ROCKWOOD — Large farms in Canada are growing in number at the expense of small- and medium-sized farms, and that consolidation process is accelerating, warns an independent ag research entity — Agri-Food Economic Systems of Rockwood, Ontario — in a newly released policy note.
Co-authors Douglas Hedley and Al Mussell explore farm-size data and challenge the conventional wisdom of changes in farm structure over time. The researchers also point to the “forthcoming risks” of the current dynamic, in their 9-page work titled Size Economies and Stratification in Primary Agriculture: Understanding the Implications.
“Today, increasing average farm size is not due to farms incrementally increasing in size step-by step — it is almost entirely explained by the increase in size of already large and very large farms and the decline in medium-sized and small farms,” says Hedley. “A step-by-step process leading to larger farms may never have accurately reflected these dynamics, but this is now more clearly evident — the ‘average’ farm is all but meaningless.”
Released Sept. 13, the policy note interprets these changes in the context of farm management, especially in relation to economies of size, and the central role of investments in equipment. It raises the conundrum that the expansion of large farms depends upon small and medium sized farms — which are themselves pressured by the expansion of large farms.
“The large farms have size economies that support investments in new equipment, but these acquisitions are partially financed by the value of trade-ins. Small and medium-sized farms comprise most of this used equipment demand,” explains Mussell, research lead.
“The investments in new equipment increase farm product supplies, dampen farm prices, and sharpen the competition for land from large farms — continually pressuring the viability of small and medium-sized farms. But as this dynamic plays out, it will weaken the demand for used equipment, and with it the value of trade-ins in financing of new equipment purchases by the large farms.”
Markets and competition among farmers may not resolve this issue, potentially representing a new dimension for agri-food policy. However, the authors caution there is need for better understanding and that policy actions need to at least do no harm.