Heterogeneity of Long‐run Technical Efficiency of German Dairy Farms: A Bayesian Approach*

In parametric efficiency studies, two alternative approaches exist to provide an estimate of the long‐run efficiency of firms: the dynamic stochastic frontier model and the generalised true random‐effects model. We extend the former in order to allow for heterogeneity in the long‐run technical efficiency of firms. This model is based on potential differences in firm‐specific characteristics and in firms’ inefficiency persistence. The model is applied to an unbalanced micro‐panel of German dairy farms over the period 1999 to 2009. Estimation of long‐run technical efficiency and inefficiency persistence is based on an output distance function representation of the production technology and estimated in a Bayesian framework. The results suggest that heterogeneity in long‐run technical efficiency of farms is mostly attributed to discrepancies in farm‐specific factors rather than differences in farms’ inefficiency persistence. Farm size is positively related to long‐run technical efficiency while subsidies exert a negative effect on the long‐run technical efficiency of farms. Inefficiency persistence is found to be very high, but heterogeneity in this persistence is low.     

Do family farms really converge to a uniform size? The role of unobserved farm efficiency*

We analyse the growth of family farms in Israeli cooperative villages during a period of economic turmoil. We use instrumental variables to account for the endogeneity of initial farm size, and correct for selectivity as a result of farm survival. We also include a technical efficiency index, derived from the estimation of a stochastic frontier production model, as an explanatory variable. Our aim is to check whether ignoring efficiency could have been the reason for convergence results obtained elsewhere in the literature. We found that technical efficiency is an important determinant of farm growth, and that not controlling for technical efficiency could seriously bias the results. In particular, larger farms are found to grow faster over time, while without controlling for technical efficiency the farm growth process seemed to be independent of initial farm size. The increasing polarisation of farm sizes in Israel has ramifications for the inefficiencies induced by the historical quota system, for the political power of the farm sector and for the social stability of farm communities.     

Small U.S. dairy farms: can they compete?

The U.S. dairy industry is undergoing rapid structural change, evolving from a structure including many small farmers in the Upper Midwest and Northeast to one that includes very large farms in new production regions. Small farms are struggling to retain competitiveness via improved management and low‐input systems. Using data from USDA's Agricultural Resource Management Survey, we determine the extent of U.S. conventional and pasture‐based milk production during 2003–2007, and estimate net returns, scale efficiency, and technical efficiency associated with the systems across different operation sizes. We compare the financial performance of small conventional and pasture‐based producers with one another and with large‐scale producers. A stochastic production frontier is used to analyze performance over the period for conventional and pasture technologies identified using a binomial logit model. Large conventional farms generally outperformed smaller farms using most economic measures—technical efficiency, various profitability measures, and returns to scale.     

Cost and environmental efficiency of rice farms in South Korea

We examine cost and nutrient use efficiency of farms and determine the cost to move farms to nutrient‐efficient operation using Data Envelopment Analysis (DEA) with a dataset of 96 rice farms in Gangwon province of South Korea from 2003 to 2007. Our findings show that improvements in technical efficiency would result in both lower production costs and better environmental performance. It is, however, not costless for farms to move from their current operation to the environmentally efficient operation. On average, this movement would increase production costs by 119% but benefit the water system through an approximately 69% reduction in eutrofying power (EP). The average estimated cost of each EP kg of aggregate nutrient reduction is approximately one thousand two hundred won. For technically efficient farms, there is a trade‐off between cost and environmental efficiency. We also find that the environmental performance of farms varies across farms and regions. We suggest that agri‐environmental policies should be (re)designed to improve both cost and environmental performance of rice farms.     

The Impact of Direct Income Transfers of CAP on Greek Olive Farms’ Performance: Using a Non‐Monotonic Inefficiency Effects Model

We analyse the impacts of direct income transfers on the technical efficiency of Greek olive farms. We use a production frontier function and a non‐monotonic inefficiency effects model, which incorporates the influences of exogenous variables (subsidies, farm characteristics, etc.) on technical efficiency. The model is applied to 1995–2004 FADN data. The results show that direct transfers of the CAP had a negative and monotonic effect on technical efficiency, whereas the degree of specialisation had a non‐monotonic effect on technical efficiency.     

