Factors Influencing Technical Efficiency in the EU Dairy Farms

Abstract

This paper aims to analyse the technical efficiency (TE) of dairy farms and find its determinants. To accomplish this problem, the Stochastic Frontier Analysis was applied. The data were obtained from the Farm Accountancy Data Network database for dairy farms (TF15-45—Specialist dairying) for 2004–2019. Dairy farms were divided into four clusters according to their physical size (number of livestock units per farm) and economic size (standard output per farm). The largest farms by physical and economic size are located in Denmark and Cyprus. The smallest, in comparison, are in Bulgaria, Croatia, Latvia, Lithuania, Austria, Poland, Romania, and Slovenia. Farms in the EU are relatively technically efficient, i.e., they use their resources efficiently to produce maximum output (production). However, they have the potential to achieve better economic results and be more competitive, as the size of farms’ is not fully optimised. The abolition of the milk quota can be considered a factor in improving technical efficiency, as the indicator is higher after the abolition. New and old member states have almost comparable technical efficiency levels (the p-value of the t-test is 0.463), with old members having slightly higher level TE. Subsidies have contradictory effects on TE. Farm efficiency with higher subsidies per cow is higher for farms with €51–100/cow. However, as subsidies increase, TE decreases. Only the group of farms with the highest subsidies has a higher TE. More diversified farms are more technically efficient than specialised farms. Milk yield did not influence the analysed indicator. The analysis results can serve the stakeholders as a tool for modelling future agricultural policy, as the European farms are very heterogenous and show different conditions and economic outcomes.

Entrepreneurship in Dairy Cattle Sector: Key Features of Successful Administration and Management

“…Many studies on the dairy cattle sector use the same input and/or output variables in their efficiency models. Indicatively, gross revenue has been used as output by Náglová and Rudinskaya [18], Theodoridis et al [19], Theodoridis and Ragkos [23], Mitsopoulos et al [25], and Spička and Smutka [34]; human labor has been used as input in Alvarez and Arias [17], Náglová and Rudinskaya [18], Madau et al [21], Theodoridis and Ragkos [23], Siafakas et al [24], Mitsopoulos et al [25] and Areal [35]; while variable capital cost and fixed capital cost have been used as inputs by Alvarez and Arias [17], Náglová and Rudinskaya [18], Madau et al [21],. Theodoridis and Ragkos [23], Mitsopoulos et al [25], Areal [35] and Kovács and Szücs [36].…”

“…Indeed, Musliu et al [40] estimated the technical efficiency of 57 farms in Kosovo using SFA and reported a high TE score of 0.95, a result that is in accordance with our findings. In addition, Náglová and Rudinskaya [18], based on panel data obtained from the Farm Accountancy Data Network (FADN) database covering EU member states (no data available for Cyprus and Greece) for 2004-2019, calculated an average TE score of 0.900 for EU-27 members. Náglová and Rudinskaya [18] used the stochastic frontier approach (SFA) for the estimation of efficiency, an approach that does not attribute any deviation from the efficient frontier entirely to inefficiencies [30].…”

“…Under these circumstances, the economic performance of the modern dairy cattle sector is heavily dependent on efficient management [13], which also largely defines its resilience and sustainability. In the ongoing rapid transition of the sector towards a highly intensive system with explicit entrepreneurial elements [14][15][16], the efficient use of the existing resources in dairy farms is also crucial to their competitiveness [17,18].…”

“…Recent studies on the evaluation of the managerial abilities of European dairy farmers are mainly focused on the estimation of the technical efficiency (TE) level of the farms and its determinants, without providing insights concerning the operational characteristics and the applied production and management practices of the best farms. Indicatively, Cuesta [20] and Alvarez et al [17] estimated the efficiency of Spanish dairy farms using stochastic frontier models, Madau et al [21] evaluated the technical efficiency and the total factor productivity change of dairy farms in EU countries, Kroupová et al [22] estimated the productivity of Czech farms, while Náglová and Rudinskaya [18] estimated the TE of EU dairy farms and found its determinants. Regarding Greece, the most recent studies on the efficiency of dairy farms were conducted by Theodoridis and Ragkos [23], Siafakas et al [24] and Mitsopoulos et al [25].…”

Digitalisation, politics of sustainability and new agrarian questions: The case of dairy farming in rural spaces of Italy and Sweden

“…In the EU, dairy production is a core agricultural sector, and its market‐driven transformation has been key in the CAP, even before the abolition of the milk quota system in 2015 (Jongeneel, 2011). The latter may have contributed to improved technical efficiency (Náglová & Rudinskaya, 2021) and increased productivity (Čechura et al., 2021). Nevertheless, it has also brought new and significant challenges concerning the role of dairy production in terms of rural development (Stuiver & Wiskerke, 2004; van der Ploeg, 2008) and transformed the socioeconomic structures of the dairy sector (Butler & Holloway, 2016; Vik et al., 2019).…”