United States 

Department of 

Agriculture

Economic

Research

Service

Linda Foreman

Characteristics and Production Costs 

of U.S. Cotton Farms, 2007

Economic 

Information 

Bulletin 

Number 104

December 2012
www.ers.usda.gov

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Recommended citation format for this publication:

Foreman, Linda. Characteristics and Production Costs of U.S. Cotton Farms, 

2007, EIB-104, U.S. Department of Agriculture, Economic Research Service, 

December 2012. 
United States

Department

of Agriculture

www.ers.usda.gov

A Report from the Economic Research Service

Abstract

Agricultural Resource Management Survey (ARMS) data for 2007 highlight the production practices and costs related to the cotton enterprise, as well as the characteristics of 

U.S. cotton farm operations. Combining ARMS data with ERS cost-of-cotton production 

estimates for 2007 provides a 1-year snapshot of cotton producers. For instance, low-cost 

producers reported higher yields and lower levels of major inputs per planted cotton acre 

than mid- and high-cost producers in 2007. Southwest producers accounted for a larger 

share of the smaller U.S. cotton crop in 2007 due to their lower cotton production costs 

and lack of alternative crops. Most U.S. cotton is produced on very large diversifi ed farm 

operations, with cotton often constituting a small share of these operations’ total acres. In 

contrast, producers with larger cotton enterprises in 2007 relied more on their cotton crop, 

making them vulnerable to changes in cotton prices or yields. These producers, however, 

were also more likely to offset greater risks by purchasing revenue insurance on cotton.

Keywords: cotton, operator characteristics, production costs, production practices, cost 

variation, Agricultural Resource Management Survey, ARMS

Acknowledgments

The author thanks William McBride, Erik Dohlman, Leslie Meyer, and William Liefert 

of USDA’s Economic Research Service; John Robinson of Texas A&M University; Darren 

Hudson of Texas Tech University; and Carol Skelly and Gene Rosera of USDA’s Offi ce of 

the Chief Economist for their helpful comments and suggestions. Thanks also go to Angela 

Anderson for editorial assistance and Curtia Taylor for design assistance.

Linda Foreman, lfarmer@ers.usda.gov

Characteristics and Production 

Costs of U.S. Cotton Farms, 2007 Economic 

Information 

Bulletin

Number 104

December 2012
ii

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Contents

Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Data Sources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Prices Covered Costs for Most U.S. Cotton Production. . . . . . . . . . . . . . 8

Southwest Producers Dominate U.S. Cotton Production . . . . . . . . . . . . 14

Cotton Production, by Size of the Cotton Enterprise . . . . . . . . . . . . . . . 23

Cotton Production, by Farm Typology. . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Appendix I: Determining the Break-Even Price 

Per Pound of Cotton Lint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Appendix II: Comparison of ARMS and Census 

of Agriculture Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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Summary

What Is the Issue?

This report provides a 1-year snapshot of U.S. cotton farms in 2007, the 

latest year for which detailed data were collected from a cotton version 

of USDA’s Agricultural Resource Management Survey (ARMS). While 

aggregate estimates provide some clues about cotton production costs and 

practices and about the characteristics of cotton farm operations and their 

operators, aggregate data mask diversity among cotton operations. Our 

analysis is based on disaggregated data and offers additional perspective 

to a topic previously discussed in the ERS report, “Characteristics and 

Production Costs of U.S. Cotton Farms,” which examined 1997 data.

What Did the Study Find?

Cotton farms are not homogeneous. Operators have different characteristics 

and utilize different production practices. Cotton farm operators raise several 

varieties of cotton in different locations on enterprises that may vary from 

less than 200 acres of cotton per farm to more than 1,500 acres of cotton per 

farm. An enterprise refers to the production of one commodity on a farm, 

such as cotton, but a farm may include one or more enterprises. For our 

purposes, enterprise size is measured by the acres of the planted commodity, 

and farm size is measured by the value of annual gross sales from all 

commodities.

• The number of U.S. cotton farms fell by 41 percent between 1997 and 

2007, while the average size of cotton farms rose and the share of U.S. 

cotton production in the Southwest (primarily Texas) increased.

• The Southwest is the major U.S. cotton production region, accounting for 

nearly half the cotton acreage and output in 2007. The Southwest also has 

more cotton farms than any other region. Southwest cotton producers are 

vulnerable to swings in cotton demand since they generally lack alternative crops and cotton accounts for a higher percentage of their farm 

production value. These farmers were more likely than cotton farmers in 

other regions to mitigate their risks by purchasing buy-up or revenue crop 

insurance.

• Low-cost producers’ operating and ownership costs averaged $0.44 per 

pound of cotton, compared with $0.64 per pound for mid-cost producers 

and $1.02 per pound for high-cost producers. Cotton producers with the 

lowest operating and ownership costs per pound of cotton had higher 

cotton yields and lower costs per planted acre than mid- and high-cost 

cotton producers. The lower per-acre costs stemmed mainly from lower 

application or usage rates of seed, gasoline, diesel, fertilizer, and labor 

per planted acre. Low-cost producers made fewer trips across their fi elds, 

reducing machinery use and ownership costs per unit. Most low-cost 

producers in 2007 farmed in the Southwest, where favorable weather 

boosted their yields.
iv

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

• Operating costs per acre did not vary signifi cantly by the size of the 

cotton enterprise. Operators with larger cotton enterprises generally did 

not have lower costs per planted acre or per pound, despite economies of 

scale. Many operators with smaller cotton enterprises minimized their 

ownership costs by relying on custom work to avoid the purchase cost and 

maintenance of expensive cotton harvesters. Providers of custom work 

supply their own machinery as well as labor to accomplish a task.

• Most cotton production takes place on very large farm operations, with 

half of the cotton production occurring on farms with annual gross sales 

of $1 million or more. Those farms had the highest average cotton yields 

per planted acre and the highest average per acre costs. They were more 

likely to irrigate their cotton acres than smaller cotton farms.

• Cotton farms vary considerably in the degree of reliance on cotton. 

Operators with the larger cotton enterprises often had less commodity 

diversifi cation on their farms. They depended more on cotton compared 

with operators with smaller cotton enterprises. In contrast, operators of 

the largest U.S. farms who included cotton in their production mix had 

more commodity diversifi cation and were less dependent on cotton than 

operators of smaller cotton farms, since many operators of the largest 

farms growing cotton had small- to mid-size cotton enterprises.

How Was the Study Conducted?

Cotton producers were grouped by cotton production costs, region, cotton 

acreage, and typology to examine the variation in characteristics and production practices of U.S. cotton farms in 2007. Farms were ranked by the operating and ownership costs per pound of cotton lint to analyze the factors 

associated with low and high cotton production costs. We analyzed the characteristics of cotton farms by major cotton production areas to gain insights 

into regional shifts in cotton production. Cotton farms were grouped by the 

size of the cotton enterprise (planted acres) and size of the farm (gross farm 

sales) to determine whether size offers advantages or disadvantages. 

The data we analyzed came from ERS’s farm-level production cost estimates for cotton and the cotton version of the 2007 Agricultural Resource 

Management Survey (ARMS)—a joint effort conducted annually by USDA’s 

National Agricultural Statistics Service (NASS) and ERS. These two data 

sources are tightly intertwined since the cotton version of ARMS is one of 

several data sources used by ERS to compute cotton production cost estimates. Several NASS reports provided secondary data for estimating cotton 

production costs.

For our purposes, a farm is considered a cotton farm if 1 or more cotton acres 

were planted with the intention of harvesting the cotton for lint, with cottonseed as a byproduct. Therefore, data from producers who planted cotton with 

the intention of harvesting the cotton for commercial seed are excluded from 

our analysis. In addition, yield and cost data per acre are based on planted 

acres rather than harvested acres.
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Economic Research Service/USDA

Background

The cotton plant produces both cotton lint and cottonseed. Cotton lint is a 

natural fi ber that competes with other natural and synthetic fi bers in textile 

production. Cottonseed is fed as whole seed to animals or is separated into 

three components—hulls, meal, and oil. The hulls and meal are used as 

feed for livestock, poultry, and fi sh, or as fertilizer. Cottonseed oil is used as 

cooking oil and as an ingredient in various food products, especially snack 

foods.

Cotton lint is more valuable than cottonseed, even though cottonseed 

accounts for two-thirds of harvested cotton by weight (USDA/ERS, 1992). 

In 2007, the value of cotton lint accounted for 81 percent of the gross value 

of cotton production and cottonseed for the remainder, according to ERS 

production cost accounts. Cotton producers often use their cottonseed as 

payment to the cotton ginner for transporting their cotton to the gin and for 

ginning their cotton. In addition, cotton producers may either receive or pay a 

small additional amount, depending on prices.

U.S. farmers planted 10.8 million acres of cotton in 2007, according to 

USDA’s National Agricultural Statistics Service (USDA/NASS, 2011). Nearly 

all cotton acres planted in 2007 were harvested, pushing the yield to 879 

pounds per harvested acre, a record that has yet to be broken through the 

2012 season. According to NASS, cotton prices averaged $0.61 per pound in 

2007, up from $0.48 per pound in the previous year. In 2007, net returns after 

operating costs averaged $183 per planted cotton acre, while the total cost of 

production exceeded the gross value of production by an average of $32 per 

planted acre. Net returns per acre for cotton in 2007 were the highest since 

2003.1

In the United States, cotton is a major fi eld crop that generates signifi cant 

cash receipts for farm producers. Only corn, soybeans, wheat, and greenhouse products account for more crop cash receipts than cotton. From 

2005 to 2007, cotton accounted for 2.4 percent of total cash receipts from 

agricultural commodities and for nearly 5 percent of annual crop cash 

receipts (USDA/ERS, 2011a). In 2007, cotton was planted on 1.2 percent of 

U.S. farmland and on 2.5 percent of farmland in cotton-producing States, 

according to NASS data.

Understanding the trends that faced cotton producers may help put the data 

in this report in perspective. According to the 2007 and 1997 Censuses of 

Agriculture, 18,591 farms grew cotton in 2007, down 41 percent from 1997. 

Planted U.S. cotton acreage trended downward slightly between 1997 and 

2007. Texas accounted for 43 percent of U.S. cotton production in 2007, 

while Arkansas, Georgia, California, and Mississippi each accounted for 

7-10 percent.

As a major cotton producer and the leading cotton exporter, the United States 

ranks third in production behind China and India. The share of the U.S. 

cotton crop exported has grown rapidly as domestic mill use has declined. 

By 2007, U.S. cotton exports had grown to 13.6 million 480-pound bales 

and accounted for 75 percent of U.S. cotton disappearance. A decade earlier, 

1Net returns after costs were lower 

in the 2 years following 2007, while 

2010 returns were higher than those for 

2007. Estimates of returns to cotton 

production in 2011 were signifi cantly 

lower than those for 2007. For current 

information on returns, see http://www.

ers.usda.gov/data-products/commoditycosts-and-returns.aspx.
2

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

the United States exported 7.5 million bales of cotton, which accounted for 

40 percent of U.S. cotton disappearance. As U.S. cotton exports trended 

upward, domestic mill use declined to 4.6 million 480-pound bales in 2007 

after peaking in 1997 at 11.3 million bales. Domestic mill use fell as apparel 

imports rose amid lower trade barriers and lower labor costs abroad (Meyer et 

al., 2007).

As higher shares of the U.S. cotton crop are exported, the economic wellbeing of U.S. cotton producers becomes linked more closely to changes 

in foreign demand for cotton. Trade policies, exchange rates, the global 

economy, and cotton production and prices in foreign countries all infl uence foreign demand for U.S. cotton. Cotton producers may face increased 

market risks as a result of greater fl uctuations in annual cotton exports than 

in annual domestic mill use. Since China is a major importer of U.S cotton, 

changes in China’s cotton demand will have signifi cant impacts on U.S. 

cotton producers.
3

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

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Data Sources

The data we analyzed came from ERS’s farm-level production cost estimates for cotton and the cotton version of the 2007 Agricultural Resource 

Management Survey (ARMS).2 These two data sources are tightly intertwined since the cotton version of ARMS is one of two major data sources 

used by ERS to compute cotton production cost estimates. Several NASS 

reports provided secondary data for estimating cotton production costs.3

The cotton version of the 2007 ARMS collected data related to cotton farms 

with a focus on cotton production practices, cotton production costs, and farm 

business characteristics, as well as the characteristics of farm operators. The 

survey was implemented in three phases:

• Phase I: verifi ed the operating status of a farm and identifi ed whether 

the operator was a cotton producer. If so, the farm operator received the 

phase II cotton questionnaire in fall 2007. 

• Phase II: collected data on production practices, input usage, and input 

costs for a randomly selected cotton fi eld. Acres in the selected fi eld 

were weighted to represent NASS’s number of planted cotton acres in the 

surveyed States. 

• Phase III: collected data related to the whole farm operation, including 

the fi nancial situation of the farm operation and the characteristics of the 

farm, farm operator, and farm household. 

The phase II cotton version of the survey provided 1,502 usable observations on farms planting cotton for lint, and these data served as the basis for 

estimates found in tables 1 and 2. The phase III cotton version of the survey 

targeted the same set of producers in spring 2008 that received phase II. As 

a result, data for the cotton production practices and costs collected in phase 

II of the survey can be matched with data on farm and operator characteristics from phase III. The phase III cotton version of the survey contained 

1,114 usable observations from the pool of phase II respondents. Weights 

were applied to phase III data to more closely represent the population of 

cotton farms in the surveyed States. The weighted phase III data were used 

to produce estimates in the third table “Characteristics of 2007 cotton farm 

and operators” in each of the major sections in this report with one exception. 

Data on the type of crop insurance for cotton acreage came from phase II 

rather than phase III.

Cotton producers from 11 States within the 4 traditional U.S. cotton 

producing regions—the Southeast, Delta, Southwest, and West—where the 

majority of cotton production takes place, were surveyed in the 2007 ARMS 

(fi g. 1). The 11 States included North Carolina, South Carolina, Georgia, 

Alabama, Tennessee, Mississippi, Arkansas, Missouri, Louisiana, Texas, 

and California. According to the 2007 Census of Agriculture, these States 

accounted for 92 percent of all cotton farms, 95 percent of the harvested 

cotton acreage, and 94 percent of the cotton production. 

2ARMS is a joint effort by the 

National Agricultural Statistics Service 

and Economic Research Service. For 

more information, visit www.ers.usda.

gov/Data/ARMS.

3For more information on ERS 

production cost estimates, please see 

http://www.ers.usda.gov/data-products/

commodity-costs-and-returns.aspx.
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Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Table 1

Production costs and returns per planted acre for 2007 cotton, by cost groups

Production item Low (a) Mid (b) High (c) Total

Cotton farms (percent) 25 50 25 100

Planted cotton acres (percent) 27 52 21 100

Cotton production quantity (percent) 31 56 13 100

Cotton production value (percent) 27 55 17 100

Planted cotton acres per farm 771c719 c 567 ab 693

Cotton acres harvested (percent) 100c 100 c 92ab 98

Expected lint yield (pounds per planted acre) 1,085c 1,072 c 949 ab 1,050

Yield (pounds per planted acre):

Cotton lint 1,057bc 967ac 569 ab 908

Cottonseed 1,711bc 1,564 ac 921ab 1,469

Break-even price (dollars per pound of lint) 0.32bc 0.51 ac 0.88 ab 0.50

Operating and ownership costs not covered (percent of farms) 0bc 30 ac 96ab 39

Price (dollars per pound):

Cotton lint 0.55bc 0.57 ac 0.59 ab 0.57

Cottonseed 0.08bc 0.08 ac 0.08 ab 0.08

Operating and ownership costs (dollars per pound of lint) 0.44bc 0.64 ac 1.02 ab 0.63

Costs and returns per planted cotton acre (dollars):

Gross value of production: 715bc 677 ac 414 ab 632

Cotton lint 583bc 551 ac 336 ab 514

Cottonseed 133bc 126 ac 78 ab 118

Operating costs: 370bc 486 ac 458 ab 449

Seed 45bc 64 ac 69 ab 60

Fertilizer 35bc 67 ac 86 ab 63

Chemicals 40bc 70 ac 77 ab 63

Custom operations 15bc 25 a 22a22

Fuel, lube, and electricity 35bc 52a 54a48

Repairs 26bc 36 ac 32 ab 33

Ginning 158bc 146 ac 87 ab 137

Purchased irrigation water #0bc 3a6 a3

Interest on operating capital 4bc 7 ac 8 ab 6

Hired labor 10bc 15 a 16a14

--continued
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Table 1

Production costs and returns per planted acre for 2007 cotton, by cost groups (continued)

Production item Low (a) Mid (b) High (c) Total

Ownership costs: 98bc 131 ac 122 ab 120

Capital recovery of machinery and equipment 92bc 123 ac 114 ab 113

Taxes and insurance 7 8 8 8

Economic costs: 74bc 101 a 103 a 94

Opportunity cost of land 38bc 60 a 63a55

Opportunity cost of unpaid labor 24 25 23 24

General farm overhead 12bc 16 a 17a15

Operating and ownership costs 468bc 617 ac 580 ab 570

Total costs 543bc 718 ac 683 ab 664

Value of production less...

