12 20 19

Farm finances (dollars/farms)

 Wheat production value 33,580 38,082 19,725

 Farm production value 170,488 205,007 122,085

 Net cash income 35,291 34,490 18,247

 Government payments 16,922 20,276 12,830

 Assets 640,280 862,012 622,695

 Debt 87,578 133,810 91,353

 Debt-to-asset ratio (percent) 13.7 15.5 14.7

 Favorable (percent of farms) 76 59 60

 Wheat crop insurance (percent of farms) 71 62 47

 Farm operator characteristic (percent of farms)

 Farming as major occupation 85 78 72

 Under 50 years of age 49 44 33

 Completed college 13 23 21

* = 0.1 to less than 5 percent. 1

Low-cost = The 25 percent of producers with the lowest operating and ownership costs.

2

Mid-cost = The 50 percent of producers in the midrange of operating and ownership costs.

3

High-cost = The 25 percent of producers with the highest operating and ownership costs.

Source: 1998 USDA Agricultural Resource Management Study.
Farm Characteristics and Production Costs by Enterprise Size

Economic Research Service 23

Costs of producing wheat decreased as wheat acreage increased. Producers planting 400 or more acres

of wheat accounted for two-thirds of total production.

Prior analyses of farm businesses and

commodity production indicate that enterprise

size may affect costs of production. Costs of

producing cotton, corn, and wheat have been

shown to decline as the size of the enterprise

increases, at least to some level of acreage where

costs either tend to level off or begin to increase

(Brooks, 2001; Foreman, 2001; Ali et al., 1998;

and McBride, 1994). The size distribution of

1998 wheat farms was used to identify cost

differences among producers. Five size classes

were developed according to planted wheat

acreage: fewer than 50 acres, 50-199 acres, 200-

399 acres, 400-799 acres, and 800 or more acres.

Sixty percent of ARMS farms had fewer than

200 wheat acres but accounted for only 15

percent of total wheat production (table 9).

Thirty percent of wheat farms were in the group

with fewer than 50 wheat acres. Roughly half of

U.S. wheat production came from the 10 percent

of farms with 800 or more wheat acres.

The acreage of wheat planted was related closely

to size of the farming operation. As the total

farm acreage increased, the acres planted to

wheat increased. Farms in the smallest size

group averaged 26 acres of wheat as part of 330

operated acres, or 8 percent of the farm acreage.

Farms in the largest size group averaged 1,336

acres of wheat on 3,715 operated acres, or 36

percent of the farm acreage. Wheat farms were

generally larger in the Basin and Range and the

Northern Great Plains than in the other regions.

Seventy percent of growers in the Basin and

Range region planted 200 or more acres of

wheat and 25 percent planted more than 800

acres, a higher percentage than any other region.

The largest concentration of the Prairie Gateway

farms was in the 50-199-acre group, while more

than 50 percent of the North Central and

Southeast wheat farms were in the smallest size

group with fewer than 50 wheat acres (fig. 5).

The percentage of operator-owned acres

decreased as enterprise size increased. Roughly

60 percent of wheat acres in the smallest size

group were planted to wheat on operator-owned

land, compared with 45 percent of owned acres

in the largest size group. The proportion of

wheat acreage share-rented also increased with

size--from 19 percent on the smallest size farms

to more than 30 percent on larger sized farms.

Share-rent arrangements often reflect an attempt

by the producer to shift part of the production

risk to the landlord.

Per-acre total costs decreased with size of the

wheat enterprise (table 10). The smallest size

farms spent, on average, $200 per acre--$40

more per acre than larger size farms. Fertilizer

expense was the single most important input cost

item varied greatly among size groups followed

by custom operations, chemicals, and seed.

These cost items together accounted for an

average of 70 percent of operating expenses in

each size group. A high percentage of the

smallest size farms reported custom operations

(table 11). As a result, these farms had higher

expenses for custom work than larger farms.

On a per-bushel basis of actual 1998 yields,

farms with 50-199 wheat acres had the highest

costs at $4.41, compared with $3.75 per bushel

for farms with 800 or more wheat acres (table

10). To account for differences between 1998

and a typical year, costs were also compared per

bushel of expected yield. Despite lower yields

on the large operations, unit costs declined with

size due to significantly lower operating and

overhead costs on larger farms. When expected

yields were used, per-bushel costs decreased

from $4.38 per bushel to $3.96 as size increased.
24 Economic Research Service

1

North Central = Northern Crescent and Heartland production resource regions. 

2

Southeast = Eastern Uplands, Southern Seaboard, and Mississippi Portal production resource regions. 

Source: 1998 USDA Agricultural Resource Management Study. 

Figure 5

Distribution of wheat farms by enterprise size in each region, 1998

Most of the Northeast farms had fewer than 50 wheat acres while a higher 

percentage of Basin and Range farms had 800 or more wheat acres.

0

10

20

30

40

50

60

70

80

90

100

Prairie

Gateway

Northern

Great Plains

Fruitful Rim Basin and

Range

North

Central

1 Southeast

2

 Fewer than 50 acres 50-199 acres 200-399 acres

 400-799 acres 800 or more acres Percent
Economic Research Service 25

Table 9—Characteristics of wheat farms, by enterprise size, 1998

Fewer than 50 50-199 200-399 400-799 800 or more

Item wheat acres wheat acres wheat acres wheat acres wheat acres

ARMS share (percent)

 Wheat farms 28 33 15 14 10

 Wheat acres * 12 15 26 45

 Wheat production * 13 15 26 44

Size (acres)

 Operated 330 935 1,402 1,858 3,715

 Planted wheat 26 107 278 558 1,336

 Harvested wheat 26 100 256 510 1,256

Wheat acres tenure (percent of acres)

 Owned 56 48 52 45 42

 Cash-rented 24 24 22 24 21

 Share-rented 19 28 26 31 37

Production practices

 Winter wheat (percent of acres) 92 79 74 67 60

 Spring wheat (percent of acres) 8 21 26 33 40

 Irrigated (percent of acres) 5975*

 Fallow (percent of farms) * 15 25 25 40

 Double-cropping (percent of farms) 6 6 * * *

 Straw (percent of farms) 38 20 11 8 *

 Grazing (percent of farms) * 10 12 9 9

Previous crop (percent of farms)

