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Farm structure underlies the efficiency
and competitiveness of the farm sector, the well-being of farm households,
the design of public policies, and the nature of rural areas. Farm
structure covers a variety of topics, including the number and
size of farms, concentration of production, tenure, farm organization,
business arrangements (including contractual agreements), and the
characteristics of farmers and their households. Farm structure both
affects and is affected by public policy and the economy at all levels.
The ERS research program in this area seeks to identify and analyze
the key factors affecting farm structure. It includes a descriptive
component focused on the development of appropriate information to
define the elements of structure, to measure those elements, and to
summarize changes in structure through time.
Several ongoing developments currently affect
farm structure. Farm production is becoming increasingly concentrated
on larger operations, but small farms—most of them operated
by part-time or retired farmers—account for significant shares
of farm production and farm assets, particularly land. Agribusinesses
that buy from or sell to farmers are also becoming more concentrated.
The business arrangements governing transactions among farmers and
between agribusinesses and farmers (particularly large farmers)
are changing, leading to greater specialization and greater reliance
on contracts, alliances, and cross-ownership. Finally, farm policy
continues to evolve at the national, State, and local levels.
Changes in farm structure are driven by a complex variety of forces.
For example production technology may create economies of scale,
such that larger operations realize lower per unit costs than smaller
operations. These economies may cause shifts in farm size toward
larger operations. But, realizing the cost advantages of scale may
depend on certain operator characteristics (such as management skills),
as well as the nature of available land and other natural resources.
Formal contracts are increasingly used to govern commercial relationships
between farmers, their buyers, and their input suppliers. Contracts
typically include terms and conditions that specify product characteristics,
quantities, delivery schedules, and set formulas/methods for determining
the prices that farmers receive.
Government policy also affects farm structure in a variety of ways.
For example, U.S. tax policy may influence farm operators to enter
or exit agriculture or to change the size of operations, especially
part-time. Research policy may also ultimately influence structure
through the types of projects that are funded.
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