Operating costs 345bc 191ac -44 ab 183

Operating and ownership costs 247bc 59 ac -166 ab 62

Total costs 172bc -41 ac -269 ab -32

Coeffi cient of variation (CV) = (Standard error/estimate) x 100. 

# indicates that CV is greater than 50. 

Notes: Letters a, b, and c indicate that the estimates are signifi cantly different from the indicated group at the 90-percent level or higher using 

the t-statistic. The total category in column 4 is excluded from testing due to a lack of sample independence. 

Source: USDA’s 2007 Agricultural Resource Management Survey, jointly conducted by Economic Research Service and National Agricultural 

Statistics Service.
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Table 2

Production practices on 2007 cotton acreage, by cost groups

Production practice Low (a) Mid (b) High (c) Total

Cotton planted acres (percent):

Dryland 65 b 48 ac 71 b 57

Irrigated 35 b 52 ac 29 b 43

Upland 100 bc 97 ac 96 ab 98

Pima 0 bc 3 ac 4 ab 2

Farms irrigating cotton (percent) 31 b 51 ac 28 b 40

Crop rotation (percent of acreage):

Cotton 70 62 64 65

Legumes *3 6 *6 5

Grass 19 25 23 23

Idle or Conservation Reserve Program *6 c *5 *2 a 4

Seed (pounds per acre) 9.8 bc 10.8 a 10.9 a 10.5

Seed variety (percent of acres):

Herbicide resistant 33 c 26 22 a 27

Bt *7 c 11 13 a 10

Stacked gene 52 57 57 55

Other *8 7 *9 7

Energy use:

Gasoline (gallons per acre) 0.7 bc 1.0 ac 1.1 ab 0.9

Diesel (gallons per acre) 7.4 bc 13.1 a 14.2 a 11.8

Liquefi ed petroleum gas (gallons per acre) #0.1 b *0.7 a #1.4 *0.7

Natural gas (1,000 cubic feet per acre) #0.2 *0.5 #0.2 *0.4

Electricity (kilowatt hour per acre) 58.9 b 119.6 a *78.3 94.7

Fertilizer and manure use:

Nitrogen (pounds per acre) 55 bc 88 a 88 79

Phosphorous (pounds per acre) 20 bc 30 ac 37 ab 29

Potassium (pounds per acre) 15 bc 39 ac 59 ab 37

Lime (tons per acre) 0.0 bc 0.2 ac 0.3 ab 0.2

Nitrogen (percent of farms) 79 bc 94 a 94 a 90

Phosphorous (percent of farms) 59 bc 71 ac 79 ab 70

Potassium (percent of farms) 34 bc 56 ac 77 ab 56

Lime (percent of farms) 19 bc 38 ac 60 ab 39

Chemical use:

Herbicides (percent of acreage) 98 97 95 96

--continued
7

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Table 2

Production practices on 2007 cotton acreage, by cost groups (continued)

Production practice Low (a) Mid (b) High (c) Total

Insecticides (percent of acreage) 43 bc 72 a 78 a 65

Herbicides (treatments per acre) 3.0 bc 3.8 a 3.9 a 3.6

Insecticides (treatments per acre) 1.0 bc 2.9 ac 2.3 ab 2.2

Trips over fi eld (number) 8.9 bc 11.0 a 10.3 a 10.3

Farms custom harvesting (percent) 19.2 17.2 15.3 17.2

Labor (hours per acre): 2.2 bc 2.6 a 2.6 a 2.5

Paid 1.0 bc 1.5 a 1.5 a 1.4

Unpaid 1.1 1.1 1.0 1.1

Farms with paid labor (percent) 60 b 75 a 72 71

Machinery maximum width (feet):

Planter 27.0 c 26.5 c 24.8 ab 26.2

Harvester 19.3 bc 17.1 ac 15.4 ab 17.2

Coeffi cient of variation (CV) = (Standard error/estimate) x 100.

* indicates that CV is greater than 25 and less than or equal to 50. 

# indicates that CV is above 50.

Notes: Letters a, b, and c indicate that the estimates are signifi cantly different from the indicated group at the 90-percent level or higher using 

the t-statistic. The total category in column 4 is excluded from testing due to a lack of sample independence.

Source: USDA’s 2007 Agricultural Resource Management Survey, jointly conducted by Economic Research Service and National Agricultural 

Statistics Service.

Source: USDA’s 2007 Agricultural Resource Management Survey, jointly conducted by 

Economic Research Service and National Agricultural Statistics Service.

Figure 1

States and regions covered in the cotton version of the 2007 

Agricultural Resources Management Survey

Cotton producers in 11 surveyed States produced 94 percent 

of U.S. cotton in 2007.

West

Southwest

Delta

Southeast
8

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Prices Covered Costs for Most 

U.S. Cotton Production

In 2007, low- and mid-cost producers, on average, covered their 

cotton operating and ownership costs, while high-cost cotton 

producers did not, primarily because of low average yields caused 

by a widespread drought in the Southeast. Compared with mid- and 

high-cost producers, low-cost cotton producers, on average, used 

lower levels of inputs on their cotton fi elds and made fewer trips 

across their fi elds. Fewer trips resulted in lower ownership costs per 

unit. In addition, low-cost producers planted more cotton acres per 

farm than high-cost producers.

Cotton production costs per acre and per pound varied widely in 2007 among 

farms due to differences in production and management practices, weather 

conditions, natural resources, effi ciencies, and varieties of cotton. Cotton 

farms were ranked from lowest to highest based on the operating and ownership costs per pound of cotton lint in 2007 and grouped into quartiles to evaluate the factors associated with various cost levels.4 We chose to rank farms 

by operating and ownership costs per pound of cotton lint since these costs, 

over a period of several years, must be covered for sustainable cotton production. Low- and high-cost farms were in the extreme quartiles, while mid-cost 

farms consisted of farms in the mid-quartiles.5

Producers in the lowest cost quartile produced 31 percent of the cotton lint, 

while producers in the middle two quartiles produced 56 percent of the 

cotton lint and high-cost producers produced 13 percent of the cotton lint 

(see table 1). In 2007, low-cost cotton producers received $0.55 per pound 

for cotton lint, far exceeding the price they needed to break even on cotton 

lint (see glossary, break-even price for cotton lint). As a result, all low-cost 

producers were able to cover their operating and ownership costs of cotton 

production from gross value of cotton production. At the opposite end, highcost producers needed $0.88 per pound, on average, to break even (fi g. 2). 

However, they received $0.59 per pound, on average, for their cotton. Nearly 

all the high-cost cotton producers, 96 percent, were not able to cover their 

operating and ownership costs of cotton production from cotton production in 2007. The average price of $0.57 per pound for cotton lint received 

by producers in the mid-cost group exceeded their average break-even price 

of $0.51 per pound for operating and ownership costs. Nearly 70 percent of 

mid-cost producers were able to cover their operating and ownership costs of 

cotton production from cotton sales.

Although differences in both yield and costs per acre contributed to the 

$0.56 per pound gap in the average break-even price of cotton lint between 

low- and high-cost producers, yield differences contributed more. Low-cost 

producers averaged 1,057 pounds per acre of cotton lint in 2007, compared 

with 967 pounds per acre for mid-cost producers and 569 pounds per acre 

for high-cost producers. Part of the large yield difference between low- and 

high-cost producers was due to weather conditions in 2007. Southwest cotton 

producers saw record cotton yields in 2007 resulting from favorable weather 

conditions, while the drought in southeastern Tennessee, Alabama, northwestern Georgia, and southwestern South Carolina reduced cotton yields in 

4See box, “ERS Cotton Production 

Costs and Returns,” for more information on cost measures or refer to 

Appendix I: Determining the BreakEven Price per Pound of Cotton Lint. 

Less than 2 percent of cotton farms 

changed cost groups when cotton 

ginning and custom hauling costs 

were subtracted from the operating 

and ownership costs before ranking 

the farms into quartiles based on the 

remaining operating and ownership 

costs per pound of cotton lint.

5Quartiles represent a quarter of the 

total. The low-cost group represents 

the 25 percent of farms with the lowest 

total operating and ownership costs per 

pound of cotton lint, while the highcost group represents the 25 percent 

of the farms with the highest operating and ownership costs per pound. 

Mid-cost producers were ranked from 

the 26th to the 74th percentile of farms.
9

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Economic Research Service/USDA

ERS Cotton Production Costs and Returns

USDA’s Economic Research Service (ERS) production cost estimates include costs and 

returns for all participants in commodity production. Thus, the costs and returns of farmers, 

landlords, and contractors are included. Costs and returns for commodities are calculated on 

a per planted acre basis rather than per harvested acre. By computing the costs and returns 

per planted acre, varying degrees of crop failure are taken into consideration. ERS production 

cost estimates are computed based on the recommendations of the American Agricultural 

Economics Association Task Force on commodity costs and returns.

ERS calculates gross returns per acre from the harvested quantity of the crop times the harvest 

month price from NASS divided by the number of planted acres. All expenses incurred up 

to the point of “fi rst rest” are included. The fi rst rest point for cotton is the selling point or, if 

it is not immediately sold, the storage point. Since cotton must be ginned, ginning costs are 

included in cotton production cost estimates.

There are several measures of commodity costs , and each measure has a different purpose. 

Generally, a producer will not plant a commodity unless the expected revenue from commodity 

production exceeds expected operating costs. Operating costs include inputs that vary with the 

amount of the commodity planted. Often, these inputs are purchased and paid for annually. 

For our purposes, cotton operating costs include seed, fertilizer, chemicals, custom operations, 

fuel, repairs, purchased irrigation water, interest, hired labor, and cotton ginning costs.

Over several growing seasons, producers need to recover their operating and ownership costs 

to continue producing a commodity profi tably over the longer term, including replacement 

of farm machinery, equipment, and facilities needed to effi ciently produce the commodity. 

Annual ownership costs include those for capital recovery in farm machinery, equipment, 

and facilities used in the production of the commodity, as well as the annual nonreal estate 

property taxes and insurance.

Producers may examine expected and actual returns over total production costs for their farm 

operations and for individual commodities over a period of years to assist in planning their 

long-term goals. Producers who feel that their net returns are not suffi cient may reassess the 

commodity mix on their farming operation; allocation of time among farm work, nonfarm 

work, and other activities; and returns from alternate investment sources. Total production 

costs include the opportunity costs for land and unpaid labor and general farm overhead, in 

addition to operating and ownership costs.

Often, the gross value of production does not cover total production costs in ERS’s production 

cost estimates. This does not necessarily mean that producers are losing money by producing 

the commodity. Producers often store crops for later sale when prices are typically higher 

than the harvest month price or use forward contracting to lock in higher prices for their 

commodities. Many crop producers also receive Government payments, loans, or subsidies 

that, although not directly tied to the crop being produced, supplements income from 

commodity production.

Producers may be willing to accept different rates of return than the ones used by ERS 

to estimate opportunity costs for owned land and unpaid labor. In ERS’s production cost 

estimates, the cash rental rate for farmland is used to measure the opportunity cost of land 

used in cotton production. The off-farm wage rates earned by workers with comparable age, 

education, and location serves as a measure of the opportunity costs of unpaid labor. Producers 

may accept lower returns due to personal preferences, costs of switching occupations, Federal 

and State income and estate tax laws, or other factors. 
10

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

these areas. High yields likely pushed a higher-than-normal percentage of 

Texas cotton producers into the low-cost group in 2007. In the Southeast and 

Delta regions, National Agricultural Statistics Service (NASS) data show that 

the average 2007 cotton lint yield was lower than the average annual yields 

for 2005-09 by 23 percent in Alabama, 6 percent in Georgia, 41 percent in 

South Carolina, and 31 percent in Tennessee. Many producers in these States 

were classifi ed with the high-cost group due to a temporary reduction in their 

cotton lint yields that boosted their average production costs per pound of 

cotton lint.

The operating and ownership costs, which include ginning costs, averaged 

$468 per planted acre for low-cost producers in 2007, compared with $617 

per acre for mid-cost producers and $580 per acre for high-cost producers. 

The cost per planted acre was lower for high-cost producers compared with 

mid-cost producers because high-cost producers had lower ginning costs per 

acre as a result of lower yields. Low-cost producers had statistically signifi -

cant lower costs per planted cotton acre compared with mid- and high-cost 

producers for all operating and ownership cost items except for taxes, insurance, and ginning. Ginning costs were higher based on higher yields.

Low-cost cotton producers planted an average of 771 acres of cotton per 

farm compared with high-cost producers who averaged 567 acres of planted 

cotton per farm. Since more cotton acreage may allow low-cost producers to 

make effi cient use of larger machines, low-cost cotton producers used larger 

planters and harvesters. On average, low-cost producers used planters that 

were 2 feet wider and harvesters that were 4 feet wider than those of highcost producers.

1Share of production.

Source: USDA, Economic Research Service calculations based on USDA’s 2007 

Agricultural Resource Management Survey, jointly conducted by Economic Research 

Service and National Agricultural Statistics Service.

Figure 2

U.S. cotton lint prices and share of lint produced, by cost 

groups, 2007

Prices received for cotton lint exceeded break-even prices after operating 

and ownership costs for most cotton production. 

0

10

20

30

40

50

60

70

80

90

100

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

Low-cost Mid-cost High-cost United States

Price in dollars per pound Percent of production

Price Break-even price Cotton lint1
11

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

On average, low-cost producers used lower levels of major inputs per planted 

acre of cotton in 2007, consuming less seed, gasoline, diesel, fertilizer, insecticides, and labor per planted acre than mid- and high-cost producers (see 

table 2). Low-cost producers were the least likely to apply fertilizers, and 

they made fewer applications of herbicides and insecticides. These actions 

resulted in fewer trips over their cotton fi elds and fewer labor hours used per 

acre. Low-cost producers’ use of larger planters and harvesters also reduced 

their labor hours per acre.

Mid-cost cotton producers were the most likely to irrigate their cotton 

fi elds. Irrigating typically raises fuel costs and capital recovery costs (i.e., 

machinery and equipment) that result from the use of irrigation pumps, wells, 

and various irrigation systems. Since electricity is a major energy source for 

irrigation pumps, electricity use per acre was highest for mid-cost producers.

Cotton accounted for a larger share of the farm value of production for lowcost producers compared with high-cost producers. Approximately 57 percent 

of the gross value of agricultural production for low-cost producers is derived 

from cotton, compared with 40 percent for mid-cost producers and 31 percent 

for high-cost producers (table 3). If high-cost producers had achieved more 

normal cotton yields, their value of production attributable to cotton would 

have been closer to those for mid- and low-cost producers.

The number of commodities produced per farm averaged 3.1 for low-cost 

producers, 3.8 for mid-cost producers, and 4.2 for high-cost producers. 

Greater commodity diversifi cation protects producers against large swings 

in net income if a commodity price or yield changes dramatically from the 

expected. Differences in commodity diversifi cation are due partly to the 

location of producers in the low-, mid-, and high-cost groups. Texas—a 

low-cost cotton production region—tends to be hot and dry, thus limiting 

the alternative crops that can be economically grown there. Mid- and highcost producers were more likely to grow soybeans, corn, peanuts, fruits, or 

vegetables.

