Agricultural Policies and Structural Change in French Dairy Farms: A Nonstationary Markov Model

The aim of this paper is to gain an understanding into how agricultural policies have affected structural change in the French dairy sector. A nonstationary Markov model is estimated using a Generalized Cross Entropy approach. Results show that while the price of cow's milk encourages farm growth, direct payments and quota restriction favor small farms. The price signal is a key factor of structural change. As a result, higher milk prices may accelerate the trend toward the further growth of dairy farms. Settlement policy and technical change seem not to slow this trend.     

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.     

Impact of de-coupling agricultural support on dairy investment and milk production volume in Finland

This study analyses the impacts of de-coupling of agricultural support from production in Finland. A dynamic agricultural sector model, which includes 17 production regions and endogenous investments and technical change, is used in the analysis. Investment in different production techniques is dependent on the relative profitability and the spread of each technique in the population of heterogeneous farms. There are relatively few large farms which use efficient production techniques in Finland. De-coupling weakens the incentive for investment in dairy production and causes a temporary but significant slow down in dairy investments and technical change. Consequently, de-coupling is likely to result in a significant drop in milk and beef production in the next 10-20 year period if no corrective measures are taken in agricultural policy in less-favoured areas such as Finland. However, a slow recovery of investment and output levels are expected in the long run.     

Sources of productivity growth on Finnish dairy farms—application of an input distance function

The objective is to examine sources of productivity change on Finnish dairy farms in the 1990s. The decomposition of productivity change into technical and technical efficiency change is widely recognized but it neglects the scale effect. Generalized decompositions incorporating all three components are calculated for a sample of Finnish dairy farms from 1989-2000. This period is of interest because of the drastic change in agricultural policy when Finland joined the European Union (EU) in 1995. The results indicate that productivity growth was on average low, approximately 0.15% per year. Neutral technical change was identified as the most important source of productivity growth (1.1%). Technical efficiency decreased by almost 0.5% annually. The contribution of the scale effect in productivity change increased towards the end of study period.     

Enhancing productivity on suburban dairy farms in China

Dairy farms in China's suburban areas have been playing an important role in providing urban markets with fresh milk. With the rising demand for fluid milk and dairy products in the cities, there is a perception that small and scattered dairy farms in China's provinces are gradually disappearing and more concentrated dairy cattle farming is being formed near suburban areas. This article uses farm‐level survey data and stochastic input distance functions to make estimates of total factor productivity (TFP) on suburban dairy farms, as well as for the entire dairy sector. The results show that over the past decade TFP growth has been positive on suburban dairy farms, and this rise in productivity has been driven mostly by technological change. However, at the same time we find that, on average, the same farms have been falling behind the advancing technical frontier. We also find one of the drivers of the suburban dairy sector is the relatively robust rate of technological change of these farms, which has been more rapid than on farms in the dairy sector as a whole. The results suggest that efforts to achieve greater adoption of new technologies and better advice on how to use the technologies and manage production and marketing within the suburban dairy sector will further advance productivity growth in the sector.     

A LINEAR PROGRAMMING STUDY OF FAMILY-RUN DAIRY FARMS IN NORTHERN IRELAND

The paper presents the results of a study in which multiperiod linear programming models were used to examine the probable responses of small and medium sized dairy farms in Northern Ireland to various policy, farm indebtedness and development options and to project consequent structural change in the dairy sector. The introduction of quotas has curtailed the considerable potential for expansion of output on these farms while having a less detrimental effect on farm profits and the survival of the smaller dairy herd than the price cut necessary to produce the same reduction in output.     

