The effect of land fragmentation on agriculture has worried policymakers for a long time because it is expected to be a negative effect. Land consolidation policies are frequently implemented to soften the degree of land fragmentation. However, to the authors' knowledge, no study in the dairy sector has empirically analyzed the role of land fragmentation on farm productivity and profits. This study helps to fill this gap in the literature by evaluating the effect of land fragmentation on milk production. To accomplish this, a stochastic frontier production function was 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 policymakers in the region assume that land fragmentation has a negative influence on agricultural production, particularly in dairy production, a land consolidation process was developed. Thereafter, a simulation analysis was 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 degree of land fragmentation in a proportion similar to that attained by the land consolidation process that is being carried out in the region.

a b s t r a c tLand fragmentation affects dairy farming through its influence on foodstuff production. As its impact on extensive farms (which use a large land area per cow) is expected to be larger than on intensive farms, land fragmentation could also constitute an obstacle to adopting an extensive production technology. Given that extensive farming is being encouraged by direct payments from the Common Agricultural Policy to protect the environment and preserve rural heritage, land fragmentation may reduce the effectiveness of this rural development aid. We provide an empirical application using a sample of Spanish dairy farms located in a region where land is highly fragmented. Using a stochastic frontier latent class model, we find a significantly larger impact of land fragmentation on the productivity of extensive farms compared to intensive ones. Moreover, land fragmentation significantly reduces the probability of using extensive production processes. Our simulation analyses shows that a reduction in the number of plots similar to that already achieved by previous land consolidation processes in the region would improve the variable profits of extensive farms by 16% compared to 6% for intensive farms. Additionally, up to 84% of intensive farms would switch to extensive production processes.

Consumer surplus, Household behavior, Rationing, Supply interruptions, Water demand, D11, D12, D45, D60, Q25,

This paper analyzes the role that genetic progress may play in improving profits of dairy farms. A novel data set of Spanish commercial dairy farms including management data and cow indices of genetic merit for production and nonproduction traits was used. In the empirical section, a frontier production function that included a farm genetic index for milk yield was estimated. To evaluate the full effect of genetics on farm profit it was necessary to consider the fact that feed intake increases with cows' genetic improvement. Results show that the increase in profits corresponding to the average genetic progress during the sample period is equivalent to a 5% increase in income from milk sales. Managerial ability plays an important role in exploiting genetics. Optimal management increases the return of genetics by 22% compared with farms with average management in the sample.

The value-added diversification strategy provides an option for guaranteeing the sustainability of small farms. This study examines how factors related to managerial strategy and socio-environmental sustainability influence the efficiency of diversification initiatives. For this purpose, we use a novel and unique database of value-added ventures implemented by 49 dairy farms located in northern Spain. We construct a production frontier using a Data Envelopment Analysis (DEA) model to estimate technical efficiency. The mean technical efficiency of the initiatives was 0.56 and 0.59 for the constant and variable returns specifications, respectively. Determinants of efficiency are analyzed with a two-step procedure with a double bootstrap. We find that the elaborations of more complex products other than fresh milk are negatively associated with efficiency. However, specialization in one product with different variants and direct sales both have a positive association with efficiency. In terms of socio-environmental variables, there is a positive association between efficiency and the use of quality schemes such as ‘protected designation of origin’ (PDO), the use of organic labelling and the farmer having university education, and a negative association with the percentage of family labor. Our findings support the idea that value-added diversification contributes to more resilient pathways of development and underlines the importance of good quality management of marketing and operational factors.