Short and medium-term impact of dairy barn investment on profitability and herd size in Switzerland

Abstract

Investing in larger barns and increasing herd size are crucial milestones in dairy production. Based on the Swiss Farm Accountancy Data Network and data on government-supported investments, we investigate the development of two key variables over the first eight years after investment: change in herd size and calculated profit, that is, farm income minus opportunity costs for family labour and capital. We apply a fixed-effects panel regression and test for autocorrelation present in the time series. Compared to the year before the investment, calculated profit decreases in the first three years, while in the remaining years no significant difference compared to the year before investment can be seen. Herd size increases slowly, predominantly in the second and third years after investment, to some extent explaining the less favourable development of profitability in these years. We conclude that investment in a dairy barn does not lead to improved profitability in the short and medium term, pointing to the question of whether this picture changes in the long term.