Some individuals  decry the decline of the small family farm and its replacement with the huge corporate megafarm.Discuss the possibility that this is the consequence of economies of scale?

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

I'd say this is almost certainly the result of economies of scale.  Some economies of scale include:

  • The ability to get bulk discounts on chemicals and other such inputs.  Companies that can guarantee huge buys are likely to receive price breaks from their suppliers.  The large farms can probably also get lower interest rates on loans.
  • Technology and machinery.  As farm machinery has gotten bigger and more expensive, it has become harder for small farms to buy the expensive machines which are much more efficient than smaller ones.
  • Big farm companies can produce lots of different crops in different areas.  This reduces their dependence on any one crop in any one year.  Small farms can't do this.
krishna-agrawala's profile pic

krishna-agrawala | College Teacher | (Level 3) Valedictorian

Posted on

It would be more appropriate to say that small family farms were replaced by corporate megafarms because of economies of scale offered by modern farming technology. It should be noted such economies of scale in farming was not available prior to development of modern farming technology which utilized big and expensive farming equipments.

Prior to development of such equipments the productivity and costs of small and big farms was same. If the farm size doubled, all the inputs required for farming including the cost of buying simple implements used in the farming also doubled. The area of land that could be tilled and harvested from a set of tools required was typically less than the holdings of a small family owned farm.

However when sophisticated farming equipments were developed, not every farmer had the financial resource to buy these equipments. Further, people who started using these equipments found that, with these equipment they can farm much bigger areas that they were doing earlier with same equipment and with marginal increase in labour cost. With this started the process of farmers trying to increase the size of their holdings, which then led to development of mega farms.

Once these farms were big enough they were able to derive additional benefits because of their ability to negotiate better rice for the farming inputs like seeds and fertilizers they used.

However I am not so sure about the extent to which big farms enjoy an advantage over smaller farms for multiple cropping.

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