Assessing the linkage between dairy productivity growth and climatic variability: The case of New York State

Abstract

Despite the importance of maintaining a high productivity level for the future viability of the dairy sector in the face of changing climate, very few studies have investigated how climatic conditions impact total factor productivity (TFP) growth in dairy farming. In order to bridge this gap in literature, we conducted a TFP decomposition exercise using dairy farm summary records from the New York state which is one of the historically major milk producing regions of the United States. Stochastic frontier models with air temperature, incorporated as an environmental input in an otherwise conventional dairy production function, are estimated using an unbalanced panel of constructed 'average' dairy farms of various size-classes covering a sufficiently long time-period. Change in TFP is then decomposed into various components namely technological change, technical efficiency change, and scale efficiency change. Further analysis also establishes that the introduction of average air temperature in the stochastic production frontier soaks what otherwise could be attributed to inefficiency and/or model residual.