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

Christiano De Sousa Monaco, Henrique

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https://hdl.handle.net/2142/113247 Copy

Description

Title

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

Author(s)

Christiano De Sousa Monaco, Henrique

Issue Date

2021-06-21

Director of Research (if dissertation) or Advisor (if thesis)

Schnitkey, Gary

Department of Study

Agr & Consumer Economics

Discipline

Agricultural & Applied Econ

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

M.S.

Degree Level

Thesis

Keyword(s)

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

Abstract

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.

Graduation Semester

2021-08

Type of Resource

Thesis

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

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

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