Technical efficiency of dairy farms in Uruguay : a stochastic production frontier analysis

Abstract

The productivity of Uruguayan dairy farms has been consistently growing for the last 40 years. This process has implied the adoption of new technologies which have had significant effects on the production system. The efficiency with which available technologies are used influence output growth. Hence, assuring and enhancing dairy farms’ productivity and efficiency represent an important challenge to improve the competitiveness of the sector and achieve sustained economic growth. The overall objective of this study is to analyze the efficiency performance of dairy farms in Uruguay. Using a cross-sectional database, this study estimates a Cobb-Douglas stochastic production frontier and technical inefficiency model for dairy farms to determine the effect of each input on the production frontier and the principal factors that explain differences in farm efficiency. Results show that the number of milking cows has the highest effect on production, followed by the total consumption of feed, including concentrated feed, hay and silage. Although veterinary, agronomic and accounting assistance matter, the major determinants of efficiency differences are farmers’ specialization in dairy farming and the usage of artificial insemination. Overall, farm profiles indicate that those in the high efficiency group achieve a higher level of milk production than those less efficient; and they produce under a more intensive production system than farmers in low efficiency groups