High-cost cotton producers had signifi cantly lower household incomes in 

2007 compared with mid- and low-cost producers. Farm incomes for highcost producers were lower than those for low- and mid-cost producers, while 

the differences in off-farm income received by the producers’ families in the 

different cost groups were not statistically signifi cant.
12

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Table 3

Characteristics of cotton farms and operators, by cost groups, 2007

Characteristic Low (a) Mid (b) High (c) Total

Cotton as percent of value of production 57 bc 40 ac 31 ab 41

Commodities per farm 3.1 bc 3.8 ac 4.2 ab 3.7

Farms producing (percent):

Cotton under contract 39 b 50 a 43 46

Corn 24 bc 46 ac 55 ab 43

Sorghum 25 22 c 14 b 20

Soybeans 16 bc 27 ac 45 ab 29

Cattle 27 25 21 25

Wheat 37 31 31 32

Hay 16 14 11 14

Peanuts *12 bc 22 a 26 a 21

Fruits or vegetables *0 bc 10 a 11 a 8

Farms in Southwest (percent) 74 42 23 45

Cotton acreage with crop insurance (percent): 96 95 95 95

Federal insurance: 94 91 92 92

Basic catastrophic 29 35 39 34

Buy-up 41 32 34 35

Revenue 19 18 c 12 b 17

Private crop insurance 48 bc 26 ac 17 ab 30

Total operated acres per farm: 2,091 1,862 1,677 1,868

Owned and operated *763 450 450 523

Rented: 1,329 1,401 c 1,225 b 1,339

Cash-rented 517 bc 743 a 836 a 714

Share-rented 811 bc 657 ac 389 ab 624

Cropland 1,551 1,596 c 1,417 b 1,540

Principal operator occupation (percent):

Farming 89 95 94 93

Nonfarm *11 4 #5 6

Principal operator age (mean): 57 b 54 a 55 55

Younger than 50 years (percent) 29 34 28 31

65 years or more (percent) 29 bc 19 a 17 a 21

Principal operator education (percent):

High school 93 97 93 95

Completed college 37 32 26 32

--continued
13

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Table 3

Characteristics of cotton farms and operators, by cost groups, 2007 (continued)

Characteristic Low (a) Mid (b) High (c) Total

Farm organization (percent):

Sole/family proprietor 82 b 72 ac 78 b 76

Partnership *12 b 20 ac 14 b 17

Family corporation *5 *6 *5 5

Gross cash income per farm (1,000 dollars): 614.8 bc 971.0 a 832.6 a 852.7

Crop cash receipts 446.7 bc 748.5 a 629.7 a 647.9

Government payments: 71.1 80.7 78.6 77.9

Direct 32.7 b 39.9 a 37.6 37.6

Counter-cyclical 28.6 32.1 29.2 30.6

Loan defi ciency *0.6 bc 1.7 a *2.6 a 1.7

Other 9.2 7.0 9.1 8.1

Federal crop and livestock insurance 5.2 c 7.7 c 18.7 ab 10.0

Cash production expenses 407.6 bc 697.2 a 676.9 a 624.6

Net cash income 207.2 273.8 c 155.6 b 228.1

Household income per family (1,000 dollars): 214.2 c 198.3 c 118.1 ab 182.0

Farm income 150.6 c 164.2 c *71.2 ab 137.5

Off-farm income: *63.6 b 34.1 ac 46.9 b 44.5

Earned income from business or job 36.4 b 20.4 a 25.2 25.5

Percent with off-farm business or job 57 55 55 56

Average value per farm (1,000 dollars):

Farm assets 1,791.1 2,194.6 2,115.5 2,080.5

Farm debt 164.0 b 238.2 a 220.4 216.4

Farm equity 1,627.1 1,956.4 1,895.2 1,864.1

Debt-to-asset percentage 9 11 10 10

Coeffi cient of variation (CV) = (Standard error/estimate) x 100.

* indicates that CV is greater than 25 and less than or equal to 50. 

# indicates that CV is above 50.

Notes: Letters a, b, and c indicate that the estimates are signifi cantly different from the indicated group at the 90-percent level or higher using 

the t-statistic.The total category in column 4 is excluded from testing due to a lack of sample independence.

Source: USDA’s 2007 Agricultural Resource Management Survey, jointly conducted by Economic Research Service and National Agricultural 

Statistics Service.
14

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Southwest Producers Dominate 

U.S. Cotton Production

In 2007, Southwest cotton farms produced more cotton than cotton 

farms in other regions, and their share of U.S. cotton production 

grew because they had the lowest average cotton production costs 

and lacked viable alternative crops.

Like most crops, cotton is grown in several U.S. regions (see fi g. 1). Some 

of the diversity in cotton farms’ production practices and characteristics is 

driven by location. Regional climatic and soil conditions infl uence the type 

of cotton grown, whether the cotton is irrigated, and the mix of agricultural 

commodities grown. Other factors, such as farmland availability and land 

costs, impact farm size in these regions. 

The Southwest is the major cotton production region, accounting for 42 

percent of U.S. cotton farms and 48 percent of the planted cotton acres in 

2007 (table 4 and fi g. 3). Southwest cotton growing conditions can fl uctuate 

widely based on weather. Because of good regional growing conditions 

during 2007, Southwest cotton producers achieved record-high cotton yields 

per harvested acre. Calculations based on NASS data indicate that Southwest 

cotton producers experienced the most volatile cotton yields from 1997 to 

2012. Volatile yields raise production and fi nancial risks.

The Southwest accounts for a larger proportion of the U.S. cotton crop. 

According to ARMS data, Southwest producers accounted for 47 percent 

of U.S. cotton production in 2007, up from 25 percent in 2003. Southeast 

producers accounted for 17 percent in 2007, down from 25 percent in 2003, 

and Delta producers share fell to 28 percent in 2007 from 35 percent in 2003 

(Meyer et al., 2007 and table 4).6 The West’s share of U.S. cotton production 

slipped to 7 percent in 2007, down from 16 percent in 2003.

The Southwest’s rising share of the U.S. cotton crop comes more as a result of 

the region’s slower rate of decline in cotton acreage, compared with declines 

in other regions, rather than from increases in the region’s cotton acreage or 

cotton production. U.S. cotton acreage fell 20 percent between 2003 and 2007 

because of a decline in cotton demand and an increase in ethanol demand 

that boosted corn acreage as the returns to corn production rose. In contrast, 

cotton acreage fell 12 percent between 2003 and 2007 in the Southwest.

The percentage drop in cotton acres was less in the Southwest for several 

reasons. First, Southwest cotton producers had the highest average returns to 

upland cotton production per acre and the lowest average cotton production 

costs per acre, which encouraged cotton production in the region in 2007 

(see box, “Cotton Types” and fi g. 3).7 Because Southwest cotton yields 

per planted acre were similar to the U.S. average, their low per acre cotton 

production costs were largely responsible for high average returns. Their 

average per acre costs for seeds, fertilizer, chemicals, land, and general farm 

overhead matched or were signifi cantly lower than those for other regional 

producers. Southwest producer seed costs per acre were low because the 

region used more herbicide-resistant seeds than seeds with stacked genes. 

6This trend is continuing. 

Calculations using National 

Agricultural Statistics Service’s Quick 

Stats data show that Southwest cotton 

producers planted just over 50 percent 

of the U.S. annual average cotton 

acreage during 2008-12, compared with 

43 percent during 2005-07.

7Differences in the average returns 

to cotton production in the Southeast, 

Delta, and Southwest would have been 

smaller if producers achieved their 

expected yields.
15

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Table 4

Production costs and returns per planted acre for 2007 cotton, by region

Production item Southeast (a) Delta (b) Southwest (c) West (d)

Farms (percent) 31 22 42 6

Planted cotton acres (percent) 21 26 48 4

Cotton production quantity (percent) 17 28 47 7

Cotton production value (percent) 16 26 47 11

Planted cotton (acres per farm) 479 bc 916 acd 746 abd 445 bc

Cotton acres harvested (percent) 98 b 100 ac 97 b 99

Expected lint yield (pounds per planted acre) 1,005 bd 1,126 acd 980 bd 1,566 abc

Yield (pounds per planted acre):

Cotton lint 743 bcd 972 acd 888 abd 1,512 abc

Cottonseed 1,203 bcd 1,573 acd 1,437 abd 2,446 abc

Break-even price (dollars per pound of lint) 0.63 bcd 0.55 ac 0.41 abd 0.53 ac

Operating and ownership costs not covered

(percent of farms) 62.3 bcd 53.8 acd 21.4 ab 18.6 ab

Price (dollars per pound):

Cotton lint 0.55 bcd 0.55 ad 0.55 ad 0.75 abc

Cottonseed 0.07 bcd 0.08 acd 0.08 abd 0.12 abc

Operating and ownership costs (dollars per pound 

of lint) 0.75 bc 0.68 acd 0.54 abd 0.73 bc

Costs and returns (dollars per planted cotton acre):

Gross production value: 498 bcd 659 acd 602 abd 1,438 abc

Cotton lint 409 bcd 538 acd 490 abd 1,134 abc

Cottonseed 89 bcd 121 acd 111 abd 304 abc

Operating costs: 437 bcd 520 acd 370 abd 945 abc

Seeds 64 bcd 84 acd 47 ab 47 ab

Fertilizer 96 bc 80 acd 36 abd 92 bc

Chemicals 75 bcd 90 ac 40 abd 102 ac

Custom operations 20 bd 25 acd 16 bd 75 abc

Fuel, lube, and electricity 38 cd 38 cd 49 abd 152 abc

Repairs 32 bd 37 acd 30 bd 41 abc

Ginning 94 bcd 143 ad 135 ad 319 abc

Purchased irrigation water 0 cd 0 cd *0 abd 68 abc

Interest on operating capital 7 bcd 8 acd 5 abd 13 abc

Hired labor 13 bd 16 acd 11 bd 37 abc

Ownership costs: 118 bcd 140 acd 108 abd 155 abc

Capital recovery of machinery and equipment 110 bd 131 ac 102 bd 141 ac

Taxes and insurance 8 d 9 cd 6 bd 14 abc

--continued
16

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Table 4

Production costs and returns per planted acre for 2007 cotton, by region (continued)

Production item Southeast (a) Delta (b) Southwest (c) West (d)

Economic costs: 98 bcd 114 acd 71 abd 208 abc

Opportunity cost of land 62 bcd 78 acd 31 abd 141 abc

Opportunity cost of unpaid labor 19 cd 20 cd 28 ab 27 ab

General farm overhead 17 cd 17 cd 12 abd 40 abc

Operating and ownership costs 555 bcd 660 acd 478 abd 1,100 abc

Total costs 653 bcd 774 acd 549 abd 1,309 abc

Production value less...

Operating costs 61 bcd 139 acd 231 abd 493 abc

Operating and ownership costs -57 bcd #-1 acd 124 abd 338 abc

Total costs -155 bcd -115 acd 53 ab *129 ab

Coeffi cient of variation = (Standard error/estimate) x 100.

* indicates that CV is greater than 25 and less than or equal to 50. 

# indicates that CV is above 50.

Note: Letters a, b, c, and d indicate that the estimates are signifi cantly different from the indicated group at the 90-percent level or higher using 

the t-statistic.

Source: USDA’s 2007 Agricultural Resource Management Survey, jointly conducted by Economic Research Service and National Agricultural 

Statistics Service.

Source: USDA’s 2007 Agricultural Resource Management Survey, jointly conducted by 

Economic Research Service and National Agricultural Statistics Service.

Figure 3

Cotton lint produced, by region and cost groups, 2007

Southwest cotton farms produced more cotton than farms in any other 

region, and they produced most of the low-cost cotton.

0

1,000

2,000

3,000

4,000

5,000

6,000

Southeast Delta Southwest West United States

Low-cost producers

Mid-cost producers

High-cost producers

Quantity produced by:

Million pounds
17

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Southwest cotton producers used lower levels of fertilizer, gasoline, diesel, 

and insecticides per acre (table 5).

The rate of decline in Southwest cotton acres was also slower due to climatic 

conditions. The Southwest climate is not as conducive to the production of 

other commodities, such as corn and soybeans, compared with the Southeast 

and Delta regions. Therefore, many Southwest cotton producers did not have 

the option of switching into corn or soybean production when demand for 

corn rose, pushing up corn prices and net returns for corn and soybeans.

Cotton’s importance to Southwest producers is refl ected in the average 

number of commodities produced per farm and in the percentage of cotton’s 

production value to the farm’s production value (table 6). The number of 

commodities produced is an indicator of the producers’ fl exibility to shift 

commodity production should demand, prices, or local growing conditions change. Increased fl exibility may reduce long-term risks and lessen 

producers’ dependence on a particular commodity. Cotton’s production value 

as a share of agricultural production value indicates a producer’s reliance on 

cotton. Higher percentages may indicate less diversifi cation and, therefore, 

higher risk for farm income variability should conditions for cotton change.

Southwest cotton producers were the least agriculturally diversifi ed with 

an average of 2.9 commodities per farm, typically including sorghum and 

wheat. Cotton producers in the Southeast, Delta, and West averaged 3.6 or 

more commodities per farm. Soybeans and corn were grown on at least 45 

percent of the Southeast and Delta farms, while peanuts were grown on more 

than half of Southeast cotton farms. Southeast cotton producers averaged 

4.8 commodities per farm, the highest of all the regions. Cotton producers in 

the West often grew fruits, vegetables, or hay rather than corn, soybeans, or 

peanuts.

Cotton Types

Two major types of cotton are grown in the United States, with American Upland 

cotton accounting for 97 percent of the cotton acres planted and American Pima, 

or extra-long staple (ELS), accounting for the remainder of the acreage. Fiber 

from American Upland cotton is usually shorter than the fi ber from American 

Pima cotton. American Pima cotton is primarily grown in California, where it 

accounted for 57 percent of the State’s planted cotton acreage in 2007 (USDA/

NASS, 2012). Small quantities of American Pima cotton are also grown in 

southwest Texas, southern Arizona, and New Mexico. In the United States, Pima 

cotton yields are, on average, signifi cantly higher than upland cotton yields. In 

California, however, where special varieties of upland cotton are grown, upland 

cotton yields exceed Pima yields. Producers receive higher prices for American 

Pima cotton compared with American Upland, partly refl ecting Pima’s higher 

quality cotton lint and its higher production costs based on different ginning 

techniques and extra management needs. Pima cotton is more expensive to gin 

since it is roller-ginned to preserve the fi ber’s length and quality, while upland 

cotton is saw-ginned or cut from the seed in the ginning process. Pima cotton is 

used mainly in higher value products, such as fi ner apparel, sewing thread, and 

fi ner home furnishings (Calcot, 2012).
18

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Table 5

Production practices on 2007 cotton acreage, by region

Production practice Southeast (a) Delta (b) Southwest (c) West (d)

Cotton acres (percent):

Dryland 73 bcd 54 ad 57 ad 0 abc

Irrigated 27 bcd 46 ad 43 ad 100 abc

Upland 100 d 100 d 100 d 53 abc

Pima 0 d 0 d 0 d 47 abc

Farms irrigating cotton (percent) 15 bcd 40 ad 46 ad 100 abc

Crop rotation (percent of acreage):

Cotton 40 bcd 79 acd 68 ab 61 ab

Legumes 17 bcd *4 acd *1 abd 0 abc

Grass 38 bcd 14 ac 23 abd *9 ac

Idle or Conservation Reserve Program #1 cd #0 cd 8 ab *10 ab

Seed (pounds per acre) 8.4 bcd 9.9 acd 11.2 abd 16.5 abc

Seed variety (percent of acres):

Herbicide resistant 9 cd 12 cd 42 ab 39 ab

Bt 16 cd 11 d *8 a #3 ab

Stacked gene 73 cd 77 cd 40 abd *10 abc

Other #2 cd #0 cd 10 abd 49 abc

Energy use:

Gasoline (gallons per acre) 1.2 cd 1.2 cd 0.7 ab 0.6 a

Diesel (gallons per acre) 13.5 cd 12.6 cd 8.4 abd 36.5 abc

Liquefi ed petroleum gas (gallons per acre) 0.0 b *0.4 a #0.6 #6.8

Natural gas (1,000 cubic feet per acre) 0.0 c na *0.7 ab #0.2

Electricity (kilowatt hour per acre) *36.9 cd 19.2 cd 124.9 abd 491.3 abc

Fertilizer and manure use:

Nitrogen (pounds per acre) 82 bcd 104 acd 60 abd 118 abc

Phosphorous (pounds per acre) 44 bcd 31 ac 21 ab 30 a

Potassium (pounds per acre) 78 bcd 68 acd 4 abd *14 abc

Lime (tons per acre) 0.4 bd 0.3 ad na #0.1 ab

Nitrogen (percent of farms) 97 bc 99 ac 81 abd 94 c

Phosphorous (percent of farms) 88 bcd 73 acd 61 abd 50 abc

Potassium (percent of farms) 96 bcd 79 acd 25 ab 32 ab

Lime (percent of farms) 95 bcd 59 ad na *5 ab

--continued
19

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Southwest cotton producers’ reliance on cotton is refl ected in the proportion of agricultural production value attributed to cotton. In 2007, cotton 

accounted for 58 percent of their agricultural production value, the highest 

percentage for all regions. These producers faced risks if cotton prices 

declined or if climatic events or disease signifi cantly reduced cotton yields. 

