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Can the small dairy farm remain competitive in US agriculture?

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  • Tauer, Loren W.
  • Mishra, Ashok K.

Abstract

The 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.
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  • 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.
  • Handle: RePEc:eee:jfpoli:v:31:y:2006:i:5:p:458-468
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    Cited by:

    1. 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 (IFAMA), vol. 8(03).
    2. Tauer, Loren W. & Mishra, Ashok K., 2005. "U.S. Dairy Farm Cost Efficiency," Working Papers 127079, Cornell University, Department of Applied Economics and Management.
    3. repec:bla:afrdev:v:29:y:2017:i:1:p:28-43 is not listed on IDEAS
    4. repec:oup:revage:v:31:y:2009:i:2:p:284-302. is not listed on IDEAS
    5. Richard Nehring & Jeffrey Gillespie & Carmen Sandretto & Charlie Hallahan, 2009. "Small U.S. dairy farms: can they compete?," Agricultural Economics, International Association of Agricultural Economists, vol. 40(s1), pages 817-825, November.
    6. Xiaoheng Zhang & Feng Chu & Xiaohua Yu & Yingheng Zhou & Xu Tian & Xianhui Geng & Jinyang Yang, 2017. "Changing Structure and Sustainable Development for China’s Hog Sector," Sustainability, MDPI, Open Access Journal, vol. 9(1), pages 1-15, January.
    7. 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.
    8. Mkhabela, Thulasizwe S. & Mndeme, S.H., 2010. "The cost of producing milk in the KwaZulu-Natal Midlands of South Africa: a cost-curve approach," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 49(1), March.
    9. A. M. Theodoridis & A. Psychoudakis, 2008. "Efficiency Measurement in Greek Dairy Farms: Stochastic Frontier vs. Data Envelopment Analysis," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 1(2), pages 53-67, December.
    10. 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.
    11. 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.
    12. 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.
    13. Getu Hailu & B. James Deaton, 2016. "Agglomeration Effects in Ontario’s Dairy Farming," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(4), pages 1055-1073.
    14. 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).
    15. Gillespie, Jeffrey & Nyaupane, Narayan & McMillin, Kenneth & Harrison, Wes, 2014. "The Impact of Marketing Channels Used by U.S. Meat Goat Producers on Farm Profitability," 2014 Annual Meeting, February 1-4, 2014, Dallas, Texas 162499, Southern Agricultural Economics Association.
    16. 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, June.
    17. Ferrara, Giancarlo & Vidoli, Francesco, 2017. "Semiparametric stochastic frontier models: A generalized additive model approach," European Journal of Operational Research, Elsevier, vol. 258(2), pages 761-777.
    18. Labarthe, Pierre & Laurent, Catherine, 2013. "Privatization of agricultural extension services in the EU: Towards a lack of adequate knowledge for small-scale farms?," Food Policy, Elsevier, vol. 38(C), pages 240-252.
    19. Mayen, Carlos D. & Balagtas, Joseph Valdes & Alexander, Corinne E., 2009. "Vertical Economies of Scope for Organic and Conventional Dairy Farms in the United States," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49409, Agricultural and Applied Economics Association.
    20. 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).

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