Farm Operator Entry and Exit Behavior: A Longitudinal Analysis

Farm structure is experiencing a persistent change. Since the early 1980s, US farms specializing in crops have constantly declined in number and grown in average size. Crop production has moved to large farms at the expense of small and medium sized farms. This shift in farm structure to more concentrated production is complex. Market forces such as technological change and changing factor input prices are likely contributors as they have been in the past. Another factor that has generated considerable interest is the role of commodity program payments. Commodity payments are tied to a farm’s current or historical production. Therefore, larger farms tend to receive the greatest share of commodity program payments. However, the extent that commodity payments have contributed to farm concentration is under debate. This project proposes to investigate the role farm characteristics, management practices, and government commodity payment programs in farm concentration by studying the entry and exit decisions of farm operators at the county level in the South Dakota. The study will use longitudinal data from the US Agricultural Census to identify farm structures, management practices and individual operator human capital and demographic characteristics. We intend to combine the agricultural census data with regional data on local economic activity, fiscal measures and natural amenities to explain farm producer’s entry and exit decisions.