IDEAS home Printed from https://ideas.repec.org/p/lvl/creacr/2014-7.html
   My bibliography  Save this paper

Scale Economies and Technical Efficiency of Quebec Dairy Farms

Author

Listed:
  • Alphonse G. Singbo
  • Bruno Larue

Abstract

Canada’s average cost for milk production is amongst the highest in the world. The paper focusses on specific potential causes by estimating economies of scale and technical efficiency for a panel of Quebec dairy farms that spans the 2001-2010 period. The stochastic frontier analysis based on an input distance function is use to estimate returns to scale relationships across dairy farms. We show that there is significant economies scale to be exploited and that cost of production could also be reduced by improving technical efficiency. The results have important implications for Canada’s supply management policy, and more specifically for the trading of production quota between dairy farmers, as well as for the delivery of targeted extension services.

Suggested Citation

  • Alphonse G. Singbo & Bruno Larue, 2014. "Scale Economies and Technical Efficiency of Quebec Dairy Farms," Cahiers de recherche CREATE 2014-7, CREATE.
    • Handle: RePEc:lvl:creacr:2014-7
    as

    Download full text from publisher

    File URL: https://www.create.ulaval.ca/sites/create.ulaval.ca/files/Publications/create2014-7.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Fernandez C. & Koop G. & Steel M.F.J., 2002. "Multiple-Output Production With Undesirable Outputs: An Application to Nitrogen Surplus in Agriculture," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 432-442, June.
    2. O'Donnell, Christopher J. & Coelli, Timothy J., 2005. "A Bayesian approach to imposing curvature on distance functions," Journal of Econometrics, Elsevier, vol. 126(2), pages 493-523, June.
    3. Marie-Hélène Felt & Bruno Larue & Jean-Philippe Gervais, 2012. "Compositional Standards, Import Permits and Market Structure: The Case of Canadian Cheese Imports," The World Economy, Wiley Blackwell, vol. 35(8), pages 1053-1072, August.
    4. Christos Pantzios & Giannis Karagiannis & Vangelis Tzouvelekas, 2011. "Parametric decomposition of the input-oriented Malmquist productivity index: with an application to Greek aquaculture," Journal of Productivity Analysis, Springer, vol. 36(1), pages 21-31, August.
    5. Robert Romain & Rémy Lambert, 1995. "Efficacitè technique et coûts de production dans les secteurs laitiers du Québec et de l'Ontario," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 43(1), pages 37-55, March.
    6. Guy Chapda Nana & Bruno Larue, 2014. "Imposing curvature conditions on flexible functional forms for GNP functions," Empirical Economics, Springer, vol. 47(4), pages 1411-1440, December.
    7. Luis Orea, 2002. "Parametric Decomposition of a Generalized Malmquist Productivity Index," Journal of Productivity Analysis, Springer, vol. 18(1), pages 5-22, July.
    8. Svend Rasmussen, 2010. "Scale efficiency in Danish agriculture: an input distance--function approach," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 37(3), pages 335-367, September.
    9. Hallam, David & Machado, Fernando, 1996. "Efficiency Analysis with Panel Data: A Study of Portuguese Dairy Farms," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 23(1), pages 79-93.
    10. Larue, Bruno & Gervais, Jean-Philippe & Pouliot, Sebastien, 2007. "Should tariff-rate quotas mimic quotas?: Implications for trade liberalization under a supply management policy," The North American Journal of Economics and Finance, Elsevier, vol. 18(3), pages 247-261, December.
    11. Alex Cairns & Karl Meilke, 2012. "Price Ceilings on Milk Production Quota Values: Future or Folly?," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 60(1), pages 93-112, March.
    12. Xavier Irz & Colin Thirtle, 2004. "Dual Technological Development in Botswana Agriculture: A Stochastic Input Distance Function Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 55(3), pages 455-478, November.
