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Estimates of Individual Dairy Farm Supply Elasticities

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  • Tauer, Loren W.

Abstract

Milk supply elasticities were estimated for 70 farms who participated in the New York Dairy Farm Business Summary Program from 1985 through 1993. Technology was modeled as a single output, single composite input Cobb-Douglas function. The resultant supply function is the natural log of milk quantity as a function of the log of milk price to prices paid for all inputs, with a time trend added. Since random output shocks to each farm may have occurred in any of the nine data years, a dummy year variable was modeled sequentially for each year for each farm. Ignoring 12 negative estimates, elasticities averaged .65. Pooling the data with a fixed effects model produced an elasticity estimate of .47. A geometric lag pooled model produced a short-run elasticity of .2 and a long-run supply elasticity of 1.00 using instrumental variables, but an OLS short-run elasticity of .25 and long-run elasticity of .64.
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Suggested Citation

  • Tauer, Loren W., 1998. "Estimates of Individual Dairy Farm Supply Elasticities," Working Papers 179370, Cornell University, Department of Applied Economics and Management.
    • Handle: RePEc:ags:cudawp:179370
    DOI: 10.22004/ag.econ.179370
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    File URL: https://ageconsearch.umn.edu/record/179370/files/Cornell_Dyson_wp9808.pdf
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    References listed on IDEAS

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    1. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    2. Adesoji O. Adelaja, 1991. "Price Changes, Supply Elasticities, Industry Organization, and Dairy Output Distribution," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(1), pages 89-102.
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    1. Key, Nigel D. & Sneeringer, Stacy & Marquardt, David, 2014. "Climate Change, Heat Stress, and U.S. Dairy Production," Economic Research Report 186731, United States Department of Agriculture, Economic Research Service.
    2. Chung, Chanjin & Kaiser, Harry M., 2000. "Do Farmers Get An Equal Bang For Their Buck From Generic Advertising Programs? A Theroetical And Empirical Analysis," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(1), pages 1-12, July.
    3. Kravchenko, Alexey, 2012. "Estimating Dairy Farms’ Demand for Water," 2012 Conference, August 31, 2012, Nelson, New Zealand 136048, New Zealand Agricultural and Resource Economics Society.
    4. Escalante, Cesar L. & Turvey, Calum G. & Barry, Peter J., 2006. "Farm-Level Evidence on the Sustainable Growth Paradigm from Grain and Livestock Farms," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25329, International Association of Agricultural Economists.

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