Top Farmer Conference: January 5, 2024

Explore key factors influencing the U.S. economy & biofuels future. Join us for a one-day conference that will stimulate your thinking about agriculture's future and how you can position your farm to be successful in the years ahead. Attend in person in West Lafayette, Indiana or join us remotely.

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.

Read More

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.

Read More

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.

Read More

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.

Read More

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.

Read More

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.

Read More

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.

Read More

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.

Read More

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.

Read More
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.




Agility and Producer Sentiment

October 3, 2023

Survey of U.S. farmers reveals how a farm’s agility relates to farm growth. Respondents were asked if they had established goals, objectives, and core values; whether their farm looked for opportunities that new enterprises may provide; whether they regularly assessed their advantages and disadvantages compared to other farms.


Absorption Capacity and Producer Sentiment

September 26, 2023

Survey of U.S. farmers reveals how absorption capacity drives farm growth and resilience. Respondents were asked if they had low per unit fixed costs, a diversified enterprise mix, and a strong balance sheet.


Farm Lease Types, Side X Side Digital Webinar

August 8, 2023

Michael Langemeier introduced the types of leases (cash rent, flex rent, and share rent) and discussed the advantages and disadvantages of each leasing arrangement during the August 2, 2023 Side By Side Digital Webinar. A comparison with risk/return tradeoffs between lease types was also included in the webinar discussion.



Purdue Income Tax School: Ag Tax Webinar

December 13, 2023

The 2023 Ag Tax Webinar, part of the Purdue Income Tax School, will provide in-depth coverage of selected agricultural and farm income tax issues to supplement material provided at the two-day in-person or virtual tax schools. The 2023 webinar will be taught by Guido Van Der Hoeven, an expert on agricultural tax issues and one of the authors of the 2023 Agricultural Tax Issues book, on Monday, December 13, 2023, starting at 9:00 am ET.

Read More

Top Farmer Conference 2024

January 5, 2024

A management programs geared specifically for farmers. Surrounded by farm management, farm policy, agricultural finance and marketing experts, and a group of your peers, the conference will stimulate your thinking about agriculture’s future and how you can position your farm to be successful in the years ahead.

Read More

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 November 2023 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.