 Wheat 22 36 35 50 46

 Corn 11 9 6 7 *

 Soybeans 52 30 21 8 *

Production specialty (percent of farms)

 Cash grains 67 60 73 74 83

 Other crops 5 12 6 5 *

 Livestock 26 27 21 21 15

Livestock (percent of farms)

 Hogs 12 10 8 * *

 Beef cattle 59 48 58 61 46

 Dairy 8 * * * *

 Other livestock 19 16 19 20 17

Farm finances (dollars/farm)

 Wheat production value 2,543 11,941 30,089 59,714 146,294

 Farm production value 71,449 149,642 220,840 232,484 390,456

 Net cash income 10,863 25,785 41,363 35,089 75,661

 Government payments 4,870 12,843 19,124 27,591 51,519

 Assets 404,329 664,601 853,904 978,136 1,464,550

 Debt 32,742 98,476 121,143 150,611 304,886

 Debt-to-asset ratio (percent) 8.1 14.8 14.2 15.4 20.8

 Favorable (percent of farms) 65 66 62 56 61

 Wheat crop insurance (percent of farms) 38 57 71 80 86

Farm operator characteristics (percent of

 Farming as major occupation 61 80 85 90 95

 Under 50 years of age 39 41 43 43 51

 Completed college 16 18 21 23 33

* = 0.1 to less than 5 percent.

Source: 1998 USDA Agricultural Resource Management Study.
26 Economic Research Service

Table 10—Wheat production costs and returns per planted acre, by enterprise size, 1998

Fewer than 50 50-199 200-399 400-799 800 or more

Item wheat acres wheat acres wheat acres wheat acres wheat acres

Dollars per planted acre

Gross value of production 139.11 121.04 109.05 111.60 116.19

 Wheat grain 117.53 112.65 104.29 109.24 114.96

 Wheat straw/grazing 21.58 8.39 4.76 2.36 1.23

Operating costs

 Seed 11.67 9.71 7.61 7.10 7.18

 Fertilizer 27.09 21.62 20.43 18.45 16.96

 Chemicals 2.98 4.16 5.65 6.91 9.13

 Custom operations 11.91 9.03 8.63 6.40 5.58

 Fuel, lube, and electricity 5.79 6.96 6.25 6.37 5.81

 Repairs 7.08 9.33 9.11 8.71 9.14

 Purchased irrigation water and baling 1.23 1.32 0.75 0.52 0.35

 Interest on operating capital 1.62 1.49 1.40 1.30 1.30

 Hired labor 0.99 1.48 1.70 2.00 2.53

Ownership costs

 Capital recovery (machinery and equipment) 38.05 45.8 43.54 42.56 43.38

 Taxes and insurance 5.66 4.12 4.10 3.38 3.54

Other costs

 General farm overhead 10.01 7.93 6.83 6.67 5.98

 Opportunity cost of land 46.6 44.28 37.28 34.45 37.15

 Opportunity costs of unpaid labor 29.53 23.55 17.51 15.40 10.90

Total operating costs 70.36 65.1 61.53 57.76 57.98

Total operating and ownership costs 114.07 115.02 109.17 103.70 104.9

Total costs 200.21 190.78 170.79 160.22 158.93

Returns above

 Operating costs 68.75 55.94 47.52 53.84 58.21

 Operating and ownership costs 25.04 6.02 -0.12 7.90 11.29

 Total costs -61.10 -69.74 -61.74 -48.62 -42.74

Bushels per planted acre

Actual yield 47.8 43.3 39.2 40.5 42.4

Expected yield 45.7 45.0 41.4 40.7 40.1

Dollars per bushel

Price at harvest 2.46 2.60 2.66 2.70 2.71

Costs per bushel of actual yield

 Operating costs 1.47 1.50 1.57 1.43 1.37

 Operating and ownership costs 2.39 2.66 2.78 2.56 2.47

 Total costs 4.19 4.41 4.36 3.96 3.75

Costs per bushel of expected yield

 Operating costs 1.54 1.45 1.49 1.42 1.45

 Operating and ownership costs 2.50 2.56 2.64 2.55 2.62

 Total costs 4.38 4.24 4.13 3.94 3.96

Source: 1998 USDA Agricultural Resource Management Study.
Economic Research Service 27

Table 11—Input use of wheat production operations, by enterprise size, 1998

Fewer than 50 50-199 200-399 400-799 800 or more

Item wheat acres wheat acres wheat acres wheat acres wheat acres

Field size (acres) 17 31 50 70 107

 Yield (bushels per acre)

 Actual yield 48 43 39 41 42

 Expected yield 45.7 45.0 41.4 40.7 40.1

Seed

 Rate per acre, one time (bushels/acre) 1.9 1.6 1.5 1.4 1.3

 Homegrown seed (percent of seed) 32 40 58 64 66

Fertilizer use (percent of farms)

 Any fertilizer 94 88 89 93 94

 Nitrogen 89 86 88 91 94

 Phosphorus 68 66 72 72 74

 Potassium 56 44 30 23 12

Fertilizer application rate (pounds/acre)

 Nitrogen 65 64 60 61 59

 Phosphorus 31 27 27 23 18

 Potassium 29 20 14 8 *

Chemical use (percent of farms)

 Any chemicals 30 43 58 69 70

 Herbicides 30 40 56 69 69

 Insecticides * 7 5 6 6

Tillage system (percent of farms)

 Conventional with moldboard plow 7 8 6 * 5

 Conventional without moldboard plow 63 63 68 70 48

 Mulch tillage 10 15 14 23 38

 No-till 19 14 11 * 9

Soil covered (percent) 24 23 23 22 30

Tillage/planting (field passes) 2.90 3.49 3.80 4.11 4.18

All field operations (field passes) 4.74 5.36 5.68 6.53 7.07

Custom operations (percent of farms)

 Any custom operation 68 55 59 57 55

 Fertilizer/chemical 50 39 38 33 32

 Harvest/hauling 31 19 24 19 14

Fuel use (gallons/acre)

 Diesel 3.4 4.1 4.2 4.4 4.5

 Gasoline 1.6 1.4 1.3 1.1 0.9

* = 0.1 to less than 5 percent.

