Defining a Critical Mass Threshold for Agricultural Support Services

The structure of the American agriculture is decidedly changed from that of the previous century. Mechanization and other technological advances have wildly increased the productivity of industrialized operations at the national scale. With downward pressure on commodity prices, incomes to small and medium sized farmers have eroded. Many contemporary family farms now depend on non-farm income to maintain their livelihoods. This decline in the economic viability of lower-intensity agriculture is destabilizing many rural communities. Where small farmers once purchased inputs from local suppliers and sold their products in local or regional markets, the vertical integration of industrial operations are closing off important linkages in the agricultural value chain. With dwindling access to critical products and services, smaller farms face increasing costs of production, coupled with suppressed commodity prices, endangering their long-term financial stability.

This paper poses the hypothesis that there is a threshold, or point of critical mass, in agricultural production, below which a variety of businesses, institutions, and supplier networks that provide support services to agriculture, may be expected to close down or relocate outside the region. Using four counties in western North Carolina as a case study, this paper examines the critical mass threshold for agricultural support services necessary to overcome structural barriers and sustain agriculture in this rural region. The research provides local policy makers with evidence for and against the existence of a critical mass threshold and highlights which support service categories may be most at-risk. These techniques, and the challenges faced by western North Carolina, are generalizable to other rural regions, especially those in Appalachia and other mountainous regions.

The region, in this context, includes the counties of Buncombe, Henderson, Madison, and Transylvania in the western mountains of North Carolina. In western North Carolina, farms are of smaller than average size and face constraints of geography and climate. Steep ridges and narrow valley bottoms limit the cultivatable land area. As a result, many farms achieve subsistence through diversified production; taking advantage of not only the fertile valley floor, but also the grassy slopes for livestock, and timber harvesting on the wooded ridge tops. In the past, the mountainous terrain greatly restricted farmers’ access to global markets. With the introduction of the railroad in the 1800’s, and development of the Interstate Highways in the late 1950’s and 60’s, the region is now strategically well situated for the distribution of goods to the highly competitive markets of the Northeast and South. Unfortunately, it appears that the region’s limited capacity to produce high volumes of agricultural goods restrict its ability to capitalize on this comparative advantage.

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(Author: Aaron J. Nousaine, G. Jason Jolley

Published by Macrothink Institute)