The associations of management and demographic factors with technical, allocative and economic efficiency of Irish dairy farms

Abstract

The phasing out of the European Union (EU) milk quota will create opportunities for producers to expand without the constraint of quota which has limited expansion since 1984. Therefore, it will be necessary for Irish dairy producers to become more competitive by increasing performance using the least amount of inputs per unit of output and maximizing the level of technical and economic efficiency. The objectives of the current study were to measure technical, allocative and economic efficiency, and to investigate the associations of key management, qualitative and demographic characteristics on efficiency. Efficiency scores were calculated using the non-parametric methodology data envelopment analysis (DEA). The DEA results showed that on average the sample of Irish dairy producers were not fully efficient in 2008 with technical, allocative and economic efficiency results under variable returns to scale (VRS) of 0·771, 0·740 and 0·571, respectively. In a second stage analysis, Tobit regressions were used to determine the associations of key variables with the technical, allocative and economic efficiency scores. The efficiency scores were included as dependent variables and the key independent variables were a variety of management and demographic variables. Mean calving date, number of grazing days, breeding season length, milk quality, discussion group membership and soil quality were all associated with technical and economic efficiency. Milk recording, use of artificial insemination (AI) and level of dairy specialization were associated with allocative and economic efficiency only. Age and age squared were the only significant demographic associations with the efficiency scores. © Cambridge University Press 2012.