Cotton accounted for 45 percent of agricultural production value on Delta 

farms, 29 percent on Southeast farms, and 22 percent on West farms in 2007.

Southwest producers were the most likely to purchase private insurance and 

Federal insurance on their cotton crop to mitigate risks imposed by the lack 

of crop diversity and reliance on cotton (table 6). Southwest cotton producers 

also were more likely to purchase Federal revenue insurance, 28 percent 

compared with 11 percent or less for cotton producers in other regions. 

Federal revenue insurance offers more fi nancial protection than insurance 

based on yields, since revenue insurance protects producers against both price 

and yield declines.

Cotton production varies by region since they grow different cotton varieties. 

In 2007, about half of the West’s cotton acres were planted with Pima cotton, 

with the balance of the region’s cotton acres planted with upland cotton varieties not typically planted in other regions (see box, “Cotton Types”). While 

Table 5

Production practices on 2007 cotton acreage, by region (continued)

Production practice Southeast (a) Delta (b) Southwest (c) West (d)

Chemical use:

Herbicides (percent of acreage) 99 d 99 d 96 d 76 abc

Insecticides (percent of acreage) 78 bc 93 acd 42 abd 82 bc

Herbicides (treatments per acre) 4.1 cd 4.4 cd 3.0 abd 1.9 abc

Insecticides (treatments per acre) 1.9 bc 4.5 acd 1.2 abd 1.8 bc

Trips over fi eld (number) 8.9 bcd 12.2 ac 9.9 abd 11.9 ac

Farms custom harvesting (percent) 21.7 b 6.7 acd 18.4 b 26.2 b

Labor (hours per acre): 2.1 bcd 2.5 ad 2.5 ad 4.4 abc

Paid 1.2 bd 1.6 acd 1.1 bd 3.4 abc

Unpaid 0.9 c 0.9 c 1.3 abd 1.0 c

Farms with paid labor (percent) 57 bcd 86 ac 68 abd 89 ac

Machinery maximum width (feet):

Planter 20.3 bc 29.7 acd 28.1 abd 20.8 bc

Harvester 14.7 bc 16.6 acd 19.4 abd 14.3 bc

Coeffi cient of variation (CV) = (Standard error/estimate) x 100.

* indicates that CV is greater than 25 and less than or equal to 50. 

# indicates that CV is above 50.

na indicates value is not available due to no observations, an undefi ned statistic, or reliability concerns.

Note: Letters a, b, c, and d indicate that the estimates are signifi cantly different from the indicated group at the 90-percent level or higher using 

the t-statistic.

Source: USDA’s 2007 Agricultural Resource Management Survey, jointly conducted by Economic Research Service and National Agricultural 

Statistics Service.
20

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Table 6

Characteristics of 2007 cotton farms and operators, by region

Characteristic Southeast (a) Delta (b) Southwest (c) West (d)

Cotton’s production value (percent) 29 bcd 46 acd 58 abd 23 abc

Commodities per farm 4.8 bcd 3.9 ac 2.9 abd 3.6 ac

Farms producing (percent):

Cotton under contract 51 bd 40 ad 42 d 67 abc

Corn 61 cd 64 cd 23 abd *12 abc

Sorghum #1 bcd 14 acd 41 abd 0 abc

Soybeans 45 bd 70 ad na 0 ab

Cattle 34 bd 11 acd 28 bd na

Wheat 28 30 38 28

Hay *7 bcd *3 acd 18 abd 61 abc

Peanuts 55 bcd *1 acd *8 abd 0 abc

Fruits and vegetables 11 bcd *1 ad *2 ad 62 abc

Cotton acreage with crop insurance (percent): 91 cd 94 cd 99 abd 73 abc

Federal insurance: 87 cd 89 cd 98 abd 71 abc

Basic catastrophic 22 bd 66 ac 20 bd 63 ac

Buy-up 45 bd 15 acd 44 bd *7 abc

Revenue 11 bcd *5 acd 28 abd 0 abc

Private crop insurance 23 cd 23 cd 39 abd *7 abc

Total operated acres per farm: 1,415 bcd 2,075 a 2,099 a 1,820 a

Owned and operated 471 bd 322 acd 611 b 928 ab

Rented: 942 bc 1,749 acd 1,477 abd 889 bc

Cash-rented 881 c 942 c 454 abd 871 c

Share-rented 60 bcd 807 acd 1,023 abd #18 abc

Cropland 1,071 bcd 1,962 ac 1,634 ab 1,767 a

Principal operator occupation (percent):

Farming 91 91 94 95

Nonfarm *5 9 *5 #5

Principal operator age (mean): 55 54 55 55

Younger than 50 years (percent) 31 34 30 28

65 years or older (percent) 17 16 c 26 ab 20

Principal operator education (percent):

High school 97 93 94 96

Completed college 17 bcd 32 ac 41 ab 40 a

--continued
21

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Table 6

Characteristics of 2007 cotton farms and operators, by region (continued)

Characteristic Southeast (a) Delta (b) Southwest (c) West (d)

Farm organization (percent):

Sole/family proprietor 82 bd 68 acd 79 bd 51 abc

Partnership 11 bd 27 ac 13 bd 31 ac

Family corporation 6 5 d *5 d *12 bc

Gross cash income per farm (1,000 dollars): 690.6 bd 1,058.8 acd 620.7 bd 2,693.2 abc

Crop cash receipts 509.7 bd 839.4 acd 436.3 bd 2,258.5 abc

Government payments: 74.3 b 103.7 acd 66.4 bd 83.9 bc

Direct 32.2 bd 57.7 acd 30.0 bd 46.3 abc

Counter-cyclical 28.1 b 37.7 ac 28.2 b 34.4

Loan defi ciency 2.9 c 2.1 c *0.5 ab #1.9

Other 11.1 bcd 6.3 ad 7.7 ad #1.3 abc

Federal crop and livestock insurance 19.6 bcd 4.7 ad 6.9 ad #0.4 abc

Cash production expenses 550.6 bcd 792.5 acd 398.9 abd 2,080.3 abc

Net cash income 140.0 bcd 266.3 a 221.8 ad *612.9 ac

Household income per farm family (1,000 dollars): 120.6 bcd 189.9 a 207.7 a *351.9 a

Farm income 81.0 bcd 153.5 a 155.9 a *305.7 a

Off-farm income 39.6 36.4 51.9 *46.2

Earned income from business or job 25.0 25.8 25.0 *32.7

Percent with off-farm business or job 50 bd 61 a 54 d 73 ac

Average value per farm (1,000 dollars):

Farm assets 2,166.5 bcd 1,661.9 ad 1,549.9 ad 7,245.4 abc

Farm debt 172.7 bd 232.4 acd 172.3 bd *727.6 abc

Farm equity 1,993.7 bcd 1,429.6 ad 1,377.6 ad *6,517.8 abc

Debt-to-asset percentage 9 bc 14 ac 11 ab *10

Coeffi cient of variation (CV) = (Standard error/estimate) x 100.

* indicates that CV is greater than 25 and less than or equal to 50. 

# indicates that CV is above 50.

Notes: Letters a, b, c, and d indicate that the estimates are signifi cantly different from the indicated group at the 90-percent level or higher using 

the t-statistic.Sums may not total to exactly 100 due to rounding.

Source: USDA’s 2007 Agricultural Resource Management Survey, jointly conducted by Economic Research Service and National Agricultural 

Statistics Service.
22

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

cotton varieties grown in the West produce higher yields and garner higher 

prices for their lint, their irrigation needs and longer growing seasons tend 

to boost production costs per acre. In 2007, cotton yields in the West averaged 1,512 pounds per planted acre, more than 50 percent greater than the 

highest average yield for other cotton-producing regions. In 2007, all cotton 

acreage in the West was irrigated, while less than half the cotton acreage in 

other regions was irrigated (see table 5). The West’s dependence on irrigation 

water for the cotton crop creates greater risk for producers should the supply 

or demand for irrigation water change signifi cantly in this region. Thus, 

signifi cant droughts, changes in irrigation water policies, and population 

growth in California, which would increase pressure to divert water supplies 

to California residents, may have signifi cant impacts on cotton producers in 

the West.

In addition, irrigating usually raises per acre production costs for fuel, 

machinery and equipment, and land. The per acre costs for these items were 

highest in the West, pushing their operating, ownership, and economic cost of 

cotton production per acre above those for cotton producers in other regions 

(see table 4). Despite the high cotton production costs, producers in the West 

earned the highest average returns per acre after costs as a result of their 

above-average prices and yields.

Cotton producers in the West owned more acres per farm and had the highest 

ratio of owned-to-operated farmland. Cotton farms in this region also were 

the most likely to have multiple operators (see table 6). Multiple partners in 

the farm operation may have boosted the percentage of farmland owned by 

the farm operation through the combined use of partner-owned assets.

Cotton farms in the West generated the highest net cash income per farm 

in 2007, more than twice the average amount generated by cotton farms 

in other regions, even though cotton producers in the West operated fewer 

acres per farm than those in the Delta and Southwest. The above average net 

returns per acre from cotton production in the West, as well as their per acre 

returns from their fruit and vegetable production likely contributed to their 

high average net cash income per farm. Compared with cotton farms in other 

regions, Southeast cotton farms produced the lowest net cash income in 2007, 

partly as a result of the smaller number of acres operated and a widespread 

drought in the region.
23

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Cotton Production, by Size 

of the Cotton Enterprise

The cost of production per acre and per pound of cotton did not vary 

signifi cantly by the size of the enterprise. Cotton played a larger role 

on farms with larger cotton enterprises. Producers on these farms 

were at a greater fi nancial risk if cotton yields or prices declined, 

but they also were more likely to take steps to mitigate their risks.

The sizes and characteristics of cotton enterprises vary widely. Cotton farms 

were divided into fi ve classes based on the size of their cotton enterprise, 

where enterprise size was measured by the number of planted cotton acres 

per farm. 

At the extreme ends, cotton producers with more than 1,500 acres of planted 

cotton accounted for 11 percent of U.S. cotton farms and 36 percent of U.S. 

cotton production, while producers with fewer than 200 acres of planted 

cotton accounted for 25 percent of cotton farms and 4 percent of cotton 

production in 2007 (see box, “Relationship Between Cotton Enterprise Size 

and Farm Typology”). Most U.S. cotton production occurs on farms with 500 

or more acres of planted cotton. In 2007, they accounted for 80 percent of 

planted cotton acreage and 46 percent of all cotton farms (table 7).

In 2007, producers needed an average price of $0.49-$0.52 per pound, 

depending on enterprise size, to break even with the operating and ownership 

costs of cotton lint. These differences, however, were not statistically signifi -

cant (i.e., due to chance). Cotton lint prices ranged from $0.56 to $0.58 per 

pound, well above the break-even price in each enterprise size category.

In 2007, the average operating and ownership costs ranged from $540 to 

$582 per acre of cotton for the enterprise classes, but these differences were 

statistically insignifi cant. With economies of size, operators with larger 

cotton enterprises often have lower costs per unit because they can spread 

their fi xed costs over more units, and their larger size may allow them to 

negotiate better prices or receive discounts from bulk purchases. Average 

operating costs per acre ranged from $431 to $466 per acre and did not vary 

signifi cantly by the number of planted cotton acres per farm. Average ownership costs per acre were higher for farms with more cotton acreage (see 

table 6), contrary to what might be expected from economies of size. Capital 

recovery of machinery and equipment contributes most to ownership costs. In 

2007, producers with 1,500 acres of cotton averaged $119 per acre in capital 

recovery costs compared with $93 per acre for those with fewer than 200 

acres of cotton.

ARMS data suggest that some producers with smaller cotton enterprises 

avoided purchasing large, specialized cotton machinery by relying on custom 

work,8 which allowed small cotton enterprises to avoid capital recovery 

and repair costs for farm machinery. Custom costs per acre were higher for 

producers with smaller cotton enterprises, averaging $36 per acre for those 

with fewer than 200 acres of cotton compared with $16 per acre for those 

with 1,500 or more acres of cotton (table 7). Producers with smaller cotton 

enterprises made fewer trips over their fi elds, lending support to the fact that 

8Custom workers supply their own 

farm machinery. Custom work is not 

considered a component of the farming 

sector; rather, it is a component of the 

service sector. Therefore, the capital 

recovery costs for farm machinery 

supplied for custom operations are 

not included in ERS’s production cost 

accounts and the number of trips over a 

fi eld does not include those for custom 

work.
24

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Relationship Between Cotton 

Enterprise Size and Farm Typology

Commodity enterprise size and farm typology are related. The size of a crop 

enterprise is measured by the number of acres planted to the commodity, 

while farm typology is based on the annual gross sales of all commodities 

and the primary occupation of the operator. In many cases, farms with larger 

enterprises have higher sales unless there was a signifi cant crop failure. Because 

the ratio of unharvested cotton acres to planted cotton acres was low in 2007, 

producers with larger cotton enterprises generally had higher farm sales. For 

example, in 2007, 69 percent of the producers planting 1,500 or more cotton 

acres had annual sales of $1 million or more.

Producers with higher farm sales may not always plant a large number of acres 

of the specifi c commodity. A signifi cant percentage of these producers had 

small- to mid-size cotton enterprises. In 2007, 29 percent of cotton producers 

with annual agricultural sales of $1 million or more planted 1,500 or more 

acres of cotton, while 26 percent of them planted fewer than 500 acres of cotton 

(see box table). There is a stronger relationship between small cotton farms 

and small cotton enterprises than there is between large cotton farms and large 

cotton enterprises. Only 1 percent of small family farms planted 1,500 or more 

acres of cotton, while 89 percent of small cotton farms planted fewer than 500 

acres of cotton.

Cotton farms, by cotton enterprise and farm typology, 2007

Cotton acres

Small family 

farms

Large family 

farms Very large family farms

(less than 

$250,000)

($250,000-

$499,999)

$500,000-

$999,999

$1 million 

or more

Percent of farms

Fewer than 200 53 20 11 8

200-499 36 42 27 18

500-999 9 26 29 28

1,000-1,499 1 9 20 16

1,500 or more 1 2 12 29

Source: USDA’s 2007 Agricultural Resource Management Survey, jointly conducted by 

Economic Research Service and National Agricultural Statistics Service.

