Dynamic efficiency under investment spikes in lithuanian cereal and dairy farms

Abstract

Lithuanian agriculture has been receiving investment support under the Common Agricultural policy since 2004. Indeed, the most profitable farming types – cereal and dairy farms – saw a particularly strong increase in the investment amounts. The measure of dynamic efficiency allows one analyze the performance of businesses in regards of inter-temporal optimization of the investment behavior. This paper, therefore, looks into the trends of dynamic efficiency in Lithuanian cereal and dairy farms. The research is based on the data from the Farm Accountancy Data Network covering the period of 2004-2014. The analysis carried out for different farm sizes indicates that scale inefficiency is the main source of technical inefficiency for smaller farms, whether cereal, or dairy ones. Farms experienced investment spikes showed slightly lower inefficiency. These technical efficiency gains are due to improved pure technical efficiency and scale efficiency. However, the latter source appeared as a more important one for the smallest farms (less than 30 ha).