Is farming enough in mountain areas? Farm diversification in the Pyrenees

The continuity of farming in mountain areas in Europe is at severe risk and its future faces manifold uncertainties. Mountain farms are immersed in a long-term process of reorganization. Farm diversification plays a prominent role in this process of adjustment and reallocation. However, little work has been done explicitly on the role farm diversification plays in the current structural changes occurring. In order to fill this void, the nature of farm diversification has been examined in the Pyrenees, where four different typologies of farms have been identified: absence of diversification, agricultural diversification, farmland diversification and finally farm labour diversification. These typologies reflect a gradation along which the farm diversification practices are applied to more aspects of the farm household. Throughout this gradation farming is increasingly marginalised. Finally, it is argued that the endorsement of policy measures stimulating farm diversification in mountain regions should be cautiously considered, since there is high risk of encouraging further agricultural abandonment.     

Factors affecting farm growth intentions of family farms in mountain regions: Empirical evidence for Central Switzerland

Family farms in mountain regions are undergoing a progressive structural change and an ongoing shift in the allocation of production factors land, capital and labor. In Switzerland, various policy measures influence the re-allocation of these production factors. To understand the effectiveness of these schemes and to assess future farm structural change, it is useful to analyze the underlying drivers which support and hinder the emergence of individual farm growth strategies. We study the family farms’ growth intentions using a logistic regression model based on a combination of census and survey data on family characteristics from two mountain case study regions in Central Switzerland. Factors supporting farm growth intentions are the relative change in farm size in recent years, farm related sunk costs, farm diversification and farm size. We found no support for the hypothesis that farm growth intention is also influenced by the perceived personal situation represented by indicators for the perceived workload, psychological stress and financial problems. In addition, off-farm labor did not prevent farmers from stating growth intentions. Our empirical findings suggest that (i) the most important factors which support farm growth intentions correspond with factors driving observed patterns of structural change; (ii) limited availability of family labor may result in a new critical threshold for farm growth strategies; (iii) aims and non-pecuniary preferences of farmers will impede a rapid structural change in the near future.     

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.     

Herd Growth,Farm Organisation and Subsidies in the Dairy Sector of Russia and Kazakhstan

Initially taken as a template for farm restructuring after the demise of collective agriculture, the ‘Western family farm model’ has taken root in the former Soviet countries only belatedly and incompletely. We examine dairy structures in Russia and Kazakhstan and analyse the drivers of recent herd growth. We are specifically interested in the role of farm management and organisation, vertical integration, and the role of policy. Regression analysis based on a sample of 180 randomly selected commercial dairy farms, using an innovative simultaneous equation framework, shows that better herd management and access to milk marketing contracts were more effective in stimulating herd growth than current subsidy payments. We do not find evidence that milking plants belonging to corporate entities or even supra‐regional agroholdings grow more substantially than medium‐sized individual farms. Twenty‐five years after the end of central planning, structural change among commercial dairy farms in Russia and Kazakhstan appears similar in many ways to the patterns observed in the West more recently: smaller farms catch up in terms of herd growth and classical family‐run operations coexist with or even emulate vertically integrated agribusinesses based on hired labour. In moving toward this ‘new normal’ of farming structures, commercial dairy farms in Russia may even be a few steps ahead of their Western counterparts. At the same time, the still sizeable but stagnating group of subsistence producers in rural households finds no equivalent in the West.     

Deregulation reforms,resource reallocation and aggregate productivity growth in the Australian dairy industry

Deregulation reforms in the Australian dairy industry had long‐lasting repercussions for Australian agriculture and the wider Australian economy. Using farm‐level data from 1979 to 2013, we investigate the effect of these reforms on productivity in the Australian dairy industry which arose from correcting resource misallocation between farms and across segregated state milk markets. Our results demonstrate that after the dairy reforms in 2000, relative market share shifted from less productive farms to more productive ones, and between farms using different production systems – generating additional productivity gains for the farm sector, but imposing some costs on downstream manufacturers by strengthening the seasonality of milk supply. Lessons from the Australian experience provide timely guidance for those countries exploring deregulation now or in the future to improve the industry‐level agricultural productivity growth through facilitating resource reallocation from less efficient to more efficient farms.     

