Agriculture Reference
In-Depth Information
histories include an examination of the large Bonanza farms that existed in the Red River
Valley at the turn of the century; the impact of the combine on the organization of wheat
farms; the technical changes in sugarcane processing on the organization of production; and
the emergence of large-scale factory production in the modern livestock industry.
Seasonality and the Dominance of Family Farming.
Our model implies that differences
in nature's parameters (seasonality and random shocks) explain some differences in agri-
cultural organization. Recall that nature's parameters include the number of cycles
(C)
, the
number of stages per year
(S)
, the number of tasks
(T)
in a stage, the length of the stages
2
(L)
. Annual crops with many short
stages, few tasks, and many unpredictable natural phenomena dominate farming in North
America. These are precisely the conditions for which our model predicts that family farm
organization is likely to be chosen. Seasonality in this environment severely limits the gains
from specialization and, accordingly, places a premium on a type of organization that serves
to squelch moral hazard.
When the number of cycles is low, as with annual grain crops like wheat, the gains
from specialization are severely limited (prediction 9.4); the cost of extending a farmer's
duties to adjacent stages is lower, because the opportunity to perform repetitive tasks is
diminished; and timing between stages is more important. For many North American
crops, a low number of cycles is associated with a large number of stages that have few
tasks,
21
a condition that limits the gains from specialization (prediction 9.4) and makes labor
monitoring costs high (prediction 9.6). Production characterized by few cycles is sensitive
to random shocks because hiring workers for a given single task is more expensive because
there are more opportunities for shirking. Taken together, these forces imply that a family
farm organization is more likely to be optimal when the number of cycles is low. Family
units, for example, dominate wheat farms, where there is never more than one crop per year
and (on a per-plot basis) sometimes less when arid conditions require fallowing. As of 1997,
approximately 80 percent of all wheat farms were family firms, and they were responsible
for over 64 percent of all wheat sales. Only 0.025 percent of all wheat farms were nonfamily
corporations, responsible for just 0.6 percent of all wheat sales.
22
When crop production is characterized by many cycles, long stages with many tasks,
and few random shocks, our farm organization model predicts that large, factory-corporate
farms are more likely. Within the United States, the sole (family) proprietor has been
much less common in southern agriculture than in northern agriculture. This is consistent
with the key predictions of our model. For example, before the Civil War the South was
home to large slave plantations for cotton, rice, and sugarcane. These plantations were
large farms that used highly specialized wage labor. As Gray (1941) argues, plantation
agriculture thrived because plantations used a “one-crop system permitting the routinizing
, and the variance in random production shocks
(σ
)
