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Production and Technical Efficiency on Australian Dairy Farms


  • Tom Kompas
  • Tuong Nhu Che


The dairy industry plays an important role in both Australia and the world dairy market. Domestically, it is one of the most important agricultural industries, valued at $A3.7 billion a year. Internationally, the industry exports more than $A3 billion a year, making Australia the third largest dairy exporter in the world. Using traditional farm survey input and output data and a unique biannual data set on farm technology use, this paper estimates a stochastic production frontier and technical efficiency model for Australian dairy farms, determining the relative importance of each input in dairy production, the quantitative effects of key technology variables on farm efficiency and overall farm profiles based on the efficiency rankings of dairy producers. Estimated results show that production exhibits constant returns to scale and although feed concentration and the number of cows milked at peak season matter, the key determinants of differences in dairy farm efficiency are the type of dairy shed used and the proportion of irrigated farm area. Overall farm profiles also indicate that those in the high efficiency group employ either rotary or swingover dairy shed technology and have (by far) the largest proportion of land under irrigation.

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  • Tom Kompas & Tuong Nhu Che, 2004. "Production and Technical Efficiency on Australian Dairy Farms," International and Development Economics Working Papers idec04-1, International and Development Economics.
  • Handle: RePEc:idc:wpaper:idec04-1

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    References listed on IDEAS

    1. Coelli, Tim J. & Battese, George E., 1996. "Identification Of Factors Which Influence The Technical Inefficiency Of Indian Farmers," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 40(02), August.
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    4. Schmidt, Peter & Knox Lovell, C. A., 1979. "Estimating technical and allocative inefficiency relative to stochastic production and cost frontiers," Journal of Econometrics, Elsevier, vol. 9(3), pages 343-366, February.
    5. Hallam, David & Machado, Fernando, 1996. "Efficiency Analysis with Panel Data: A Study of Portuguese Dairy Farms," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 23(1), pages 79-93.
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    7. Kalirajan, K P & Obwona, M B, 1994. "Frontier Production Function: The Stochastic Coefficients Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(1), pages 87-96, February.
    8. Forsund, Finn R. & Lovell, C. A. Knox & Schmidt, Peter, 1980. "A survey of frontier production functions and of their relationship to efficiency measurement," Journal of Econometrics, Elsevier, vol. 13(1), pages 5-25, May.
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    11. Loyland, Knut & Ringstad, Vidar, 2001. "Gains and structural effects of exploiting scale-economies in Norwegian dairy production," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 24(2), January.
    12. 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.
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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q19 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Other

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