SOUTHERN JOURNAL OF AGRICULTURAL ECONOMICS JULY, 1979 FARM GROWTH AND ESTATE TRANSFER IN AN UNCERTAIN ENVIRONMENT

Farm firm growth has been an important Additional uncertainties arise from the status topic for research and discussion since the of family members ' health and longevity. An1950s. Incentives for farm growth have been untimely death may create havoc in the firm and continue to be substantial. An agricultural growth and estate transfer decision process. economy characterized by technological im- One of the frequently overlooked aspects ofprovement, decreasing costs, competition, and the entry-growth-exit process is the relation-an inelastic demand for farm products leaves ship between the desire of a father to reducelittle alternative but growth for a commercial debt and consolidate his operation and that offarm. Farm growth is stimulated by the need his son to expand to a size sufficient to support to achieve size economies that arises partly an additional family. Father-son relationshipsfrom new technology and partly from large in- have assumed greater importance because of vestments in machinery and equipment. the myriad of problems now confronting farm-Growth is encouraged by the improving mana- ers. gerial ability of the operator as he matures and One of the most critical problems in begin-gains experience. Increased family living needs ning and expanding a farm operation is the tre-and the desire to overcome the adverse effects mendous amount of capital required. Values of of inflation on purchasing power spur interest assets and liabilities in the farm sector for se-in improving the farm's earning potential. In lected years from 1940 to 1979 are shown in addition, the operator's goals may include size Table 1 [47, 48]. Value of farm real estate as-aspirations to satisfy the desire for a large op- sets increased by 174 percent to $573.1 billion eration or to support the family of a son or from 1969 to January 1, 1979. Most of this in-daughter attempting to become established in crease was due to increases in the price per acrefarming. Because the pressures for growth, of land. In deflated dollars (1967 equals 100both internal and external to the firm, are long- percent), the value of farm real estate increase