Darby Minnow Smith in an article for Grist writes:
I didn't find a lot in the report by Food and Water Watch that would seriously substantiate a causation between increasing the number of small farms and higher income for a community. What I did find there was a lot of correlational analysis and, in a few spots, some cherry picking of dates to make the argument more convincing.
First, the article is correct that there is a long-term trend toward fewer, larger farms. The cause isn't corporatization or greed or any of these factors, but rather increased technological progress that substitutes capital for labor and increases the returns to size. The driving force on the other side of the supply chain are we consumers who relentlessly demand lower prices, higher quality, and more consistency.
When discussing the book Meat Racket, I previously listed a bunch of research on effects of vertical integration and concentration in animal agriculture (which is the focus of much of the above report). This review of the research by Michael Wohlgenant, for example, concludes:
Indeed, as I showed in this article in Animal Frontiers, the long run trend is much more output (due to technology gains) resulting in lower prices for consumers.
So, what of the argument that communities with more small farms are financially better off than communities with more large farms? That statistic may be true (or may not; I'm not sure what a representative look at the data would say). But, even if so, I doesn't necessarily imply causation: that more small farms would increase the economic prosperity of a community. Rather, I suspect the causation is the other way around.
Most of the farms in this country are small farms, and you can be defined as a farm if you have just $1,000 is gross sales. Most of these small farms/farmers aren't making a living from farming and they account for a very small share of the value of agricultural output. The USDA classifies some of these as "residential" or "lifestyle" farms. I suspect the more likely direction of causation is that people living in communities that happen to growing for some other reason can afford to take on a "hobby farm." That is, my guess is that economically growing communities spur growth in small farms, not the other way around.
Moreover, if you look at work by my colleagues Brian Whitacre and Trey Malone, what you'll see in their graphs is that farmers markets and CSAs are largely an urban phenomenon. They write:
This leads me to believe that urban areas experiencing economic growth for reasons beyond agriculture are one of the key causes of more small farms. So, again, it's not the small farms causing economic growth and vitality, it's the economic growth and vitality enabling small farming.