IDEAS home Printed from https://ideas.repec.org/p/ags/cudawp/127239.html
   My bibliography  Save this paper

Can the Small Dairy Farm Remain Competitive in U.S. Agriculture?

Author

Listed:
  • 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.

Suggested Citation

  • Tauer, Loren W. & Mishra, Ashok K., 2003. "Can the Small Dairy Farm Remain Competitive in U.S. Agriculture?," Working Papers 127239, Cornell University, Department of Applied Economics and Management.
    • Handle: RePEc:ags:cudawp:127239
    DOI: 10.22004/ag.econ.127239
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/127239/files/Cornell_Dyson_wp0328.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.127239?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Edwards, Clark & Smith, Matthew G. & Peterson, R. Neal, 1985. "The Changing Distribution of Farms by Size: A Markov Analysis," Journal of Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, vol. 37(4), pages 1-16.
    2. Short, Sara D., 2004. "Characteristics and Production Costs of U.S. Dairy Operations," Statistical Bulletin 262279, United States Department of Agriculture, Economic Research Service.
    3. Douglas Jackson-Smith & David Trechter & Nate Splett, 2004. "The Contribution of Financial Management Training and Knowledge to Dairy Farm Financial Performance," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 26(1), pages 132-147.
    4. George E. Battese & Greg S. Corra, 1977. "Estimation Of A Production Frontier Model: With Application To The Pastoral Zone Of Eastern Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 21(3), pages 169-179, December.
    5. Antonio Alvarez & Carlos Arias, 2003. "Diseconomies of Size with Fixed Managerial Ability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 134-142.
    6. Christopher A. Wolf & Daniel A. Sumner, 2001. "Are Farm Size Distributions Bimodal? Evidence from Kernel Density Estimates of Dairy Farm Size Distributions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(1), pages 77-88.
    7. 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.
    8. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
    9. Battese, George E. & Corra, Greg S., 1977. "Estimation Of A Production Frontier Model: With Application To The Pastoral Zone Of Eastern Australia," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 21(3), pages 1-11, December.
    10. Short, Sara D. & Livezey, Janet S., 2004. "Characteristics and Production Costs," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, pages 1-2, April.
    11. 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 325-332.
    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 435-444, June.
    13. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    14. Douglas Jackson-Smith & David Trechter & Nate Splett, 2004. "The Contribution of Financial Management Training and Knowledge to Dairy Farm Financial Performance," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 26(1), pages 132-147.
    15. Blayney, Donald P., 2004. "Milk Production shifts West," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, pages 1-4, September.
    Full references (including those not matched with items on IDEAS)

    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. Tauer, Loren W. & Mishra, Ashok K., 2005. "U.S. Dairy Farm Cost Efficiency," Working Papers 127079, Cornell University, Department of Applied Economics and Management.
    2. Roy, Manish & Mazumder, Ritwik, 2016. "Technical Efficiency of Fish Catch in Traditional Fishing: A Study in Southern Assam," Journal of Regional Development and Planning, Rajarshi Majumder, vol. 5(1), pages 55-68.
    3. Roberto Furesi & Fabio Madau & Pietro Pulina, 2013. "Technical efficiency in the sheep dairy industry: an application on the Sardinian (Italy) sector," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 1(1), pages 1-11, December.
    4. Madau, Fabio A., 2011. "Parametric Estimation of Technical and Scale Efficiencies in Italian Citrus Farming," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 12(1).
    5. Tim J. Coelli, 1995. "Recent Developments In Frontier Modelling And Efficiency Measurement," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 39(3), pages 219-245, December.
    6. Althaler, Karl S. & Slavova, Tatjana, 2000. "DEA Problems under Geometrical or Probability Uncertainties of Sample Data," Economics Series 89, Institute for Advanced Studies.
    7. Larson, Donald F. & Plessmann, Frank, 2009. "Do farmers choose to be inefficient? Evidence from Bicol," Journal of Development Economics, Elsevier, vol. 90(1), pages 24-32, September.
    8. Martín Rossi, 2015. "The Econometrics Approach to the Measurement of Efficiency: A Survey," Working Papers 117, Universidad de San Andres, Departamento de Economia, revised Feb 2015.
    9. Tom Kompas & Tuong Nhu Che & R. Quentin Grafton, 2004. "Technical efficiency effects of input controls: evidence from Australia's banana prawn fishery," Applied Economics, Taylor & Francis Journals, vol. 36(15), pages 1631-1641.
    10. Williams, Jonathan, 2004. "Determining management behaviour in European banking," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2427-2460, October.
    11. Edward Ebo ONUMAH & Bernhard BRÜMMER & Gabriele HÖRSTGEN-SCHWARK, 2010. "Productivity of the hired and family labour and determinants of technical inefficiency in Ghana's fish farms," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 56(2), pages 79-88.
    12. repec:use:tkiwps:3232 is not listed on IDEAS
    13. Madau, Fabio A., 2005. "Technical Efficiency in Organic Farming: An Application on Italian Cereal Farms Using a Parametric Approach," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24545, European Association of Agricultural Economists.
    14. Vangelis Tzouvelekas & Konstantinos Giannakas & Peter Midmore & Konstantinos Mattas, 1997. "Technical efficiency measures for olive-growing farms in Crete, Greece," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 3(2), pages 154-169, May.
    15. Alejandro Esteller-Moré, 2005. "Is There a Connection Between the Tax Administration and the Political Power?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(5), pages 639-663, September.
    16. Luis Murillo-Zamorano & Carmelo Petraglia, 2011. "Technical efficiency in primary health care: does quality matter?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 12(2), pages 115-125, April.
    17. Amer Ait Sidhoum & K Hervé Dakpo & Laure Latruffe, 2022. "Trade-offs between economic, environmental and social sustainability on farms using a latent class frontier efficiency model: Evidence for Spanish crop farms," PLOS ONE, Public Library of Science, vol. 17(1), pages 1-17, January.
    18. Manlagnit, Maria Chelo V., 2015. "Basel regulations and banks’ efficiency: The case of the Philippines," Journal of Asian Economics, Elsevier, vol. 39(C), pages 72-85.
    19. Arbelo-Pérez, Marta & Arbelo, Antonio & Pérez-Gómez, Pilar, 2017. "Impact of quality on estimations of hotel efficiency," Tourism Management, Elsevier, vol. 61(C), pages 200-208.
    20. Williams, Jonathan & Nguyen, Nghia, 2005. "Financial liberalisation, crisis, and restructuring: A comparative study of bank performance and bank governance in South East Asia," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 2119-2154, August.
    21. Méon, Pierre-Guillaume & Weill, Laurent, 2010. "Does financial intermediation matter for macroeconomic performance?," Economic Modelling, Elsevier, vol. 27(1), pages 296-303, January.

    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:ags:cudawp:127239. 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: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/dacorus.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.