Wednesday, December 14, 2011

Trend: Farms with over $1 Million in Production Continue to Gain Market Share

Continuing Shifts to Large-Scale Farms
Not only do large farms receive the most support, but they also have a competitive advantage in the marketplace. Farms with sales below $100,000 in 2007 had, on average, negative operating profit margins, while those above $100,000 in sales enjoyed positive average margins that increased with farm size. Large farms, in addition, can adopt new or improved technologies more easily. This suggests a continued shift in production to very large farms.

Farms with sales above $1 million already increased their share from 27 to 59 percent of total agricultural production between 1982 and 2007. This also suggests a continued increase in the share of production under production and or marketing contracts since large food processors tend to favor contracting with large farms. Between 1991 and 2007, the use of contracts increased by 9 percentage points, and we can expect further increases going forward. The number of smaller commercial farms (those with sales of $10,000 to $249,999), in contrast, will likely continue to decline.

Very small farms, however, exist independent of the farm economy—the operators of which rely heavily on off-farm income and are less likely to decline in number. Despite probable continued shifts in production to larger farms, farming will likely remain a family-oriented business as the family-farm share of the farm count remained between 97 and 99 percent of all farms from 1988 through 2007.

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