Economic Factors Affecting Farming

Economic Factors Affecting Farming

Studying the economic factors affecting farming helps in determining the profitability of agriculture. However, it should be noted that the success of farming depends on various other factors as well, including the decisions made by the farmer. For instance, a farmer must always decide on the best land to use, crops to grow and how to handle other activities in the farm so as to generate maximum yields. The economy is one of the key elements of decision-making that farmers should always consider.

Farming is of great significance to the economy considering it accounts for a greater percentage of the materials we use on a daily basis. Besides, farmers also export and import large quantities of agricultural products. This implies changes in the economic status of a country or region can potentially affect farming practices. However, farming also involves a variety of risks.

The Main Economic Factors Affecting Farming

There are different kinds of economic factors affecting farming, however, not all can have significant impacts. The following are the main factors that farmers should look into when making decisions.


For farmers to effectively conduct profitable agricultural practices, they need enough finance. Making an investment in farming requires land, machinery, fertilizers, and seeds among other inputs.

If a farmer has enough inputs for farming, he or she is likely to have a good harvest. In fact, the results can even be more amazing if the farmer has more capital to expand the investment. The greater the investment, the higher the chances of more profits.


The size of the farm and activities conducted therein determines the workforce required by the farmer. However, there are instances whereby labor can be quite expensive such that farmers are unable to hire the required workforce. As a result of this, productivity is decreased, causing low yields.

On the other hand, cheap labor can be a great advantage to farmers since it enables them to hire enough workforce for maximum yields. This will cut down the operational costs for farmers, thereby ensuring a wider profit margin.


For farmers to benefit from their produce, there must be markets. Without a market or a place to sell their products, a large quantity will go to waste. Thus, farmers should always study the market trends and know the products that are in demand in order to meet the needs of customers.

Market trends keep changing based on lifestyles, technology, and climate among other factors. Hence, farmers must keep up to speed with these changes in order to ensure a profitable market for their produce.


Some countries, like the USA offer subsidies on certain crops, which ensures greater profits to farmers who produce them. In such arrangements, it is considered that mass production of agricultural products benefits the economy by keeping prices on the low. If a farmer chooses to invest in crops that have subsidies, there are higher chances of increased profitability since they are able to make money regardless of the prevailing market conditions. However, this policy may only apply to farmers in countries where it is operational.

Prices of Agricultural products

Apart from just looking at the general atmosphere in the market, farmers should also narrow down to the prices. The prices of commodities vary from one market to another and are based on a number of factors. However, farmers must be sure to invest in commodities that can fetch better prices in the market for impressive returns. If a farmer invests in a crop shoes prices are quite low in the market, the profit margin will be reduced leading to low returns.

The government can also be listed among the key economic factors impacting farming, considering it plays a role in the decisions regarding crops to be grown, recommended farming practices among others through regulations. Some governments offer advisory services, training and financing to farmers, hence are critical in the farming decisions and results.


Among the key economic factors affecting farming outlined above, there are some that can be controlled by farmers and others that cannot be manipulated. However, farmers should always strive to make decisions that encourage recommended farming practices for greater yields to sustain the rapidly growing population.

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