The Business of Buying department

Dec 1, 2003 12:00 PM

Does a larger farm size translate into lower costs? Apparently only up to 1,200 acres. Below 1,200 acres, per-acre costs are $373 to $449/acre, whereas at more than 1,200 acres, costs are $349 to $376/acre. At more than 1,200 acres, the cost of farming does not increase significantly. A University of Illinois Extension Service study by Gary Schnitkey and Dale Lattz came up with these answers based on 2002 data from farms enrolled in the Farm Business Management Association record-keeping program.

These answers run counter to the common belief that larger farms have better purchasing power than smaller farms do. “Our data does not support this contention because costs are relatively constant across farm sizes,” Schnitkey says. “In particular, crop costs remain constant across larger farm sizes, suggesting that farmers do not have purchasing power with fertilizer, seed or pesticide inputs.” View the report at www.farmdoc.uiuc.edu/manage/newsletters/fefo03_10/fefo03_10.html.

This same study also examined living expenses among the Illinois farm families enrolled in the record-keeping program. Living expenses in 2002 averaged $48,855 compared to $48,097 in 2001, an increase of 2.9%. In spite of the increase, income and social security taxes dropped. Income taxes paid in 2002 averaged $9,867 compared with $11,475 in 2001. The researchers report this is lowest level of taxes paid since 1990. The complete report is available online at www.farmdoc.uiuc.edu/manage/newsletters/fefo03_09/fefo03_09.html.