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Economies of Size in Farming: Theory, Analytical Procedures, and a Review of Selected Studies

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  • Madden, J. Patrick

Abstract

Excerpts from the report Highlights: Selected studies of the economies of size in crop production, specialized beef feedlots, and dairy farms were reviewed. The theoretical basis for analyzing economies of size was discussed, and several alternative analytical procedures were examined. The analytical procedure that provides the most reliable results in studying economies of size in farming is the synthetic-firm or economic-engineering approach. When the farm organization includes relatively few choices, this type of analysis may be done through manual budgeting. But when more complex farming operations are analyzed, linear programming is helpful. Choice of a residual claimant (the factors that absorb profit) strongly influences the height and shape of the average cost curve. For example, as more factors are included in the residual claimant, total cost is reduced, thus lowering average cost. A modified concept of the farm firm--viewing the farm as a goods-and-services firm--provides a realistic basis for explaining the persistence of a relatively large number of small farms and part-time farms. This concept also helps to account for the rising importance of custom-hired farm operations. A number of studies of crop-farming situations in various States were reviewed. In most of these situations, all of the economies of size could be achieved by modern and fully mechanized 1-man or 2-man farms.

Suggested Citation

  • Madden, J. Patrick, 1967. "Economies of Size in Farming: Theory, Analytical Procedures, and a Review of Selected Studies," Agricultural Economic Reports 307322, United States Department of Agriculture, Economic Research Service.
  • Handle: RePEc:ags:uerser:307322
    DOI: 10.22004/ag.econ.307322
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    Citations

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    Cited by:

    1. Fueglein, Hugo V. & Bravo-Ureta, Boris E., 1986. "A Linear Programming Analysis Of Economies Of Size And Profitability In Vegetable Production," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 15(2), pages 1-9, October.
    2. Davis, Bob & Ihnen, Loren A., 1971. "An Analysis Of Labor Use For Alternative Flue-Cured Tobacco Harvesting And Curing Systems," Department of Economics and Business - Archive 259734, North Carolina State University, Department of Economics.
    3. Fueglein, Hugo V. & Bravo-Ureta, Boris E., 1984. "Preliminary Estimates Of Economies Of Size In Vegetable Production," 1984 Annual Meeting, August 5-8, Ithaca, New York 279011, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Knutson, Ronald D. & Richardson, James W. & Smith, Edward G. & Rister, M. Edward & Grant, Warren R. & Lippke, Lawrence A. & Israelsen, Craig L., 2002. "Economic Impacts of Farm Program Payment Limits," Working Papers 42717, Texas A&M University, Agricultural and Food Policy Center.
    5. Davis, Bob & Ihnen, Loren A., 1971. "Organization Of Tobacco Farms Under Acreage And Acreage-Poundage Control Programs, Census Subregion 17, North Carolina," Department of Economics and Business - Archive 259535, North Carolina State University, Department of Economics.
    6. Lesher, William G. & Mapp, Harry P., Jr., 1974. "Economies Of Size In Highway Maintenance And Administration: A Preliminary Analysis For The Counties Of New York State," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 0(Number 1), pages 1-23, May.
    7. Lesher, William G. & Mapp, Harry P., Jr., 1974. "Economies Of Size In Highway Maintenance And Administration: A Preliminary Analysis For The Counties Of New York State," Journal of the Northeastern Agricultural Economics Council, Northeastern Agricultural and Resource Economics Association, vol. 3(1), pages 1-23, May.
    8. Boehm, William T. & Penn, J.B., 1978. "Research Issues Reemphasized by 1977 Food Policy Legislation," Economics Statistics and Cooperative Services (ESCS) Reports 142841, United States Department of Agriculture, Economic Research Service.
    9. Ryan, James G., 1976. "Growth And Size Economies Over Space And Time: Wheat-Sheep Farms In New South Wales," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 20(3), pages 1-19, December.
    10. Johnson, James D., 1989. "Firm Level Agricultural Data Collected And Managed By The Federal Government," 1989 Conference, January 7-10, Tucson, Arizona 260161, Regional Research Committe NC-181: Determinants of Farm Size and Structure.
    11. Meekhof, Ronald L. & Penn, J.B. & Johnson, James & Miller, Thomas A., 1980. "Agricultural-Food Policy Review," Economics Statistics and Cooperative Services (ESCS) Reports 279723, United States Department of Agriculture, Economic Research Service.

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