2012 Winter - Will corporate agriculture swallow the family farm?

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FPJ0902 - Lynch et al., What can family farms gain from corporate farms business models

 Lynch, B, Llewellyn, R, Umberger (2012), What can family farms gain from corporate farms business models?, in in Farm Policy Journal, Vol. 9, N.2, Winter 2012, pp. 51-62.

The broadacre grains sector of Australian agriculture has traditionally been dominated by family farms. However, in recent years there has been an influx of corporate investment in the sector driven by a range of investors. This has resulted in the development of diverse farm business models with different objectives and risk profiles. Further, the diversity of business models adopted by corporate entities introduces new technical and managerial innovations with the potential to increase profitability and productivity. Limited studies on farm productivity have shown that corporate farms are often more productive than typical non-corporate farms. This paper takes the view that typical family farms may gain from exploring what corporate farms are doing differently to increase productivity. We define and characterise the existing range of corporate farm business models operating in the Australian broadacre sector, in relation with their capacity to innovate. Two broad groups of corporate farm models and their associated sub-model are identified – hub based models and contracting models.Interviews conducted with personnel from six corporate farm businesses revealed the main advantages these businesses consider they hold relative to typical family farms. This includes the scale of farm operations, better access to financial capital, stronger governance and due diligence processes, and increased human capital through labour specialisation. To capture these benefits while retaining the inherent advantages of family farms, alternative hybrid farm models with the potential to increase innovation adoption and improve productivity are discussed. Future research will focus on identifying which hybrid models are most attractive and in what circumstances they provide the most potential to increase the productivity and profitability of family-based farms. 

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