CS - Size And Non-size Effects On The Profitability Of Farms In English Less Favoured Areas

Farms from English less favoured areas (LFA) are separated into size quartiles (measured by grazing livestock units (GLU)/farm) and ranked within these size quartiles by Farm Business Income (FBI)/farm to show size and non-size effects respectively. FBI increases with farm size but some small farms are highly profitable and large farms loss making, showing size is not an insurmountable barrier to or guarantee of business profitability. There is more variability in performance among smaller farm, showing they have better non-scale opportunities for improving performance than larger farms. Business growth by increasing herd/flock size leads to an initial fall in profits because revenues fall faster than costs, suggesting growth trajectories need to either (i) expand GLUs quickly or (ii) increase value added per GLU. Benchmarking clubs are considered better than comparative analysis against industry standards because they reveal more process-type details and afford better insights to developing diversification activities: where diversified income streams cannot be developed the future of small upland hill farms appears bleak.

Key words: English hill farms, business viability, diversification, comparative analysis, benchmarking clubs, unique business signatures