Large farms in Canada are growing in number at the expense of small and medium-sized farms, and the shift to very large farms is accelerating.
An Independent Agri-Food Policy Note explores the data on farm size in Canada, challenges the conventional wisdom of changes in farm structure over time, and warns of forthcoming risks from this dynamic.
“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,” said Douglas Hedley, Agri-Food Economic Systems research associate, and co-author of the policy note. “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.”
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,” says Al Mussell, Agri-Food Economic Systems research lead, and co-author of the policy note. “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.”
The policy note concludes that markets and competition among farmers may not resolve this issue, and that it potentially represents a new dimension for agri-food policy. They caution the need for better understanding and that policy actions need to at least do no harm.
The policy note is available at www.agrifoodecon.ca Agri-Food Economic Systems is an independent economic research organization dedicated to agri-food located in Rockwood, Ontario.
Source: September 13, 2021 news release