Scale Economies and Efficiency in U.S. Agriculture: Are Traditional Farms History?
2004
Paul, Catherine Morrison | Nehring, Richard | Banker, David | Somwaru, Agapi
The structural transformation of agriculture in recent decades has raised serious concerns about the future of the family farm. This study examines the economic performance of U.S. farms, to explore the potential of smaller farms to compete with larger entities, and ultimately to survive in this rapidly changing environment. We use deterministic and stochastic frontier methods and survey data to measure and evaluate factors underlying scale economies (SEC) and efficiency (SEF) of corn-belt farms for 1996-2001. Our results suggest that family farms are both scale and technically inefficient. Potential for the exploitation of significant scale and scope economies, and some greater technical efficiency, seem to be driving trends toward increased farm size and dwindling competitiveness of the small family farm.
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