Factors Impacting Farm Growth

By Michael Langemeier and Anil Balchhaudi

There are numerous reasons why a farm may want to expand including the following: reduce per-unit costs, improve profit margins, improve asset utilization, bring in new family members, invest retained earnings, and more fully utilize the skills of key managers (Boehlje and Langemeier, 2016).  In general, larger businesses have lower per-unit costs, higher profit margins, and are able to more fully utilize assets such as machinery and buildings, which improves their asset turnover ratio.  Larger businesses also tend to retain more money in the business.  Langemeier and Mintert (2023) noted that farm operators that expect to grow are relatively more optimistic about current and future prospects for production agriculture than operators who expect their farm’s size to remain unchanged or decline.  In addition to these factors, farm growth may also be influenced by farm goals and characteristics.

A recent survey of 400 U.S. producers was conducted in late February 2025 to assess individual farm goals, producer sentiment, farm growth, succession plans, sustainability and risk preferences, resilience, and adoption of conservation practices.  A previous article focused on farm goals and their tradeoffs (Langemeier, 2025).  This article focuses on the relationship between farm growth, farm goals, producer sentiment, and farm characteristics.

Survey Results Pertaining to Farm Growth

Survey respondents were asked what annual growth rate they expected for their farm over the next five years.  The results for this question can be found in Figure 1.  Approximately 50% of the survey respondents said that their farm either had “no plans to grow” (40%) or “plan to exit or retire (10%).  Respondents who expect their farm to grow “less than 5% annually” or “from 5 to 10% annually” represented 14% and 22% of the total respondents, respectively.  The percentage of respondents who expect their farm to grow 10% or more represented approximately 13% of the respondents.  A farm that expects to grow 10% every year would double in size every 7 years.