IDEAS home Printed from https://ideas.repec.org/p/ags/spaawp/125261.html
   My bibliography  Save this paper

Cost Economies in Hog Production: Feed prices matter

Author

Listed:
  • Duvaleix-Treguer, Sabine
  • Gaigne, Carl

Abstract

In this paper, we assess the impact of farm size on the production cost and evaluate the marginal costs and margins by taking into account that input prices may change with the scale of production. By using French data at the hog farm level, we estimate a system of equations including feed price equation, input demand functions, a output supply function based on a technology approximated by a combined generalized Leontief‐Quadratic form. Our results suggest the marginal costs are over‐estimated whether the endogeneity of feed prices is not controlled for. We show also that cost economies associated with output size are related to lower feed prices and not to a better use of labor. More specifically, cost economies for large farms (enjoying highest levels of profits) arise from feed prices and not by technological scale economies. In contrast,farms with no hired labor exhibit technological scale economies and reach higher pricecost margins than the larger farms.

Suggested Citation

  • 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).
  • Handle: RePEc:ags:spaawp:125261
    as

    Download full text from publisher

    File URL: http://ageconsearch.umn.edu/record/125261/files/Cost-Economies-SPAA_2012-6.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Michaela Draganska & Daniel Klapper & Sofia B. Villas-Boas, 2010. "A Larger Slice or a Larger Pie? An Empirical Investigation of Bargaining Power in the Distribution Channel," Marketing Science, INFORMS, vol. 29(1), pages 57-74, 01-02.
    2. Azzeddine Azzam & Cari S. Skinner, 2007. "Vertical Economies and the Structure of U.S. Hog Farms," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 55(3), pages 349-364, September.
    3. 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.
    4. Key, Nigel & McBride, William & Mosheim, Roberto, 2008. "Decomposition of Total Factor Productivity Change in the U.S. Hog Industry," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 40(01), pages 137-149, April.
    5. Catherine J. Morrison Paul, 2001. "Market and Cost Structure in the U.S. Beef Packing Industry: A Plant-Level Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(1), pages 64-76.
    6. Carl Gaigné & Julie Le Gallo & Solène Larue & Bertrand Schmitt, 2012. "Does Regulation of Manure Land Application Work Against Agglomeration Economies? Theory and Evidence from the French Hog Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(1), pages 116-132.
    7. Roberto Mosheim & C.A. Knox Lovell, 2007. "Scale Economies and Inefficiency of U.S. Dairy Farms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 777-794.
    8. 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.
    9. Douglas W. Allen & Dean Lueck, 2004. "The Nature of the Farm: Contracts, Risk, and Organization in Agriculture," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511851, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Livestock Production/Industries; Production Economics; Productivity Analysis;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:spaawp:125261. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search). General contact details of provider: http://servsas.fsaa.ulaval.ca/index.php?id=12482&L=1 .

    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 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.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.