家庭农场经营效率及其差异分析*——基于山东234个示范家庭农场的调查

[目的]文章通过对山东省家庭农场经营效率的实证分析,旨在厘清技术、规模对农场经营效率的促进作用,通过比较分析找出各类型家庭农场短板,针对性地提出政策建议。[方法]以山东234个家庭农场数据为例,运用DEA模型对家庭农场全样本及纯种植、种养结合、种植兼休闲、种养兼休闲4类家庭农场的经营效率进行了测算和分解。[结果]首先,家庭农场综合技术效率仅为0. 170,纯技术效率和规模效率分别为0. 235和0. 786,规模效率相对充分纯技术效率不足是经营效率较低的主要原因;其次,种养结合类农场发展势头较好,纯种植类家庭农场发展滞后且综合技术效率和纯技术效率最低,种养兼休闲类农场的规模效率最低。[结论] 4类农场差异明显,应降低生产技术使用门槛,引导农场主参加职业教育,提升纯种植类农场纯技术效率,同时出台相关政策,实现土地流转的降费提效,改善种养兼休闲类农场规模效率。     

The role of family life-cycle events on persistent and transient inefficiencies in less favoured areas

Family farms dominate less favoured areas (LFAs) within Europe, and family life-cycle conditions, such as succession and retirement, affects how these farms adapt to changing circumstances. Past studies of on-farm technical efficiency have not directly addressed these conditions, but they may explain why some farms are more efficient than others, especially as the farm family model dominates most farming systems. Motivated by the UK's withdrawal from the EU and the debate around establishing replacement support policies, we apply a multi-step model to measure both transient and persistent inefficiencies using a panel of LFA cattle and sheep farms in Scotland over the period 2003–2020. We find a greater prevalence of persistent compared to transient inefficiency, which suggests that structural problems still exist. Farms with planned succession are found to have higher persistent efficiencies, whereas farmers nearing retirement have lower levels. Other factors, such as dependence on subsidy, off-farm activity and classification as severely disadvantaged tend to compound these lower efficiencies. We argue that life-cycle conditions should not be ignored in studies of farm technical efficiency. Within the scope of framing a new agricultural policy for UK administrations, these results inform the debate on support for LFAs, as well as the promotion of support towards generational renewal to ease transition across farm family life-cycle events.     

Farm size,relative efficiency and agrarian policy in Côte d'Ivoire: profit function analysis of rice farms

This paper examines the relative economic efficiency of small and large rice farms in Côte d'Ivoire using a profit function approach. No differences in the relative economic efficiency of small and large farms were found. This conclusion is robust under alternative model specifications. Agrarian reforms directed towards further concentration of landholding for large farms in Côte d'Ivoire cannot be justified based on economic efficiency. Results show that access to credit and use of modern rice varieties significantly increase profits. To improve technical efficiency of rice farms, an accelerated program to provide information, credit, improved seeds and other inputs is needed. When all the farms (i.e. large and small) are taken together, there is evidence of allocative inefficiency. Strategies are needed to remove such management related inefficiencies in rice production either through the development of a better market price information system or effective farmer-oriented technical training programs by rice extension workers.     

Spatial dependency and technical efficiency: an application of a Bayesian stochastic frontier model to irrigated and rainfed rice farmers in Bohol,Philippines

We investigated the role of spatial dependency in the technical efficiency estimates of rice farmers using panel data from the Central Visayan island of Bohol in the Philippines. Household‐level data were collected from irrigated and rainfed agro‐ecosystems. In each ecosystem, the geographical information on residential and farm‐plot neighborhood structures was recorded to compare household‐level spatial dependency among four types of neighborhoods. A Bayesian stochastic frontier approach that integrates spatial dependency was used to address the effects of neighborhood structures on farmers’ performance. Incorporating the spatial dimension into the neighborhood structures allowed for identification of the relationships between spatial dependency and technical efficiency through comparison with nonspatial models. The neighborhood structure at the residence and plot levels were defined with a spatial weight matrix where cut‐off distances ranged from 100 to 1,000 m. We found that spatial dependency exists at the residential and plot levels and is stronger for irrigated farms than rainfed farms. We also found that technical inefficiency levels decrease as spatial effects are more taken into account. Because the spatial effects increase with a shorter network distance, the decreasing technical inefficiency implies that the unobserved inefficiencies can be explained better by considering small networks of relatively close farmers over large networks of distant farmers.     

