Why are many large agricultural companies in the World not making a profit?

In the photo - harvesting corn in an efficient large agricultural enterprise, which operates 10 thousand hectares of land in Ukraine. It is about 25 thousand acres! But not all large farmers are efficient ...

For this farm we offer improvements that will increase profitability and the total corn yield by 30%!

There are very large agricultural companies that cultivate the soil and grow crops on an area of more than 100 thousand to 1 million hectares in one country alone (it from 250 thousand to 2,5 million acres!). There are international companies operating in different countries up to 5 - 8 million hectares of land (it about 12 - 19,7 million acres!). But why are many of them ineffective and losing money?

What is biggest farms in the World?

Top 10 biggest farms in the World*:

  1. Kidman & Co Ltd  - Australia. Cattle (171,000 cattle), pastures. About 8,000,000 ha.
  2. Australian Agricultural Company (AACo) - Australia. Cattle (340,000 cattle), pastures. About 6,100,000 ha.
  3. North Australian Pastoral Company - Australia. Cattle (200,000 cattle), pastures. About 6,100,000 ha.
  4. Jumbuck Pastoral Company - Australia. Cattle, Sheep, pastures. About 5,750,000 ha.
  5. Handbury Group (Arcoona Cattle Station and Wagyu cattle property Swinging Shovel) - Australia. Cattle, pastures. About 5,280,000 ha.
  6. Williams Cattle Company - Australia. Cattle (36,500 cattle), pastures. 4,500,000 ha.
  7. Paraway Pastoral Company - Australia. Cattle (220,000 cattle), Sheep (250,000 sheep), pastures. 4,481,370 ha. 
  8. Crown Point Pastoral Company - Australia. Cattle (48,000 cattle), pastures. About 4,450,000 ha.
  9. Consolidated Pastoral Company - Australia. Cattle (300,000 cattle), pastures. About 3,600,000 ha.
  10. McDonald - Australia. Cattle, pastures. About 3,600,000 ha.

* By land area. Unfortunately, information about dairy farms in China, which have 9,1 and 4,5 million hectares (that published by LaScalA), is not confirmed from reliable sources, so we did not include them in this rating.

In Australia concentrated biggest land owners in world. In main it is pastures for cattle and sheep. In Russia and Ukraine in main large scale agricultural companies are rented lands from small owners. In photo cattle at Naryilco Station of S. Kidman & Co Pty Ltd. Photo S. Kidman & Co

In photo 150 ha sunflower field in Ukraine.  Photo © Dr. Oleksii Orlov 

World top of countries with the most area of large-scale farms. The largest amount of land is concentrated in large-scale farms in the following countries and regions (% of total agricultural land area):
• Australia - biggest concentration of pastures at big companies in World
• Russia
• Kazakhstan
• Ukraine (see also Top of Ukrainian Large Scale Farms) - biggest concentration of arable lands at big companies in World
• Countries of South America (Brazil, Argentina, Bolivia, Uruguay, Paraguay)
• China

But the amount of land that used by large agricultural enterprises does not correlate with the amount of agricultural products that produced per unit of area.

Grain logistics at AMAGGI, the largest farm, which cultivates about 280 thousand hectares of land in Argentina, Brazil and Paraguay! Photo source:  AMAGGI

Is large scale farming more efficient?

Many people think that large-scale farming is more efficient. But this is a myth. The efficiency and profitability of any business depends from proper management. It often happens that if poorly managed, big business brings big losses and not competitive! This shows the market position of many large scale farming companies! Price of mistakes in industrial agriculture and large-scale farming significant more!

Biggest agricultural farms not always have good management and not competitive.  In this photo - not effective spraying and strong pesticides drift in time of application chemicals in large 1200 hectares orchard in Central Asia. Photo © Dr. Oleksii Orlov 

Many large-scale farms are ruined and taken over by more successful farmers, despite excellent agricultural machinery and equipment. For example, in Russia in 2020-2021, about 5 large-scale farms, which had more than 150-300 thousand hectares, went bankrupt. And many have significantly reduced the amount of land. And this trend is growing! For example, the large-scale farm Ivolga-Holding, which operated 1.5 million hectares of land in Russia and Kazakhstan, went bankrupt in Russia. And now it is reorganized into Olzha Agro and has only about 940 thousand hectares in Kazakhstan. The losses amounted to about 560 thousand hectares!