Source: 1998 USDA Agricultural Resource Management Study.
Farm Characteristics and Production Costs Vary by Typology

28 Economic Research Service

Eighty percent of wheat farms were small family farms that accounted for more than half of total

production.

The ERS farm typology classifies farms

according to gross value of farm product sales,

farmer's occupation, and farm asset values

(Hoppe et al., 2000). The wheat version of the

1998 ARMS survey did not have adequate

sample size to use all the classes in the typology.

The three smallest classes of farms (limitedresource, retirement, and residential/lifestyle)

have been combined for this report and will be

called residential farms (see glossary). Eightyone percent of ARMS wheat farms were small

family farms (gross sales under $250,000),

similar to the share reported in the 1997 Census

of Agriculture. This group accounted for 56

percent of total U.S. wheat production (table

12). Small family farms were fairly evenly

distributed, with 22-30 percent of all wheat

farms in each subgroup of the small farm

typology. The largest share of wheat production

came from high-sales small family farms (28

percent). Eleven percent of surveyed wheat

farms were large farms, accounting for 25

percent of total wheat production. Roughly 20

percent of wheat production came from the 5

percent of farms classified as very large farms.

A larger percentage of very large family farms

were in the Southeast and Fruitful Rim (fig. 6).

Most low-sales small family farms were in the

Prairie Gateway and Northern Great Plains.

Nearly half of the North Central wheat farms

were classified as residential.

As discussed earlier, both wheat value of

production and total farm value of production

rose with farm size. But unlike the acreage

concentrations, the largest farms did not have

the highest concentration of sales from wheat

(fig. 7). Low-sales small family farms had the

highest proportion of sales coming from wheat

followed by residential and high-sales farms.

Larger farms were less specialized in cash grains

and more likely to specialize in other crops and

livestock (table 12).

Production costs varied among the typology

groups, but most of the significant differences

were between small and large family farms,

particularly for seed, fertilizer, chemicals,

custom operations, labor, and overhead

expenses. On a per-acre basis, very large farms

had the highest total costs, averaging $191 per

acre, compared with $150-$160 per acre for

small farms (table 13). Very large farms had the

highest per-acre production costs due primarily

to irrigation-related expenses but they also had

the highest yield. As a result, these farms had the

lowest per-bushel cost, averaging $3.77,

compared with $4.83 per bushel for the lowsales small family farms.

Residential farmers with an average of 110

wheat acres had production costs similar to those

of other small farms. A high percentage of

residential farmers reported custom harvest and

hauling operations (table 14). As a result, these

farmers had higher expenses for custom work

than farmers who reported farming as a major

occupation. The North Central region had the

highest percentage of residential farmers.
Economic Research Service 29

1

Residential farms = Small family farms that include limited-resource, retirement,

and residential/lifestyle farms. 

2

North Central = Northern Crescent and Heartland regions. 

3

Southeast = Eastern Uplands, Southern Seaboard, and Mississippi Portal regions. 

Source: 1998 USDA Agricultural Resource Management Study. 

Figure 6

Distribution of farms by farm typology in each region, 1998

Thirty-three percent of the Prairie Gateway and 42 percent of the 

Northern Great Plains farms were low-sales small family farms.

0

20

40

60

80

100

Prairie

Gateway

Northern

Great Plains

Fruitful Rim Basin and

Range

North Central2 Southeast3

Residential

1 Low sales High sales

Percent Large Very large
30 Economic Research Service

Figure 7

Wheat production costs and contribution to total value of production, 

by farm typology, 1998

Wheat contributed a smaller share of total value of production

 on large farms.

1

Residential farms = Small family farms that include limited-resource, retirement,

and residential/lifestyle farms. 

Source: 1998 USDA Agricultural Resource Management Study. 

$ per bushel Percent

0

1

2

3

4

5

6

Residential1 Low-sales high-sales large very large 

0

10

20

30

40

Percent value

of production

from wheat
Economic Research Service 31

Table 12—Characteristics of wheat farms, by farm typology, 1998

Small family farms Large family farms

Item Residential1 Low-sales High-sales Large Very large

ARMS share (percent)

 Wheat farms 30 29 22 11 5

 Wheat acres 11 23 29 20 15

 Wheat production 10 18 28 24 18

Size (acres)

 Operated 392 988 1,621 2,127 3,795

 Planted wheat 110 232 384 512 818

 Harvested wheat 102 202 355 505 793

Wheat tenure (percent of acres)

 Owned 42 50 49 42 35

 Cash-rented 27 26 20 22 29

 Share-rented 31 24 32 36 37

Production practices

 Winter wheat (percent of acres) 76 61 60 56 67

 Spring wheat (percent of acres) 24 39 40 44 33

 Irrigated (percent of acres) * * * 5 16

 Fallow (percent of farms) 22 27 27 24 13

 Double-cropping (percent of farms) 5 * * * *

 Straw (percent of farms) 14 12 11 15 6

 Grazing (percent of farms) 9 11 10 * 10

Previous crop (percent of farms)

 Wheat 43 46 39 32 28

 Corn * * 6 11 20

 Soybeans 31 11 18 25 12

Production specialty (percent of farms)

 Cash grains 82 60 65 69 43

 Other crops 6 6 6 9 24

 Livestock 11 34 29 21 30

Livestock (percent of farms)

 Hogs 6 8 11 12 10

 Beef cattle 51 60 57 50 47

 Dairy 0 * 11 9 *

 Other livestock 12 25 17 18 20

Farm finances (dollars/farm)

 Wheat production value 9,995 19,659 40,303 67,213 108,584

 Farm production value 36,034 65,639 190,216 383,991 1,021,502

 Net cash income 480 2,213 30,091 79,386 248,325

 Government payments 5,082 9,181 19,898 40,162 71,658

 Assets 319,747 552,620 889,013 1,295,422 2,316,703

 Debt 29,285 52,233 129,556 212,867 593,366

 Debt-to-asset ratio (percent) 9.2 9.5 14.6 16.4 25.6

 Favorable (percent of farms) 67 56 66 65 65

 Wheat crop insurance (percent of farms) 48 57 72 66 73

Farm operator characteristics (percent of farms)

 Farming as major occupation 33 100 99 94 93

 Under 50 years of age 40 26 46 64 72

 Completed college 19 12 20 31 36

* = 0.1 to less than 5 percent. 1

Residential farms = Small family farms that include limited-resource, retirement, and residential/lifestyle farms.

