Next time someone makes that argument, I'll point them to this excerpt from Eat Here by Brian Halweil (bigger excerpt available here):
Perhaps most surprising to people who have only casually followed the debate about small-farm values versus factory-farm “efficiency” is the fact that a large body of evidence shows that small farms are actually more productive than large ones, producing as much as 1,000 per cent more output per unit of area.* How does this jibe with the often-mentioned productivity advantages of large-scale mechanized operations? The answer is simply that those big-farm advantages are always calculated on the basis of how much of one crop the land will yield per acre. The greater productivity of a smaller, more complex farm, however, is calculated on the basis of how much food overall is produced per acre. The smaller farm can grow several crops utilizing different root depths, plant heights, or nutrients on the same piece of land simultaneously. It is this “polyculture” that offers the small farm’s productivity advantage.
*Peter Rosset, “The Multiple Functions and Benefits of Small Farm Agriculture,” Policy Brief No. 4 (Oakland, California: Food First/Institute for Food and Development Policy, September 1999), pp. 12, 13.