The relationship between financial performance and changes in farm size in Illinois grain farms

The average size of Illinois grain farms has been increasing. Economies of size have been pointed as a possible driver for this pattern, suggesting an incentive to grow. This study will investigate the relationship between farm size and financial performance across Illinois grain farmers. The study relies on balanced panel data of 297, 297 and 97 farmers, with individual and time fixed effects, in 3 different periods: 2010 to 2014, 2015 to 2019 and 2010 to 2019. Moreover, a 5-year consecutive rolling period is used to investigate this relationship from 2003 to 2019. Robustness checks also are conducted to analyze the relationship comparing top and bottom groups sorted by equity-to-asset and farm size. In addition, the study tests different relationships of farm size and different financial dependent variables: (i) logarithmic, (ii) quadratic and (iii) linear. Overall, results show that an increase in size is strongly related to higher capital and labor efficiencies and moderately and positively related to higher profitability ratios (ROA, Management Returns Margin and Operator and Land return margin). Results in general were consistent between bottom and top third groups of farm size and equity-to-asset, except for land cost ratio, which needs further investigation. Farm size was not significant in all financial variables, such as revenue per acre. This suggests that economies of size are reflected in costs, not in revenues. Moreover, no evidence of diseconomies of scale were found, which suggests that the pattern of consolidation is likely to continue.

Name thesis:degree_name

M.S.

Level thesis:degree_level

Thesis

Discipline thesis:degree_discipline

Agricultural & Applied Econ

Grantor

University of Illinois at Urbana-Champaign

Year dc:date

2022

Author dc:creator

• Christiano De Sousa Monaco, Henrique

Contributors dc:contributor

• Schnitkey, Gary

• Economies of size, economies of scale, financial performance, agriculture, grain farms

Statement dc:rights

• © 2021 by Henrique Christiano de Sousa Monaco. All rights reserved.

Language dc:language

en

Handle dc:identifier

http://hdl.handle.net/2142/113247

OAI identifier oai:identifier

oai:www.ideals.illinois.edu:2142/113247