Source: 1998 USDA Agricultural Resource Management Study.
32 Economic Research Service

Table 13—Wheat production costs and returns per planted acre, by farm typology, 1998

Small family farms Large family farms

Item Residential1 Low-sales High-sales Large Very large

Dollars per planted acre

Gross value of production 95.31 92.43 108.44 127.59 136.36

 Wheat grain 91.14 89.96 106.37 122.48 134.61

 Wheat straw/grazing 4.17 2.47 2.07 5.11 1.75

Operating costs

 Seed 6.84 7.42 7.20 8.29 9.10

 Fertilizer 16.59 15.48 17.30 23.31 24.18

 Chemicals 5.45 6.14 6.06 10.24 10.06

 Custom operations 14.22 5.74 5.65 4.07 10.26

 Fuel, lube, and electricity 4.37 5.48 5.11 7.75 8.14

 Repairs 6.53 9.01 8.22 9.63 10.77

 Purchased irrigation water and baling 0.30 0.38 0.29 0.77 1.66

 Interest on operating capital 1.30 1.19 1.19 1.53 1.78

 Hired labor 0.71 1.33 2.16 2.63 3.70

Ownership costs

 Capital recovery (machinery and equipment) 31.76 43.64 40.43 47.99 45.61

 Taxes and insurance 3.90 4.16 3.79 3.79 2.72

Other costs

 General farm overhead 7.12 6.99 6.18 6.54 5.68

 Opportunity cost of land 32.96 30.32 32.01 41.37 47.00

 Opportunity costs of unpaid labor 18.24 22.91 14.61 12.99 10.38

Total operating costs 56.31 52.17 53.18 68.22 79.65

Total operating and ownership costs 91.97 99.97 97.40 120.00 127.98

Total costs 150.29 160.19 150.20 180.90 191.04

Returns above

 Operating costs 39.00 40.26 55.26 59.37 56.71

 Operating and ownership costs 3.34 -7.54 11.04 7.59 8.38

 Total costs -54.98 -67.76 -41.76 -53.31 -54.68

Bushels per planted acre

Yield 34.60 33.20 39.40 45.90 50.70

Dollars per bushel

Price at harvest 2.63 2.71 2.70 2.67 2.66

Costs per bushel

 Operating costs 1.63 1.57 1.35 1.49 1.57

 Operating and ownership costs 2.66 3.01 2.47 2.61 2.52

 Total costs 4.34 4.83 3.81 3.94 3.77

1

Residential farms = Small family farms that include limited-resource, retirement, and residential/lifestyle farms.

Source: 1998 USDA Agricultural Resource Management Study.
Economic Research Service 33

Table 14—Input use of wheat production operations, by farm typology, 1998

Small family farms Large family farms

Item Residential1 Low-sales High-sales Large Very large

Field size (acres) 42 47 63 76 92

Yield (bushels/acre)

 Actual yield 35 33 39 47 51

 Expected yield 35 36 38 46 49

Seed

 Rate per acre, one time (bushels/acre) 1.4 1.4 1.4 1.6 1.4

 Homegrown seed (percent of seed) 52 64 63 69 44

Fertilizer use (percent of farms)

 Any fertilizer 83 86 95 95 97

 Nitrogen 82 84 94 94 96

 Phosphorus 65 63 79 76 67

 Potassium 30 24 30 35 38

Fertilizer application rate (pound/acre)

 Nitrogen 47 52 57 73 84

 Phosphorus 21 20 24 26 21

 Potassium 8 5 6 13 10

Chemical use (percent of farms)

 Any chemicals 50 59 57 60 71

 Herbicides 49 58 57 60 68

 Insecticides 7 5 8 5 14

Tillage system (percent of farms)

 Conventional with moldboard plow 7 7 * * *

 Conventional without moldboard plow 63 63 68 70 48

 Mulch tillage 14 22 27 26 31

 No-till 6 * 14 16 10

Soil covered (percent) 20 21 28 30 27

Tillage/planting (field passes) 3.80 3.98 3.61 3.53 3.42

All field operations (field passes) 5.42 6.81 7.15 7.29 6.14

Custom operations (percent of farms)

 Any custom operation 62 43 54 61 81

 Fertilizer/chemical 43 25 35 41 46

 Harvest/hauling 40 18 16 8 24

Fuel use (gallons/acre)

 Diesel 3.5 4.8 4.0 4.6 4.8

 Gasoline 1.0 1.2 0.9 1.2 1.0

* = 0.1 to less than 5 percent.

1

Residential farms = Small family farms that include limited-resource, retirement, and residential/lifestyle farms.

Source: 1998 USDA Agricultural Resource Management Study.
Glossary

34 Economic Research Service

Agricultural Resource Management Study

(ARMS). This annual survey of U.S. farmers

and ranchers is USDA’s major source of

financial information on U.S. agriculture. A

subsample of the survey collects production

practice information for individual crop and

livestock commodities and is the primary source

of data used in this report. Wheat cost and return

estimates in this report are derived from the

responses of 1,941 wheat farmers in 20 states

(CA, CO, GA, ID, IL, KS, LA, MN, MO, MS,

MT, NC, NE, ND, OH, OK, OR, SD, TX, and

WA). The survey included information on wheat

production practices, input use, and costs of

production for the 1998 wheat crop. The target

population for the survey was farmers who

planted wheat with the intention of harvesting

the wheat for grain.

Cost group:

 Low-cost producers represent the 25 percent

of U.S. wheat producers with the lowest perbushel operating plus ownership costs.

These wheat producers had operating plus

ownership costs of $1.86 per bushel or less.

