Student Corner: Is Critical Mass Necessary for Economic Sustainability in Agriculture?

Community and Economic Development – Blog by UNC School of Government

https://ced.sog.unc.edu

Student Corner: Is Critical Mass Necessary for Economic Sustainability in Agriculture?

By CED Program Interns & Students

Published March 8, 2011

Aaron Nousaine is a UNC-Chapel Hill graduate student pursuing a master’s degree in City and Regional Planning. He is currently working with the Land-of-Sky Regional Council in Asheville through the Carolina Economic Revitalization Corps (CERC).

As the irreversible loss of agricultural land becomes of greater concern, some have questioned whether a critical mass of farmland or agricultural production is required to maintain the economic viability of the industry (Lapping, 1982).  This threshold or “critical mass” concept relies on the assumption that as cultivated acreage and aggregate farm productivity decline, the ratio of costs to revenue will rise, driving support businesses to close or relocate.  With suppliers and processors exiting the region, the nearest alternative may be much farther away, adding to the farmer’s transportation costs.  These other firms may also charge higher prices for products and services.  These increases in costs combined with other factors may significantly impact the competitiveness of regional agriculture, leading even to large scale collapse.

Lynch and Carpenter (2002) analyzed historical data for 1949 to 1997 and found evidence that counties with less than 150,000 acres of farmland had a higher rate of agricultural land conversion than counties with 250,000 or more.  The caveat, however, is that in an analysis of only more recent years (1978 to 1997) the authors found no evidence of a critical mass threshold.  This suggests, as the authors note, that technological change and crop diversification may play a role in determining, and possibly overcoming, this threshold effect (Lynch and Carpenter, 2002; 2003).

Research currently underway in partnership with the Land-of-Sky Regional Council in Asheville, North Carolina, is attempting to establish if, and at what level, a critical mass threshold might exist in the region.  To date, most agriculture supporting businesses have indicated that their service market areas are sufficiently large, and their product lines sufficiently diversified, that a reduction in harvested acreage within any particular crop or county in the Land-of-Sky region alone would not critically affect their businesses’ viability.  These businesses typically offer a variety of products intended to appeal to a broad subset of producers located throughout western North Carolina, South Carolina, eastern Tennessee, northern Georgia, and Virginia.  Rather, structural changes to the multi-regional and national agricultural economies would be required to reduce the competitiveness of the remaining agricultural producers, creating a cumulative effect.

This is the second in a series of posts that explore some of the issues and trends surrounding agriculture and agricultural support service provision in the Land-of-Sky region of western North Carolina.