Dairy farm cost efficiency in leading milk-producing regions in Poland

Abstract

This paper examines the cost efficiency of dairy farms in 2 important regions of commercial milk production in Poland (i.e., Wielkopolskie and Podlaskie). Both regions gained importance following the market-driven resource allocation mechanism adopted after Poland's transition to the market economy in 1989 and accession to the European Union (EU) in 2004. The elimination of the dairy quota system in the EU in 2015 offers new expansion opportunities. The analysis of trends in cow numbers, milk production, and yield per cow shows different patterns of expansion of the dairy sector in the 2 regions. We selected dairy farm data from the Farm Accounts Data Network database for both regions and applied the cost frontier estimation model to calculate the relative cost-efficiency index for the period 2004 to 2009. The indexes compare each farm in the sample to the most efficient dairy farm in each region separately. Additionally, the top 5% of dairy farms with the highest relative cost efficiency index from each region were compared in terms of production costs with published results from a study using the representative farm approach. The comparison of results from 2 different studies permits a conclusion that Wielkopolskie and Podlaskie dairy farms are able to compete with farms from the 4 largest milk-producing countries in the EU. Although both regions can improve yields per cow, especially Podlaskie, both regions are likely to take advantage of the expansion opportunities offered by the 2015 termination of the milk quota system.