Effects of subsidies in Russian dairy farming

This study develops a microeconometric model of specialized dairy farms in the Moscow region using panel data over the period 1995–2001. The model is used to analyze the role of subsidies on profit as well as input and output allocation. Theoretical conditions for short‐term profit maximization are not rejected by the data. Differences between farms allow for a fixed‐effect specification. The dairy producers in the region demonstrate a low responsiveness to market signals, but technology change becomes important. Labor, land, and livestock had low shadow prices. Although subsidies have a distorting effect on the input–output mix, this study shows they relieve the credit constraints on dairy farms and have an important positive influence on farm profit.     

Economic Meltdown in Malaysia

Abstract

The economic downturn in Malaysia has encouraged a debate on the benefits of its export-oriented industrialisation strategy. There is renewed interest in the agricultural and livestock sectors. One of the beneficiaries of this policy change could be the dairy farming sector. Using desktop research and ‘key-informant’ techniques, this study reviews various factors that could influence the development of the dairy farming sector in Malaysia. The study concludes that the (a) Government may encourage the start-up of integrated plantation crop, animal feed and livestock farms, (b) investment and trade linkages with neighbouring countries could lead to diversification of import sources, and (c) consumption of dairy products may have matured, leading to increases in dairy self-sufficiency. It is postulated that these developments will produce a dynamic environment and significant threats to the interests of traditional dairy exporting countries.     

Energy productivity and greenhouse gas emission intensity in Dutch dairy farms: A Hicks–Moorsteen by-production approach under non-convexity and convexity with equivalence results

The agricultural sector is currently confronted with the challenge to reduce greenhouse gas (GHG) emissions, whilst maintaining or increasing production. Energy-saving technologies are often proposed as a partial solution, but the evidence on their ability to reduce GHG emissions remains mixed. Production economics provides methodological tools to analyse the nexus of agricultural production, energy use and GHG emissions. Convexity is predominantly maintained in agricultural production economics, despite various theoretical and empirical reasons to question it. Employing non-convex and convex frontier frameworks, this contribution evaluates energy productivity change (the ratio of aggregate output change to energy use change) and GHG emission intensity change (the ratio of GHG emission change to polluting input change) using Hicks-Moorsteen productivity formulations. We consider GHG emissions as by-products of the production process by using a multi-equation model. Given our empirical specification, non-convex and convex Hicks-Moorsteen indices can coincide under certain circumstances, which leads to a series of theoretical equivalence results. The empirical application focuses on 1,510 observations of Dutch dairy farms for the period of 2010–2019. The results show a positive association between energy productivity change and GHG emission intensity change, which calls into question the potential of on-farm, energy-efficiency-increasing measures to reduce GHG emission intensity.     

Medium-term EU integration impacts on Norwegian agriculture: A partial equilibrium analysis

The paper analyses and discusses possible impacts on Norwegian agriculture of an EU membership based on the regionalized agricultural sector model CAPRI. Norwegian agriculture is characterized by a small-scale farming structure and high levels of support. Previous analyses have shown that Norwegian agriculture is expected to undergo dramatic changes because of EU membership in terms of farm income, production and structural change. Our study indicates that a substantial share of the agricultural production can be maintained at the national level. Milk and crop production may remain largely unaffected, while meat production decreases in the range of 10-20% compared to a reference run without membership. However, a reduction in total farm income by about 40% indicates that structural adjustments will follow EU accession. The results are discussed in view of the pattern of adjustments observed in Finland and Austria after EU accession in 1995. The need for the dairy industry to take advantage of the improved market access is stressed. Attention is also called to some strengths and limitations of the CAPRI model to analyse large-scale policy changes and to identify model improvements as an area of future research.     

