THE ECONOMIC PAMPHLETEER: Economies of scale in food production

Abstract

First paragraph: Why do industrial agricultural operations continue to displace smaller family farms in spite of their continued pollution of the natural environment and degradation of rural communi­ties? Large-scale, specialized agricultural operations, such as concentrated animal feeding operations (or CAFOs), persist because they have an economic advantage over smaller, diversified farming opera­tions. They have higher ecological and social costs but lower economic costs. This economic advan­tage is commonly referred to as economies of scale. In economic theory, there are two types of economies of scale. Internal economies of scale refer to differences in the costs of production associated with different sizes of production units. In animal agriculture, “scale” refers to the number of hogs, poultry, milk cows, or beef cattle in a single farming operation or production unit. In field crop and pasture-based animal production, scale refers to the acres of land in a single production unit. External economies of scale, on the other hand, refer to differences such as the costs of fertilizer or feed, or the cost of complying with government regulations, for different sizes of management units. Management units may include one or more production units under single man­agement or control (Ross, 2022). A single farm or production unit may comprise multiple parcels of land, but a farm management unit may comprise multiple farms that are managed as a single economic entity or unit. . . .