Efficacitè technique et coûts de production dans les secteurs laitiers du Québec et de l'Ontario

This study aims to estimate the level of technical efficiency in milk production and to analyze the relationship between the costs of production, the level of technical efficiency and farm size. Furthermore, the socio-economic variables that characterize the most efficient farms and those producing at lower cost are identified. The results indicate that in Quebec, the level of technical efficiency increases with herd size, but this increase is very small. In Ontario, herd size is not significant to explain technical efficiency. The level of education, the participation in milk recording programs, expenditures per cow fort are and artificial insemination, the quality of hay and the number of years as member of a management club are a11 variables that characterize efficient farms.     

Technical efficiency and farm size: a conditional analysis

The relationship between technical efficiency and size might be affected by farm heterogeneity. We analyse this relationship conditional on a set of control variables. These control variables are chosen using a production model where technical efficiency is introduced as a parameter. As a result, technical efficiency affects both the input demand and the output supply of a profit maximising producer. The empirical application explores these issues using panel data of dairy farms in Spain.     

Feed use intensification and technical efficiency of dairy farms in New Zealand

In recent years, the traditionally pasture‐based dairy farms in New Zealand have become more intensive by using higher proportions of supplementary feed. This trend has been attributed to a range of factors, such as productivity enhancement, overcoming pasture deficits and the improvement of body condition scores. However, there is a lack of knowledge as to how feed use intensification affects the technical efficiency of dairy farms in New Zealand. This paper addresses the research gap by estimating the impact of feed use intensification on the technical efficiency of New Zealand dairy farms, using a fixed effects stochastic production frontier model and a balanced panel of 257 farms from 2010 to 2013. The empirical results show that technical efficiency on New Zealand dairy farms is positively and significantly influenced by feed use intensification, herd size and milking frequency.     

Analysis of Environmental Efficiency Variation

In this article, we develop and implement a methodology for analyzing the sources of variation in environmental efficiency across producers. We formulate a two–stage model. In the first stage, we use stochastic frontier analysis to estimate both technical and environmental efficiency. In the second stage, we again use stochastic frontier analysis to regress estimated environmental efficiency scores against a variety of technology, physical environment, and management variables. In this stage we estimate the impact of each explanatory variable on environmental efficiency, and we derive conditional estimates of environmental efficiency from the one–sided error component. We illustrate our methodology with an empirical application to a panel of Dutch dairy farms. We find evidence of relatively low levels of environmental efficiency, and we find that environmental efficiency can be improved through a number of policy options, including the provision of farmers with more insight into the nutrient balance of their farms.     

Off‐farm work and technical efficiency on U.S. dairies

In this study, we investigate the impact of an increase in farm households’ off‐farm work on technical efficiency (TE) of U.S. dairies. We present a theoretical framework that implies that an increase in farm household off‐farm work decreases TE. We use two nationally‐representative samples of U.S. dairies (2010 and 2005 Agricultural Resource Management Surveys) and a parametric approach (stochastic frontier analysis) to empirically test the hypothesis. Results are generally consistent with the hypothesis and show that an increase in off‐farm work by the farm household is associated with a significant decrease in TE. In addition, results show that there is a statistically significant difference in TE between small, medium, and large farms. Small farms are associated with significantly higher off‐farm work and have lower TE than large farms, which implies that less off‐farm work by households with larger farms is at least partially responsible for the evidence of economies of scale in the U.S. dairy industry.     

Gains and structural effects of exploiting scale-economies in Norwegian dairy production

In this paper, we present calculations of the economic gains in terms of reduced costs by exploiting scale‐economies in dairy production in Norway, and the effect this would have had on the number of farms. We also explore whether or not optimal scale and unexploited scale‐economies change over time due to scale‐augmenting technical change. The analysis is based on homothetic cost functions estimated by means of data for individual dairy farms for the period 1972–1996. For 1972, we find that, by full exploitation of scale‐economies, the costs could have been reduced by almost 40%, while the number of farms would have been reduced by more than 85%. The number of small farms has been substantially reduced in the period considered. This fact, combined with small scale‐augmenting technical change, implies that the gains and structural effects of exploiting scale‐economies have decreased over time. In 1996, costs could have been reduced by close to 30% by full exploitation of scale‐economies, while the number of farms would have been reduced by slightly more than 70%. Thus, both gains and structural effects are substantially less than in 1972. Nevertheless, the calculated gains for 1996 make almost 5 billion NOK. This corresponds almost exactly to the total public support to the dairy farms in 1996. The unexploited scale‐economies are largely due to the agricultural policy. Thus, a substantial share of the same can be considered as part of the‘price’ the Norwegian society has to pay for this policy. In addition, there are likely to be large hidden costs of this policy due in particular to the quota system and other direct production regulations. They imply that technical innovations and other efficiency‐improving investments requiring increased production to be profitable are not carried out. This is the more likely explanation for the extremely poor efficiency development in Norwegian dairy production in the period studied.     