Since very large cotton farms do not necessarily have large cotton enterprises, 

the characteristics of very large cotton farms can differ from the characteristics 

of cotton farms with large cotton enterprises. The most striking difference 

between these two groups is their commodity diversity and dependence 

on cotton production. Very large cotton farms have more commodity 

diversifi cation and are less dependent on cotton compared with farms with large 

cotton enterprises.
25

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Table 7

Production costs and returns per planted acre for 2007 cotton, by enterprise size

Production item Fewer than 

200 acres (a)

200-499

acres (b)

500-999

acres (c)

1,000-1,499

acres (d)

1,500 or more 

acres (e)

Cotton farms (percent) 25 30 23 11 11

Planted cotton acres (percent) 4 16 24 21 35

Cotton production quantity (percent) 4 15 24 21 36

Cotton producton value (percent) 4 15 26 20 36

Planted cotton acres per farm 105 bcde 342 acde 728 abde 1,231 abce 2,423 abcd

Cotton acres harvested (percent) 97 e 96 e 97 98 100 ab

Expected lint yield (pounds per planted 

acre) 1,047 1,021 1,081 1,035 1,051

Yield (pounds per planted acre):

Cotton lint 872 834 cde 914 b 916 b 937 b

Cottonseed 1,411 1,1349 cde 1,478 b 1,482 b 1,515 b

Break-even price (dollars per pound 

of lint) 0.51 0.52 0.50 0.49 0.49

Operating and ownership costs not 

covered (percent of farms) 43.0 41.6 36.6 34.7 33.8

Price (dollars per pound):

Cotton lint 0.58 de 0.57 c 0.58 bde 0.56 ac 0.56 ac

Cottonseed 0.09 bcde 0.08 ae 0.08 ade 0.08 ac 0.08 abc

Operating and ownership costs (dollars 

per pound of lint) 0.65 0.65 0.64 0.62 0.62

Costs and returns (dollars per planted 

cotton acre):

Gross production value: 629 581 ce 654 b 631 642 b

Cotton lint 504 472 ce 532 b 513 524 b

Cottonseed 125 b 109 ace 121 b 118 118 b

Operating costs: 466 431 462 444 450

Seed 61 57 62 59 62

Fertilizer 67 64 65 62 60

Chemicals 64 60 66 61 64

Custom operations 36 cde 28 de 25 ae 21 ab 16 abc

Fuel, lube, and electricity 45 45 46 48 52

Repairs 26 cde 29 cde 32 abe 34 ab 35 abc

Ginning 138 125 ce 139 b 136 141 b

Purchased irrigation water *11 de *3 e *6 de #2 ac *1 abc

Interest on operating capital 7 6 7 6 6

Hired labor 10 cde 11 cde 14 ab 15 ab 15 ab

--continued
26

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

they had more custom work done in their cotton fi elds (table 8). In addition, 34 percent of the operators with the smallest cotton enterprises had 

their cotton custom harvested in 2007 compared with just 2 percent of the 

operators with the largest cotton enterprises. Higher repair costs per acre for 

producers with larger cotton enterprises indicate that they were more likely to 

use their own or leased machinery in fi eld operations.

Cotton equipment often cannot be adapted for use on other crops. Hence, 

operators must have suffi cient cotton acreage to justify the purchase of 

machinery that can only be used on cotton. Cotton harvesters tend to be 

more expensive than other farm equipment designed for crop use. A four-row 

cotton picker with spindle cost $272,000 in 2007, second only to combines 

as the most expensive machinery based on the Agriculture Prices 2007 

Summary (USDA/NASS, 2008a). In 2007, harvesting cotton also required 

module builders, which were expensive, although less so than cotton pickers.

Only one of the return measures—the value of production less total costs—

shows a statistically signifi cant and positive correlation with the number of 

cotton acres per farm (see table 7). Including economic costs in total costs 

contributed to making these returns per acre statistically signifi cant since the 

economic cost per acre was lower on farms with more cotton acres in 2007. 

Table 7

Production costs and returns per planted acre for 2007 cotton, by enterprise size (continued)

Production item Fewer than 

200 acres (a)

200-499

acres (b)

500-999

acres (c)

1,000-1,499

acres (d)

1,500 or more 

acres (e)

Ownership costs: 101 cde 109 cde 120 ab 124 ab 126 ab

Capital recovery of machinery 

and equipment 93 cde 101 cde 112 abe 117 ab 119 abc

Taxes and insurance 8 8 8 7 7

Economic costs: 131 bcde 109 ade 100 ae 94 abe 79 abc

Opportunity cost of land 68 bde 57 ae 60 e 53 a 49 abc

Opportunity cost of unpaid labor 40 bcde 32 ace 25 abe 27 ae 17 abcd

General farm overhead 24 cde 20 cde 15 ab 14 ab 13 ab

Operating and ownership costs 567 540 582 568 577

Total costs 698 649 682 662 656

Production value less...

Operating costs 163 150 ce 192 b 187 192 b

Operating and ownership costs *62 *41 c 72 b *63 65

Total costs *-69 e *-68 ce *-28 b #-31 #-13 ab

Coeffi cient of variation (CV) = (Standard error/estimate) x 100.

* indicates that CV is greater than 25 and less than or equal to 50. 

# indicates that CV is greater than 50.

Note: Letters a, b, c, d, and e indicate that the estimates are signifi cantly different from the indicated group at the 90-percent level or higher 

using the t-statistic.

Source: USDA’s 2007 Agricultural Resource Management Survey, jointly conducted by Economic Research Service and National Agricultural 

Statistics Service.
27

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Table 8

Production practices on 2007 cotton acreage, by enterprise size

Production practice Fewer than 

200 acres (a)

200-499

acres (b)

500-999

acres (c)

1,000-1,499

acres (d)

1,500 or more 

acres (e)

Cotton planted acres (percent):

Dryland 59 65 e 61 e 55 52 bc

Irrigated 41 35 e 39 e 45 48 bc

Upland 96 de 98 c 95 bde 99 ac 99 ac

Pima *4 de *2 c *5 bde #1 ac *1 ac

Farms irrigating cotton (percent) 38 37 41 46 45

Crop rotation (percent of acres):

Cotton 37 bcde 58 ace 66 ab 65 a 70 ab

Legumes *11 de 9 de 6 e *3 ab *3 ab

Grass 41 bcde 28 ac 21 ab 23 a 21 a

Idle or Conservation Reserve Program *9 bc *3 a #3 a *6 #5

Seed used (pounds per acre) 11.4 bde 10.4 a 10.8 10.3 a 10.5 a

Seed variety (percent of acres):

Herbicide resistant 32 24 25 26 31

Bt 9 b 16 ace *8 b 10 *9 b

Stacked gene 49 50 56 58 56

Other *10 10 e 11 e *7 *4 bc

Energy use:

Gasoline (gallons per acre) 1.0 0.9 1.0 0.9 1.0

Diesel (gallons per acre) 13.5 9.9 d 11.5 14.2 b 11.3

Liquefi ed petroleum gas (gallons per acre) #0.7 *0.3 #1.3 na #0.6

Natural gas (1,000 cubic feet per acre) #0.2 #0.7 #0.3 #0.1 #0.4

Electricity (kilowatt hour per acre) *75.1 85.2 *89.5 *65.2 *122.3

Fertilizer and manure use:

Nitrogen (pounds per acre) 81 75 80 75 83

Phosphorous (pounds per acre) 30 30 29 32 26

Potassium (pounds per acre) 40 41 e 39 37 32 b

Lime (tons per acre) 0.2 0.2 e 0.2 0.2 0.1 b

Nitrogen (percent of farms) 89 89 91 90 93

Phosphorous (percent of farms) 71 73 e 67 75 e 63 bd

Potassium (percent of farms) 62 de 58 d 53 48 ab 51 a

Lime (percent of farms) 46 de 41 de 34 33 ab 33 ab

--continued
28

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Economic costs are the sum of the opportunity costs for land and unpaid 

labor and general farm overhead. All three of these economic costs were 

signifi cantly lower on a per acre basis for farms with more cotton acreage. 

Their opportunity cost of land was lower since cotton acres in the Southwest 

account for a larger share of their total cotton acres. The opportunity cost 

of cotton land is low in the Southwest, or $31 per acre compared with an 

average $62-$141 per acre for other regions (see table 4).

Production practices and inputs do not vary greatly by enterprise size, with 

a few notable exceptions. Farms with larger cotton enterprises had a higher 

proportion of labor hours per acre supplied by paid laborers. The unpaid labor 

hours that can be provided by operators and their family members are often 

insuffi cient to meet the labor needs of larger enterprises. Nearly all farms 

with 1,500 or more acres of cotton (94 percent) used hired labor compared 

with half of farms with fewer than 200 acres of cotton (see table 8).

In 2007, producers with more cotton acres per farm were less likely to rotate 

crops in their cotton fi elds, partly as a result of their lower levels of crop 

diversifi cation and cotton’s dominance on their farm operations (fi g. 4).9 

Seventy percent of producers with 1,500 or more acres of cotton did not plant 

their 2007 cotton fi eld with other crops in 2006 compared with 37 percent 

9Note the defi nitional differences 

between farms with the largest cotton 

enterprises and the largest cotton 

farms. See box, “Relationship Between 

Cotton Enterprise Size and Farm 

Typology.” Many of the farms with 

the largest cotton enterprises will also 

be large cotton farms, but many large 

cotton farms will not have large cotton 

enterprises. 

Table 8

Production practices on 2007 cotton acreage, by enterprise size (continued)

Production practice Fewer than 

200 acres (a)

200-499

acres (b)

500-999

acres (c)

1,000-1,499

acres (d)

1,500 or more 

acres (e)

Chemical use:

Herbicides (percent of acreage) 95 de 94 de 93 de 99 abc 99 abc

Insecticides (percent of acreage) 67 67 69 63 63

Herbicides (treatments per acre) 2.7 bcde 3.4 a 3.5 a 3.8 a 3.7 a

Insecticides (treatments per acre) 2.0 2.2 2.5 2.1 2.2

Trips over fi eld (number) 8.8 bcde 10.0 acde 11.2 abe 11.0 abe 11.9 abcd

Farms custom harvesting (percent) 34.2 bcde 16.1 ae *10.1 ae *11.6 ae *2.2 abcd

Labor (hours per acre): 2.8 e 2.5 e 2.5 e 2.8 e 2.3 abcd

Paid 1.0 cde 1.1 cde 1.4 ab 1.5 ab 1.5 ab

Unpaid 1.8 bcde 1.4 ace 1.1 abe 1.3 ae 0.8 abcd

Farms with paid labor (percent) 50 bcde 64 acde 80 abde 91 abc 94 abc

Machinery maximum width (feet):

Planter 21.5 bcde 25.6 acde 27.6 abe 28.6 abe 32.3 abcd

Harvester 14.8 cde 16.2 ae 18.3 ae 18.6 a 19.8 ab

Coeffi cient of variation (CV) = (Standard error/estimate) x 100. 

* indicates that CV is greater than 25 and less than or equal to 50. 

# indicates that CV is above 50.

na indicates value is not available due to no observations, an undefi ned statistic, or reliability concerns.

Note: Letters a, b, c, d, and e indicate that the estimates are signifi cantly different from the indicated group at the 90-percent level or higher 

using the t-statistic.

Source: USDA’s 2007 Agricultural Resource Management Survey, jointly conducted by Economic Research Service and National Agricultural 

Statistics Service.
29

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

of producers who grew fewer than 200 acres of cotton in 2007 (see table 8). 

More than half of the acreage on farms with 1,500 or more acres of cotton 

was planted to cotton in 2007 compared with 13 percent of the acreage on 

farms planting fewer than 200 acres of cotton.

Cotton’s production value to total production value averaged 15 percent on 

farms with fewer than 200 cotton acres compared with 62 percent for farms 

with 1,500 acres or more of cotton in 2007. As stated in the previous section, 

these higher percentages indicate increased risk for variations in farm income 

if conditions outside of a producer’s control change the demand, yields, or 

prices for U.S. cotton.

Farms with greater commodity diversity face less fi nancial risks since they 

often have greater fl exibility to shift production between commodities when 

supply and demand change, and they often rely less on income from any one 

commodity. Farms with 1,500 or more acres of cotton in 2007 averaged 3.1 

commodities per farm, compared with 4.1 or more commodities per farm for 

farms with fewer than 200 acres of cotton.

Producers with more cotton acreage also tend to have higher percentages of 

debt to assets. These producers are at greater risk of defaulting on their loans 

should their income levels drop. In 2007, producers with fewer than 1,000 

acres of cotton had debt-to-asset levels averaging 9 percent compared with 

16 percent for producers with 1,500 or more acres of cotton. Higher average 

debt-to-asset percentages are usually found on farms with large enterprises 

Source: USDA’s 2007 Agricultural Resource Management Survey, jointly conducted by 

Economic Research Service and National Agricultural Statistics Service.

Figure 4

Cotton's role on farms, by cotton enterprise size, 2007

Farms with larger cotton enterprises tend to specialize in cotton. They grow 

fewer commodities per farm, and cotton accounts for a higher percentage of 

their value of production.

0

1

2

3

4

5

0

10

20

30

40

50

60

70

200 to 499 500 to 999 1,000 

to 1,499

1,500 

or more

Percent Number of commodities 

Cotton acres per farm

Cotton as percent of value of production Commodities per farm

Fewer 

than 200
30

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

devoted to one crop.10 These farms were the least likely to have operators 

who were 65 years or older. Older operators tend to have lower debt-to-asset 

percentages since they have had more time to repay their debt obligations.

Cotton producers facing greater risk from farm income variability and loan 

repayment problems as a result of high percentages of cotton to total acres, 

cotton production value to total production value, and debt to assets were 

more likely to mitigate these risks. In 2007, 98 percent of operators with 

1,500 or more cotton acres insured their cotton crop through Federal or 

private crop insurance compared with 77 percent of cotton producers with 

fewer than 200 acres of cotton (table 9). Producers with more cotton acreage 

also were more likely to purchase higher levels of insurance coverage for their 

cotton crop. According to Shields (2010), basic catastrophic and buy-up policies provided payments based on yield losses, with buy-up policies providing 

greater benefi t levels than basic policies. Federal revenue policies are based 

on both prices and yields, so they provide income protection to producers. 

In 2007, 22 percent of producers with the largest cotton enterprises obtained 

Federal revenue insurance policies on their cotton crop compared with 8 

percent of producers with the smallest cotton enterprises (table 9).

Producers can mitigate their fi nancial risks by share-renting farmland. In 

share-renting, the landlord often receives a percentage of the crop and, therefore, shares in the risks for price and yield changes. In 2007, producers with 

fewer than 200 acres of cotton per farm share-rented 23 percent of their total 

farm acres, while producers with 1,500 or more cotton acres per farm sharedrented 44 percent of their farm acres.

Producers with the largest cotton enterprises are slightly younger, on average, 

and they are more likely to have a partnership arrangement on their farms 

compared with producers with the smallest cotton enterprises. Cotton 

producers with different sizes of cotton enterprises showed no distinguishable 

difference in their level of education. In 2007, the off-farm income received 

by cotton producers’ families did not vary signifi cantly by the size of the 

cotton enterprise, even though considerable variation did exist in the average 

farm income received per farm family among these groups.

