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| Let's game this out.
It's been said on here that "These 100K operations don't make a dent with overall picture of 150 million acres."
O.K.
Let's look at the trends. The trend for some time has been to larger farms. You have certain investors like Jim Rodgers pumping Agriculture. We know what the trend has been on Wall Street. Let's say these trends to "Mega-size" row crop operations really catches on. You start getting investor money pumped in, which, IMHO, is only a matter of time, and is probably already happening anyway. Now, a single 100K acre operation in a small geographic area is going to stress the local COOPS and dealers by simply going around them and buying direct from Wholesalers and even probably direct to suppliers. Would Monsanto sell direct to a 200K acre operation? What would be the effect of 2 or 3 of these 100K operations competing? Small COOPS are going to have to charge more to the existing customers to cover overhead, or go out of business. Some definitely will go out of business. At any rate, this is going to make the existing "smaller" operations in the area less competitive. It's not hard to foresee the mega putting up a fertilizer operation, and essentially, the local operations are forced to buy from the competition, or attempt to upscale and go direct themselves. Well, you say, a fairly small operation can still buy direct from the barge. Yes, but, the logical next step would be for a number of these "Mega" operations, let's say 10 representing, say, 1.5 mil acres, to buy a barge terminal, thereby allowing them to both import and export directly, cutting out the middle man. This further reduces the ability of the existing "smaller" operations to be competitive by now not allowing them access to those products, or, once again, forcing them to buy through their competition to have access. Now, at the same time the "Mega's" are pushing on the sell side. The trend will be for them to sign exclusivity agreements to provide all the grain for certain Ethanol plants, or, perhaps, to own the plants outright. Due to their size and ability to handle large quantities, they will also take over most of the "specialty" markets. Low lin beans, high oil corn, food grade corn, etc, etc. Some of the regional terminal elevators will get bought out. This is already happening in some areas. At some point the smaller operations essentially "collapse" leaving only the "Mega's," some alternative type producers, and some of the very well healed "smaller" operations. If you get enough Billions of Wall Street money pouring in, the changes could come very quickly. The hog industry consolidated in a period of under 10 years without a lot of outside investment. Also, "efficiency" won't make a difference. There is no way that "efficiency" will help you when the other players have virtually unlimited funds. Ask anyone that has farmed in a 1031 bubble about that, or that has tried to farm in an area with a couple operations that are funded by large sums of outside money. The key is to get the acres, weather a few years till the other players go under, and then renegotiate rents/contracts with a much smaller field of players.
Now, some will say this is a fanciful picture, but, if you look at the history of Poultry production, Swine, Beef, etc, this is essentially the way that it has gone. The Auction market structure is essentially gone right now for fat hogs and fat cattle. Feeder cattle hang on due to geographical constraints. Very few geographical constraints will exist to slow these "Mega" crop operations, if, in fact, that model decides to take hold. Now, this isn't talking about social considerations, food safety and security issues, or any of the boundless things that could come up. This is just taking a logical look at the existing "trends" and trying to see where the end point is.
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Farm Consolidation. Trends and endpoints.