Technical efficiency in paddy farms of Tamil Nadu: an analysis based on farm size and ecological zone

Despite the wider application of efficiency analysis in Indian agriculture, little has been done on the investigation of intra and interecological variations, size differences and their interactions. However, ecological issues have paramount implications for the low-input sustainable agricultural production. Furthermore, due to the various causes of efficiency, the age-old size-based debate on efficiency differences is not yet resolved. The present study examines the level of technical efficiency across ecological zones and farm size groups in paddy farms of the southern Indian state of Tamil Nadu. The study showed that 90% of the variation in output among paddy (IR-20) farms in the state is due to differences in technical efficiency. Land, animal power and fertilisers have significant influence on the level of paddy production. Varying from 0.59 to 0.97, the mean technical efficiency was found to be 0.83. The use of F-test in two-way analysis of variance (ANOVA) and censored regression (Tobit model), with dummies for ecological zones, farm size groups and their interactions, has shown that, at mean level, the level of technical efficiency among paddy farms of the state differs significantly across agro-ecological zones and size groups as well, The study further indicated that small-sized paddy farms in zone II and medium-sized paddy farms in zone III are represented by ecologically size-biased production techniques; thus achieving higher technical efficiency.     

Relationships between Technical Efficiency and Financial Management for Czech Republic Farms

This paper provides the first analysis of the relationship between farm financial structure and technical efficiency in Central and Eastern European farming during the transition to a market economy. First, technical efficiency scores for a sample of Czech farms are computed with data envelopment analysis, accounting for sampling variability by using the Simar and Wilson bootstrapping procedure. The confidence intervals show that corporate livestock farms are the most homogenous in terms of technical efficiency. Second, a Tobit model is applied for the investigation of factors, including financial considerations, which influence the variation in technical efficiency. The potential endogeneity of the financial variables in the explanation of efficiency is examined, following Smith and Blundell. The Amemiya estimator is used for those cases which are revealed as endogenous. The analysis indicates substantial differences in the way in which the different management structures are treated by lenders. De novo, individual farms are subject to stringent evaluation of their loan applications, which is not the case for the successors of the former collective and state farms.     

Broadacre farm productivity and profitability in south‐western Australia

This paper examines broadacre farm performance in south‐western Australia. This region has experienced pronounced climate variability and volatile commodity prices since the late 1990s. Relationships between productivity and profitability are explored using panel data from 47 farms in the study region. The data are analysed using nonparametric methods. By applying the Fare‐Primont index method, components of farm productivity and profitability are measured over the period 1998–2008. Growth in productivity is found to be the main contributor of profitability. Gains in efficiency and technical change are identified as jointly and similarly important in their contribution to total factor productivity for the farm sample in the region from 1998 to 2008. However, across environments, efficiency gains play an increasingly important role in influencing productivity as growing season rainfall increases. We conclude that R,D&E that delivers further improvement in technical efficiency and technical change is needed to support the profitability of farms across the study region.     

Productivity of New York Dairy Farms Measured by Nonparametric Malmquist Indices

The productivity of 70 individual New York dairy farms, decomposed into technical efficiency change and technological change components, was measured annually from 1985 to 1993 from output distance functions estimated using nonparametric programming methods. Technology is measured regressively only if it is regressive to all previous periods rather than just the immediate previous period. Productivity increase averaged 2.6 per cent annually, mostly from gains in technological improvements, since average efficiency decreased slightly. Twenty-five per cent of the farms failed to increase productivity sufficiently over the period to offset the decreased ratio of output to input prices.     

Analysis of the technical efficiency of state rubber farms in Vietnam

This study entails an analysis of the technical efficiency of natural rubber production by state farms in Vietnam. A time-varying stochastic frontier production function model for unbalanced data is estimated for 33 farms. Individual farm technical efficiencies are reported and discussed. One of the main results concerns the bimodal distribution of technical efficiency indices. A few farms operate near the production frontier while the bulk operate well away from the frontier. Some implications are drawn from the results as a guide to future policy research work in the rubber industry in light of recent moves by the Vietnamese government towards economic reform.