SHORT-RUN AND LONG-RUN EFFICIENCIES OF NEW YORK DAIRY FARMS

Short-run and long-run technical and allocative efficiencies were computed for 395 New York dairy farms using data envelopment or nonparametric procedures on 1990 Dairy Farm Business Summary data. The farms were, on average, more allocatively efficient in the short run than in the long run, but were more technically efficient in the long run than in the short run. Stanchion barns were as efficient as milking parlors, and milking more than two times per day did not increase efficiency.Productivity Analysis,

Estimation of Treatment Effects of recombinant Bovine Somatotropin using Matching Samples

The production and profit impacts of recombinant Bovine Somatotropin (rbST) on select New York dairy farms were estimated using data over the years 1994 through 2004, by comparing matching farms which use and do not use rbST. The use of rbST increases milk production per cow and decreases the cost of production per hundredweight of milk. The cost penalty (cost reduction) is $0.39 per hundredweight for those currently using rbST to stop using rbST, while the average treatment effect is$0.73.Bovine Somatotropin, BST, Dairy, Matching Samples, Treatments, Agribusiness, Farm Management, Food Consumption/Nutrition/Food Safety,

When to Get In and Out of Dairy Farming: A Real Option Analysis

The Dixit entry/exit real option model was applied to the entry/exit decisions of New York dairy farmers. For the cost structure of a 500-cow farm, the entry milk price is $17.52 per hundredweight (cwt) and the exit milk price is$10.84. For the 50-cow farm cost structure, the entry price is higher at $23.71 per cwt, and the exit price is also higher at$13.48. If infinite numbers of representative farms enter and exit at these prices, the price of milk should range between $13.48 and$17.52 per cwt.dairy farming, entry-exit, investment, real options, Farm Management,

ESTIMATES OF INDIVIDUAL DAIRY FARM SUPPLY ELASTICITIES

Milk supply elasticities were estimated for 70 farms who participated in the New York Dairy Farm Business Summary Program from 1985 through 1993. Technology was modeled as a single output, single composite input Cobb-Douglas function. The resultant supply function is the natural log of milk quantity as a function of the log of milk price to prices paid for all inputs, with a time trend added. Since random output shocks to each farm may have occurred in any of the nine data years, a dummy year variable was modeled sequentially for each year for each farm. Ignoring 12 negative estimates, elasticities averaged .65. Pooling the data with a fixed effects model produced an elasticity estimate of .47. A geometric lag pooled model produced a short-run elasticity of .2 and a long-run supply elasticity of 1.00 using instrumental variables, but an OLS short-run elasticity of .25 and long-run elasticity of .64.Livestock Production/Industries,

Life Insurance Funding of Buy-Sell Arrangements in Small Businesses

Buy-sell arrangements for the death of a co-owner may be funded with life insurance. The mechanisms and details of buy-sell arrangements were discussed. The decision whether to use life insurance was modeled using the expected utility theorem. State dependent utility was used since a surviving partner may become more (or less) risk averse upon the death of a co-owner. Life insurance funding is preferred at relatively low amounts of risk aversion, especially if the surviving partner becomes more risk averse after the co-owner's death. A lower percentage of life insurance would be used if insurance premiums are significantly above actuarially fair premiums. Given currently available insurance rates, most closely held small businesses probably should fund their buy-sell arrangements with life insurance.Risk and Uncertainty,

When to Get In and Out of Dairy Farming: A Real Option Analysis

The Dixit entry/exit real option model, modified to accommodate a milk price support regime, was applied to the entry/exit decisions of New York dairy farmers. Results varied by farm size, but for the 500-cow farm the entry milk price is $19.09 and the exit milk price is$11.66 when farmers were allowed to continuously enter and exit the industry. With no option to ever return to dairy farming, the exit milk price falls to $10.00.

THE EMPIRICAL IMPACT OF BOVINE SOMATOTROPIN ON A GROUP OF NEW YORK DAIRY FARMS

The empirical impact of rBST was measured for 211 dairy farms using 1993-95 data. Farms applying rBST on roughly half of their herds saw, on average, a net increase of about 1,300 pounds of milk per cow per year. The impact on profits, was, however, not statistically different from zero.Livestock Production/Industries,

PRODUCTIVITY OF DAIRY PRODUCTION IN INDIVIDUAL STATES

In a competitive market dairy production will shift to that region which is the most productive. Thus, this paper reports the measurement of productivity of dairy production in the various states of the U.S. using recent Census data and non-parametric Malmquist index techniques. These are total factor productivity measures that do not require the assumption of cost or profit maximization behavior for aggregation. Individual state estimates of changes in efficiency, technology, and productivity from 1987 to 1992 were computed, divided by 1987 values. Over these states the average increase in productivity was 3.6 percent, or about 0.7 percent per year. Almost all of the productivity increase occurred from technological change, since the average increase in efficiency was only 0.1 percent. Technological change averaged 3.5 percent over the five year period, or about 0.7 percent each year. If there is a significant decrease in the number of farms in a state, it might be expected that the remaining farms are more efficient, under the assumption that the least efficient farms are those that exit the industry. This was tested by regressing the percent change in efficiency on the percent change in farm numbers. The results were statistically insignificant. Likewise, if the output of the average farm increased it might be expected that efficiency might fall. This was tested by regressing the percent change in efficiency on the percent change in output per farm. Again the results were statistically insignificant. It was further expected that states that increased output per farm might have done so by using new technology. This was tested by regressing percent technological change on the percent change in output per farm. These results were also statistically insignificant.Dairy Productivity, Malmquist Index, Livestock Production/Industries, Productivity Analysis,

Empirical Analysis of Stanchion and Parlor Milking Cost on New York Dairy Farms

This paper empirically estimates cost functions for two milking technologies, stanchion and parlor, using farm level data from New York dairy farms for the years 1993 through 2002. A translog cost function was estimated along with input cost share equations for each milking technology by Iterative Seemingly Unrelated Regression. Any pair of inputs among feed, hired Labor, and cows had some degree of substitutability except for a pair of feed and hired labor evaluated by the Allen elasticity, and that of hired labor and feed evaluated by the Morishima elasticity. Additionally, economies of scale were found to exist over the entire range of output levels of the samples. The cost of stanchion technology was lower than that of parlor technology over the sample range of output levels of stanchion technology, but because parlor using farms were larger and costs continually decline, parlor using farms eventually experience lower costs than farms milking with stanchions.Livestock Production/Industries,

FARMER EFFICIENCY AND TECHNOLOGY USE WITH AGE

Productivity of U.S. farmers by age is measured by non-parametric programming using 1992 Census data, decomposed into efficiency and technology Malmquist index components. Productivity increases slightly with age and then decreases. In most states productivity variations are from technology use rather than efficiency differences.Farm Management, Research and Development/Tech Change/Emerging Technologies,