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Cost Economies in Hog Production: Feed prices matter

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  • 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
    DOI: 10.22004/ag.econ.125261
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    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. Giancarlo Moschini, 1988. "The Cost Structure of Ontario Dairy Farms: A Microeconometric Analysis," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 36(2), pages 187-206, July.
    3. 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(1), pages 137-149, April.
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