Farm Management Tour: July 17, 2024

Learn about innovative farm management strategies, new technologies for improving efficiency and productivity, ways to ensure a successful transition of farm operations to the next generation. Join us at the 91st annual Purdue Farm Management Tour and reception honoring the 2024 Indiana Master Farmers in Randolph County (Winchester), Indiana on Wednesday, July 17th.

May 8, 2018

Farm Growth: Challenges and Opportunities

by Michael Langemeier and Michael Boehlje

Farm size and growth are often discussed in the context of economies of size. Previous research suggests that the average cost curve in production agriculture is downward sloping or at a minimum L-shaped (Langemeier, 2013). Thus, in general, larger businesses have lower costs of production. Other motivations for farm growth include to provide opportunities to more fully employ the skill sets of managers, to add family members to the operation, and to receive better prices on inputs and products sold. In fact, farm growth is a “natural phenomena”, in part because successful farm businesses have earnings that they must deploy, and using these earnings to expand the farm business is a logical choice.

Today’s environment in which risk and uncertainty are dominant forces may seem like an odd time to think about farm growth. Risk is perceived by many individuals to be something that is “bad”. However, entrepreneurs and business owners realize that without some risk and uncertainty, there is likely to not be much return or reward. Also, it is important to note that risk and uncertainty have both an upside and a downside (Boehlje, 2015). The key management challenge is to mitigate downside risk and try to capture the upside associated with risk.

This article discusses ten questions that should be addressed when examining the challenges and opportunities associated with farm growth. Future articles (listed at the bottom of this page) will delve into some of these questions in more detail.

Why Grow?

There are numerous reasons why a farm may want to grow including the following: reduce costs, improve profit margins, improve asset utilization, bring in new family members, invest retained earnings, and more fully utilize the skills of key managers. Before growing, it is essential for an operation to think about their strategic direction. Is the operation interested in a commodity based strategy or a differentiated product strategy? A commodity product strategy focuses on cost control. In contrast, a differentiated product strategy focuses on value-added production or receiving an above average price for the farm’s products. As an operation continues to think about growth, how growth impacts strategic direction needs to be addressed.


What are my Options to Grow?

November 8, 2017

Farms have numerous options that can be explored when examining farm growth and downsizing decisions. When evaluating alternatives, it is important to gauge the impact of each alternative on net returns, risk, and the farm’s resource base.

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What Strategic Issues Should Influence my Growth Options?

December 12, 2017

When evaluating growth options, it is important to identify key resources and capabilities, and to evaluate the business environment, and assess opportunities and threats. The idea is to use the farm’s key resources and strengths to pursue potential opportunities.

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How Should Farm Growth Options be Evaluated?

January 8, 2018

When evaluating business venture opportunities, it is important to gauge the impacts of these options on strategic fit, expected returns and risk, capital structure, ease of entry and exit, value creation, and managerial requirements.

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What Skills and Competencies Do I Need to Grow?

February 12, 2018

When evaluating farm growth options, it is imperative that a farm evaluate the skills and competencies needed to grow. These skills are often more limiting than capital, and can become spread very thin.

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How Do I Finance the Growth of My Operation?

February 13, 2018

Retained earnings, net farm income remaining after operator withdrawals, off-farm income, transfer of funds into the business, and debt financing can be used for farm growth. When using debt, is important to consider how risk is impacted by leverage.

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What Business Model Should I Use to Grow?

March 8, 2018

The business model a farm uses when expanding the operation is not just limited to the traditional organic or internal growth model. Today’s environment provides opportunities to experiment with other business models.

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How Will Expansion Impact My Current Operation?

April 8, 2018

Expansion is likely to impact farms in numerous ways. Each expansion option should be evaluated in terms of its impact on the farm’s financial statements, financial performance, and managerial attention and oversight.

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What are the Start-Up Challenges Associated with Farm Growth?

April 8, 2018

Start-up challenges may include cash flow shortages and depleted working capital, operational inefficiencies, and management bottlenecks. Comparing and contrasting these challenges among expansion options helps mitigate potential start-up challenges.

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What is My Sustainable Growth Rate?

May 8, 2018

A farm’s sustainable growth rate depends on the farm’s return on equity and its components. A farm with a higher profit margin, a higher asset turnover ratio, a higher ratio of assets/equity, and/or a lower percentage of owner withdrawals to net farm income will have a higher sustainable growth rate.

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Farm Growth: Challenges and Opportunities Series

Final Comments

Growth enables farm businesses to increase revenue and earnings, take advantage of economies of size, and to more fully utilize the skills of current and future employees. This article briefly discussed ten questions that should be examined when thinking about farm growth. Future articles will elaborate on several of these ten questions.



Boehlje, M. “Farm Growth: Venture Analysis and Business Models.” Center for Commercial Agriculture, Purdue University, January 2013.

Boehlje, M. “Managing in Turbulent Times: Positioning to Capture the Upside, Buffer the Downside.” Center for Commercial Agriculture, Purdue University, June 2015.

Boehlje, M., C. Dobbins, and A. Miller. “Are Your Farm Business Management Skills Ready for the 21st Century?” Center for Commercial Agriculture, Purdue University, August 2000.

Langemeier, M.R. “Measuring Economies of Size with Expense Ratios.” Journal of the American Society of Farm Managers and Rural Appraisers. 76(2013):222-235.

Langemeier, M. “Identification of Unique Resources.” Center for Commercial Agriculture, Purdue University, June 2016.




Managing Strategic Risks on Your Farm

May 24, 2024

Purdue University’s Center for Commercial Agriculture recorded a series of short podcasts and accompanying videos to help agricultural producers improve their strategic risk management skills. Farms are exposed to strategic risks that are caused by a wide variety of unanticipated shocks to the operating environment ranging from government policy shifts to disease outbreaks.


Key Resources

May 24, 2024

Advancements in production agriculture continue to accelerate making the business environment more complex and creating a significant need for a forward-thinking mindset. Develop an integrated risk management approach and build a strategic plan now.


Farm Resilience, Management Practices, and Producer Sentiment: Segmenting U.S. Farms Using Machine Learning Algorithms

April 4, 2024

Margaret Lippsmeyer, Michael Langemeier, James Mintert, and Nathan Thompson segment U.S. farms by farm resilience, management practices, and producer sentiment. This paper was presented at the Southern Agricultural Economics Meeting in Atlanta, Georgia in February. 



Purdue Farm Management Tour & Indiana Master Farmer Reception 2024

Two outstanding farms in east-central Indiana will host visitors wanting to learn about farm and crop management on July 17th for the Purdue University Farm Management Tour. The Indiana Master Farmer reception and panel discussion will follow.

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2024 Crop Cost and Return Guide

November 22, 2023

The Purdue Crop Cost and Return Guide offers farmers a resource to project financials for the coming cropping year. These are the March 2024 crop budget estimations for 2024.


(Part 2) Indiana Farmland Cash Rental Rates 2023 Update

August 7, 2023

Purdue ag economists Todd Kuethe, James Mintert and Michael Langemeier discuss cash rental rates for Indiana farmland in this, the second of two AgCast episodes discussing the 2023 Purdue Farmland Values and Cash Rents Survey results.


(Part 1) Indiana Farmland Values 2023 Update

August 6, 2023

Purdue ag economists Todd Kuethe, James Mintert and Michael Langemeier discuss Indiana farmland values on this, the first of two AgCast episodes discussing the 2023 Purdue Farmland Values and Cash Rents Survey results. Each June, the department of agricultural economics surveys knowledgeable professionals regarding Indiana’s farmland and cash rental market.