An analysis of issues related to economies of size in Saskatchewan crop farms

Abstract

Farm size economies size measure the relationship between the size of operation and the average cost of production. Along with increasing farm size, the average cost of production per unit may decline. One reason farms have been growing in size is that larger sized farms tend to have more recent and advanced machines capable of covering more land with less labor. However, it is still questionable how farm size affects on input costs and field operation costs in Saskatchewan. The major objective of this study was to examine the issues related to size economies in larger crop farms in Saskatchewan. The project has taken a different approach than is traditionally done in economies of size research where various forms of statistical data are analyzed. First, the study analyzed several different operating and investment costs to see whether they are decreasing or staying the same as a result of increasing farm size. Next the study determined the probabilities of available field workdays using conditional probability equations derived from the Markov Chain method. The analysis was carried out for the West central and East central Saskatchewan regions’ to determine spring and fall field workability. Based on the field workdays estimation, the optimal area of combine for larger farms were analysed using a least-cost machinery size approach. The last part of this study analysed farm operational costs per unit for larger crop farms in order to determine how machinery efficiency and farm size have an effect on the farm production costs. The study found that however there were certain combine costs that increase with farm size in Saskatchewan. In addition, soil types, weather conditions and field efficiency can strongly affect combine cost per acre. The results of this research provide a reference for policy makers in designing policy recommendations. In addition, the results may offer useful information for farmers in designing management plans to control farm operation costs.