The Impact of Energy Prices on Optimum Machinery Size and the Structure of Agriculture: A Georgia Example

Abstract

In analyzing the impact of recent energy price increases on agriculture, agricultural economists have suggested the possibility of substitution of labor for farm machinery inputs [3, pp. 881-833] [17, pp. 195-196]. Since large energy input is embodied in farm machinery [14, p. 195], energy-price increases not only raised costs of machinery fuel, but also provided a cost-push effect on other fixed and variable machinery cost components. However, these potential price incentives have not been sufficient to reverse aggregate historical trends towards larger equipment in current machinery purchases [11, 15]. Understanding the nature of recent shifts in optimum machinery size on different farm sizes is important for consideration of future farm size and labor-capital structure of agriculture.