Can the Small Dairy Farm Remain Competitive in U.S. Agriculture?
AbstractThe cost of milk production by farm size was decomposed into frontier and efficiency components with a stochastic cost curve using data on 755 USA dairy farms from the year 2000. The estimated frontier function is much flatter than the composite cost curve, and although the frontier cost of production decreases with farm size, that cost reduction is not as pronounced as a cost curve that includes inefficiency. The higher cost of production of many smaller farms is caused by inefficiency. The 50-cow farm has a frontier cost of production of $10.05 and an inefficiency cost of $10.27 for a composite cost of $20.32. In contrast, the 1,000-cow herd has a frontier cost of production of $9.27 and an inefficiency cost of $2.82 for a composite cost of $12.09. The implication is that the efficient 50-cow farm is competitive with the average 1,000-cow farm, but not with the efficient 1,000-cow farm.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Cornell University, Department of Applied Economics and Management in its series Working Papers with number 127239.
Date of creation: Sep 2003
Date of revision:
Farm Management; Livestock Production/Industries;
Other versions of this item:
- 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.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Antonio Alvarez & Carlos Arias, 2003. "Diseconomies of Size with Fixed Managerial Ability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 134-142.
- Edwards, Clark & Smith, Matthew G. & Peterson, R. Neal, 1985. "The Changing Distribution of Farms by Size: A Markov Analysis," Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, issue 4.
- Christopher A. Wolf & Daniel A. Sumner, 2001. "Are Farm Size Distributions Bimodal? Evidence from Kernel Density Estimates of Dairy Farm Size Distributions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(1), pages 77-88.
- Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
- Battese, George E. & Corra, Greg S., 1977. "Estimation Of A Production Frontier Model: With Application To The Pastoral Zone Of Eastern Australia," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 21(03), December.
- 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.
- Kumbhakar, Subal C & Ghosh, Soumendra & McGuckin, J Thomas, 1991. "A Generalized Production Frontier Approach for Estimating Determinants of Inefficiency in U.S. Dairy Farms," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(3), pages 279-86, July.
- George E. Battese & Greg S. Corra, 1977. "Estimation Of A Production Frontier Model: With Application To The Pastoral Zone Of Eastern Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 21(3), pages 169-179, December.
- Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
- Douglas Jackson-Smith & David Trechter & Nate Splett, 2004. "The Contribution of Financial Management Training and Knowledge to Dairy Farm Financial Performance," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 26(1), pages 132-147.
- Tauer, Loren W. & Mishra, Ashok K., 2005. "U.S. Dairy Farm Cost Efficiency," Working Papers 127079, Cornell University, Department of Applied Economics and Management.
- 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.
- Almuhanad Melhim & Erik J. O'Donoghue & C. Richard Shumway, 2009.
"Do the Largest Firms Grow and Diversify the Fastest? The Case of U.S. Dairies,"
Review of Agricultural Economics,
Agricultural and Applied Economics Association, vol. 31(2), pages 284-302, 06.
- Almuhanad Melhim & Erik J. O'Donoghue & C. Richard Shumway, 2008. "Do the Largest Firms Grow and Diversify the Fastest? The Case of U.S. Dairies," Working Papers 2008-7, School of Economic Sciences, Washington State University.
- Mugera, Amin W. & Bitsch, Vera, 2005. "Managing Labor on Dairy Farms: A Resource-Based Perspective with Evidence from Case Studies," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 8(03).
- Bitsch, Vera & Kassa, Getachew Abate & Harsh, Stephen B. & Mugera, Amin W., 2006. "Human Resource Management Risks: Sources and Control Strategies Based on Dairy Farmer Focus Groups," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(01), April.
- Amarender Reddy, A. & Bantilan, Ma Cynthia S., 2012. "Competitiveness and technical efficiency: Determinants in the groundnut oil sector of India," Food Policy, Elsevier, vol. 37(3), pages 255-263.
- Todd Kuethe & Mitch Morehart, 2012. "The Agricultural Resource Management Survey: An information system for production agriculture," Agricultural Finance Review, Emerald Group Publishing, vol. 72(2), pages 191-200, July.
- Duvaleix-Treguer, Sabine & Gaigne, Carl, 2012. "Cost Economies in Hog Production: Feed prices matter," Working Papers 125261, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
- Dalton, Timothy J., 2004. "Indivisible And Spatial Components Of Dairy Firm Efficiency," 2004 Annual meeting, August 1-4, Denver, CO 20320, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If references are entirely missing, you can add them using this form.