Technical Efficiency of Dairy Farms: An Empirical Study of Producers in Poland

By Wilczynski, Artur; Koloszycz, Ewa et al. | European Research Studies, January 2020 | Go to article overview

Technical Efficiency of Dairy Farms: An Empirical Study of Producers in Poland


Wilczynski, Artur, Koloszycz, Ewa, Switlyk, Michal, European Research Studies


1. Introduction

One of the most important production on Polish farms is cow's milk, which in 2017 accounted to 16% of the global agricultural production in Poland. Milk production at the level of 13.7 million tons allowed Poland to take the 13th place in the world and the 5th in the EU in terms of the amount of milk produced. This was the result of many changes taking place on farms, mainly related to the concentration and intensification of production. In 2007-2016, the number of farms with cows decreased by 59% (from 656 000 to 267 000) and the number of cows decreased by 20%. An important factor affecting the milk volume produced on farms was the increase in milk yield of cows by 30%. The above changes were associated with the desire to improve the efficiency of production demonstrating the ability of farms to compete on the market.

In relation to a producer, production efficiency means either maximizing production from disposed production ratios or minimizing the expenditure on a given production. It can be assessed on the basis of reference to its most effective level, the so-called unit limit. One of the methods enabling such assessment is Data Envelopment Analysis--DEA, based on a non-parametric approach to creating an efficiency curve. This method has been used many times in research on the efficiency of dairy farms, among others, by Stokes et al. (2007), Balcombe et al. (2006), Kelly et al. (2012), Latruffe et al. (2012). The results of these researches on effectiveness were quite diverse, which was related to the assumptions made in the models (Mareth et al., 2016; Minviel and De Witte, 2017; Minviel and Latruffe, 2017; Spicka and Smutka, 2014; Rusielik and Switlyk, 2012). The results of the analyses prove that efficiency is related to the amount of expenditure per unit of production (MichaliCkova et al., 2013), with farm size and production intensity (Jiang and Sharp, 2015; Ma et al., 2019). Research also indicates a link between farm efficiency and milk quality (Kelly et al., 2013) and animal welfare (Allendorf and Wettemann, 2015). However, the conducted research did not clearly indicate the direction and strength of the impact of subsidies on the technical efficiency of farms (Latruffe et al., 2016).

The aim of the study was to determine the technical efficiency of Polish farms specialized in dairy production using the DEA method. The analysis was expanded to include the study of scale efficiency and diversification of technical efficiency in groups of farms separated according to the herd size and milk yield.

2. Material and Methods

The source of factual data was the information collected by the European system for accountancy data collection from agricultural holdings--FADN (Farm Accountancy Data Network). The field of observation of the system is only commercial farms producing about 90% of the Standard Output (SO) value in a given country, which are classified according to economic size and agricultural type. According to the indicated typology, farms described as specializing in dairying (type 45) must meet the following conditions:

* over 75% share of dairy cows in total grazing livestock;

* over 10% share of grazing livestock in total grazing livestock and forage.

Source data from the Polish FADN were verified in terms of data consistency and purposefulness. An additional selection criterion was to have at least 15 dairy cows. The conducted research so far shows that farms that do not meet this condition can be considered as not achieving the farm income at the parity level in Poland (similar to that obtained in non-agricultural activity), which at the same time prompts them to be called farms with low development capacity (non-developmental farms). As a consequence of these activities, the number of farms ranged from 869 to 1308 and changed depending on the analysed year (2008-2017).

The determination of technical efficiency was based on the concept of its measurement presented by Coelli et al. …

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