What Does Initial Farm Size Imply About Growth and Diversification?

Almuhanad Melhim, O'Donoghue, Erik J. and C. Richard Shumway

Journal of Agricultural and Applied Economics, 2009, vol. 41, issue 01

Abstract: Recent consolidation in agriculture has shifted production toward fewer but larger farms, reshaping business relationships between farmers, processors, input suppliers, and local communities. We analyze growth and diversification of U.S. corn, wheat, apple, and beef farms by examining longitudinal changes in 10 size cohorts through three successive censuses. We fail to reject Gibrat’s law in apple and wheat industries and the mean reversion hypothesis in beef and corn industries. Apple and wheat farms diversify over time. The findings suggest that scale economies diminish for large farms across all four industries and scope economies dominate scale economies for large apple and wheat farms.

Keywords: diversification; firm growth; Gibrat’s law; longitudinal data; scale economies; scope economies; Agribusiness; Farm Management; Production Economics; Q12 (search for similar items in EconPapers)
Date: 2009
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