    13. Fernandez, Carmen & Koop, Gary & Steel, Mark F.J., 2005. "Alternative efficiency measures for multiple-output production," Journal of Econometrics, Elsevier, vol. 126(2), pages 411-444, June.
    14. Johannes Sauer & Klaus Frohberg & Heinrich Hockmann, 2006. "Stochastic Efficiency Measurement: The Curse of Theoretical Consistency," Journal of Applied Economics, Taylor & Francis Journals, vol. 9(1), pages 139-165, May.
    15. David Hadley & Euan Fleming & Renato Villano, 2013. "Is Input Mix Inefficiency Neglected in Agriculture? A Case Study of Pig-based Farming Systems in England and Wales," Journal of Agricultural Economics, Wiley Blackwell, vol. 64(2), pages 505-515, June.
    16. Yélou, Clément & Larue, Bruno & Tran, Kien C., 2010. "Threshold effects in panel data stochastic frontier models of dairy production in Canada," Economic Modelling, Elsevier, vol. 27(3), pages 641-647, May.
    17. 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 279-286, July.
    18. Jaforullah, Mohammad & Whiteman, John, 1999. "Scale efficiency in the New Zealand dairy industry: a non-parametric approach," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 43(4), pages 1-19, December.
    19. Carol Newman & Alan Matthews, 2007. "Evaluating the Productivity Performance of Agricultural Enterprises in Ireland using a Multiple Output Distance Function Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 58(1), pages 128-151, February.
    20. L. Martin Cloutier & Robin Rowley, 1993. "Relative Technical Efficiency: Data Envelopment Analysis and Quebec's Dairy Farms," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 41(2), pages 169-176, July.
    21. Paul, Catherine J. Morrison & Nehring, Richard, 2005. "Product diversification, production systems, and economic performance in U.S. agricultural production," Journal of Econometrics, Elsevier, vol. 126(2), pages 525-548, June.
    22. Johannes Sauer & Klaus Frohberg & Henrich Hockmann, 2006. "Stochastic efficiency measurement: The curse of theoretical consistency," Journal of Applied Economics, Universidad del CEMA, vol. 9, pages 139-166, May.
    23. Roberto Mosheim & C.A. Knox Lovell, 2007. "Scale Economies and Inefficiency of U.S. Dairy Farms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 777-794.
    24. Kumbhakar,Subal C. & Lovell,C. A. Knox, 2003. "Stochastic Frontier Analysis," Cambridge Books, Cambridge University Press, number 9780521666633.
    25. George E. Battese, 1997. "A Note On The Estimation Of Cobb‐Douglas Production Functions When Some Explanatory Variables Have Zero Values," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1‐3), pages 250-252, January.
    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. Fanny Le Gloux & Marie Laporte & Sabine Duvaleix-Treguer & Pierre Dupraz & Elodie Letort, 2021. "Cost of changing dairy cows' diet to reduce enteric methane emissions in livestock farms [Coût de la modification du régime alimentaire des vaches laitières permettant de réduire les émissions de m," Working Papers hal-03261368, HAL.
    2. Wirat Krasachat, 2023. "The Effect of Good Agricultural Practices on the Technical Efficiency of Chili Production in Thailand," Sustainability, MDPI, vol. 15(1), pages 1-25, 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. Gbemay Singbo, Alphonse & Larue, Bruno, 2014. "Scale Economies and Technical Efficiency of Quebec Dairy Farms," Working Papers 182482, University of Laval, Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE).
    2. Alphonse Singbo & Bruno Larue, 2016. "Scale Economies, Technical Efficiency, and the Sources of Total Factor Productivity Growth of Quebec Dairy Farms," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 64(2), pages 339-363, June.
    3. Nguyen, Huy, 2014. "Crop diversification, economic performance and household’s behaviours Evidence from Vietnam," MPRA Paper 59090, University Library of Munich, Germany.
    4. Fabian Frick & Johannes Sauer, 2021. "Technological Change in Dairy Farming with Increased Price Volatility," Journal of Agricultural Economics, Wiley Blackwell, vol. 72(2), pages 564-588, June.