How drought affects the financial characteristics of Australian farm businesses

The financial performance of 240 farms in a drought‐affected agricultural region of Australia is analysed. The decadal study period included some years of widespread drought, as well as years with only subregional droughts or no drought. Some droughts created larger adverse financial impacts than others. Mostly, the more droughts farms experienced, the worse was their financial performance relative to farms within the same quantile of farm performance. Despite the incidence of drought, by the end of the decade, almost all the farm businesses were wealthier from increasing their farm size and becoming more crop dominant. Unexpectedly, consecutive years of drought had a significant positive effect on the operating profit per hectare and retained profit per hectare of farms in a majority of their respective quantiles. Many farms that experienced consecutive drought were forced to make structural changes, shifting away from livestock production towards additional cropping. These structural changes boosted farm performance over the decade. The incidence of drought affected some measures of farm performance differently whilst others were affected similarly. Understanding these metrics of farm performance and the structural changes underway in an agricultural region helps form a more complete view of drought impacts.     

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.     

Dairy sheep farms in semi-arid rangelands: A carbon footprint dilemma between intensification and land-based grazing

In recent decades there have been significant changes in land use and production orientation in certain marginal agricultural areas in the southwest of Spain. The abandonment of rainfed cereal crops and their change of use as natural pastures grazed by milk sheep, have led to an improvement in the profitability of the farms, greater industrialisation and a positive impact on rural development.This paper calculates the carbon footprint (CF) of farms in the context of life cycle assessment with the objective to identify the system that accounts for the lowest CF while maintaining adequate levels of profitability and revitalising the rural environment. The data were obtained through surveys carried out on dairy sheep farms of different typologies, ranging from the semi-intensive farms with small grazing areas, to the extensive farms with large areas of natural pastures. Findings could help farmers evaluate the environmental impact of their activities, while at the same time provide consumers with valuable evidence to be used in further marketing actions.Greenhouse gas emissions vary from 1.77 to 4.09 Kg CO₂eq/kg of milk, where the lowest values correspond to the most intensive farms and the highest values to the most extensive and least productive farms. Enteric fermentation, followed by feeding, are the emissions with the greatest impact. Enteric fermentation reaches its maximum value (52.22 % of the total emissions) in the most extensive farms.On other hand, this study found that carbon sequestration varies between 0.09 and 2.04 kg of CO₂eq/kg of milk, a figure that can considerably reduce the carbon footprint calculation and justifies its inclusion in the Life Cycle Assessment.     

The evolving role of large and medium farms on Brazilian agriculture

We use Brazilian agricultural censuses data since 1970 to describe land structure evolution in Brazil, focusing on the most important agricultural commodities and livestock products across regions. The analysis reveals a remarkable stability in the number of farms in the period, as well as in the structure of land distribution across farm sizes, with a persistence of a dual agricultural structure. Land distribution, as measured by the GINI index, has changed very little and is still very high. The number of large farms is increasing significantly in time, while the number of farms with area below 500 ha changed little in the 1970–2006 period. Medium‐sized and large farms, although heavily outweighed in numbers, account for the highest share of annual crop production currently, and their share in crop (annual plus permanent) production value increased between 1980 and 2006, while the same share decreased for smaller farms. We conclude that the observed stability will probably reduce in the future, as economic forces will likely change the balance in favor of an increase in the number of large farms. This is an issue of obvious political importance, especially considering the importance of the smaller farms for employment in agriculture.     

Financing Constraints and Agricultural Investment: Effects of the Irish Financial Crisis

This paper considers the role of financing constraints in agricultural investment since the recent financial crisis. Using Irish micro data over the period 1997–2010, we estimate the Q model of investment and test for financing constraints using a measure of internal finance dependence. Our econometric method controls for censoring, heterogeneity and endogeneity. We find that financing constraints are binding and the impact of constraints becomes much more acute following the financial crisis. Constraints are found to be well above pre‐crisis levels and especially elevated in 2007, 2008 and 2009. The effects are greatest for medium‐sized farms and farms in the dairy sector.