By Bradley Zwilling
The notion that larger farms operate with a different—and often lower—cost structure is a common viewpoint. It seems logical that more acres allow for spreading fixed costs and that purchasing in larger quantities can lead to discounts. This would indicate that as farms increase in size that costs are lower. With that in mind, let’s review some costs looking at Illinois Farm Business Farm Management (FBFM) data from four groups of farms and draw our own conclusions. The data is a four-year average from 2021 through 2024. The costs used from the FBFM data set are on an accrual basis. We will look at selected per acre costs on increasing average farm size (in acres) for farms in northern Illinois, central Illinois, and southern Illinois.
Crop Costs
For the four-year average, total crop costs in central Illinois show little variance as farm size increases. Northern Illinois shows declining crop costs as farm size increases, while Southern Illinois experiences rising crop costs up to the 4,000-acre mark, after which costs begin to decrease. Crop costs from Illinois FBFM data include fertilizer, pesticides and seed. A closer look at each of the components of crop costs reveals some differences in cost per acre as farm size increases. Northern Illinois does show lower crop costs as farm size increases over 4,000 acres but not much variance before that acre size. Central Illinois shows the same trend for fertilizer and pesticides, but little variance in the cost for seed as farm size increases. Fertilizer costs increase as acreage grows to 4,000 acres, while pesticide and seed costs show little variation, but all 3 crop costs decrease for the 4,000 acres and above group in southern Illinois.
Source : illinois.edu