Does farm size matter?

On October 20th next I will take part in a workshop organised by DG AGRI at the Milan EXPO on the subject “Structural realities in EU agriculture: Does farm size matter?” The aim of the workshop is to discuss the challenges and opportunities brought about by the structural change of the EU agricultural sector for a) the up- and downstream industries, b) EU rural areas and c) the sustainability of agricultural production in Europe.
The debate on farm size
There is a long history in Europe of interest in the structure of agricultural holdings. Many European countries have had land legislation in place with the objective of maximising the number of farm holdings or limiting the maximum farm size. In recent decades, many of these restrictions have been removed, although rules limiting foreign investment in land still exist in a number of countries, particularly in the new member states. Nonetheless, the issue of farm size remains a controversial and emotional issue, as seen in the opposition to so-called ‘mega-dairies’ in a number of member states, and the introduction of the ‘redistributive payment’ option in Pillar 1 of the CAP permitting member states to make higher payments per hectare to smaller farms.
The European Parliament in an own initiative resolution on the future of small agricultural holdings in February 2014 insisted that smallholdings “represent a model of social agriculture which is still predominant in the EU and which can and must coexist with other, more large-scale and market-oriented models of agriculture”.
The issue of farm size was also central to a recent verbal spat between George Monbiot, the UK environmental activist who writes a weekly column for the Guardian newspaper, and a grouping who call themselves the ecomodernists, who argue that intensifying many human activities – particularly farming, energy extraction, forestry, and settlement – so that they use less land and interfere less with the natural world is the key to decoupling human development from environmental impacts (read the ecomodernist manifesto here, or the Breakthrough Institute’s Nature Unbound report for a similar view).
In his critique, Monbiot attacks what he calls the ecomodernists’ “crashing misconception” when they refer to “unproductive, small-scale farming”. He refers to the many papers (mainly drawing on data from developing countries) which have documented an inverse relationship between farm size and land productivity, mainly because smaller farms apply larger amounts of labour per hectare and thus get higher yields per unit of land. He therefore argues that, from an environmental perspective, because what counts is land productivity, we should maintain these small farms, even if it also means that their occupiers remain in poverty because of their low labour productivity.
Monbiot’s argument got a deserved rebuttal from the writers associated with the Breakthrough Institute the following day. They note the implication in Monbiot’s position that “agricultural modernisation is neither land-sparing nor beneficial to the poor”. They rebut this argument by pointing out that yield gaps between farms in developed (often much larger) and developing countries are profound, and that the (much larger) farms in the US produce three to five times more per hectare than African farmers. They conclude: “To suggest, as Monbiot does, that poor farmers are better off remaining on the farm is to suggest that they are better off remaining poor.”
Why might small farms be preferred?
In the EU, too, there is a strong positive relationship between farm incomes and farm size. Nonetheless, many argue that, either because of the intrinsic values associated with small farms or because of their instrumental advantages for other policy objectives, policy should support the survival of small farms through income transfers to improve their viability.
At the EU level, there is no formal preference for one type of farm size structure over another. A farm structure objective is not specifically mentioned in the objectives for the CAP in the EU Treaties. It is recognised, of course, that small farms make up an important share of total agricultural employment and play an important role in many rural economies particularly in more fragile and disadvantaged regions. But there are mixed views as to whether the steady decline in the number of small farms is a process that should be welcomed or one that should be fought, even if the likelihood of success is small.
For example, the European Parliament resolution of February 2014 referred to above made the following claims on behalf of small farms:
• Smaller holdings are more environmentally friendly, better at maintaining the characteristic features of Europe’s countryside and better at preserving biodiversity
• Smaller holdings are better for animal welfare
• Smaller holdings are better at helping to limit depopulation in marginal regions
• Smaller holdings are better at preserving cultural traditions, non-material heritage and local and regional handicrafts and manufactures.
• Smaller holdings tend to be more flexible and adapt more easily to market crises.
• [Smaller farms are more likely to be involved in direct sales, promoting sales of healthier, locally-produced food with a lower transport footprint] (not claimed as such in the resolution, but arguably implicit in its recommendations).
Similar sentiments are echoed in other fora. For example, Olga Kikou from the NGO Compassion in World Farming, published a blog post on the Euractiv website yesterday making the case that there are many negative externalities associated with dairy farming, but that these are particularly exacerbated by large scale dairy farming.
Do small farms have the perceived advantages?
A priori, we can expect the environmental and other impacts of production on smaller and larger farms to be different because of differences in technology (interpreted broadly here to mean the ways in which land, labour, inputs and capital are combined to produce agricultural outputs). Indeed, one of the principal driving forces behind increasing farm size is the desire to reap the benefits of economies of scale created by new technologies which require larger farm sizes to realise their benefits. For example, moving to mega-dairies implies a move from grazing-based production systems to zero-grazing systems, which will have different implications for animal health and the environmental footprint of milk production.
But whether these different environmental impacts are necessarily worse for larger scales of production is often simply taken for granted rather than underpinned by evidence. For example, one of the pieces of evidence cited by Olga Kikou in her post yesterday noted that the CWF investigation into poor animal welfare found that “Key welfare problems were evident in farms regardless of size which demonstrates the urgent need for legislation to cover the entire sector”.
One can certainly think of reasons why small farms, with less intensive production systems, may have better outcomes for the environment and animal health. The problem is that one can also think of many reasons why larger farms may also have better outcomes. For example, milk production is inevitably associated with greenhouse gas emissions, but mega-dairies may be in a better position to manage their manure through anaerobic digesters thus reducing their GHG footprint. Larger dairies may be able to employ more specialised veterinary staff who can give a higher standard of care to their animals than on a smaller farm. Larger arable farms may be in a better position to use precision farming and big data to more precisely target fertiliser and pesticide applications, thus reducing nitrate losses and chemical use compared to smaller farms.
In principle, my sense is that farm size is likely to be a very inadequate proxy for improved environmental performance or high animal health standards although when I last looked at this issue, some years ago, there did seem to be some evidence in favour of the smaller farm- better environmental outcomes relationship. There is likely to be a stronger case that a diversified farm structure contributes more to rural viability than a few mega-holdings. However, we need evidence on these issues and not just opinions. Also, in principle, it would seem more efficient to encourage all farms, regardless of size, for their positive contributions to public goods and to penalise farms, regardless of size, for their negative impacts on health and the environment.
I hope to learn more about the evidence base for whether farm size matters for productivity, the environment, animal health, rural viability and a healthy food supply at the DG AGRI seminar later this month. In the meantime, contributions from readers in the comments section will be very welcome.
This post was written by Alan Matthews
Photo credit: Rural Ties – Tales of a Country Girl

