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Why Small Farms Matter: Economies of Scale

small farm economies

In 2005, USDA's report on the number of farms in the U.S. really wasn't that surprising; it substantiated a trend that's continued for many years. The number of farms with gross annual sales under $250,000 declined by 0.8% (USDA determines farms in this category as "small.") Meanwhile, the number of farms with annual sales greater than $500,000 increased 3.8%.

In the 1918 text book, "Farm Management," G.F. Warren of Cornell University makes the statement: "But so long as farmers become more efficient, we will need a smaller and smaller percent of the population engaged in farming." For the young person yearning to be a farmer, not a farmhand, all this is far from encouraging. How can young people today afford to pursue an occupation where the economies of scale seem so stacked against them?

Contrary to the paradigm so often presented by ag economists, there are actually two economies of scale – and they are at opposite ends of the spectrum. The economy of scale most often referred to involves massive inflows of money for mega farms with lots of land, hundreds to thousands of cows, gigantic machinery, numerous employees, public-relations challenges, multilingual capabilities, and a never-ending race to get bigger and bigger before the other mega farms get too much bigger than you. This paradigm says if you're not getting bigger, you're going backward – Get big or get out!

However, today's agriculture still offers opportunities often not utilized. Part of that opportunity involves the efficiency of scale at the other end of the spectrum. To take advantage of this economy of scale though, your earnestness to have your own farm might well get tested.

The test many farms have failed over the years is simply in maintaining the cost of family living. Of all farm costs, none has escalated as much as the cost of providing for the family. The real culprit in this expense is the cost of "wants" as opposed to "needs." In this world of mass communication, many people are left believing they must have what everyone else is thought to have – cell phones, snowmobiles, designer clothes, eating out, football games, etc. The list goes on and on.

Yet, a "no-frills" life has proven rewarding to many. One New York farm family has lived comfortably, but simply, for more than 20 years. They sent all three children through college, never milking more than 35 cows and still see no reason to milk more.

Another left a position as a NASA physicist to support his family with just eight Jersey cows and direct marketing. The possibilities can expand significantly when the focus is on meeting needs and weeding out the wants.

Accomplishing enough with very little often takes advantage of the unmentioned economy of scale. If something needs to be built, some people will start sawing their own lumber. With help from the community, they will do there own construction.

Firewood might be the cheapest way to heat the home. Milking by hand might be an acceptable way to eliminate a significant upfront cost. Some folks still harvest their ear corn by hand; from just one corn seed, the return can be 100 fold. The family garden extends this experience while cutting out all the middlemen. The point is simple – we have been provided abundant opportunities to meet our NEEDS.

This isn't a path for the faint of heart. If all this sounds laborious, you're right, but then these folks don't need to pay for a gym for exercise. If it sounds like a low return per hour of work, not everybody's accounting puts a value on their time. For those with an occupational passion, work is simply an enjoyable part of life. If it sounds like a life of deprivation – happiness, in the pursuit of a dream, is not the experience of a deprived person.

What might seem like a mundane task or a waste of time to some just might be the fulfilling means to an end for someone else. Whether or not you want to farm, how you make your desire your reality, and exactly how you want to farm is your own particular choice. Weigh your options and your risks. You're limited only by your imagination.

And about that trend, the opportunities for small-scale farms are greater today than in 1918.

Bill Henning is Small Farms Specialist with Cornell Cooperative Extension. Reach him at 315-536-5123. For more info about opportunities for small farms, visit the Cornell Small Farms Program Web site at: