Commodity production can be massively profitable. Low cost commodity producers make boatloads of cash. Saudi Aramco is exhibit A.

The price of a commodity is the cost of the marginal producer. For oil, a marginal producer is Canadian oilsands oil. It costs them $50 - $70 a barrel to produce their oil, and another $10 to ship to market. Thus the price of a barrel of oil is typically $60 - $80. If it drops below that the Canadian oilsands producers shut down, and the next most expensive producer becomes the marginal producer. (example highly over simplified)

OTOH it costs Saudi Aramco $10 per barrel to produce their oil. They make insane profits.

American farmers are not quite Saudi Aramco levels of profitable, but they are not the marginal cost producers. Large, highly mechanized farms means American farmers have extremely low labor costs compared to the rest of the world.

The last 20 or so years have been extremely profitable for American farmers.

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Retric a day ago | parent | next [-]

American farmers aren’t some universal entity here. Of course it’s farm subsidies and tariffs that most heavily influence the economy reality for most American farm land, but the average small farm in the US isn’t particularly profitable. In many cases it’s closer to a hobby project than the sole income for a family.

It’s not even just a question of economies of scale, many east coast farmers grow corn just fine without any irrigation systems that’s a lot of capital you can spend on something else. Being able to lease out a tiny fraction of your land for a co-located wind farm alongside agriculture is a huge boon for many. And so it goes across a huge range of different situations.

All this variability is why you don’t see 20+% of US farmland under one giant corporation the way you see in many other industries which benefit more from economies of scale.

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bryanlarsen a day ago | parent [-]

The average "small" farm in the US is very large and very mechanized compared to an average farm in Europe, Asia or Africa. But when I say the advantage derives from being large and mechanized, it does imply that American farms that are less large and less mechanized do not do nearly so well.

	▲	Retric 21 hours ago \| parent [-]
		When talking about all those “family farms” in Europe with less than 10 acres that’s not the majority of farmland or necessarily a major revenue sources for those families. I known a few people in America who call a several acres of plants their garden, so in many cases there are direct parallels they just don’t call them farm or get agricultural subsidies.

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JumpinJack_Cash 15 hours ago | parent | prev [-]

> > OTOH it costs Saudi Aramco $10 per barrel to produce their oil. They make insane profits.

What is the source for this 10 bucks figure?