The Organizational System to Maintain Family Farms in Germany

Abstract

In Germany, as in other countries, agriculture has been continued through family farms and the definition or recognition of “family farm” has been discussed historically. The purpose of this study is to make it clear how the family farm has been maintained and dominant in agriculture. First, the farm expansion process after World War II was examined and showed how farms have procured the resources (farm land, labor forces, machinery) for business expansion. The average size of German farms has quadrupled in the 60 years from 1950 to 2010. This enlargement has been achieved mainly by leasing farm land. Even with this expansion, most farms in Germany have not changed into “corporate farms” but kept the “family farm” organizational form, which means that the farm owner is the manager as well as the main production worker and that more than half of labor is provided by family members. This is possible through mechanization. Agriculture is a capital intensive industry and huge investments are needed. But financial analysis shows that the machinery capital has not increased so much at the farm level. Analysis revealed that farms can save investments thorugh contract farming.
Second, the economic advantage and merit of contract farming is examined. In Germany, farm contractors and machinery rings are most developed in the world, and they form an arranging system for contract farming in regional agriculture. The system has developed the partnership between individual farms in order to outsource part of farm work. In this system, farms can save investment capital and family labor and maintain organizational flexibility. These points are the most important in this contract farming system.
Finally, it is pointed out that the contract farming management system has formed an economic environment for maintaining “family farm” and that the management system promotes the diversifica tion of the family farm business. The contract farming management system furthers the diversification of family farms and works as a network between various individual farms for their further existence.