Retirement Age Farmers¡¯ Exit and Disinvestment from Farming

The aging of farmers in the US today coincides with fluctuating incomes resulting from recent market price volatility and policy changes. We evaluate how farmers¡¯ retirement or exit, as well as their disinvestment from farming in preparation for retirement, are affected by economic and demographic factors. Exit and disinvestment are modeled as the outcome of intertemporal utility maximization, and farm-level data from the Census of Agriculture are used to estimate the probability of retirement-age farmers¡¯ exit and disinvestment for the 1992-2012 period. The results show that farm size matters the most, with larger farms less likely to exit but more likely to disinvest and scale back, presumably to a new optimal size. Demographic factors such as gender, race, and age have statistically significant but relatively small impacts. Regional differences, the size of the non-farm economy, and opportunities to diversify income also affect exit. However, flow economic variables, such as current year return-on-assets and agricultural support payments, are not associated with exit and disinvestment. Given that US farmers are now facing significant income volatility, the findings point to a level of resilience. The results suggesting that current and recent income fluctuations are less likely to drive the exit of retirement age farmers have important policy implications.