10See http://www.ers.usda.gov/dataproducts/commodity-costs-and-returns/

readings.aspx for a series of bulletins 

on the “Characteristics and Production 

Costs” for crops and livestock.
31

The Demand for Disaggregated Food-Away-from-Home and Food-at-Home Products in the United States / ERR-139

Economic Research Service/USDA

Table 9

Characteristics of 2007 cotton farms and operators, by enterprise size

Characteristic Fewer than 

200 acres (a)

200-499

acres (b)

500-999

acres (c)

1,000-1,499

acres (d)

1,500 or more 

acres (e)

Cotton as percent of value of production 15 bcde 26 acde 41 abde 52 abc 62 abc

Commodities per farm 4.1 de 4.0 cde 3.7 bde 3.1 abc 3.1 abc

Farms producing (percent):

Cotton under a contract 35 bde 50 a 42 d 55 ac 52 a

Corn 47 de 50 de 43 a 32 ab 29 abc

Sorghum 17 24 20 *18 23

Soybeans 31 d 30 d 30 d 20 abce 29 d

Cattle 31 de 27 e 24 e 18 a 13 abc

Wheat 28 35 35 33 32

Hay *16 13 17 e *9 *7 c

Peanuts 27 cde 25 cde 15 ab 16 ab 16 ab

Fruits or vegetables *6 9 *10 *7 *6

Farms in Southwest (percent) 35 44 49 56 51

Cotton acreage with crop insurance 

(percent): 77 bcde 92 ace 96 ab 95 a 98 ab

Federal insurance: 71 bcde 87 ace 93 ab 92 ae 96 abd

Basic catastrophic 32 28 c 39 b 33 35

Buy-up 26 b 36 a 36 36 34

Revenue *8 de 14 e 13 e 17 a 22 abc

Private crop insurance 21 e 25 e 27 30 36 ab

Total acres per farm: 839 bcde 1,433 acde 2,134 abe 2,465 abe 4,069 abcd

Owned and operated 289 bcde 447 ae *695 a 581 a 814 ab

Rented: 547 bcde 984 acde 1,421 abde 1,878 abce 3,251 abcd

Cash-rented 350 bcde 606 ade 781 ae 907 abe 1,447 abcd

Share-rented 197 bcde 379 acde 640 abde 971 abce 1,804 abcd

Cropland 655 bcde 1,127 acde 1,676 abde 2,160 abce 3,611 abcd

Principal operator occupation (percent):

Farming 87 cde 92 de 96 ade 99 abc 99 abc

Nonfarm *12 cde *7 cde *2 abe #1 ab *1 abc

Principal operator age (mean): 56 ce 56 e 54 a 54 52 ab

Younger than 50 years (percent) 26 e 30 34 35 37 a

65 years or more (percent) *24 23 e 20 e 17 13 bc

--continued
32

The Demand for Disaggregated Food-Away-from-Home and Food-at-Home Products in the United States / ERR-139

Economic Research Service/USDA

Table 9

Characteristics of 2007 cotton farms and operators, by enterprise size (continued)

Characteristic Fewer than 

200 acres (a)

200-499

acres (b)

500-999

acres (c)

1,000-1,499

acres (d)

1,500 or more 

acres (e)

Principal operator education (percent):

High school 95 96 94 93 96

Completed college 31 29 38 31 29

Farm organization (percent):

Sole or family proprietor 89 bcde 76 ae 73 ae 72 ae 58 abcd

Partnership *8 cde 12 cde 19 abe 22 abe 38 abcd

Family corporation *2 bc *8 a *6 a #6 *4

Gross cash income per farm (1,000 

dollars): 335.7 bcde 651.1 acde 978.5 abe 1,160.9 abe 1,920.1 abcd

Crop cash receipts 250.0 bcde 469.5 acde 767.2 abe 903.8 abe 1,464.5 abcd

Government payments: 30.7 bcde 60.5 acde 89.3 abde 104.2 abce 175.0 abcd

Direct 16.2 bcde 28.9 acde 42.1 abde 50.9 abce 83.8 abcd

Counter-cyclical 10.4 bcde 22.5 acde 36.0 abe 41.6 abe 72.8 abcd

Loan defi ciency #0.7 be *2.1 a *1.6 *1.3 *3.1 a

Other *3.4 bcde 7.0 ae 9.6 ae 10.5 a 15.3 abc

Federal crop and livestock insurance 6.7 e 9.4 e 10.1 e *7.8 e 20.4 abcd

Cash production expenses 258.7 bcde 499.8 acde 711.9 abe 827.1 abe 1,352.1 abcd

Net cash income 77.0 bcde 151.3 acde 266.6 abe 333.8 abe 568.1 abcd

Household income per farm family 

(1,000 dollars): 84.1 bcde 134.1 acde 229.9 abe 261.5 abe 355.4 abcd

Farm income *43.1 bcde 86.1 acde 182.9 abe 225.6 ab 308.7 abc

Off-farm income: 41.0 48.0 *47.0 35.9 46.7

Earned income from business or job 24.9 32.0 cd 19.9 b 18.8 b 27.3

Percent with off-farm business or job 61 52 55 55 54

Average value per farm (1,000 dollars):

Farm assets 1,128 bcde 1,999 ae 2,433 a 2,489 ae 3,189 abd

Farm debt 97 bcde 173 ade 214 ae 300 abe 504 abcd

Farm equity 1,031 bcde 1,826 ae 2,220 a 2,189 a 2,684 ab

Debt-to-asset percentage 9 e 9 e 9 e 12 16 abc

Coeffi cient of variation (CV) = (Standard error/estimate) x 100.

* indicates that CV is greater than 25 and less than or equal to 50. 

# indicates that CV is above 50.

na indicates value is not available due to no observations, an undefi ned statistic, or reliability concerns.

Notes: Letters a, b, c, d, and e indicate that the estimates are signifi cantly different from the indicated group at the 90-percent level or higher 

using the t-statistic. Total may not sum to 100 due to rounding.

Source: USDA’s 2007 Agricultural Resource Management Survey, jointly conducted by Economic Research Service and National Agricultural 

Statistics Service.
33

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Economic Research Service/USDA

Cotton Production, by Farm Typology

The largest farms dominate cotton production. These farms were the 

most likely to irrigate their cotton acres and used more inputs per 

acre of cotton. On average, the largest cotton farms were more diversifi ed in their commodity production and less dependent on cotton 

production. Operators of these farms were slightly younger and were 

more likely to be in a farm partnership arrangement.

While the number of cotton farms is spread somewhat evenly among the four 

ERS typology groups (table 10), 2007 ARMS data show that most cotton 

production takes place on the largest cotton farms.11 Farms with $1 million 

or more of annual agricultural sales accounted for 26 percent of all U.S. 

cotton farms, but they produced just over 50 percent of the cotton lint. In 

contrast, small family farms accounted for 28 percent of all U.S. cotton farms 

and produced 8 percent of the cotton lint.

Since the share of cotton farms in each farm typology class was roughly the 

same, differences in the number of planted cotton acres per farm and the 

proportion of planted cotton acres harvested contributed to the concentration of cotton production on very large farm operations. Small family farms 

averaged 254 acres of planted cotton per farm, while the largest family farms 

averaged 1,241 acres of planted cotton per farm (see box, “Relationship 

Between Cotton Enterprise Size and Farm Typology”). In 2007, small family 

farm operators abandoned a larger share of their cotton acres (5 percent) than 

operators of the largest cotton farms (less than 1 percent).

Southwest cotton producers planted more cotton acres in 2007 than producers 

in any other region, and they dominated the cotton acres planted in each 

of the farm typology groups except for producers with $1 million or more 

in annual agricultural sales (fi g. 5). In that group, Delta cotton producers 

planted the most cotton acres. Most cotton production in the Delta region 

occurred on farms with gross annual sales of $1 million or more.

For 2007, the average price received for cotton lint exceeded the average 

break-even price for three of the four farm typology groups. Producers with 

the largest farms—those with the highest annual sales—were the most likely 

to recover operating and ownership costs of cotton production from cotton 

revenue in 2007. For the fourth typology group—large family farms—the 

average price for cotton lint matched the break-even price. Half of the 

producers in this group recovered their operating and ownership costs for 

cotton production.

In 2007, the average operating and ownership costs attributed to cotton lint 

ranged from $0.48 to $0.55 per pound among the typology classes, but the 

costs did not follow a straightforward pattern. Producers with very large 

cotton farms—gross annual sales between $500,000 and $999,999—had the 

lowest average cotton lint cost ($0.48 per pound), while producers of large 

farms—gross annual sales between $250,000 and $499,999—had the highest 

lint cost ($0.55 per pound). Since cotton lint costs per pound consist of two 

components—the cost per planted acre and the yield per planted acre—each 

will be examined in more detail.

11See Glossary for a defi nition 

of farm typology classes. Also, see 

Appendix II for a comparison of 

Census of Agriculture and ARMS data 

on the distribution of cotton farms by 

typology classes.
34

The Demand for Disaggregated Food-Away-from-Home and Food-at-Home Products in the United States / ERR-139

Economic Research Service/USDA

Table 10

Production costs and returns per planted acre for 2007 cotton, by farm typology

Very large family farms

Production item Small family 

farms (a)

Large family 

farms (b)

$500,000-

$999,999 (c)

$1 million 

or more (d)

Cotton farms (percent) 28 21 25 26

Planted cotton acres (percent) 10 15 29 45

Cotton production quantity (percent) 8 12 28 52

Cotton production value (percent) 8 12 28 53

Planted cotton acres per farm 254 bcd 510 acd 826 abd 1,231 abc

Cotton acres harvested (percent) 95 d 97 d 99 100 ab

Expected lint yield (pounds per planted acre) 851 cd 891 cd 972 abd 1,125 abc

Yield (pounds per planted acre):

Cotton lint 689 cd 703 cd 847 abd 1,005 abc

Cottonseed 1,114 cd 1,137 cd 1,371 ab 1,626 abc

Break-even price (dollars per pound of lint) 0.49 0.55 c 0.48 b 0.52

Operating and ownership costs not covered (percent) 43.1 50.3 d 40.8 36.2 b

Price (dollars per pound):

Cotton lint 0.55 d 0.55 d 0.56 d 0.59 abc

Cottonseed 0.08 d 0.08 cd 0.08 bd 0.08 abc

Operating and ownership costs (dollars per 

pound of lint) 0.62 0.68 c 0.61 bd 0.65 c

Costs and returns (dollars per planted cotton acre):

Gross value of production: 468 cd 475 cd 579 abd 726 abc

Cotton lint 381 cd 388 cd 471 abd 592 abc

Cottonseed 86 cd 87 cd 108 abd 134 abc

Operating costs: 337 cd 372 d 397 ad 518 abc

Seed 51 d 57 d 55 d 66 abc

Fertilizer 44 bd 58 ad 51 d 73 abc

Chemicals 50 bd 59 ad 55 d 75 abc

Custom operations 23 c 19 d 15 d 26 bc

Fuel, lube, and electricity 33 d 36 d 42 d 55 abc

Repairs 24 cd 27 acd 31 abd 37 abc

Ginning 101 cd 101 cd 127 abd 154 abc

Purchased irrigation water *1 d #0 d *1 d 4 abc

Interest on operating capital 5 bd 6 ad 6 d 7 abc

Hired labor 6 bcd 9 acd 13 abd 18 abc

--continued
35

The Demand for Disaggregated Food-Away-from-Home and Food-at-Home Products in the United States / ERR-139

Economic Research Service/USDA

The average operating and ownership costs per planted acre of cotton were 

higher on farms with greater annual gross sales, even though more cotton 

acres were planted per farm. Differences in the average cost per acre among 

the typology classes were statistically signifi cant. In 2007, producers with 

gross annual sales of $1 million or more averaged $653 per acre in operating 

and ownership costs compared with $426 per acre for small family farms 

with gross annual sales of less than $250,000 (see table 10). This contradicts what one normally expects, since farms with more acreage devoted to a 

particular commodity often will have lower costs per unit due to economies 

of size. With economies of size, fi xed costs can be spread over more output 

units and operators are more likely to receive discounts for bulk purchases of 

inputs, which would lower the operating cost per unit.

Farms with sales of $1 million or more had higher-than-average costs per 

planted acre for two reasons. First, they had higher average cotton yields per 

planted acre, so their ginning costs per acre were higher. In 2007, cotton lint 

yields averaged 689 pounds for small family farms compared with 1,005 

pounds for the largest family farms. Second, operators of the largest farms 

were more likely to plant Pima cotton or specialized varieties of upland 

cotton that are more expensive to produce because of their longer growing 

season, irrigation needs, and, in the case of Pima cotton, more expensive 

ginning techniques.

Table 10

Production costs and returns per planted acre for 2007 cotton, by farm typology (continued)

Very large family farms

Production item Small family 

farms (a)

Large family 

farms (b)

$500,000-

$999,999 (c)

$1 million

or more (d)

Ownership costs: 89 bcd 105 acd 119 abd 135 abc

Capital recovery of machinery and equipment 83 bcd 98 acd 111 abd 127 abc

Taxes and insurance 7 d 6 d 7 9 ab

Economic costs: 94 95 c 82 bd 101 c

Opportunity cost of land 42 d 50 d 42 d 65 abc

Opportunity cost of unpaid labor 37 cd 32 cd 26 abd 20 abc

General farm overhead 15 14 d 15 17 b

Operating and ownership costs 426 bcd 477 acd 515 abd 653 abc

Total costs 520 cd 572 d 598 ad 755 abc

Production value less...

Operating costs 131 cd 103 cd 182 ab 208 ab

Operating and ownership costs *41 #-2 cd 63 b 73 b

Total costs #-53 -97 cd #-19 b *-28 b

Coeffi cient of variation (CV) = (Standard error/estimate) x 100.

* indicates that CV is greater than 25 and less than or equal to 50. 

# indicates that CV is above 50.

Note: Letters a, b, c, and d indicate that the estimates are signifi cantly different from the indicated group at the 90-percent level or higher using 

the t-statistic.

Source: USDA’s 2007 Agricultural Resource Management Survey, jointly conducted by Economic Research Service and National Agricultural 

Statistics Service.
36

The Demand for Disaggregated Food-Away-from-Home and Food-at-Home Products in the United States / ERR-139

Economic Research Service/USDA

Operators of larger farms achieved higher cotton yields per planted acre 

based on a variety of factors. Larger cotton farms were more likely to irrigate their cotton, which reduces yield losses. In 2007, 48 percent of the 

cotton acres on cotton farms with sales of $1 million or more were irrigated 

compared with 23 percent on small family farms (table 11). Most Pima 

cotton, with its higher yields, was grown on farm operations with sales of 

$1 million or more. From 2003 to 2007, the weighted annual yield averaged 

812 pounds of cotton lint per harvested acre for upland cotton compared with 

1,260 pounds per acre for Pima cotton (USDA/NASS, 2011). Finally, operators of larger farms harvested 97 percent or more of their planted cotton acres 

compared with 95 percent for operators of small family farms.

Cotton farms with sales of $1 million or more used more inputs per acre of 

cotton production in 2007 than farms in any other typology class. Diesel fuel 

and electricity consumption per planted cotton acre was signifi cantly higher 

on very large farms; these were the two most commonly used energy sources 

to operate irrigation pumps. Operators of the largest cotton farms were most 

likely to apply nitrogen, and just over 75 percent applied insecticide to their 

cotton acres compared with 50-61 percent of the producers of smaller cotton 

farms.

Producers with the largest cotton farms made more trips over their cotton 

fi elds, 11.4 trips on average compared with 8.8 trips for producers with small 

family farms. In addition to being the least likely to use nitrogen and insecticides in 2007, small farms producers were more likely to abandon their 

Note: The number of cotton acres in the West on small, large, and very large farms with 

sales of $500,000-$999,999 is not available due to statistical quality or confidentiality 

concerns. 

Source: USDA’s 2007 cotton version of the Agricultural Resource Management Survey, 

jointly conducted by Economic Research Service and National Agricultural Statistics Service.

Figure 5

Cotton acres, by region and typology, 2007

Most of the cotton acres in 2007 were planted by very large cotton farms 

in the Delta and Southwest.

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Small farms Large farms

Thousands of acres

Southeast

Delta

Southwest

West

Cotton acres in:

Very large farms 

$500,000 to

$999,999

Very large farms 

$1 million 

or more
37

The Demand for Disaggregated Food-Away-from-Home and Food-at-Home Products in the United States / ERR-139

Economic Research Service/USDA

Table 11

Production practices on 2007 cotton acreage, by farm typology

Very large family farms

Production practice Small family 

farms (a)

Large family 

farms (b)

$500,000-

$999,999 (c)

$1 million

or more (d)

Cotton planted acres (percent):

Dryland 77 cd 81 cd 63 abd 52 abc

Irrigated *23 cd 19 cd 37 abd 48 abc

Upland 100 d 100 d 99 94 ab

Pima *0 d #0 d #1 6 ab

Farms irrigating cotton (percent) *23 cd 24 cd 41 abd 54 abc

Crop rotation (percent of acres):

Cotton 64 70 74 d 64 c

Legumes *6 *4 4 5

Grass 22 23 18 23

Idle or Conservation Reserve Program #3 *2 #3 *4

Seed used (pounds per acre) 10.7 10.1 10.9 10.7

Seed variety (percent of acres):

Herbicide resistant 26 c 30 40 ad 20 c

Bt *11 *12 7 9

Stacked gene 50 51 48 d 62 c

Other *13 c *7 *5 a 9

Energy use:

Gasoline (gallons per acre) 0.8 bcd 1.0 a 1.0 a 1.0 a

Diesel (gallons per acre) 7.4 cd 8.8 d 10.4 ad 13.7 abc

Liquefi ed petroleum gas (gallons per ace) 0.0 na na #1.0

Natural gas (1,000 cubic feet per acre) na #0.1 c *0.5 b #0.3

Electricity (kilowatt hour per acre) *52.2 d #72.7 45.2 d 114.7 ac

Fertilizer and manure use:

Nitrogen (pounds per acre) 55 d 64 d 70 d 90 abc

Phosphorous (pounds per acre) 19 bd 28 a 25 30 a

Potassium (pounds per acre) 24 bd 34 ad 29 d 44 abc

Lime (tons per acre) 0.1 bd 0.2 ac 0.1 bd 0.2 ac

Nitrogen (percent of farms) 81 cd 90 d 94 a 96 ab

Phosphorous (percent of farms) 67 76 70 71

Potassium (percent of farms) 56 62 60 59

Lime (percent of farms) 42 48 c 35 bd 44 c

--continued
38

The Demand for Disaggregated Food-Away-from-Home and Food-at-Home Products in the United States / ERR-139

Economic Research Service/USDA

cotton acres and were nearly three times as likely to custom harvest their 

cotton acreage compared with the largest cotton farm producers.

