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You get more plants per unit of farm surface.
25*10% chances are better than 10*10% (modified by same farmer skill). But 2(10*10%) will have shorter down times and more regular production for the dependent crafting.
Therefore the larger farms use less space and less water per plant and the trade off for that is they are less efficent with the "seed plants" when building the farm and if your farmers aren't skilled enough it may take too long to harvest and some plants die.
ie. small uses 10 to plant 25, but medium uses 25 to only plant 40 (of course that's only a one time investment not every harvest)
The rate of growth -fertility and the %chance of success are based on location (prospecting) not the farm size.
The farm size, only influnces how many potential crops are availbe for harvest.
Harvest rate/chance of success is modified by skill of farmer(s), on a per attempt basis.
If one has good farmers and high fertility then 1 XL farm is good. But in the slower growing areas, there's a huge downtime between harvests, hence more fields and its harder to set the fields up because of the reduced crop ouput so keeping them small reduces initial costs. The overall output will be lower, but should be far more steady... which fits better with production lines.
Overtime one can of course gradually upgrade at no real loss, just remember to keep the fields lit, so one doesn't end up harvesting the XL fields into the night and loosing the crop.
I'm not sure about water consumption mechanic, i believe its universal... but the lower the fertility% the quicker the health of the crop deteriorates when lacking water is my observation, would need confirmation on this. There's also the lack of water stops growth so its important to keep the fields under regular supply for fast and healthy harvests. Or pick a base location that naturally has rain.
check out the Food production guide on ste guides section its very good and informitive about everything ye asked :P
Like asking why you want have a auto well and windmills. Your crew has better stuff to do then try always work ineffectively. Why have a cow/horse draw your field plows. Just do all the work your self.