Management and Size Economies in the England and Wales Dairy Sector

Dawson, P.J.; Hubbard, Lionel

doi:10.1111/j.1477-9552.1987.tb01022.x

Cited by 37 publications

(26 citation statements)

References 7 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Recent statistical studies (Dawson & Hubbard, 1987;Mukhtar & Dawson, 1990) on the nature of long-run average costs (LAC) in the England and Wales milk sector suggest a U-shaped curve, but one that is skewed to exhibit much greater economies than diseconomies as output is increased. In effect, this places the curve somewhere between the U-shape of traditional theory and the L-shape of 'modern' theory.…”

Section: Costsmentioning

confidence: 99%

See 1 more Smart Citation

The price of Milk Quota in England and Wales

Hubbard

1992

Oxford Agrarian Studies

View full text Add to dashboard Cite

In this paper prices for leasing milk quota in England and Wales are estimated using traditional and 'modern' microeconomic theory of firms' costs. In both cases it is argued that the distinction between short-run and long-run is relevant in establishing quota prices. Estimates of marginal cost are derived by econometric methods and by direct use of observed costs, after which it is a straightforward exercise to obtain estimates of quota values at farm level and equilibrium quota prices for the industry. Results from the empirical analysis justify choice of the efficiency criterion, whereby quota is transferred from high-cost to low-cost producers, as a suitable basis for establishing a leasing price. Whilst higher milk prices are shown to have been the principal cause of increases in the nominal price of quota, reductions in input prices dominate when these increases are measured in real terms. As for choice of cost function, the use of constant marginal cost, associated with 'modern' microeconomic theory, provides some credible estimates.

show abstract

Section: Costsmentioning

confidence: 99%

“…To this end, two LAC functions were estimated using cross-section MMB data for 1984/85. The first was a translog function (after Dawson & Hubbard, 1987); the second was a reciprocal function, to allow for the possibility of continuously falling average costs. 8 The two specifications provided almost identical fits to the data.…”

Section: Costsmentioning

confidence: 99%

The price of Milk Quota in England and Wales

Hubbard

1992

Oxford Agrarian Studies

View full text Add to dashboard Cite

show abstract

“…Be that as it may, one needs to be alert to the pitfalls of attempting to derive the shape of the LAC curve based on a two-dimensional scatter plot that does not take into account the vital influence that management exerts on production and thus on the attendant costs. This cautionary note is echoed by Dawson and Hubbard (1987) in the dairy industry in England, and Hubbard et al (2007) in the oilseed rape production in England. It is axiomatic that better managerial acumen enables a farmer to produce any given output at a lower cost, and it should be realised that each point on the scatter plot shown in Figure 4 typifies a given level of managerial ability and/or practice.…”

Section: Figure 3: Variable Fixed and Total Cost Curvesmentioning

confidence: 88%

“…Following the approach adopted by Hubbard et al (2007), this could be done by relating average cost to actual output, but it is more appropriate to relate average cost to planned output, on the basis that costs are more likely to reflect what the farmer expects output to be (Hubbard et al, 2007;Dawson & Hubbard, 1987). As a result, a pragmatic two-step procedure will be adopted.…”

Section: Conceptualisation Estimation and Datamentioning

confidence: 99%

The cost of producing milk in the KwaZulu-Natal Midlands of South Africa: a cost-curve approach

Mkhabela

Mndeme

2010

Agrekon

View full text Add to dashboard Cite

The cost of producing a unit of output is a critical management aspect in the dairy industry, particularly in South Africa. The ability of minimise unit costs of producing milk, while not curtailing output levels, is often a determining factor of the long-term survival of dairy farms in South Africa. In this study, average cost curves showing the variation of unit cost with output are estimated for dairy production in the KwaZuluNatal Midlands of South Africa, using a panel of 37 farms for the period 1999 to 2007. The results show that economies of size exist, with larger farms able to produce any given level of output at lower costs compared to their smaller counterparts. The study found that the long-run average cost curve (LAC) for the sample of dairy farms is Lshaped rather than U-shaped. The best farmers, in terms of average costs of producing a litre of milk, are found between the 100 000 to about 170 000 litres of milk per year output range and these were found to spend less than R1 per litre.

show abstract

“…Despite its importance, it has been absent from the production, generating the ''management bias'' (Griliches, 1957). Several studies have appeared in the literature for the control of management efforts; they include the adoption of proxies (Dawson and Hubbard, 1985;Mefford, 1986), covariance analysis, which controls for the effect of time-invariant management, by eliminating it from the estimating equation (Mundlak, 1961), and data envelopment analysis (DEA) with a three-stage analysis (Avkiran and Rowlands, 2008). Recently, Alvarez et al (2004) proposed to handle this problem as an unobservable input, which can be recovered from the estimate function under certain hypothesis about the relationship between managerial ability and conventional inputs.…”

Section: Management Abilitymentioning

confidence: 99%