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Productivity and the Dairy Industry

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  • Watson, Alistair S.

Abstract

Productivity measurement is useful in some circumstances but not others. Measured productivity is poor for the Australian dairy industry as a whole. This finding is consistent across a range of studies and is confirmed by other information and analysis.It is useful to explore reasons for this poor performance because some public policy questions are related to overall industry performance. In particular, productivity measurement concentrates attention on industry-based research and extension programs.Production (and exports) have increased rapidly in the dairy industry but input use has increased faster. The major change has been increased grain feeding. Both increased purchases of grain and a higher proportion of exports exacerbate the financial risks of dairy farming. Recent drought and associated water shortages in irrigated dairying areas have compounded these systematic changes. By definition, estimates of average productivity in the whole dairy industry have little to say about what is happening on individual farms. Moreover, productivity is measured using annual data on inputs and outputs. While day-to-day technical and management skills are important, many of the crucial economic decisions by farmers are long-term. Aggregate productivity analysis is a useful first step in analysing industry performance. A next step is disaggregating the data to identify inputs, regions or time periods of particular interest. The time path of prices, policy changes and the weather continue to have most effect on the dairy industry. A conclusion that follows from recent experience is that the change to increased grain feeding has not been well understood in its scientific dimension, nor well executed at the farm level. Furthermore, expected gains from specialisation in manufacturing milk production following deregulation have not been realised for technical reasons, presumably related to poor reproductive performance. In particular, it appears that farmers have been given poor information on the difference between the marginal costs and marginal benefits of concentrate feeding in different time periods and circumstances. Nor have the financial consequences been properly considered in advice that has been given to farmers. Production is not the same as productivity. Increased production and exports should not be promoted as such by dairy companie

Suggested Citation

  • Watson, Alistair S., 2005. "Productivity and the Dairy Industry," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 13.
  • Handle: RePEc:ags:auagre:126554
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    File URL: http://purl.umn.edu/126554
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    References listed on IDEAS

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    1. Fraser, I. & Cordina, D., 1999. "An application of data envelopment analysis to irrigated dairy farms in Northern Victoria, Australia," Agricultural Systems, Elsevier, vol. 59(3), pages 267-282, March.
    2. Graham, Mary, 2004. "Environmental efficiency: meaning and measurement and application to Australian dairy farms," Economics Series eco_2004_02, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
    3. Kompas, Tom & Che, Tuong Nhu, 2004. "Productivity in the Australian Dairy Industry," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 12.
    4. Fraser, Iain & Hone, Phillip, 2001. "Farm-level efficiency and productivity measurement using panel data: wool production in south-west Victoria," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 45(2), June.
    5. Fraser, Iain & Graham, Mary, 2005. "Efficiency Measurement of Australian Dairy Farms: National and Regional Performance," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 13.
    6. Graham, Mary & Fraser, Iain, 2003. "Scale Efficiency In Australian Dairy Farms," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 57878, Australian Agricultural and Resource Economics Society.
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    Cited by:

    1. Kelvin Balcombe & Hristos Doucouliagos & Iain Fraser, 2007. "Input usage, output mix and industry deregulation: an analysis of the Australian dairy manufacturing industry ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(2), pages 137-156, June.
    2. Seyoum, Emayenesh & Karanja, Francis, 2014. "Investment decisions of dairy farmers in south-west Victoria under price and yield uncertainty," 2014 Conference (58th), February 4-7, 2014, Port Maquarie, Australia 183419, Australian Agricultural and Resource Economics Society.

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