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Technology choice and efficiency on Australian dairy farms

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  • Tom Kompas
  • Tuong Nhu Che

Abstract

Deregulation of the Australian dairy industry, specifically the removal of price subsidies to 'market milk', as well as ongoing drought in many dairy regions, has placed considerable pressure on farm cash income and a search for ways in which dairy farms can be made to operate more efficiently. Using traditional farm survey data and a unique biannual data set on farm technology use, this paper estimates a stochastic production frontier and technical efficiency model for dairy farms in New South Wales and Victoria, determining the relative importance of each input in dairy production, the effects of key technology variables on farm efficiency, and overall farm profiles based on the efficiency rankings of dairy producers. 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 indicate that those in the 'high efficiency group' largely employ either rotary or swing-over dairy shed technology and have almost three times the proportional amount of land under irrigation. Copyright Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Ltd 2006.

Suggested Citation

  • Tom Kompas & Tuong Nhu Che, 2006. "Technology choice and efficiency on Australian dairy farms ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(1), pages 65-83, March.
  • Handle: RePEc:bla:ajarec:v:50:y:2006:i:1:p:65-83
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    References listed on IDEAS

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    1. 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.
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    5. Kumbhakar, Subal C & Biswas, Basudeb & Bailey, DeeVon, 1989. "A Study of Economic Efficiency of Utah Dairy Farmers: A System Approach," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 595-604, November.
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    Cited by:

    1. Graham, Mary, 2009. "Developing a social perspective to farm performance analysis," Ecological Economics, Elsevier, vol. 68(8-9), pages 2390-2398, June.
    2. Ligia Alba Melo-Becerra & Antonio José Orozco-Gallo, 2017. "Technical efficiency for Colombian small crop and livestock farmers: A stochastic metafrontier approach for different production systems," Journal of Productivity Analysis, Springer, vol. 47(1), pages 1-16, February.
    3. 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).
    4. Jiang, Nan & Sharp, Basil, 2014. "Cost Efficiency of Dairy Farming in New Zealand: A Stochastic Frontier Analysis," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 43(3), December.
    5. Solis, Daniel & Bravo-Ureta, Boris E. & Quiroga, Ricardo E., 2007. "Soil conservation and technical efficiency among hillside farmers in Central America: a switching regression model," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(4), December.
    6. Nan Jiang & Basil Sharp, 2015. "Technical efficiency and technological gap of New Zealand dairy farms: a stochastic meta-frontier model," Journal of Productivity Analysis, Springer, vol. 44(1), pages 39-49, August.
    7. Jiang, Nan & Sharp, Basil, 0. "Cost Efficiency of Dairy Farming in New Zealand: A Stochastic Frontier Analysis," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association.
    8. Tsimpo Nkengne, Clarence, 2010. "Technical Efficiency and Optimal Farm Size in the Tajik's Cotton Sector," MPRA Paper 35192, University Library of Munich, Germany.
    9. Ligia Alba Melo-Becerra & Antonio José Orozco-Gallo, 2015. "Eficiencia técnica de los hogares con producción agropecuaria en Colombia," DOCUMENTOS DE TRABAJO SOBRE ECONOMÍA REGIONAL Y URBANA 013903, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.
    10. 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, Cambridge University Press, vol. 41(03), pages 275-285, December.
    11. repec:eee:reveco:v:51:y:2017:i:c:p:328-341 is not listed on IDEAS
    12. 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).
    13. Karanja, Francis & Gilmour, Daniel & Fraser, Iain, 2012. "Dairy productivity growth, efficiency change and technological progress in Victoria," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia 125053, Australian Agricultural and Resource Economics Society.
    14. D’Antoni, Jeremy M. & Mishra, Ashok K. & Blayney, Donald, 2013. "Assessing participation in the Milk Income Loss Contract program and its impact on milk production," Journal of Policy Modeling, Elsevier, vol. 35(2), pages 243-254.
    15. Fariña, S.R. & Alford, A. & Garcia, S.C. & Fulkerson, W.J., 2013. "An integrated assessment of business risk for pasture-based dairy farm systems intensification," Agricultural Systems, Elsevier, vol. 115(C), pages 10-20.
    16. Tanira T. Kingi & Tom F. Kompas, 2005. "Communal Land Ownership and Agricultural Development: Overcoming Technical Efficiency Constraints Among Fiji’s Indigenous Sugercane Growers," International and Development Economics Working Papers idec05-11, International and Development Economics.
    17. Roibás, David & Wall, Alan & Pérez, José A., 2014. "The influence of meteorological conditions on dairy production," Efficiency Series Papers 2014/02, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    18. Sauer, Johannes & Graversen, Jesper T. & Park, Timothy A., 2006. "Breathtaking or Stagnating? - Productivity, Technical Change and Structural Dynamics in Danish Organic Farming," 2006 Annual meeting, July 23-26, Long Beach, CA 21481, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    19. 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), issue 1, April.
    20. Moreira, Victor H. & Bravo-Ureta, Boris E. & Dunner, Roberto & Vidal, Ricardo, 2012. "Total Factor Productivity Change in Dairy Production in Southern Chile: Is Farm Size Significant?," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126895, International Association of Agricultural Economists.
    21. Jiang, Nan & Sharp, Basil, 2013. "Cost Efficiency of Dairy Farming in New Zealand: a stochastic frontier analysis," 2013 Conference, August 28-30, 2013, Christchurch, New Zealand 160266, New Zealand Agricultural and Resource Economics Society.
    22. Graham, Mary, 2008. "Biophysical Modelling and Performance Measurement," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6773, Australian Agricultural and Resource Economics Society.

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