Dairy farms without quotas in Belgium: estimation and simulation with a flexible cost function

Frahan, Bruno Henry de; Baudry, Alexandre; Blander, Rembert De; Polomé, Philippe; Howitt, Richard E.

doi:10.1093/erae/jbr013

Cited by 24 publications

(14 citation statements)

References 37 publications

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“…The empirical specification of the cost function used in this study is the Symmetric Generalised McFadden (SGM) developed by Diewert and Wales (1987) and expanded by Kumbhakar (1994), Peeters and Surry (2000), Pierani and Rizzi (2003), Wieck and Heckelei (2007) as well as in Henry de Frahan et al (2011). The extensive literature on flexible functions and the use of SGM in earlier empirical studies lead us to a rather short description of the model, which takes the following functional form:…”

Section: Empirical Specificationmentioning

confidence: 99%

The Influence of Biodiversity Provision on the Cost Structure of Swedish Dairy Farming

Gullstrand¹,

Blander²,

Waldo³

2013

J Agricultural Economics

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Multi-functionality and the provision of eco-system services are politically highly prioritised aspects of farming. This study uses a Symmetric Generalised McFadden cost function to analyze the relationship between costs of production and the provision of biodiversity for Swedish milk farms. Biodiversity indicators are based on the number of valuable plant species present at the farm and are modeled as an output in the cost function. The results show that the marginal cost of biodiversity increases with higher provision, and that an increased provision of biodiversity also increases the costs of market commodities such as milk and beef. The upward slope of the marginal cost of biodiversity and its competitive relationship with market goods questions the efficiency of support schemes based on voluntary programmes with a flat-rate per hectare compensation. Instead, the results support targeted environmental policy schemes with zonings and/or the use of biodiversity indicators.

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Section: Empirical Specificationmentioning

confidence: 99%

The Influence of Biodiversity Provision on the Cost Structure of Swedish Dairy Farming

Gullstrand¹,

Blander²,

Waldo³

2013

J Agricultural Economics

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“…They estimated short-run feed demand elasticities of -0.312 with respect to feed prices and 1.483 with respect to milk output. Meanwhile, in a study of Belgian dairy farms for a period running from 1996, de Frahan et al (2011 found slightly higher long-run feed demand elasticity with respect to feed prices (-0.664).…”

Section: Discussionmentioning

confidence: 98%

“…The findings of the present paper show land and purchased feed to be substitute factors of production, land and cows to be complementary, and cows and purchased feed to be substitutes. There are two possible reasons for the divergence between the findings of de Frahan et al (2011) and our own: 1) that Belgian farms largely supplement their cows' diets with purchased feed, while farmers in Navarre also use purchased forage and, 2) that de Frahan et al's longrun approximation differs from ours in that their specification estimates a long-run cost function, while ours estimates a short-run cost function, which it uses to approximate the long-run cost function.…”

Section: Discussionmentioning

confidence: 99%

“…Moreover, Hoque & Adelaja (1984) and De Frahan et al (2011) show that firm structure also has a high impact on milk production costs and that firmsize adjustment enables substitution between fixed and variable inputs (). To analyse the impact of the livestock feed component on milk production costs, therefore, it is important to approximate long-run costs using the short-run estimates.…”

Section: Introductionmentioning

confidence: 99%

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Feed prices and production costs on Spanish dairy farms

Casasnovas-Oliva¹,

Aldanondo-Ochoa²

2014

Span. j. agric. res.

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This paper analyses the impact of livestock feed prices and pasture quality on the long and short-term costs of milk production in a region of Spain (Navarre). The empirical results are obtained from the estimation of a flexible shortrun cost function, followed by the approximation of long-run equilibrium based on the quasi-fixed factors adjusted to their optimal levels. The results reveal a high sensitivity of milk production costs to changes in livestock feed prices due to two reasons. One is that, as milk production expands, it tends to become technologically more intensive. The other is that, in the current structure of dairy farming, land input is suboptimal, particularly in the case of large farms and areas of poor pasture. The results reveal that short-run substitution between feed and livestock is a potential strategy for farms to respond to feed price increases. They also suggest that structural policies designed to strengthen the dairy sector's competitiveness should vary according to agro-climatic conditions. In areas of poor pasture, herd growth might be used as a long-term measure to increase competitiveness through economies of scale; while the alternatives for farms in better-endowed regions also include extensification of dairy production.

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“…Input price indices for crop‐specific inputs and other inputs are computed using weighted average cost shares. The price for capital is calculated as the sum of the rental price of acquisition, measured by dividing the financial expenses by the debt, and the rate of depreciation obtained by dividing depreciation costs by the initial value of capital (de Frahan et al ., 2011). Finally, prices for land (both owned and rented) and labour (both paid and unpaid) are calculated as district‐specific (NUTS 2) values using the farm‐level data on land rental prices and prices for hired labour, respectively.…”

Section: Sample and Data Descriptionmentioning

confidence: 99%

Profitability Development and Resource Reallocation: The Case of Sugar Beet Farming in Germany

Wimmer

Sauer

2020

J Agricultural Economics

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Following the 2006 reform of the European Union sugar market, and in anticipation of the quota abolition, a reallocation of sugar production has occurred. Using a Lowe quantity index, we evaluate the productivity and profitability of sugar beet farming in Germany from 2004 to 2013. The results show that an increase in total factor productivity partly compensated for losses in terms of trade. Moreover, the contribution of production reallocation to sector productivity growth varied across regions with distinct ownership structures of sugar processing companies. These findings have implications for policy and industry, as it transitions to a liberalised market.

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Dairy farms without quotas in Belgium: estimation and simulation with a flexible cost function

Cited by 24 publications

References 37 publications

The Influence of Biodiversity Provision on the Cost Structure of Swedish Dairy Farming

The Influence of Biodiversity Provision on the Cost Structure of Swedish Dairy Farming

Feed prices and production costs on Spanish dairy farms

Profitability Development and Resource Reallocation: The Case of Sugar Beet Farming in Germany

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