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Small U.S. dairy farms: can they compete?

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  • Richard Nehring
  • Jeffrey Gillespie
  • Carmen Sandretto
  • Charlie Hallahan

Abstract

The U.S. dairy industry is undergoing rapid structural change, evolving from a structure including many small farmers in the Upper Midwest and Northeast to one that includes very large farms in new production regions. Small farms are struggling to retain competitiveness via improved management and low‐input systems. Using data from USDA's Agricultural Resource Management Survey, we determine the extent of U.S. conventional and pasture‐based milk production during 2003–2007, and estimate net returns, scale efficiency, and technical efficiency associated with the systems across different operation sizes. We compare the financial performance of small conventional and pasture‐based producers with one another and with large‐scale producers. A stochastic production frontier is used to analyze performance over the period for conventional and pasture technologies identified using a binomial logit model. Large conventional farms generally outperformed smaller farms using most economic measures—technical efficiency, various profitability measures, and returns to scale.

Suggested Citation

  • Richard Nehring & Jeffrey Gillespie & Carmen Sandretto & Charlie Hallahan, 2009. "Small U.S. dairy farms: can they compete?," Agricultural Economics, International Association of Agricultural Economists, vol. 40(s1), pages 817-825, November.
    • Handle: RePEc:bla:agecon:v:40:y:2009:i:s1:p:817-825
    DOI: 10.1111/j.1574-0862.2009.00418.x
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    1. Mosheim, Roberto & Lovell, C.A. Knox, 2006. "Economic Efficiency, Structure and Scale Economies in the U.S. Dairy Sector," 2006 Annual meeting, July 23-26, Long Beach, CA 21440, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Fernandez-Cornejo, Jorge & Nehring, Richard F. & Erickson, Kenneth W., 2007. "Off-Farm Work and Economic Performance: Comparing Crop and Livestock Farms," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon 9904, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Tauer, Loren W. & Mishra, Ashok K., 2006. "Can the small dairy farm remain competitive in US agriculture?," Food Policy, Elsevier, vol. 31(5), pages 458-468, October.
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    5. MacDonald, James M. & O'Donoghue, Erik J. & McBride, William D. & Nehring, Richard F. & Sandretto, Carmen L. & Mosheim, Roberto, 2007. "Profits, Costs, and the Changing Structure of Dairy Farming," Economic Research Report 6704, United States Department of Agriculture, Economic Research Service.
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    1. D’Antoni, Jeremy M. & Mishra, Ashok K. & Blayney, Donald, 2013. "Assessing participation in the Milk Income Loss Contract program and its impact on milk production," Journal of Policy Modeling, Elsevier, vol. 35(2), pages 243-254.
    2. Nehring, Richard & Gillespie, Jeffrey & Hallahan, Charles & Sauer, Johannes, 2015. "The Economics and Productivity of Organic versus Non-organic U.S. Dairy Farms," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196805, Southern Agricultural Economics Association.
    3. Sabine Duvaleix-Tréguer & Carl Gaigné, 2016. "On the nature and magnitude of cost economies in hog production," Agricultural Economics, International Association of Agricultural Economists, vol. 47(4), pages 465-476, July.
    4. Díaz-Fernández, M. Carmen & González- Rodríguez, M. Rosario & Simonetti, Biagio, 2020. "Top management team diversity and high performance: An integrative approach based on upper echelons and complexity theory," European Management Journal, Elsevier, vol. 38(1), pages 157-168.
    5. Thyena Karen Magalhães Dias & Edward Martins Costa & Filipe Augusto Xavier Lima & Helson Gomes de Souza, 2021. "Regional Heterogeneity of the Family Farming in Brazil: an Analysis Using a Spatial Stochastic Frontier," Journal of Agricultural Studies, Macrothink Institute, vol. 9(3), pages 179-214, September.
    6. Nehring, Richard F. & Gillespie, Jeffrey M. & Hallahan, Charles B. & Sauer, Johannes, 2012. "Economic Efficiency of U.S. Organic Versus Conventional Dairy Farms: Evidence from 2005 and 2010," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119769, Southern Agricultural Economics Association.
    7. Nehring, Richard F. & Sauer, Johannes & Gillespie, Jeffrey M. & Hallahan, Charles B., 2011. "Intensive versus Extensive Dairy Production Systems: Dairy States in the Eastern and Midwestern U.S. and Key Pasture Countries the E.U.: Determining the Competitive Edge," 2011 Annual Meeting, February 5-8, 2011, Corpus Christi, Texas 98824, Southern Agricultural Economics Association.

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