“Waiting for Godot”- Restructuring on Small Family Farms

This paper examines the extent to which favourable off-farm labour market conditions coupled with growth in land values have contributed to the observed resilience of small scale family farms. We use data from Northern Ireland and employ farm household optimisation models to analyse household decision making processes that contribute to the observed inertia in farm structure. The analysis indicates that farm household behaviour is influenced not just by current farm income, but also expected capital asset returns. Increased wealth, associated with continuing land ownership, gives rise to the proposition that the link between off-farm incomes, increased land values and remaining in farming may be associated with farmers pursuing wealth maximizing objectives, whilst still maintaining a rural way of life. Alongside increased wealth through land ownership the farm household model quantifies the importance of off-farm income removing the pressure from farming income to fund all family consumption needs. This enables households to sustain low-income farming activities in order to pursue other objectives such as wealth management (including tax efficient transfer of wealth) and lifestyle. Consequently, the results indicate that the survival of small-scale family farms may be much less sensitive to agricultural support policies than has been commonly suggested. In an extension that explores the effects of the recent economic turbulence due to the ‘credit crunch’ we find that the households remain resilient even when subjected to a protracted period of reduced off-farm employment.