Small U.S. dairy farms: can they compete?

Abstract

The U.S. dairy industry is undergoing rapid structural change, evolving from a structure including many small farmers in the Upper Midwest and Northeast to one that includes very large farms in new production regions. Small farms are struggling to retain competitiveness via improved management and low-input systems. Using data from USDA's Agricultural Resource Management Survey, we determine the extent of U.S. conventional and pasture-based milk production during 2003-2007, and estimate net returns, scale efficiency, and technical efficiency associated with the systems across different operation sizes. We compare the financial performance of small conventional and pasture-based producers with one another and with large-scale producers. A stochastic production frontier is used to analyze performance over the period for conventional and pasture technologies identified using a binomial logit model. Large conventional farms generally outperformed smaller farms using most economic measures-technical efficiency, various profitability measures, and returns to scale. Copyright No claim to original US government works (c) 2009 International Association of Agricultural Economists.

Comparing economic performance of organic and conventional U.S. beef farms using matching samples*

“…Production economists have typically compared cost and/or profitability of production systems in one of several ways, common methods including (i) using experimental data to develop cost and return estimates for systems and comparing resultant performance measures (Gillespie et al. 2008), (ii) using regression analysis to determine the system impacts on performance measures (McBride and Greene 2009a), and (iii) comparing systems using efficiency measures derived from production frontiers (Nehring et al. 2009).…”

Profitability of wine grape growing in the EU member states

“…Generally, reference is made to the classification of profitability factors such as holding characteristics, economic context, production factor conditions and the relationship of the holdings with their markets (Pretolani, 2003). Generally, the concept of profitability is correlated with competitiveness, which in turn depends on other territorial characteristics ranging from natural resources to production factors and techniques (Bojnec & Ferto, 2009;De Stefano, 2003;Diniz, Katsioloudes, & Fortunas 2006;Nehring, Gillespie, Sandretto, & Hallahan, 2009). In the case of agro-foods, the main components of competitiveness, apart from historical factors, lie in economies of scale and differing degrees and capacities of adopting production and product innovation.…”

Competitiveness of management-intensive grazing dairies in the mid-Atlantic region from 1995 to 2009

“…Demand for milk has not risen as rapidly as productivity, leading to downward pressure on prices. As a result, smaller dairies that have been a mainstay of traditional rural landscapes in many parts of the United States have found it difficult to compete (Mosheim and Lovell, 2009;Nehring et al, 2009;Winsten et al, 2010).…”