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4 Replies to “Does farm size matter?”

  1. Dear Matthew
    Thanks for a good brief review of the different views and assessments. A lot of the studies, conclusions and views, I think, can hardly be generalized. Environmental impacts, for example, include so many different things. The examples you provide illustrate that. Europe is just so diverse in almost all respects. For me personally and based on my European level research of 25+ years, I think we need to take two dimensions into account that are often neglected:
    First, the fact that we are reaching planetary boundaries in many areas and that we need to consider this when assessing resource-use-efficiencies and the sustainability and resilience of agricultural (production) systems. Many productivity and efficiency parameters that we still use, are just outdated. I really hope that the new EIP Agri Focus Group on ‘Benchmarking of farm productivity and sustainability performance’ will try to go further, push boundaries. A lot of the assessment systems currently used are probably not sufficient in respect of the urgency of action required.
    Second, in very large parts of eastern and southern Europe we very commonly still have a predominance of small farms. Families are combining different income sources, they are semi-subsistent in food (often also supplying relatives including those living in cities), and often still appreciating their rural life and small-scale farming as a lifestyle (the latter we find all over Europe). We can argue about the quality and importance of all that but where will the new/alternative employment and income opportunities come from that facilitated the transitioning out of agriculture in Western Europe in the 1950s-1980s? We can then get easily into discussions about how to generate still a bit more economic growth. I would argue that this has already become very problematic.
    All only very briefly and quick writing. Hope it might still somehow help discussions in Milano 😉
    We will soon have a conference in Brussels on related questions. See In many of our case study areas, smaller farms matter so much in so many respects.
    Greetings, Karlheinz

  2. The question on the relationship between farm size and environmental outcomes is certainly interesting and it would be helpful to have good evidence on it. But to me a more relevant question is which policies are most effective at improving the environmental performance of farming. I bet the answer to that question will have to do very little with directly enforcing or encouraging larger or smaller farms. I think the same reasoning applies to objectives such as animal welfare.

  3. @Karlheinz
    Very worthwhile points, thank you. I tend to agree it may be hard to find generalisations because of the many different types of environmental impacts and there may often be trade-offs between them. Good luck with the RETHINK conference in Brussels in December, a great topic.

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