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What Does Initial Farm Size Imply About Growth and Diversification?

Published online by Cambridge University Press:  26 January 2015

Almuhanad Melhim ,
Erik J. O'Donoghue  and
C. Richard Shumway
Almuhanad Melhim
Affiliation:
School of Economic Sciences, Washington State University, Pullman, WA
Erik J. O'Donoghue
Affiliation:
Economic Research Service, U.S. Department of Agriculture, Washington, DC
C. Richard Shumway
Affiliation:
School of Economic Sciences, Washington State University, Pullman, WA
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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

diversificationfirm growthGibrat's lawlongitudinal datascale economiesscope economiesQ12
Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 41 , Issue 1 , April 2009 , pp. 193 - 206
Copyright
Copyright © Southern Agricultural Economics Association 2009

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