 High-cost producers represent the 25

percent of U.S. wheat producers with the

highest per-bushel operating plus ownership

costs. These wheat producers had operating

plus ownership costs of $3.62 per bushel or

more.

Debt-to-asset ratio is a balance sheet measure

calculated by dividing the farm’s total liabilities

by total assets.

Enterprise size is an acreage measure which in

this report is one of five categories: farms with

fewer than 50 wheat acres, 50-199 wheat acres,

200-399 wheat acres, 400-799 wheat acres, and

800 or more wheat acres.

Expected yield is the reported wheat yield per

acre that farmers expected on their operation at

the time of planting.

Farm resource regions. ERS developed farm

resource regions according to farm

characteristics, previous production regions,

USDA's land resource regions, and NASS crop

reporting districts which are aggregates of

counties (Heimlich, 2000). Due to sample size

limitations in the 1998 wheat survey, the

Northern Crescent and the Heartland resource

regions were combined into the North Central

region while the Eastern Uplands, Southern

Seaboard, and Mississippi Portal resource

regions were combined into the Southeast (see

fig. 2).

Farm typology is a classification developed by

ERS to categorize farms and ranches into more

homogeneous groups than classifications based

on sales volume alone. Farms vary widely in

size and other characteristics, ranging from very

small retirement and residential farms to

establishments with sales in the millions. The

typology is based on the occupation of operators

and the sales class of farms, including the

operation’s asset base and total household

income.

 Small family farms have sales of $250,000

or less. Family farms exclude farms

organized as nonfamily corporations or

cooperatives and farms operated by hired

managers.

 Residential farms are small family farms

that combine limited-resource, retirement,

and residential/lifestyle farms. These three

typology groups were combined in this

report due to sample size limitations.

Limited-resource farms have sales less than

$100,000, total farm assets less than

$150,000, and total operator household

income less than $20,000. They may report

farming, a nonfarm occupation, or

retirement as their major occupation.

Retirement farms have sales less than

$250,000; these operators report they are

retired (excludes limited-resource farms

operated by retired farmers). Residential/

lifestyle farms have sales less than $250,000

and the operators report a major occupation
Economic Research Service 35

other than farming (excludes limitedresource farms with operators reporting a

nonfarm major occupation).

 Low-sales family farms have sales less than

$100,000 and the operators report farming

as their major occupation (excludes limitedresource farms whose operators report

farming as their major occupation).

 High-sales family farms have sales between

$100,000 and $249,999 and the operators

report farming as their major occupation.

 Large family farms have sales between

$250,000 and $499,999.

 Very large family farms have sales of

$500,000 or more.

 Nonfamily farms are organized as

nonfamily corporations or cooperatives, as

well as farms operated by hired managers.

Favorable financial position is indicated by a

positive net farm income and debt/asset ratio

less than 0.40. Farms in this position are

generally considered financially stable.

Production costs:

 Operating costs are the costs for purchased

inputs that are consumed in one production

period. These costs include seed; fertilizer;

chemicals; custom operations; fuel, lube,

and electricity; repairs; purchased irrigation

water; baling; hired labor; and interest on

operating inputs.

 Operating and ownership costs include the

sum of operating costs and asset ownership

costs. Ownership costs are mainly the costs

of maintaining the capital stock used in

production, including asset depreciation and

interest (capital recovery), taxes, and

insurance.

 Total costs are operating costs and

ownership costs plus all other allocated

long-term costs that account for all

production inputs, without regard to the

ownership or equity position of farm

operators. These costs are operating costs,

paid and unpaid labor charges, an imputed

cost for capital recovery, the opportunity

cost of land, as well as the enterprise share

of general farm overhead, taxes, and

insurance.

Production specialty is the farm’s production

classification that represents the largest

proportion of gross commodity receipts from the

farm operation.

Tillage systems are defined by the amount of

crop residue remaining on the soil.

 Conventional tillage systems leave less than

30 percent of crop residue remaining on the

soil when wheat is planted.

 Conventional tillage systems with

moldboard plow include any tillage system

uses a mold board plow.

 Conventional tillage without moldboard

plow include any tillage system that has less

than 30 percent remaining residue and does

not use a moldboard plow.

 Conservation tillage leaves 30 percent or

more of the previous crop residue covering

the soil when wheat is planted.

 No-till leaves the soil undisturbed from

harvest to planting except for nutrient

injection. Planting or drilling is

accomplished in a narrow seedbed or slot

created by coulters, row cleaners, disk

openers, in-row chisels, or roto-tillers. Weed

control is accomplished primarily with

herbicides. Cultivation may be used for

emergency weed control.

 Mulch-till disturbs the soil prior to planting.

Tillage tools such as chisels, field

cultivators, disks, weeps, or blades are used.

Weed control is accomplished with

herbicides and/or cultivation. 

Value of production is an estimate of the total

value of all farm products produced on farm,

excluding the value of intermediate products,

such as corn fed to livestock.

Wheat class:

 Winter wheat is a general category of wheat

that is seeded in the fall, lies dormant in the
36 Economic Research Service

winter, and is harvested the following spring

or summer. 

 Spring wheat is a general term for wheat

that is planted in the spring and harvested in

summer or fall, relatively high in protein

content, and used in bread flours (includes

durum and other spring wheat).

Wheat farms represent those operations

selected in the 1998 ARMS. Wheat farms are

defined as farm operations that planted one or

more acres of wheat with the intention of

harvesting as grain.
References

Economic Research Service 37

Ali, Mir B., Nora L. Brooks, and Robert G.

McElroy. Characteristics of U.S. Wheat

Farming, A Snapshot. U.S. Department of

Agriculture, Economic Research Service,

Statistical Bulletin No. 968, June 2000.

American Agricultural Economics Association

(AAEA). Commodity Costs and Returns

Estimation Handbook. A report of the AAEA

Task Force on Commodity and Costs Returns,

July 1998, Ames, Iowa.

Brooks, Nora L. Characteristics and Production

Costs of U.S. Cotton Farms. U.S. Department of

Agriculture, Economic Research Service,

Statistical Bulletin No. 974, August 2001.

http://www.ers.usda.gov/publications/sb974-1/.

