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Due to the economies of scale that I would expect a large farm operation could provide, I would think the US would be dominated by only a few farming companies. But in reality it's populated by a crazy huge number of small "family" farms, and after looking into it a bit more, the EU is mostly small farms as well. Why is this? Is it due to legislation or subsidies that prevent mega-farms from taking over? Or do small farms have some kind of economic advantage over large farms? Maybe there are diminishing returns on economies of scale as you scale the farm up (e.g. tractors can only get so large)?

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  • $\begingroup$ Though there are a lot of small farms, some industries are indeed dominated by a few large agricorps. Did you try to look at some concentration indexes, e.g., what percentage of revenue goes to the top 4 companies in an industry? $\endgroup$
    – Giskard
    Aug 7, 2021 at 6:59

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Subsidies play some role but most important factor according to Eastwood et al$^1$ are principal-agent problems.

Despite increased scale, in many advanced countries the family remains the main source of farm labor. Hired labor supervision costs tend to favor family farming as the equilibrium institution. Theory suggests that the family farm will typically become larger with economic development, but its efficiency advantage over the agroindustrial enterprise will decline.


  1. Eastwood, R., Lipton, M., & Newell, A. (2010). Farm size. Handbook of agricultural economics, 4, 3323-3397.
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