Farm size matters when it comes to profit

But when it comes to the profitability and survival of Pennsylvania farms, size apparently matters, according to a report compiled by economists in Penn State’s College of Agricultural Sciences. Theodore Alter, professor of agricultural, environmental and regional economics, and Theodore Fuller, development economist, both in the Department of Agricultural Economics, Sociology, and Education, co-authored the report, Pennsylvania Agriculture: Where the Action Is! Incorporating data from the U.S. Department of Agriculture’s 2012 Census of Agriculture — the most recent available — the researchers looked at farm size and farm incomes, with an eye toward determining what classes of farms can better weather low commodity prices, which have fallen sharply since the census was completed. A close look at Pennsylvania farms in 2012 suggests that farm incomes are closely linked to farm size,” said Fuller. About nine of every 10 mega-farms and large farms — 92 and 88 percent, respectively — had a gain in net income, and 68 percent of medium farms did as well. On the other hand, only 23 percent of small farms saw their net income rise. The economists also looked at the relationship between productivity and farm size, and they found that mega-farms and large farms outpaced medium and small farms on three key productivity measures in 2012. Farm expenses as a percent of product sales told a similar story. Expenses were 76 percent and 73 percent of sales for mega-farms and large farms, respectively.Medium farms’ expenses represented 92 percent of sales, and small farms had expenses that were 344 percent of sales, fueling their negative net cash income.