El-Osta, Hisham S., and Mary C. Ahearn.

Estimating the Opportunity Costs of Unpaid

Farm Labor for U.S. Farm Operators. U.S.

Department of Agriculture, Economic Research

Service, Technical Bulletin No. 1848, March

1996.

Foreman, Linda. Characteristics and Production

Costs of U.S. Corn Farms. U.S. Department of

Agriculture, Economic Research Service,

Statistical Bulletin No. 974, August 2001.

http://www.ers.usda.gov/publications/sb974-1/.

Heimlich, Ralph. New U.S. Farm Resource

Regions. U.S. Department of Agriculture,

Economic Research Service, AIB No. 760,

August 2000.

http://www.ers.usda.gov/publications/aib760/.

Hoppe, Robert A., Janet E. Perry, and David

Banker. ERS Farm Typology for a Diverse Ag

Sector. U.S. Department of Agriculture,

Economic Research Service, AIB 759,

September 2000.

http://www.ers.usda.gov/publications/AIB759/.

McBride, William D. Characteristics and

Production Costs of U.S. Corn Farms, 1991.

U.S. Department of Agriculture, Economic

Research Service, AIB No. 691, January 1994.

U.S. Department of Agriculture, Economic

Research Service. "U.S. Wheat Supplies to Drop

in 2001/02." Agricultural Outlook, August

2001a.

U.S. Department of Agriculture, Economic

Research Service. "Costs of Production." U.S.

Agricultural Income and Finance Outlook, AIS77, September 2001b.

U.S. Department of Agriculture, National

Agricultural Statistics Service. 1997 Census of

Agriculture. AC97-A-51. United States

Summary and State Data, Vol.1, Geographic

Area Series, Part 51. March 1999.

____________. Crop Production 1999

Summary. Cr Pr 2-1 (00)a, January 2000.
Appendix 1: Data Reliability

38 Economic Research Service

Survey results are only indications of the total

population. They may differ from data collected

in a complete census using the same

questionnaires, instructions, and enumerators. A

measure of this sample variability, called

sampling error, is available from survey results.

Sampling error may be expressed as a

percentage of the estimate. These percentages

represent the relative standard error of the

estimate and are often referred to as coefficients

of variation (C.V.). In general, the smaller the

C.V., the greater the reliability of the estimate

(appendix tables 1-4).

The average operating costs of production for all

farms, $59.53 per acre, has a C.V. of 4.4 percent

(appendix table 1). Therefore, the confidence

interval for operating costs per acre of producing

wheat in the United States is estimated to be

between $54.40 and $64.66 per planted acre

based on a 95-percent probability (appendix

table 5). The relative standard error of an

estimate can also be used to evaluate the

statistical significance of differences between

groups. For example, the appropriate t-statistic

for a comparison of operating and ownership

costs per bushel between low- and high-cost

farms would be constructed by taking the

difference between the mean of the two groups

(OPOWC) and dividing by the square root of the

sum of the squared standard errors (SE2

) of the

two groups. This is estimated as follows:

20.67

(1.5062 5.4345)/(0.0310 0.1917 )

(SE SE )

(OPOWC OPOWC ) t

2 2 0.5

0.5

High-cost 2Low-cost 2

Low-cost High-cost



 



 

Conclusion: The difference in per-bushel

operating plus ownership costs is highly

significant (at 0.01 level) between the low- and

high-cost farms.

Differences among means of wheat production

characteristics and costs items for the various

groupings presented in this report were

statistically tested. Although t-statistics are not

reported here, the discussion in each section

emphasizes comparisons among the groups only

when means were significantly different at the

90-percent level.

Survey data are also influenced by nonsampling

errors, which are not measurable or known.

Enumerators, respondents, and questionnaire

design, among other factors, may introduce

nonsampling errors. Efforts were made to

minimize these errors and maintain survey

accuracy, including training of data collectors,

detailed review and edit of data, and analysis for

comparability and consistency.
Economic Research Service 39

Appendix table 1—Coefficients of variation of wheat production costs, region

Prairie Northern Fruitful Basin and North Southeast2 All ARMS

Item Gateway Great Plains Rim Range Central1 farms

Percent

Operating costs

 Seed 4.3 3.2 8.7 4.7 8.1 7.0 2.2

 Fertilizer 6.4 5.0 10.0 9.0 5.0 5.1 2.8

 Chemicals 16.6 5.9 7.2 8.6 16.5 23.2 5.4

 Custom operations 8.8 13.9 12.5 16.5 15.8 20.5 4.8

 Fuel, lube, and electricity 10.6 5.8 11.7 6.6 4.7 5.2 6.0

 Repairs 4.9 4.4 5.4 6.6 5.3 8.9 3.1

 Purchased irrigation water and baling 53.8 20.4 14.9 50.5 18.8 29.1 14.6

 Interest on operating capital 4.3 2.8 5.0 6.0 3.8 4.2 2.2

 Hired labor 11.6 16.7 11.4 17.5 16.4 14.6 7.7

Ownership costs

 Capital recovery (machinery and equipment) 4.0 4.2 4.2 6.8 4.9 8.1 2.5

 Taxes and insurance 8.6 4.0 11.0 4.3 11.4 7.6 3.9

Other costs

 General farm overhead 5.9 5.2 10.7 9.4 17.8 11.5 4.3

 Opportunity cost of land 3.6 5.3 5.4 9.2 6.3 9.2 3.2

 Opportunity costs of unpaid labor 6.0 7.3 7.6 21.1 8.2 12.3 3.0

Operating costs 2.2 4.1 3.0 5.0 6.1 3.8 4.4

Operating and ownership costs 3.3 2.9 3.8 5.8 3.1 2.4 2.1

Total costs 2.9 2.5 3.3 6.9 3.5 3.0 2.0

Yield 4.3 3.4 3.9 4.0 2.7 2.6 2.7

Costs per bushel

 Operating costs 4.0 2.5 4.1 3.5 5.1 5.5 2.0

 Operating and ownership costs 3.9 2.5 3.4 3.8 4.5 4.4 1.8

 Total costs 3.7 2.2 3.7 4.6 5.2 5.4 1.5

Coefficient of Variation = (Standard Error/Estimate)*100.

