Location and Economics of Agricultural Production

By the end of this lesson, you will be able to explain how commercial agriculture is a series of economic and locational decisions made by farmers and corporations to increase profit.

How Did My Food Get Here?

We think food gets to our table like this…

But in actuality, the process by which food is produced and transported is more like this…

process web

We really don’t think about where our food comes from or what it is made of. As geographers, this is vital to our understanding of the global food system. This module will make you think about the origins and production of food in very different ways.

Two Types of Farming: Subsistence & Commercial

From the economic viewpoint, there are two types of farming, subsistence and commercial.

Subsistence agriculture is farming with the goal of producing enough agricultural products, both crops and animals, to meet the needs of the farmer and his family.
Subsistence farmers farm small plots of land.
The expense of advanced agricultural techniques limits the amount of production.
This type of farming is predominantly found in less developed countries.

Commercial agriculture’s primary goal is to grow enough crops or raise enough livestock to sell for profit.
Commercial farming relies on larger plots of land, mechanization, and chemical fertilizers and pesticides to increase yields, thereby increasing profits.
Commercial agriculture is found in developing and developed countries.

* This lesson focuses solely on commercial agriculture and the decisions farmers make to increase their profits while achieving high yields for each crop they produce.

As a reminder:

Intensive farming practices maximize crop and livestock output from a small land area using high inputs like capital, labor, fertilizers, pesticides, and technology. It is an agricultural production system designed to maximize crop or livestock output per unit of land. Common intensive crops include corn, rice, and market gardening (tomatoes, cucumbers, lettuce, berries). These systems are designed for high efficiency, often using genetic modification to ensure maximum productivity.

Extensive farming involves cultivating large areas of land with low inputs of labor, capital, and fertilizer per unit of land, often resulting in lower yields per hectare but higher efficiency per worker. Common extensive crops include cereal grains (wheat, barley, corn, oats), soybeans, cotton, and tobacco.

Agribusiness .... Sounds like a made-up word - but it's totally real!

Agribusiness is the business of farming.

It involves integrating various production steps in the food processing industry.

Take a look at this chart:

Vegetable Farming – Agribusiness
Activity	Production Process
Growing Food	Thousands of acres farmed, dependent on mechanization, and fewer farmers
Processing Food	Canning or freezing is done in large factories, often located close to the fields
Selling Food	Sold and shipped to wholesale distributors nationally, regionally, and globally
Financing	Loans from banks to finance inputs
Research	Focused on the development of new seeds, fertilizers, and pesticides

The largest agribusinesses are owned by transnational corporations that operate in different countries. They are commercial, highly mechanized, and often dependent on biotechnology to support the cultivation of crops and the raising of animals.

From Commercial to Industrial

As food production becomes more industrialized and globalized, the economics of farming shift.

This video will explain the shift from subsistence to commercial or industrial farming, as well as the scale of farms, influenced by globalization.

One topic from the video we need to address in more detail is economies of scale.

Economies of scale happen when a company produces more of something and, as a result, the cost of making each item goes down.

For Example:

If you make 1 T‑shirt, you still have to buy a whole bottle of ink, set up the machine, and spend a lot of time, but if you make 100 T‑shirts, you reuse the same tools, the cost of ink is shared across all shirts, and you get faster at printing.

The cost per shirt goes down as you produce more shirts.

📌 THAT’S economies of scale.

Economies of scale help explain why large farms and agribusiness companies dominate the global food industry, why industries cluster in certain places, and why small farms often struggle to compete.

Now let's look at an example as it pertains to agriculture.

We will use corn farming as an agricultural example and compare a small family farm with a much larger commercial farm.

comparison of a small family farm to a large commercial farm

Accessible Version: Farm Comparison

Farmer A: Small family farm

Owns 10 acres
Uses a small tractor
Buys fertilizer in small bags
Pays the same price for fuel, seeds, and tools as big farmers—but uses them less efficiently

Farmer B: Large commercial farm

Owns 5,000 acres
Uses huge, high‑tech machines (like combine harvesters)
Buys fertilizer and seeds in bulk, which is cheaper
Can spread the cost of expensive machinery over thousands of acres

How do economies of scale work here?

1. Machinery Costs Spread Out

A combine harvester might cost hundreds of thousands of dollars.
- Farmer A uses it on only 10 acres → very high cost per acre
- Farmer B uses it on 5,000 acres → very low cost per acre

2. Bulk Buying Saves Money

Large farms buy huge amounts of:
- Seeds
- Fertilizer
- Pesticides
They get discounts, lowering their costs.

3. More Efficient Production

Big farms can hire specialists, use advanced technology (GPS tractors, drones), and operate more efficiently.

The Result:

- The large farm’s cost per bushel of corn is much lower than the small farm’s.
- This is economies of scale: producing more lowers the cost per unit.

As seen in the scenario above, large-scale farms are more profitable than small-scale farms due to economies of scale. Large farming operations can afford mechanization, expensive high-yielding biotech seeds, and large quantities of fertilizers and pesticides to increase yield. As a result, more and more small farms are being bought by larger corporations.

While in the US, small, family-owned farms still make up 86 % of commercial farms in the United States, that number gets smaller every year.

Agribusiness depends upon a commodity chain to get food from the field to your table. As seen in the image below, there are many steps in the food commodity chain.

Corn is the top agricultural commodity produced in the United States, with 2025 being the largest harvest to date, with over 425 million metric tons produced. That is enough corn to fill up 110,000 football fields one meter deep! That’s enough fields to fill every NFL stadium more than 3,000 times!

Now, that’s A LOT of corn!

In the US, this corn is industrial corn. It is not the corn on the cob you eat in the summer or the canned corn in your grandma’s corn casserole. It is grown specifically to be processed into something else – food for cows, pigs, and chickens, biofuel, and high-fructose corn syrup, which is added to many processed foods in the United States.

You can see the steps of the US Corn Commodity Chain below.

Accessible Version: Corn Production Image
This diagram outlines the five main stages of agricultural production, from initial planting to final marketing.

Planting & Growing: The process begins with planting seeds, followed by a growing phase that requires fertile soil, moisture, and chemical inputs.
Harvesting: Crops are harvested using machines, then dried and stored for preservation.
Processing: The harvested materials are packaged or transformed to create other products.
Marketing: The final products are sold for various uses, including animal feed, biofuel, and human food additives.

The Von Thunen Model of Agricultural Land Use (aka - another old person to remember)

The last piece to this puzzle of where our food comes from and why is about location.

From a previous lesson in this module, we know that food is grown where the soil and climate suit its needs, but within those climate zones, farmers still have to make decisions on where to grow their crops to make the most profit.

The Von Thunen Model of Agricultural Land Use helps explain both historical decisions about farming location and the decisions farmers make today.

Von Thunen’s original model was only applied at the local scale and did not account for climate, but when we apply it at the national scale to the United States, with NYC (the largest US city) as the central market, we can see that even with climate variation considered, the model is actually still fairly accurate.

So, you now know that food production is not a miracle, but an interconnected series of inputs, climate, and locations of production that get food from the fields to your local grocery store and to your table.

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