The impact of land fragmentation on milk production

The effect of land fragmentation on agriculture has worried policy makers for a long time as its effect is expected to be negative. Land consolidation policies are frequently implemented in order to soften the land fragmentation degree. However, there is, to the authors’ knowledge, no study in the dairy sector that empirically analyzes the role of land fragmentation on farms’ productivity and profits. This study contributes to filling the gap in the literature by evaluating the effect of land fragmentation on milk production. To accomplish this, a stochastic frontier production function has been estimated. This empirical analysis uses information corresponding to a sample of Spanish dairy farms located in a region where dairy production is by far the most important agricultural product and land is highly fragmented. As policy makers in the region assume that land fragmentation has a negative influence on agricultural production and, particularly, in dairy production, a land consolidation process is being developed. Thereafter, a simulation analysis is carried out to evaluate the increase in profits that could be obtained by reducing land fragmentation. The results show that dairy farms could increase their profits in a range between 9.4% and 14% by reducing the land fragmentation degree in a proportion similar to the one attained by the land consolidation process that is being carried out in the region.