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Does Intensification Help to Improve the Economic Efficiency of Dairy Farms?

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  • Álvarez, Antonio
  • del Corral, Julio
  • Solís, Daniel
  • Pérez, José Antonio

Abstract

During recent decades the dairy sector has shown a global tendency towards intensification. This structural change may have significant effects on farm efficiency. The goal of this study is to offer an empirical analysis of the effect of intensification on dairy farming. To do this, we first classify our sample of dairy farms according to their level of intensification using a cluster analysis. We then estimate independent stochastic cost frontiers for each group of farms and calculate their levels of efficiency. The methodology used in this article allows for the presence of different technologies within the sample, a methodological issue frequently avoided in the empirical literature. The empirical results show that intensive farms are closer to their cost frontier than the extensive ones, suggesting a positive relation between intensification and efficiency.

Suggested Citation

  • Álvarez, Antonio & del Corral, Julio & Solís, Daniel & Pérez, José Antonio, 2007. "Does Intensification Help to Improve the Economic Efficiency of Dairy Farms?," Efficiency Series Papers 2007/04, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    • Handle: RePEc:oeg:wpaper:2007/04
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    1. Carol Newman & Alan Matthews, 2006. "The productivity performance of Irish dairy farms 1984–2000: a multiple output distance function approach," Journal of Productivity Analysis, Springer, vol. 26(2), pages 191-205, October.
    2. Benaissa Chidmi & Rigoberto A. Lopez & Ronald W. Cotterill, 2005. "Retail oligopoly power, dairy compact, and Boston milk prices," Agribusiness, John Wiley & Sons, Ltd., vol. 21(4), pages 477-491.
    3. Boris E. Bravo-Ureta, 1986. "Technical Efficiency Measures for Dairy Farms Based on a Probabilistic Frontler Function Model," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 34(3), pages 399-415, November.
    4. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
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    Cited by:

    1. Álvarez, Antonio & Arias, Carlos, 2013. "Are dairy farms becoming more intensive? Impact on farm efficiency," Efficiency Series Papers 2013/01, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    2. Jiang, Nan & Sharp, Basil, 2014. "Cost Efficiency of Dairy Farming in New Zealand: A Stochastic Frontier Analysis," Agricultural and Resource Economics Review, Cambridge University Press, vol. 43(3), pages 406-418, December.
    3. Sauer, J. & Morrison-Paul, C., 2011. "Technologies and Localized Technical Change," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 46, March.
    4. Orea, Luis & Pérez, Jose A. & Roibás, David, 2013. "Evaluating the double effect of land fragmentation on technology choice and dairy farm productivity: A latent class model approach," Efficiency Series Papers 2013/08, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    5. del Corral, J., 2009. "Studying the Impact of Managerial Activities on the Technical Efficiency of Wisconsin Dairy Farm," Efficiency Series Papers 2009/01, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    6. del Corral, J. & Pérez, J.A. & Roibás, D., 2010. "The impact of land fragmentation on milk production," Efficiency Series Papers 2010/02, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    7. Alvarez, Antonio & del Corral, Julio & Tauer, Loren W., 2012. "Modeling Unobserved Heterogeneity in New York Dairy Farms: One-Stage versus Two-Stage Models," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 41(3), pages 1-11, December.
    8. Johannes Sauer, 2011. "The Empirical Identification of Heterogenous Technologies and Technical Change," Post-Print hal-00768585, HAL.
    9. Solís, Daniel & del Corral, Julio & Perruso, Larry & Agar, Juan J., 2014. "Evaluating the impact of individual fishing quotas (IFQs) on the technical efficiency and composition of the US Gulf of Mexico red snapper commercial fishing fleet," Food Policy, Elsevier, vol. 46(C), pages 74-83.
    10. Martinez Cillero, Maria & Breen, James & Thorne, Fiona & Wallace, Michael & Hennessy, Thia, 2016. "Technical efficiency and technology heterogeneity of beef farms: a latent class stochastic frontier approach," 90th Annual Conference, April 4-6, 2016, Warwick University, Coventry, UK 236351, Agricultural Economics Society.
    11. Dong, Fengxia & Hennessy, David A. & Jensen, Helen H., 2013. "Size, Productivity and Exit Decisions in Dairy Farms," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150339, Agricultural and Applied Economics Association.
    12. Kirchweger, Stefan & Eder, Michael & Kantelhardt, Jochen, 2015. "Modelling the effects of low-input dairy farming using bookkeeping data from Austria," 2015 Conference, August 9-14, 2015, Milan, Italy 212005, International Association of Agricultural Economists.
    13. Alvarez, Antonio & Arias, Carlos, 2015. "Effects of switching between production systems in dairy farming," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 4(1), pages 1-16, April.
    14. Casasnovas, Valero L. & Aldanondo, Ana Maria, 2011. "Influence of Animal Feeding on Milk Supply in Navarre," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114316, European Association of Agricultural Economists.

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