    5. Lota D. Tamini & Bruno Larue & Gale E. West & Moise K.Ndegue Fongue, 2016. "Agricultural production and pollutant runoffs in QuŽbecÕs Chaudi re river watershed: what are the potential environmental gains?," Cahiers de recherche CREATE 2016-2, CREATE.
    6. Wirat Krasachat, 2023. "The Effect of Good Agricultural Practices on the Technical Efficiency of Chili Production in Thailand," Sustainability, MDPI, vol. 15(1), pages 1-25, January.
    7. Kellermann, Magnus A., 2015. "Total Factor Productivity Decomposition and Unobserved Heterogeneity in Stochastic Frontier Models," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 44(1), pages 1-25, April.
    8. Tateishi, Henrique Ryosuke & Bragagnolo, Cassiano & de Faria, Rosane Nunes, 2020. "Economic and environmental efficiencies of greenhouse gases’ emissions under institutional influence," Technological Forecasting and Social Change, Elsevier, vol. 161(C).
    9. Collier, Trevor & Johnson, Andrew L. & Ruggiero, John, 2011. "Technical efficiency estimation with multiple inputs and multiple outputs using regression analysis," European Journal of Operational Research, Elsevier, vol. 208(2), pages 153-160, January.
    10. Nguyen, Huy Quynh, 2017. "Analyzing the economies of crop diversification in rural Vietnam using an input distance function," Agricultural Systems, Elsevier, vol. 153(C), pages 148-156.
    11. Saldias, Rodrigo & von Cramon-Taubadel, Stephan, 2012. "Access to credit and the determinants of technical inefficiency among specialized small farmers in Chile," DARE Discussion Papers 1211, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    12. Mamardashvili, Phatima & Bokusheva, Raushan & Schmid, Dierk, 2014. "Heterogeneous Farm Output and Technical Efficiency Estimates," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 63(1).
    13. Boris Bravo-Ureta & Daniel Solís & Víctor Moreira López & José Maripani & Abdourahmane Thiam & Teodoro Rivas, 2007. "Technical efficiency in farming: a meta-regression analysis," Journal of Productivity Analysis, Springer, vol. 27(1), pages 57-72, February.
    14. A. Wondemu Kifle, 2016. "Working Paper 237 - Decomposing Sources of Productivity Change in Small-Scale Farming in Ethiopia," Working Paper Series 2332, African Development Bank.
    15. Mamardashvili, Phatima & Bokusheva, Raushan & Schmid, Dierk, 2014. "Heterogeneous Farm Output and Technical Efficiency Estimates," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 63(01), pages 1-15, March.
    16. Arne Henningsen & Christian Henning, 2009. "Imposing regional monotonicity on translog stochastic production frontiers with a simple three-step procedure," Journal of Productivity Analysis, Springer, vol. 32(3), pages 217-229, December.
    17. Wollni, Meike & Brümmer, Bernhard, 2012. "Productive efficiency of specialty and conventional coffee farmers in Costa Rica: Accounting for technological heterogeneity and self-selection," Food Policy, Elsevier, vol. 37(1), pages 67-76.
    18. Emir Malikov & Subal C. Kumbhakar & Efthymios G. Tsionas, 2015. "Bayesian Approach to Disentangling Technical and Environmental Productivity," Econometrics, MDPI, vol. 3(2), pages 1-23, June.
    19. Singbo, Alphonse G. & Emvalomatis, Grigorios & Alfons, Oude Lansink, 2013. "Assessing the impact of crop specialization on farms’ performance in vegetables farming in Benin: a non-neutral stochastic frontier approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149172, Agricultural and Applied Economics Association.
    20. Wanglin Ma & Kathryn Bicknell & Alan Renwick, 2019. "Feed use intensification and technical efficiency of dairy farms in New Zealand," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 63(1), pages 20-38, January.

    More about this item

    Keywords

    Economies of scale; technical efficiency; dairy policy; supply management;
    All these keywords.

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:lvl:creacr:2014-7. 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: Manuel Paradis (email available below). General contact details of provider: https://edirc.repec.org/data/calvlca.html .

    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.