Very large farmers can have not only very large profits, but also possible and very large losses... Let's consider the main mistakes:

  • Bad management. Responsible decisions are made by owners without taking into account the opinions of experts
  • Management is carried out by persons who have nothing to do with agriculture and do not understand anything in agriculture
  • The clan management system in some countries is a significant decrease in work efficiency
  • Lack of preliminary technical audit and business planning
  • Incorrect investment calculation
  • Overestimating profits and underestimating required investments
  • Investing less than you really need
  • Investing in new lands and projects while the old ones have not yet started to make a profit - the principle of a financial pyramid
  • Mergers and acquisitions of new companies without due diligence and full risk assessment
  • Lack of financial reserve when investing
  • Much higher operating costs than conventional farmers
  • Reduced operating costs
  • Lack of power reserve
  • Lack of control
  • Many large agricultural enterprises do not even know exactly how much land they have and cannot calculate correctly!
  • Lack of energy efficiency
  • Neglect and ineffective use of innovative technologies
  • Low motivation of responsible employees
  • Lack of preparation for climate risks
  • Risks - much higher cost of loss than small farmers
  • Others...

These are the main reasons for failures of large agricultural companies, but in each case the situation is unique and a high-quality technological audit, correct recommendations, author's supervision over the observance of these recommendations and effective management of a large agricultural business help to solve it!

The cost of losses and risks for large scale farms is always higher. Incompetent management and ignorance of climate risks and loss of money due to weather are especially dangerous. The photo shows the death of winter wheat field in a large-scale farm in the Kharkiv region, Ukraine. In March - April 2010, more than 30 thousand hectares of winter wheat and winter rape were frozen in this agricultural holding! Now this large-scale farm has reduced its land by 70% and is on the verge of bankruptcy! Photo © Dr. Oleksii Orlov, 07.04.2010

In the photo one from the biggest poultry farming in Europe that located in Hungary. Complex of problems and not effective management! For obtain high efficiency of large agricultural business need understand main points of efficiency losses in each case. For example at this farm we prepare full technical audit and detect main important problems and create  recommendations for improvement. Photo © Dr. Oleksii Orlov 

One of the largest 20 hectares greenhouse complex. Due to the lack of preliminary market analysis & business plan and mistakes during the construction, there were total losses of at least $2 million by the time of the start of business! Due to improper management, the complex began to generate profits only after 7 years from full capacity launch! The payback period has increased by more than 15 years! Now mistakes that were made at the planning stage cannot be corrected in any way! Photo © Dr. Oleksii Orlov 

The biggest mistakes in a large agricultural business are made before it start, at the planning stage! If business is a very large business - it also requires very large financial reserves. This photo shows hungry cows in one of the 10 largest agricultural enterprises in the World! This was due to insufficient funding for operating costs! Photo © Dr. Oleksii Orlov 

Despite the large number of not effective managing of large-scale agricultural business, there are a small number of profitable and very efficient large farms!

Large scale orchards and plantations. Thanks to the right approach, some large agricultural enterprises are developing successfully. In this photo, our audit of a 20 hectare olive plantation in Georgia, this is part of a large olive plantation of 1100 hectares! Even though the business is doing well, we were able to recommend significant improvements for this business! Photo © Dr. Oleksii Orlov 

Large scale Aquaculture. Large fish farm - about 2000 hectares in Ukraine. This business is built correctly and gives a steady profit by supplying fish to a large city. We have audited this business. We recommended ways to solve difficult and not standard problems. Advising where it is more profitable to invest and prepare Report for improvements to increase profitability and efficiency! 

In an agricultural business, especially a large one, there are many important factors that must be considered in order to achieve success. And a correct understanding of the interaction of these factors and effective management are the keys to success and sustainable development!

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