Total labor hours per acre for cotton production in 2007 did not vary signifi -

cantly among the farm size classes. The ratio of paid labor hours to total 

labor hours per cotton acre, however, did vary signifi cantly over the same 

period. Paid labor hours per acre ranged from 25 percent to 67 percent of 

total labor hours per acre in 2007, with a higher share for those with larger 

farms. Operators with the smallest farms were the least likely to hire labor for 

cotton production (40 percent), while operators with the largest farms were 

the most likely to hire labor (91 percent). Because operators with the largest 

farms planted an average of 1,231 acres of cotton in 2007, these operators 

often hired workers to assist with planting, maintaining, and harvesting the 

cotton. In contrast, operators with the smallest farms planted an average of 

254 acres of cotton per farm, and these acres could frequently be attended to 

by the operators and unpaid family members.

Although more trips were made across cotton fi elds on the largest cotton 

farms in 2007, the labor hours expended per cotton acre were not signifi -

cantly different based on the size of the cotton farm, partly as a result of the 

maximum width of machinery used in the cotton operation. On average, in 

Table 11

Production practices on 2007 cotton acreage, by farm typology (continued)

Very large family farms

Production practice Small family 

farms (a)

Large family 

farms (b)

$500,000-

$999,999 (c)

$1 million

or more (d)

Chemical use:

Herbicides (percent of acres) 97 97 98 96

Insecticides (percent of acres) 52 d 61 cd 50 bd 77 abc

Herbicides (treatments per acre) 3.0 bd 3.6 ac 3.3 bd 3.7 ac

Insecticides (treatments per acre) 1.2 bd 2.4 a 1.6 d 2.9 ac

Trips over fi eld 8.8 bcd 10.5 ad 10.8 a 11.4 ab

Farms custom harvesting (percent) 31.2 bcd 13.0 a *7.7 a 10.8 a

Labor (hours per acre): 2.4 2.5 2.5 2.7

Paid 0.6 bcd 1.0 acd 1.3 abd 1.8 abc

Unpaid 1.7 bcd 1.4 ad 1.2 ad 0.9 abc

Farms with paid labor (percent) 40 bcd 63 acd 85 ab 91 ab

Machinery maximum width (feet):

Planter 22.5 bcd 25.9 ad 26.8 ad 29.4 abc

Harvester 16.2 15.7 cd 17.9 b 18.2 b

Coeffi cient of variation (CV) = (Standard error/estimate) x 100.

* indicates that CV is greater than 25 and less than or equal to 50. 

# indicates that CV is above 50.

na indicates that a value is not available due to no observations, an undefi ned statistic, or reliability concerns.

Note: Letters a, b, c, and d indicate that the estimates are signifi cantly different from the indicated group at the 90-percent level or higher using 

the t-statistic.

Source: USDA’s 2007 Agricultural Resource Management Survey, jointly conducted by Economic Research Service and National Agricultural 

Statistics Service.
39

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

2007, operators with the largest farms used larger planters (29 feet wide), 

while operators with the smallest farms used smaller planters (23 feet wide).

Operators with the largest farms are the least dependent on cotton production and rely on the greatest commodity diversity.12 Cotton accounted for 33 

percent of all agricultural production value on the largest farms compared 

with 53-61 percent on smaller cotton farms (table 12). Operators of the 

largest cotton farms produced an average of 4.4 agricultural commodities 

per farm compared with 3.7 or less commodities for operators in other farm 

typology groups. Operators of the largest farms were more likely to grow 

corn, soybeans, wheat, fruits, and vegetables and less likely to raise cattle.

Operators with the largest farms were less likely to purchase Federal revenue 

insurance but more likely to purchase buy-up insurance on their cotton 

crop.13 Crop revenue insurance provides income coverage for low prices or 

low yields, while catastrophic (CAT) and buy-up insurance provides coverage 

for low yields (Shields, 2010). The operators of the largest cotton farms may 

have been the least likely to purchase cotton revenue insurance because they 

were at the least risk from income fl uctuations caused by deviations in cotton 

prices or cotton yields.

The characteristics of the largest cotton farms and their operators differed 

from those in the other typology classes. Principal operators of the largest 

farms tended to be younger and were more likely to list farming as their 

primary occupation than operators of smaller farms. In 2007, operators with 

the largest farms were more effi cient at generating gross cash income per 

dollar of cash expenses from the farm operation than operators of smaller 

farms. On average, the largest family farms generated an average of $142 in 

gross cash income for every $100 in cash production expenses, compared 

with an average of $109 in gross cash income by small family farms. The 

average annual net cash income earned per farm varied widely among the 

farm typology classes. Operators of small cotton farms earned an average of 

$11,600 per farm, while operators of large cotton farms earned an average of 

$637,700 per farm. Differences in farm size and fi nancial effi ciency contributed to differences in average income per farm.

The annual household income of cotton operators varied considerably by 

farm size in 2007. Large and small family farm operators’ household incomes 

averaged less than $60,000 in 2007, with most of their household income 

coming from off-farm sources. In contrast, household income for operators 

of very large farms averaged $175,000 or more, with farm income the major 

source of income.

The average annual value of farm equity per farm was higher for larger 

farms. The equity in small farms averaged $864,000 per farm, compared 

with $3,618,000 per farm for the largest cotton farms in 2007. The largest 

cotton farms were more likely to have multiple farm owners and to be organized in a partnership arrangement. Partnership arrangements allow owners 

to pool resources (see the Glossary for a defi nition of farm organization). 

Although farm equity per farm was highest on very large farms, operators of 

these farms had higher average ratios of debt-to-farm assets, indicating that 

these operators are at a greater risk to default on loans should farm income 

drop for several years.

12The largest cotton farms are not 

the same as farms with the largest 

cotton enterprises. The largest cotton 

farms are those farms whose operators planted at least 1 acre of cotton 

with the intention of harvesting the 

cotton for lint and whose operators 

had gross annual sales of $1 million 

or more from all commodities. See 

box, “Relationship Between Cotton 

Enterprise Size and Farm Typology.” 

Some of the largest cotton farms have 

small cotton enterprises.

13In 2007, crop revenue insurance 

was unavailable for Pima cotton. The 

infl uence on the statistics presented 

here would be minimal because Pima 

cotton was grown on only 2 percent of 

the cotton acreage, according to 2007 

ARMS data. 
40

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Table 12

Characteristics of 2007 cotton farms and operators, by farm typology

Very large family farms

Characteristic Small family 

farms (a)

Large family 

farms (b)

$500,000-

$999,999 (c)

$1 million

or more (d)

Cotton as percent of production value 61 d 53 d 55 d 33 abc

Commodities per farm 3.2 bcd 3.7 ad 3.7 ad 4.4 abc

Farms producing (percent):

Cotton under contract 38 46 48 48

Corn 28 bcd 49 a 43 ad 54 ac

Sorghum 20 19 26 19

Soybeans 19 bcd 31 a 29 ad 37 ac

Cattle 31 cd 29 d 20 a 18 ab

Wheat *22 cd 26 cd 38 ab 42 ab

Hay *11 *16 11 d 16 c

Peanuts 21 23 17 22

Fruits or vegetables *3 d *4 d *7 d 20 abc

Farms in Southwest (percent) 49 43 51 26

Cotton acreage with crop insurance (percent): 92 95 97 d 93 c

Federal insurance: 90 93 96 d 91 c

Basic catastrophic *25 d 30 d 28 d 43 abc

Buy-up 43 d 37 d 45 d 24 abc

Revenue *18 22 19 19

Private crop insurance *22 *23 36 28

Total acres per farm: 680 bcd 1,312 acd 1,899 abd 3,558 abc

Owned and operated 257 bcd 380 acd 515 ad 927 abc

Rented: 408 bcd 930 acd 1,380 abd 2,629 abc

Cash-rented 189 bcd 586 ad 520 ad 1,583 abc

Share-rented 219 bcd 344 acd 860 abd 1,046 abc

Cropland 529 bcd 1,063 acd 1,623 abd 2,935 abc

Principal operator occupation (percent):

Farming 87 cd 92 d 96 a 98 ab

Nonfarming 12 bcd *5 a *4 a *2 a

Principal operator age (mean): 58 bcd 54 a 54 ad 52 abc

Younger than 50 years (percent) 26 d 32 29 38 a

65 years or more (percent) 32 bcd 19 a 15 a 14 a

--continued
41

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Table 12

Characteristics of 2007 cotton farms and operators, by farm typology (continued)

Very large family farms

Characteristic Small family 

farms (a)

Large family 

farms (b)

$500,000-

$999,999 (c)

$1 million

or more (d)

Principal operator education (percent):

High school 93 bd 97 ac 92 bd 98 ac

Completed college 25 35 33 34

Farm organization (percent):

Sole or family proprietor 95 bcd 83 acd 70 abd 56 abc

Partnership #2 bcd *13 ad 18 ad 33 abc

Family corporation na #4 c 8 b 7

Gross cash income per farm (1,000 dollars): 140.4 bcd 385.5 acd 715.3 abd 2,143.4 abc

Crop cash receipts 86.8 bcd 260.0 acd 511.7 abd 1,698.1 abc

Government payments: 26.6 bcd 55.4 acd 80.0 abd 151.3 abc

Direct 12.3 bcd 23.3 acd 37.9 abd 78.6 abc

Counter-cyclical 10.4 bcd 23.5 acd 30.6 abd 57.5 abc

Loan defi ciency *1.1 *1.7 *1.5 2.4

Other *2.7 bcd 7.0 ad 10.1 a 12.8 ab

Federal crop and livestock insurance 6.4 cd 9.1 d 11.0 a 14.5 abc

Cash production expenses 128.7 bcd 334.3 acd 526.4 abd 1,505.7 abc

Net cash income *11.6 bcd *51.2 acd 188.9 abd 637.7 abc

Household income per family (1,000 dollars): 44.9 cd *58.6 cd 175.6 abd 457.4 abc

Farm income #3.3 cd #17.5 cd 139.5 abd 400.0 abc

Off-farm income: 41.6 41.1 36.1 57.2

Earned income from business or job 27.5 22.9 21.6 27.9

Percent with off-farm business or job 57 53 54 56

Average value per farm (1,000 dollars):

Farm assets 912 bcd 1,521 ad 1,779 ad 4,096 abc

Farm debt 48 bcd 127 acd 209 abd 478 abc

Farm equity 864 bcd 1,394 ad 1,570 ad 3,618 abc

Debt-to-asset percentage 5 bcd 8 acd 12 ab 12 ab

Coeffi cient of variation (CV) = (Standard error/estimate) x 100.

* indicates that CV is greater than 25 and less than or equal to 50. 

# indicates that CV is above 50.

na indicates that a value is not available due to no observations, an undefi ned statistic, or reliability concerns.

Notes: Letters a, b, c, and d indicate that the estimates are signifi cantly different from the indicated group at the 90-percent level or higher using 

the t-statistic. Sums may not total to 100 due to rounding.

Source: USDA’s 2007 Agricultural Resource Management Survey, jointly conducted by Economic Research Service and National Agricultural 

Statistics Service.
42

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

Conclusions

Cotton farms vary considerably in how much they rely on cotton. Cash 

receipts from the sale of cotton constitute a high percentage of total farm 

receipts for some cotton farms and a low percentage for others. The production practices and characteristics of cotton farms growing Pima cotton differ 

signifi cantly from farms growing upland cotton. Most cotton production takes 

place on large farm operations. In contrast, most food and feed grain production tends to be more evenly distributed among different size farms.

Among all cotton farms, high-cost producers were the least likely to recover 

production costs due to low yields caused by poor growing conditions. 

The large gap in expected and actual yields suggests that these low yields 

resulted from temporary conditions. Less than 15 percent of 2007 cotton was 

produced by high-cost producers. In contrast, all producers with low operating and ownership costs per pound of cotton lint were able to cover their 

costs from the gross value of cotton production. These producers had higher 

cotton yields as well as lower production costs per acre than mid-and highcost producers. Low-cost producers, on average, applied less inputs per cotton 

acre than mid- or high-cost producers, typically because low-cost producers 

were not as likely to apply such inputs as fertilizer or insecticides.

Southwest cotton producers dominated U.S. cotton production in 2007 

because they lacked alternative crops and because they had relatively low 

cotton production costs. Southwest cotton producers had higher net returns 

from American Upland cotton production than producers in other regions in 

2007. Southwest cotton producers are vulnerable to changes in cotton demand 

because they have less crop diversity and cotton accounts for more than half 

of their farm production value.

Cotton farms in the West grew varieties of cotton that have different requirements than varieties grown in other regions. And because all cotton acres 

in the West were irrigated, farms in this region were vulnerable to factors 

that could affect their ability to obtain irrigation water, including droughts, 

changes in water policies, and rising demand for water from urban areas.

Economies of size suggest that operators with more cotton acreage would 

have lower costs per pound of cotton lint or cotton acre. Cotton costs per unit, 

however, did not vary signifi cantly by the size of the cotton enterprises. Many 

operators with small cotton enterprises used custom work to avoid ownership 

and repair costs associated with expensive cotton harvesting equipment.

Operators of farms with larger cotton enterprises were more dependant on 

cotton than operators of farms with smaller cotton enterprises. This put 

operators with larger enterprises at increased fi nancial risk should cotton 

prices or yields drop. Many of these operators recognized the risks, however, 

as they were more likely to purchase buy-up or crop revenue insurance on 

their cotton acreage. Not only did these operators face increased risk based 

on the size of their cotton enterprise, but they also faced relatively high 

debt-to-asset ratios for their whole farm operation. They offset some of this 

fi nancial risk by share-renting a high percentage of their operated land. Also, 
43

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

farm operators with larger cotton enterprises were younger, on average, which 

allows them more time to recover from fi nancial setbacks.

One might expect there to be a signifi cant correlation of characteristics 

among farms with a large number of cotton acres and farms with a high level 

of gross annual sales because farms with more acreage tend to have higher 

sales. However, fi ndings show no evidence of a straightforward relationship 

between the number of cotton acres per farm and the annual value of agricultural sales from a farm operation. As such, the characteristics of farms 

with large cotton enterprises differ from those of large cotton farms (see 

box, “Relationship Between Cotton Enterprise Size and Farm Typology”). 

Our results also show that, on average, operators planting a greater number 

of cotton acres had less agriculturally diverse farming operations and were 

more reliant on cotton compared with farm operators with annual sales of $1 

million or more in 2007.

Operators with total farm sales of $1 million or more had the highest cotton 

cost of production per acre, even though these operators planted the most 

cotton acres per farm. These operators were more likely to use higher levels 

of inputs per cotton acre since they were more likely to irrigate their cotton 

and were more likely to raise Pima cotton. These latter two factors also 

contributed to higher cotton yields, which boosted ginning costs per acre. 

Although their cotton yields per acre were higher, higher production costs 

left these larger farms with net returns per acre from cotton production not 

signifi cantly different from those obtained by cotton producers with small 

family farms.
44

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

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References

Brooks, Nora. Characteristics and Production Costs of U.S. Cotton Farms, 

SB-974-2, U.S. Department of Agriculture, Economic Research Service, 

October 2001, http://www.ers.usda.gov/publications/sb-statistical-bulletin/

sb974-2.aspx.

