IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v41y2009i1p5-15.html
   My bibliography  Save this article

Empirical dairy profits under fluctuating prices

Author

Listed:
  • Masato Nakane
  • Loren Tauer

Abstract

Production theory suggests that average profits would be greater with more variation in prices, if farmers correctly adjust use of inputs and outputs to changes in prices. We provide an empirical nonparametric analysis of farmers' profits under price changes over 12 years using an unbalanced panel of dairy farmers. Each year that a farm participated, we have quantities of milk and other outputs and usage of 30 different inputs. If that farmer participated in the survey the following year, the profit that farmer would have earned that following year using the netput vector of the previous year and the price vector of the following year was calculated. This passive profit was compared to the actual profit the farmer produced the following year. Of the 2371 observations, 56% show netput vector changes which enhanced net profit implying that as a group, these farmers were not generally able to correctly adjust inputs in response to price changes consistently. Logit regression failed to differentiate characteristics of farmers who were successful.

Suggested Citation

  • Masato Nakane & Loren Tauer, 2009. "Empirical dairy profits under fluctuating prices," Applied Economics, Taylor & Francis Journals, vol. 41(1), pages 5-15.
    • Handle: RePEc:taf:applec:v:41:y:2009:i:1:p:5-15
    DOI: 10.1080/00036840801935393
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840801935393
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036840801935393?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Loren W. Tauer, 1995. "Do New York Dairy Farmers Maximize Profits or Minimize Costs?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(2), pages 421-429.
    2. Afriat, Sidney N, 1972. "Efficiency Estimation of Production Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 568-598, October.
    3. Featherstone, Allen M. & Moghnieh, Ghassan A. & Goodwin, Barry K., 1995. "Farm-level nonparametric analysis of cost-minimization and profit-maximization behavior," Agricultural Economics, Blackwell, vol. 13(2), pages 109-117, November.
    4. Loren Tauer & Zdenko Stefanides, 1998. "Success in maximizing profits and reasons for profit deviation on dairy farms," Applied Economics, Taylor & Francis Journals, vol. 30(2), pages 151-156, February.
    5. Hanoch, Giora & Rothschild, Michael, 1972. "Testing the Assumptions of Production Theory: A Nonparametric Approach," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 256-275, March-Apr.
    6. Jean-Paul Chavas & Thomas L. Cox, 1988. "A Nonparametric Analysis of Agricultural Technology," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(2), pages 303-310.
    7. Varian, Hal R, 1984. "The Nonparametric Approach to Production Analysis," Econometrica, Econometric Society, vol. 52(3), pages 579-597, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yacob Abrehe Zereyesus & Allen M. Featherstone & Michael R. Langemeier, 2021. "Are Kansas farms profit maximizers? A stochastic additive error approach," Agricultural Economics, International Association of Agricultural Economists, vol. 52(1), pages 37-50, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yacob Abrehe Zereyesus & Allen M. Featherstone & Michael R. Langemeier, 2021. "Are Kansas farms profit maximizers? A stochastic additive error approach," Agricultural Economics, International Association of Agricultural Economists, vol. 52(1), pages 37-50, January.
    2. Loren Tauer & Zdenko Stefanides, 1998. "Success in maximizing profits and reasons for profit deviation on dairy farms," Applied Economics, Taylor & Francis Journals, vol. 30(2), pages 151-156, February.
    3. Bar-Shira, Ziv & Finkelshtain, Israel, 1997. "Nonparametric analysis of pooled production data," Economics Letters, Elsevier, vol. 55(2), pages 173-178, August.
    4. Llewelyn, Richard V. & Williams, Jeffery R., 1996. "Nonparametric analysis of technical, pure technical, and scale efficiencies for food crop production in East Java, Indonesia," Agricultural Economics, Blackwell, vol. 15(2), pages 113-126, November.
    5. Jean-Paul CHAVAS & Thomas L. COX, 1994. "A Primal-Dual Approach To Nonparametric Productivity Analysis: The Case Of U.S. Agriculture," Staff Papers 372, University of Wisconsin Madison, AAE.
    6. Featherstone, Allen M. & Moghnieh, Ghassan A. & Goodwin, Barry K., 1995. "Farm-level nonparametric analysis of cost-minimization and profit-maximization behavior," Agricultural Economics, Blackwell, vol. 13(2), pages 109-117, November.
    7. Fare, Rolf & Grosskopf, Shawna, 1995. "Nonparametric tests of regularity, Farrell efficiency, and goodness-of-fit," Journal of Econometrics, Elsevier, vol. 69(2), pages 415-425, October.
    8. Robert G. Chambers, 1989. "Recent Developments in Production Economics," The Economic Record, The Economic Society of Australia, vol. 65(3), pages 243-264, September.
    9. Barnabé Walheer, 2019. "Disaggregation for efficiency analysis," Journal of Productivity Analysis, Springer, vol. 51(2), pages 137-151, June.
    10. W. Erwin Diewert & Kevin J. Fox, 2014. "Decomposing Bjurek Productivity Indexes into Explanatory Factors," Discussion Papers 2014-33, School of Economics, The University of New South Wales.
    11. Chavas, Jean-Paul & Aliber, Michael, 1993. "An Analysis Of Economic Efficiency In Agriculture: A Nonparametric Approach," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(1), pages 1-16, July.
    12. W. Erwin Diewert & Kevin J. Fox, 2021. "The Difference Approach to Productivity Measurement and Exact Indicators," Springer Proceedings in Business and Economics, in: Christopher F. Parmeter & Robin C. Sickles (ed.), Advances in Efficiency and Productivity Analysis, pages 9-40, Springer.
    13. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2008. "Analyzing Cost-Efficient Production Behavior Under Economies of Scope: A Nonparametric Methodology," Operations Research, INFORMS, vol. 56(1), pages 204-221, February.
    14. Cherchye, Laurens & De Rock, Bram & Walheer, Barnabé, 2016. "Multi-output profit efficiency and directional distance functions," Omega, Elsevier, vol. 61(C), pages 100-109.
    15. Nin-Pratt, Alejandro & McBride, Linden, 2014. "Agricultural intensification in Ghana: Evaluating the optimist’s case for a Green Revolution," Food Policy, Elsevier, vol. 48(C), pages 153-167.
    16. Kuosmanen, Timo & Post, Thierry & Scholtes, Stefan, 2007. "Non-parametric tests of productive efficiency with errors-in-variables," Journal of Econometrics, Elsevier, vol. 136(1), pages 131-162, January.
    17. Leleu, Hervé, 2013. "Inner and outer approximations of technology: A shadow profit approach," Omega, Elsevier, vol. 41(5), pages 868-871.
    18. Laurens Cherchye & Bram De Rock & Antonio Estache & Marijn Verschelde, 2015. "Efficiency Measures in Regulated Industries: History, Outstanding Challenges and Emerging Solutions," Working Papers ECARES ECARES 2015-09, ULB -- Universite Libre de Bruxelles.
    19. Ding, Jingjing & Dong, Wei & Liang, Liang & Zhu, Joe, 2017. "Goal congruence analysis in multi-Division Organizations with shared resources based on data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 263(3), pages 961-973.
    20. Aguiar, Victor H. & Kashaev, Nail & Allen, Roy, 2023. "Prices, profits, proxies, and production," Journal of Econometrics, Elsevier, vol. 235(2), pages 666-693.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:41:y:2009:i:1:p:5-15. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.