Economic and management aspects of farm amalgamation

Abstract

Farm amalgamation in the context of this thesis concerns the role of management in the growth of a farm, this source of post-amalgamation economic gains and the factors responsible for the occurrence of natural amalgamation. This study is based on an extensive review of the available literature dealing with the affects of changing farm size. In the review the theoretical basis for analysing economies of size and the concept of the utility defined farm sixe are established. As well as this, several of the alternative analytical procedures used in previous farm size studies are presented for discussion.

The approach taken for this study involved the interviewing of 33 selected farmers in the Malvern County who had amalgamated during the period 1946 to 1970. These selected farms represent an average cross section of farms for the Malvern County, with respect to farm size, equity levels, intensity of production and net income levels.

The survey results and when available, the status quo farm accounts were analysed. The major problem was found to be the degree of uniqueness of each farm situation, this limited the use of the survey results for a more rigorous inter-farm comparison. Non-economic reasons were found to be dominating the land transactions which have resulted in amalgamation. The single most important influence (41 per cent of the transactions studies) was that of farmers purchasing land to enable their sons in the future to participate in the farm business.

Management demands in the post-amalgamation situation were not found to limit farm growth, although one-third of the farmers increased their managerial input in the initial post-amalgamation period. The majority however, predicted a return to their previous level once a status quo situation was again reached.

Long term loans were required by the farmers to ensure that the additional land could operate as an independent economic identity. This has become more important with the premium and the acreage increases for the more recent amalgamations.

Economic advantage in the form of economics of size was rarely found to be of significance, due to the degree of unutilized fixed and semi-fixed resources carried by the farmers in the pre-amalgamation situation. Reductions in the production cost per acre ranging from $0.7 to $1.9 were achieved by several farmers from the greater utilization of the existing resources following amalgamation. This was often sacrificed however, by the unnecessary addition of further fixed and semi-fixed farm resources.