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Production and Technical Efficiency on Australian Dairy Farms

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  • Tom Kompas
  • Tuong Nhu Che

Abstract

The dairy industry plays an important role in both Australia and the world dairy market. Domestically, it is one of the most important agricultural industries, valued at $A3.7 billion a year. Internationally, the industry exports more than $A3 billion a year, making Australia the third largest dairy exporter in the world. Using traditional farm survey input and output data and a unique biannual data set on farm technology use, this paper estimates a stochastic production frontier and technical efficiency model for Australian dairy farms, determining the relative importance of each input in dairy production, the quantitative effects of key technology variables on farm efficiency and overall farm profiles based on the efficiency rankings of dairy producers. Estimated results show that production exhibits constant returns to scale and although feed concentration and the number of cows milked at peak season matter, the key determinants of differences in dairy farm efficiency are the type of dairy shed used and the proportion of irrigated farm area. Overall farm profiles also indicate that those in the high efficiency group employ either rotary or swingover dairy shed technology and have (by far) the largest proportion of land under irrigation.

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Bibliographic Info

Paper provided by International and Development Economics in its series International and Development Economics Working Papers with number idec04-1.

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Length: 20 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:idc:wpaper:idec04-1

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  1. Helen Caraveli & W. Bruce Traill, 1998. "Technological developments and economies of scale in dairy industry," Agribusiness, John Wiley & Sons, Ltd., vol. 14(4), pages 311-319.
  2. Kodde, David A & Palm, Franz C, 1986. "Wald Criteria for Jointly Testing Equality and Inequality Restriction s," Econometrica, Econometric Society, vol. 54(5), pages 1243-48, September.
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  5. Hallam, David & Machado, Fernando, 1996. "Efficiency Analysis with Panel Data: A Study of Portuguese Dairy Farms," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 23(1), pages 79-93.
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  7. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
  8. Coelli, Tim J. & Battese, George E., 1996. "Identification Of Factors Which Influence The Technical Inefficiency Of Indian Farmers," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 40(02), August.
  9. 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.
  10. 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.
  11. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
  12. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-44, June.
  13. Kalirajan, K P & Obwona, M B, 1994. "Frontier Production Function: The Stochastic Coefficients Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(1), pages 87-96, February.
  14. Schmidt, Peter & Knox Lovell, C. A., 1979. "Estimating technical and allocative inefficiency relative to stochastic production and cost frontiers," Journal of Econometrics, Elsevier, vol. 9(3), pages 343-366, February.
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