Document Type

Thesis - Open Access

Award Date

2016

Degree Name

Master of Science (MS)

Department

Economics

First Advisor

Matthew Diersen

Abstract

Census of Agriculture data are evaluated to test for economies of size of South Dakota farms. Economies of size occur when per-unit costs decrease as the size of a firm increases. This research measures technical economies of size, which assume that all firms pay identical input prices and receive identical output prices. The dependent variable of the model is expenses per dollar of sales. This is a typical measure of efficiency in agricultural statistics. The data come from the four prior Census of Agriculture years, 1997, 2002, 2007, and 2012. A state-wide model and a county-wide model were developed to test for economies of size of South Dakota farms. Evidence of economies of size was found at both the state and county levels. The state-wide model suggests that economies of size are present on farms with sales of approximately $100,000 or greater. An important implication of this finding is that a large proportion of South Dakota farms appears to be achieving economies of size. The county-level model was used to further analyze factors that were postulated to influence economies of size and farm efficiency. By controlling for both spatial and temporal influences, it was found that the higher the proportion of crop sales, and the higher the proportion of farms with over $100,000 in sales, the more economically efficient farms by county were found to be. Specifically, a one percent increase in the proportion of crop to total county sales was found to decrease expenses by $0.12 per dollar of sales, ceteris paribus. Similarly, a one percent increase in the proportion of farms with over $100,000 in sales was found to decrease expenses by $0.14 per dollar of sales, ceteris paribus. The main findings of this research are: 1) a large number of farms in South Dakota show evidence of economies of size, 2) counties with higher average farm sales show advantages in farm efficiency over counties with lower average farm sales, and 3) counties with a higher proportion of crop sales have lower expenses per dollar of sales. During the sample period, large shifts in farm size and cropping practices occurred. Specifically, large increases in acres of soybeans and corn were observed along with significant increases in commodity prices. These factors certainly influence the results shown in this research, and will continue to influence the structure of agriculture in South Dakota.

Library of Congress Subject Headings

Farms,

Size of -- Economic aspects -- South Dakota

Farm management -- South Dakota

Economies of scale -- South Dakota

Economies of scope -- South Dakota

Description

Includes bibliographical references (page 72-74)

Format

application/pdf

Number of Pages

83

Publisher

South Dakota State University

Rights

Copyright © 2016 Henry Brown

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