1

North Central = Northern Crescent and Heartland resource regions.

2

Southeast = Eastern Uplands, Southern Seaboard, and Mississippi Portal resource regions.

Source: 1998 USDA Agricultural Resource Management Study.
40 Economic Research Service

Appendix table 2—Coefficients of variation of wheat production costs, by cost group

Low-cost Mid-cost High-cost

Item farms1 farms2 farms3

Percent

Operating costs

 Seed 3.4 3.2 5.5

 Fertilizer 4.2 3.5 4.5

 Chemicals 15.3 6.0 15.9

 Custom operations 9.1 6.9 17.8

 Fuel, lube, and electricity 9.6 4.9 13.0

 Repairs 6.5 2.8 6.2

 Purchased irrigation water and baling 32.7 18.9 24.8

 Interest on operating capital 2.5 2.4 4.3

 Hired labor 11.8 9.0 9.0

Ownership costs

 Capital recovery of machinery and equipment 3.5 2.7 5.8

 Taxes and insurance 7.7 5.6 8.1

Other costs

 General farm overhead 6.0 4.8 10.2

 Opportunity cost of land 4.0 3.9 7.9

 Opportunity costs of unpaid labor 6.6 5.5 7.5

Total operating costs 2.6 2.4 4.3

Total operating and ownership costs 2.5 2.1 4.2

Total costs 2.0 2.2 3.8

Yield 2.0 2.6 6.0

Costs per bushel

 Operating costs 2.3 1.2 4.8

 Operating and ownership costs 2.1 1.0 3.5

 Total costs 2.0 1.3 3.2

Coefficient of Variation = (Standard Error/Estimate)*100.

1

Low-cost = The 25 percent of producers with the lowest operating and ownership costs.

2

Mid-cost = The 50 percent of producers in the midrange of operating and ownership costs.

3

High-cost = The 25 percent of producers with the highest operating and ownership costs.

Source: 1998 USDA Agricultural Resource Management Study.
Economic Research Service 41

Appendix table 3—Coefficients of variation of wheat production costs, by enterprise size

Fewer than 50 50-199 200-399 400-799 800 or more

Item wheat acres wheat acres wheat acres wheat acres wheat acres

Percent

Operating costs

 Seed 10.4 6.0 3.7 4.6 5.0

 Fertilizer 6.3 8.3 6.3 6.2 5.2

 Chemicals 21.0 8.0 11.0 7.5 8.8

 Custom operations 25.3 15.1 6.9 12.0 10.1

 Fuel, lube, and electricity 18.4 14.8 9.7 9.8 6.0

 Repairs 14.0 4.7 6.1 5.2 4.5

 Purchased irrigation water and baling 21.6 13.8 29.6 49.7 42.3

 Interest on operating capital 3.8 5.9 4.4 4.3 3.7

 Hired labor 42.4 21.0 10.3 10.1 10.1

Ownership costs

 Capital recovery (machinery and equipment) 14.0 5.0 6.6 4.5 3.7

 Taxes and insurance 18.2 11.2 11.7 5.6 4.7

Other costs

 General farm overhead 11.2 8.6 6.5 9.3 7.2

 Opportunity cost of land 11.8 4.2 6.7 5.6 5.0

 Opportunity costs of unpaid labor 17.4 3.9 8.7 10.0 7.0

Total operating costs 4.1 6.0 4.5 4.2 3.8

Total operating and ownership costs 5.8 3.8 4.9 3.9 2.7

Total costs 8.3 3.2 4.2 4.3 2.5

Yield 5.6 3.6 5.1 2.9 3.8

Costs per bushel

Operating costs 4.9 4.7 4.7 2.9 4.9

Operating and ownership costs 9.7 3.0 5.7 3.0 3.6

Total costs 12.4 2.9 4.8 3.2 3.6

Coefficient of Variation = (Standard Error/Estimate)*100.

Source: 1998 USDA Agricultural Resource Management Study.
42 Economic Research Service

Appendix table 4—Coefficients of variation of wheat production costs, by farm typology

Small family farms Large family farms

Item Residential1 Low-sales High-sales Large Very large

Percent

Operating costs

 Seed 4.0 7.2 4.5 4.1 7.0

 Fertilizer 6.1 7.4 4.8 6.7 11.7

 Chemicals 17.6 13.7 12.1 18.0 13.0

 Custom operations 17.7 15.0 12.7 12.6 19.2

 Fuel, lube, and electricity 6.7 5.2 6.3 12.8 15.9

 Repairs 6.5 6.6 3.3 4.6 12.3

 Purchased irrigation water and baling 45.0 56.0 15.5 27.2 36.7

 Interest on operating capital 6.7 5.5 2.9 5.0 8.7

 Hired labor 22.9 19.6 15.0 16.2 13.0

Ownership costs

 Capital recovery (machinery and equipment) 6.6 5.9 3.9 3.8 7.2

 Taxes and insurance 16.4 16.0 11.9 10.6 18.1

Other costs

 General farm overhead 17.2 9.7 8.3 10.0 23.9

 Opportunity cost of land 5.6 8.2 5.4 10.4 11.9

 Opportunity costs of unpaid labor 7.6 13.9 3.9 9.6 17.7

Total operating costs 6.6 5.8 2.8 4.8 8.3

Total operating and ownership costs 4.2 5.1 2.5 3.3 7.5

Total costs 3.6 5.7 2.7 4.2 7.7

Yield 8.9 6.0 3.4 5.9 7.1

Costs per bushel

 Operating costs 6.8 7.7 3.9 4.7 5.8

 Operating and ownership costs 8.5 7.7 2.6 4.9 4.5

 Total costs 8.5 7.1 2.8 5.6 4.4

Coefficient of Variation = (Standard Error/Estimate)*100.

1

Residential farms = Small family farms that include limited-resource, retirement, and residential/lifestyle farms.

