You definitely know the business of farming better than I. That coming and going of profit margins….at some point it gets to be too much for the small farmer to handle I’d have to guess. Prices get hot, so you go out and borrow to get properly setup. About the time you finally start realizing a decent ROI, the prices drop. Depending on just how much your leveraged, the farm that’s been in the family name for a hundred years or more is now owned by the bank.
I certainly would not be surprised if some of the farmers there in western Iowa (Harlan area, where they had a huge tornado this year) have essentially become contractors to the big guys. If it makes business sense and comes at low risk. But you’d have to have maintained your infrastructure for livestock for it to make sense I’d think. Many of those small farmers like my cousin have shut that down. The only building outside of the house are to house machinery or silos / corn bins.
Phil during good times, prices can be contracted to hedge against a severely downturn. Some do (we do) and a lot don't. That is much more about personal choice than size or scale. Although with size and scale come larger risk thus more incentive to hedge. Higher debt level also pushes one to hedge more... but again it is a choice some choose not to participate in. It does have additional cost in the form of brokerage fees, margin calls or fees to cover those, and interest on money tied up. But this is NOT size specific. If you do not have enough scale to fill a contract. There are co-ops and other companies who will facilitate smaller trades or even facilitate direct forward contracting. Your example is a perfect reason to hedge. If prices are good and you are investing based on that, especially borrowing, why would you not protect margins to ensure success?
I've actually tried to time a lot of my expansions to build during a down cycle. It is generally cheaper and more likely to catch the up curve once completed.
The human side and lifestyle has much more to do with farms exiting the business, especially the livestock business. Although a great place to raise kids with a good work ethic, a small livestock farm can be a dreadful lifestyle trap. Very difficult to take a family vacation when that family is the sole labor source and the livestock requires daily care. Those kids with those strong work ethics are highly desired in the workplace and often offered very good jobs. Compared to going into debt and working 7 days per week they more often than not choose the off farm job.
The only way to get out of that lifestyle trap is to expand the operation enough to either involve enough family members or hire employees so that even the owners can take time off. Of course that requires larger investment and most often large debt. Not everyone is wired to handle that. Very often the parents do not want to risk their equity to borrow for an expansion. Thus the farm stagnates and eventually goes out of business. Or as you referenced, becomes a crop farm.... which normally requires renting land from others who quit farming. With modern machinery, a mom and pop crop operation with one kid or employee can be 10,000 acres. They have to pay for that new JD combine and big Quad Track tractor somehow
As to your second paragraph, you really don't understand
The infrastructure that went away needed to.. it was largely Civil War to 1950's era technology. I love the look of the old hip roof barns but they are obsolete. Would you suggest Civil War era medical tools be used as the primary tools in health care today?
Those old livestock facilities would be like Walmart using this as it's model store