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Cost Efficiency of Dairy Farming in New Zealand: a stochastic frontier analysis

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  • Jiang, Nan
  • Sharp, Basil

Abstract

Historically NZ dairy farming has held a position as the lowest cost, non-subsidized producers at the farm gate. Recently, this position has been eroded as a result of increases in labor and land costs, while other emerging countries, such as Argentina and Ukraine, have adopted lower cost production systems. This indicates a need to continually build competitiveness on efficient utilization of resources, both physical and financial. Prior research on the efficiency performance of dairy farming in NZ is scant and the focus to date has been on technical efficiency, which alone only reveals how well farms utilize the physical production process. This paper contributes to the empirical literature by examining the cost efficiency of NZ dairy farms using established methods. Simplified translog stochastic cost frontiers are constructed based on an unbalanced panel of 824 farms. Average cost efficiency is estimated to be around 83% for dairy farms located in the North Island and 80% for the South Island. Analysis of the relationship between inefficiency and farm characteristics suggests significant associations exist between capital intensity, livestock quality, farm size and cost efficiency.

Suggested Citation

  • 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.
  • Handle: RePEc:ags:nzar13:160266
    DOI: 10.22004/ag.econ.160266
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    Cited by:

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    2. Le, Stephanie & Jeffrey, Scott R. & An, Henry, 2017. "Greenhouse gas emissions and productive efficiency in Alberta dairy production: What are the trade-offs?," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258487, Agricultural and Applied Economics Association.
    3. Anastasiadis, Simon & Kerr, Suzi, 2012. "Mitigation and Heterogeneity in Management Practices on New Zealand Dairy Farms," 2012 Conference, August 31, 2012, Nelson, New Zealand 136039, New Zealand Agricultural and Resource Economics Society.
    4. Welsh, Melissa & Marshall, Sarah & Noy, Ilan, 2016. "Modelling New Zealand milk: From the farm to the factory," Working Paper Series 5280, Victoria University of Wellington, School of Economics and Finance.
    5. Soliman, Tarek & Djanibekov, Utkur, 2018. "Assessing dairy farming eco-efficiency in New Zealand: A two–stage data envelopment analysis," 2018 Annual Meeting, August 5-7, Washington, D.C. 274374, Agricultural and Applied Economics Association.
    6. Robbie Maris & Zack Dorner, 2021. "Cost Efficiency Analysis using Operating Profit Margin for the New Zealand Dairy Industry," Working Papers in Economics 21/04, University of Waikato.
    7. David Fleming & Suzi Kerr & Edmund Lou, 2019. "Cows, cash and climate: Low stocking rates, high-performing cows, emissions and profitability across New Zealand farms," Working Papers 19_11, Motu Economic and Public Policy Research.

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