Can the small dairy farm remain competitive in US agriculture?

Loren W. Tauer, Ashok K. Mishra

Research output: Contribution to journalArticle

38 Scopus citations

Abstract

Smaller dairy farms in the US are observed to have higher costs than larger farms, and whether those higher costs are due to technology or inefficiency has implications for policy to address the small farm. If high cost of production on smaller farms is due to a higher cost frontier, then to make small farms competitive would require research to devise and design technology that is suitable for small farms. If instead high cost is due to inefficiency, then educational approaches are needed to ensure small dairy farms use technology efficiently. To determine the cause of higher costs on small farms, the cost of milk production by farm size was decomposed into frontier and efficiency components with a stochastic cost curve using data on USA dairy farms. Although the frontier cost of production decreases with farm size, that cost reduction is not as pronounced as a cost curve that includes inefficiency. The higher cost of production on many smaller farms is caused by inefficiency rather than technology.

Original languageEnglish (US)
Pages (from-to)458-468
Number of pages11
JournalFood Policy
Volume31
Issue number5
DOIs
StatePublished - Oct 1 2006
Externally publishedYes

Keywords

  • Cost curve
  • Dairy farms
  • Farm efficiency
  • Farm size
  • Stochastic frontier function

ASJC Scopus subject areas

  • Food Science
  • Development
  • Sociology and Political Science
  • Economics and Econometrics
  • Management, Monitoring, Policy and Law

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