Direct answer

Loose item entities have merge, motion and tracking costs; items stored in a chest do not behave like loose drops.

How to check it

  1. Use /paper entity list minecraft:item on a supported Paper release and examine the loaded world that contains the farm.
  2. Sample a running grinder at peak output; look for a rising drop count because collection cannot keep up.
  3. Compare lag during item spawning, during water-stream transport and after items enter storage.

Example: Five hundred drops moving through water behave differently from five hundred stacks already stored in chests. Count the loose entities, not the items inside inventories.

What to change

Consolidate collection points, prevent overflowing dropper systems and consider item merge behavior only where compatible with gameplay. Focus on the bottleneck observed by profiling.

Software and version notes

The merge-radius.exp setting refers to initial XP orbs, not dropped items; merge-radius.item is separate. Increased item merging can have edge cases near walls.

Verify the result

Confirm no valuable drops disappear, farm output remains consistent and item counts fall before the next collection cycle.

References