CALCOT, Cotton Marketing Services. Cotton Production Information, 2012, 

http://www.calcot.com/ourcotton.asp?fl ag=ourcotton.

Meyer, Leslie, Stephen MacDonald, and Linda Foreman. Cotton 

Backgrounder, CWS-07B-01, U.S. Department of Agriculture, Economic 

Research Service, March 2007, http://www.ers.usda.gov/media/196515/

cws07b01.pdf.

Shields, Dennis A. Federal Crop Insurance: Background and Issue,

Congressional Research Service, December 2010, http://www.nationalaglawcenter.org/assets/crs/R40532.pdf.

U.S. Department of Agriculture, Economic Research Service (USDA/ERS). 

Farm Income and Wealth Statistics: Dataset: Cash receipts, by commodity 

groups and selected commodities, 1924-2010, 2011, http://www.ers.usda.

gov/data-products/farm-income-and-wealth-statistics.aspx#27415.

U.S. Department of Agriculture, Economic Research Service, Agricultural 

Marketing Service, Agricultural Research Service, and National 

Agricultural Statistics Service (USDA/ERS). Weights, Measures, and 

Conversion Factors for Agricultural Commodities and Their Products, 

Agricultural Handbook No. 697, June 1992, http://naldc.nal.usda.gov/

download/CAT92978524/PDF. 

U.S. Department of Agriculture, National Agricultural Statistics Service 

(USDA/NASS). Quick Stats, 2012, http://www.nass.usda.gov/

Quick_Stats/.

U.S. Department of Agriculture, National Agricultural Statistics Service 

(USDA/NASS). Agricultural Prices 2007 Summary, Pr 1-3 (08) a, July 

2008a, http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.

do?documentID=1003.

U.S. Department of Agriculture, National Agricultural Statistics Service 

(USDA/NASS). 2007 Agricultural Resource Management Survey - Phase 

III Interviewer’s Manual, January 2008b.

U.S. Department of Agriculture, National Agricultural Statistics Service 

(USDA/NASS). 2007 Census Report, 2009, http://www.agcensus.usda.

gov/Publications/2007/Full_Report/index.asp.
45

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

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Glossary

Break-even price for cotton lint: the price that allows producers to 

cover their operating and ownership production costs for cotton lint after 

subtracting the value of cottonseed production. See Appendix I: Determining 

the Break-Even Price Per Pound of Cotton Lint.

Cost categories: based on the ranking of operating and ownership costs per 

pound of cotton lint for 2007 U.S. cotton farms.15 The high-cost category 

included farms that planted cotton but did not harvest it. For these farms, the 

operating and ownership costs per pound of cotton lint were set to the costs 

per planted acre.

• Low-cost farms: 25 percent of the farms with the lowest costs per pound.

• Mid-cost farms: ranked in the 26 to 74 percentile.

• High-cost farms: 25 percent of farms with the highest costs per pound.

Cotton enterprise: the activities related to the farm production of cotton, 

including cotton lint and cottonseed. In contrast, the farm operation usually 

refers to all farm-related activities on the farm. Often farms grow more than 

one commodity and, therefore, most farms have more than one enterprise.

Cotton farms: those farms that planted at least 1 acre of cotton with the 

intention of harvesting it for lint with cottonseed as the byproduct. Farms that 

raised cotton primarily for commercial seed rather than fi ber were excluded 

from this report.

Cotton production regions: defi ned by four geographical clusters of cotton 

production. For our purposes, California cotton producers are located in 

the West region, while Texas cotton producers make up the Southwest 

region. Cotton producers in Missouri, Arkansas, Louisiana, Tennessee, 

and Mississippi are located in the Delta region, while North Carolina, 

South Carolina, Georgia, and Alabama cotton producers are located in the 

Southeast region.

Crop rotation; planting different types of crops in a fi eld during sequential 

growing seasons. The practice increases soil fertility and reduces problems 

with weeds, pests, and pathogens.

Cotton is often planted in the same fi eld for two consecutive growing 

seasons.

Legumes are plants with nodules on their roots formed by bacteria. These 

bacteria convert atmospheric nitrogen to organic nitrogen that can be 

utilized by plants. Soybeans and peanuts are two examples of legumes 

that are frequently rotated with cotton. Often, producers can reduce the 

amount of nitrogen they apply to crops planted after legumes. For our 

purposes, cotton was considered to be rotated with legumes if legumes 

were planted in summer 2006 and a second crop was not planted in the 

fall, or if legumes were planted in fall 2006 regardless of how the land 

was used during summer 2006.

15The cotton crop consists of 

two joint products--cotton lint and 

cottonseed. Since it is diffi cult to 

allocate production costs to these joint 

products, all operating and ownership costs were allocated to cotton 

lint (including ginning and hauling 

costs) in computing the costs per 

pound of cotton lint used to rank the 

farms and form the cost groups. Many 

cotton producers associate ginning 

and hauling costs with cottonseed 

production rather than cotton lint 

production, since commercial ginners 

provide ginning and hauling service in 

exchange for the cottonseed. Less than 

2 percent of farms changed cost groups 

when ginning and custom hauling 

costs were deleted from operating and 

ownership costs before ranking.
46

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

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Grasses are plants that require nitrogen for growth but cannot convert 

atmospheric nitrogen into a form usable by the plants. Therefore, 

producers usually apply nitrogen to their grass crops. For our purposes, 

cotton was considered to be rotated with grasses if grasses are planted 

in summer 2006 and a second crop was not planted in the fall, or if 

grasses were planted in fall 2006 regardless of how the land was used 

during summer 2006. Winter wheat and rye are examples of two grasses 

frequently rotated with cotton. Oats are a grass that is sometimes rotated 

with cotton.

Idled land was fallowed or in the Conservation Reserve Program during 

summer and fall 2006.

Economic costs: the sum of opportunity costs for land and unpaid labor 

and general farm overhead. The opportunity costs for land are based on cash 

rental rates per acre, and unpaid labor is valued at off-farm wage rates.

Expected yields: the yields farm operators reported that they expected to 

achieve when planting their cotton fi eld.

Farm household income: computed based on ARMS data and equals the 

sum of farm income and off-farm income for farm households but excludes 

farm income earned by landlords and contractors. It also excludes farm 

income generated by farms organized as nonfamily corporations or cooperatives or by those operated by hired managers. For farms with multiple operators or partners, the farm income, off-farm income, and household income 

fi gures used in this report represent those for the household of the principal 

farm operator. Farm income of farm households is defi ned as net cash farm 

business income plus net income from farmland rental and earnings of the 

operator household from farming activities, minus the sum of depreciation, 

gross farmland rental income, and farm business income received by other 

households. Off-farm income consists of wages, salaries, net income from 

nonfarm businesses, interest, dividends, transfer payments, Social Security 

retirement, pensions, other retirement plans, gifts, net cash income from 

another farm operation, net income from farmland rental, and other off-farm 

sources.

Farm organization: the legal status of the farm business. Sole or family 

proprietors have no legal partners or shareholders (USDA/NASS, 2008b). 

Under the sole or family proprietor arrangement, the operator(s), usually 

husband and wife, are regarded as self-employed and personally liable for all 

the farm’s obligations. In legal partnership arrangements, the farm is owned 

by two or more people. Not all partners need to be operators. The partnership 

agreement defi nes who is responsible for daily decisions and designates how 

farm profi ts are shared. A corporation, created under Federal or State laws, 

is a separate legal entity distinct from its owners. The owners are share or 

stock holders in the corporation. Family corporations are corporations where 

family members are the owners.

Farm typology: the grouping of farms into homogeneous classes to facilitate 

the analysis of a diverse farm sector. ERS has defi ned farm typology classes 

based on the gross annual value of farm sales of all agricultural products, 

the farm operator’s main occupation, and the ownership of farm assets. The 
47

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

Economic Research Service/USDA

primary occupation of farmers was reported by the farmers in a response to 

an ARMS question. Under the farm typology classifi cation system, a farm 

is considered a family farm if half or more of the farm assets are owned by 

the farm operator or other individuals related by blood, marriage, or adoption. Farms not meeting the family farm defi nition are classifi ed as nonfamily 

farms. All farms in the 2007 cotton version of the ARMS met ERS’s defi nition of a family farm. Hence, no cotton farms in this report were classifi ed as 

nonfamily farms.

Since cotton farms tend to be large farm operations, ERS farm typology 

classifi cations have been modifi ed for our purposes. Under the ERS farm 

typology classifi cation system, small farms—gross annual sales under 

$250,000—are divided into subgroups based on the farmer’s primary occupation. There were not a suffi cient number of ARMS observations from small 

cotton farms to allow an analysis among the small farm subgroups. Hence, 

data on small farms were combined.

ERS defi nes very large farms as those with annual sales of $500,000 or more. 

With 51 percent of the 2007 cotton farms falling into this group, the very 

large farms category was subdivided into two groups—farms with annual 

sales of $500,000-$999,999 and farms with annual sales of $1 million or 

more. For our purposes, farm typology defi nitions are as follows.

• Small family farms: family farms with gross annual sales of less than 

$250,000 in 2007, regardless of the operator’s primary occupation.

• Large family farms: family farms with gross annual sales of $250,000-

$499,999 in 2007.

• Very large family farms: family farms with gross annual sales of 

$500,000 or more in 2007. This category of farms was subdivided into:

- Family farms with sales of $500,000-$999,999; and

- Family farms with sales of $1 million or more.

Labor hours per acre: exclude the hours spent by workers performing 

custom fi eld operations.

Lime: a soil additive normally applied once every few years to a fi eld to 

improve agricultural production. Amounts per acre shown in the tables here 

are the average prorated annual amount of lime applied to all planted cotton 

acres. The annual prorated amount applied on farms using lime is computed 

by taking the amount of lime applied and dividing it by the number of years 

between lime applications for each farm reported in ARMS. The annual 

prorated amount of the lime is then summed across all farms and divided by 

the sum of planted cotton acres to calculate the prorated amount of lime per 

acre on all cotton acres.

Principal operator: the person who makes most of the daily decisions for 

the farm operation.

Trips over fi eld: counts the number of trips made across the selected cotton 

fi eld. The number of trips excludes trips made by custom operators since the 

costs for labor, fuel, and machinery used in custom operations are included 
48

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

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in the costs for custom operations for cotton. Tandem operations count as one 

trip over the fi eld. Partial trips over a fi eld are included in this calculation. For 

example, if a producer sprays pesticide over the entire fi eld and later sprays 

pesticide over half of the fi eld, then the number of trips over the fi eld would 

be recorded as 1.5 trips for pesticide applications.

Width of farm machinery: the maximum width of farm machinery used on 

the cotton enterprise. The machinery used in custom operations is excluded 

from this calculation.
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Appendix I: Determining the Break-Even 

Price Per Pound of Cotton Lint

Calculating the cost for a unit of output is a useful economic and accounting 

tool to measure profi tability and to compare profi tability among products. 

Typically, ERS analysts measure the crop production costs per unit of output 

by assuming that all production costs are attributed to the main crop product. 

For example, in the case of corn, ERS analysts measure the cost for all activities on acres planted to corn with the intention of harvesting the corn for 

grain. However, a few acres planted for grain are not harvested for grain. 

Instead, silage is produced from the fi eld. The cost of producing silage is 

included in the cost of grain production and in the calculation of costs per 

bushel of corn.

Normally, the secondary crop product has very little value, so no attempt is 

made to attribute some costs to the secondary product (silage) rather than the 

primary product (corn). This procedure has been followed by ERS analysts 

in the past for the calculation of costs per pound of cotton lint—where all 

production costs are attributed to the primary product (cotton lint). However, 

seed cotton produces two joint products—cotton lint and cottonseed.16

Since the value of cottonseed is a signifi cant proportion of the gross cotton 

production value, some cotton production costs should be allocated to cottonseed. Because cotton producers give up their cottonseed for ginning and 

hauling, the value of cottonseed per acre was subtracted from operating and 

ownership costs per acre. The resulting costs were divided by the pounds of 

cotton lint produced per acre to compute the break-even price per pound of 

cotton lint. The break-even price, when multiplied by the pounds of cotton 

lint produced, covers the costs per acre remaining after exchanging the 

cottonseed for ginning and hauling. The tables in this report show the breakeven price. If the cotton lint price exceeds the break-even price, producers 

covered their operating and ownership costs. If the cotton lint price is lower 

than the break-even price, producers did not recover their operating and 

ownership costs.

16Seed cotton must be ginned to 

separate the joint products. Seed cotton 

is the mix of cotton lint, cottonseed, 

and plant parts before ginning separates the components. Many cotton 

producers do not gin their own cotton. 

Rather, the seed cotton is transported to 

the gin by the ginner. Often, producers 

pay for just the ginning or both the 

ginning and hauling by giving the 

cottonseed to the ginner in exchange 

for service. In some years, the value of 

cottonseed does not cover the costs of 

ginning and hauling and the producer 

makes a small additional payment to 

the ginner. In other years, prices are 

higher and cotton producers receive a 

small payment from their cottonseed.
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Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

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Appendix II: Comparison of ARMS 

and Census of Agriculture Data

A comparison of Census of Agriculture and ARMS phase III data on cotton 

farms for 1997 and 2007 reveals differences in the percentage of cotton 

farms classifi ed as very large family farms in 2007 (app. fi g.). Data from the 

2007 cotton version of ARMS indicate that very large family cotton farms 

constitute a higher percentage of total cotton farms compared with data from 

the Census of Agriculture (see Glossary for farm typology defi nition). As a 

corollary effect, ARMS data indicate that a smaller share of the 2007 cotton 

farms is classifi ed as small family operations compared with census data 

from the same period.

Differences in the number of cotton farms reported based on typology 

may be explained by the differences in coverage between the Census of 

Agriculture and ARMS. The census included all U.S. farms with cotton, 

while the commodity specifi c version of ARMS targeted producers in States 

growing the majority of U.S. cotton (94 percent). Cotton farms in States 

not covered in the cotton version of the ARMS tended to have less than the 

average number of planted cotton acres per farm, implying that the omitted 

cotton farms were smaller than average. However, this was also true in 1997, 

when the distribution of cotton farms among the typology groups in ARMS 

and the census were more closely matched in 1997 than in 2007.

Note: Differences between the 2007 Agricultural Resource Management Survey (ARMS) and Census of Agricultural estimates are a result of 

survey sampling and nonsampling errors, definitional differences, as well as differences caused by the inclusion of fewer States in ARMS.

1Since nonfamily cotton farms were not found in the 2007 cotton version of ARMS, our use of 2007 Census of Agriculture data exclude 

nonfamily farms. The census reported that 8 percent of cotton farms were nonfamily operations in 2007 and 6 percent in 1997.

Source: USDA, Economic Research Service calculations based on data from the 2007 Census of Agriculture, and USDA’s 1997 and 2007 

Agricultural Resource Management Survey, jointly conducted by Economic Research Service and National Agricultural Statistics Service.

Appendix II figure 

Comparison of cotton farms, by typology, from the Census of Agriculture and ARMS1

The data on the share of cotton farms in each typology 

class match well in 1997 but, in 2007, ARMS data 

show a higher percentage of very large farms.

Small family farms accounted for a lower share of 

cotton and cottonseed sales, while very large 

family farms accounted for a higher percentage of 

sales in the 2007 ARMS.

0

10

20

30

40

50

60

70

80

90

Census ARMS

2007

0

10

20

30

40

50

60

70

Census ARMS Census ARMS

1997 2007

Percent of family farms Percent of sales

Small 

Large

Very large
51

Characteristics and Production Costs of U.S. Cotton Farms, 2007 / EIB-104

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Because small cotton farms are under-represented and large farms are overrepresented in the phase III cotton version of the 2007 ARMS, the percentages across the farm typology classes for total cotton farms, planted acres, 

cotton production quantity, and cotton production value (see table 10), as well 

as the U.S. aggregate estimates derived from phase III (see table 3) may be 

skewed. Per farm estimates taken from phase III and data derived from phase 

II of ARMS are the least likely to be infl uenced by the under-representation 

of small cotton farms and the over-representation of large cotton farms.