Source: 1998 USDA Agricultural Resource Management Study.
Economic Research Service 43

Appendix table 5—Statistical reliability of wheat production costs per planted acre

95-percent confidence interval

Operating costs Operating and ownership costs Total costs

Item Lower Mean Upper Lower Mean Upper Lower Mean Upper

Dollars per planted acre

All ARMS wheat farms 54.40 59.53 64.66 102.18 106.57 110.96 159.04 165.53 172.02

Region

 Prairie Gateway 47.64 49.69 51.73 87.33 93.37 99.41 134.89 143.02 151.15

 Northern Great Plains 48.02 52.22 56.42 91.68 97.21 102.74 142.07 149.39 156.71

 Fruitful Rim 108.20 114.96 121.72 170.42 184.13 197.84 272.56 291.41 310.26

 Basin and Range 80.37 89.10 97.83 142.04 160.26 178.48 213.28 246.63 279.98

 North Central1 67.23 76.36 85.49 110.91 118.08 125.25 191.30 205.39 219.48

 Southeast2 84.63 91.44 98.25 133.60 140.20 146.80 192.08 204.08 216.08

Costs group

 Low-cost3 43.45 45.78 48.11 78.31 82.35 86.39 130.63 135.96 141.29

 Mid-cost4 59.97 62.93 65.89 105.52 110.05 114.58 163.38 170.74 178.10

 High-cost5 60.81 66.41 72.01 114.52 124.79 135.06 171.59 185.4 199.21

Enterprise size group

 Fewer than 50 acres 64.71 70.36 76.01 101.10 114.07 127.04 167.64 200.21 232.78

 50-199 acres 57.44 65.10 72.76 106.45 115.02 123.59 178.81 190.78 202.75

 200-399 acres 56.10 61.53 66.96 98.69 109.17 119.65 156.73 170.79 184.85

 400-799 acres 53.01 57.76 62.51 95.77 103.70 111.63 146.72 160.22 173.72

 800 acres or more 53.66 57.98 62.30 99.35 104.90 110.45 151.14 158.93 166.72

Farm typology

 Residential6 49.03 56.31 63.59 84.40 91.97 99.54 139.69 150.29 160.89

 Low-sales 46.24 52.17 58.10 89.98 99.97 109.96 142.29 160.19 178.09

 High-sales 50.26 53.18 56.10 92.63 97.4 102.17 142.25 150.2 158.15

 Large 61.80 68.22 74.64 112.24 120.00 127.76 166.01 180.90 195.79

 Very large 66.69 79.65 92.61 109.17 127.98 146.79 162.21 191.04 219.87

1

North Central = Northern Crescent and Heartland production resource regions.

2

Southeast = Eastern Uplands, Southern Seaboard, and Mississippi Portal production resource regions.

3

Low-cost = The 25 percent of producers with the lowest operating and ownership costs.

4

Mid-cost = The 50 percent of producers in the midrange of operating and ownership costs.

5

High-cost = The 25 percent of producers with the highest operating and ownership costs.

6

Residential = Small family farms that include limited-resource, retirement, and residential/lifestyle farms.

Source: 1998 USDA Agricultural Resource Management Study.
44 Economic Research Service

Appendix table 6—-Statistical reliability of wheat production costs per bushel

Operating costs Operating and ownership costs Total costs

Item Lower Mean Upper Lower Mean Upper Lower Mean Upper

Dollars per bushel

All ARMS wheat farms 1.37 1.43 1.49 2.47 2.56 2.65 3.85 3.97 4.09

Region

 Prairie Gateway 1.16 1.26 1.36 2.19 2.37 2.55 3.37 3.63 3.89

 Northern Great Plains 1.43 1.50 1.57 2.66 2.80 2.94 4.12 4.31 4.50

 Fruitful Rim 1.54 1.68 1.82 2.50 2.68 2.86 3.94 4.25 4.56

 Basin and Range 1.28 1.37 1.46 2.29 2.47 2.65 3.45 3.79 4.13

 North Central1 1.32 1.47 1.62 2.08 2.28 2.48 3.57 3.97 4.37

 Southeast2 1.81 2.03 2.25 2.85 3.12 3.39 4.06 4.54 5.02

Costs group

 Low-cost3 0.80 0.84 0.88 1.45 1.51 1.57 2.39 2.49 2.59

 Mid-cost4 1.42 1.45 1.48 2.48 2.53 2.58 3.83 3.93 4.03

 High-cost5 2.62 2.89 3.16 5.06 5.43 5.80 7.55 8.06 8.57

Enterprise size group

 Fewer than 50 acres 1.33 1.47 1.61 1.94 2.39 2.84 3.17 4.19 5.21

 50-199 acres 1.36 1.50 1.64 2.50 2.66 2.82 4.16 4.41 4.66

 200-399 acres 1.43 1.57 1.71 2.47 2.78 3.09 3.95 4.36 4.77

 400-799 acres 1.35 1.43 1.51 2.41 2.56 2.71 3.71 3.96 4.21

 800 acres or more 1.24 1.37 1.50 2.30 2.47 2.64 3.49 3.75 4.01

Farm typology

 Residential6 1.41 1.63 1.85 2.22 2.66 3.10 3.62 4.34 5.06

 Low-sales 1.33 1.57 1.81 2.56 3.01 3.46 4.16 4.83 5.50

 High-sales 1.25 1.35 1.45 2.34 2.47 2.60 3.60 3.81 4.02

 Large 1.35 1.49 1.63 2.36 2.61 2.86 3.51 3.94 4.37

 Very large 1.39 1.57 1.75 2.30 2.52 2.74 3.44 3.77 4.10

1

North Central = Northern Crescent and Heartland production resource regions.

2

Southeast = Eastern Uplands, Southern Seaboard, and Mississippi Portal production resource regions.

3

Low-cost = The 25 percent of producers with the lowest operating and ownership costs.

4

Mid-cost = The 50 percent of producers in the midrange of operating and ownership costs.

5

High-cost = The 25 percent of producers with the highest operating and ownership costs.

6

Residential = Small family farms that include limited-resource, retirement, and residential/lifestyle farms.

Source: 1998 USDA Agricultural Resource Management Study.