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.

Analysis of Profitability of Raw Milk Production in a Commercial Farm Before and After Poland's Accession to the Eu

“…Considering milk production profitability that author for the years 2003-2006and Pytlewski et al (2014 for the years 2001-2012 obtained much higher values of that index. Sobczyński et al (2015) when analysing milk production efficiency on farms in two Polish provinces: the Wielkopolskie and the Podlaskie, found that farms in those regions are capable of competing with farms of four countries being the largest milk producers in the EU. This is because of the potential for improvement of the average milk yield per cow in those two Polish provinces and thanks to the potential to reduce milk production costs.…”

Productivity and Efficiency in European Milk Production: Can We Observe the Effects of Abolishing Milk Quotas?

“…Even before the cancelation dairy quota abolishment had attracted the attention of many studies, many of them were focused just on the situations in one or two countries. It can be said that some authors predicted an increase in milk supply together with decreasing prices for producers [18,35] as well as increasing competitiveness both within states [14] and globally [36]. The dairy sector was expected to be more dynamic than before the quota elimination [37], with a strong increase in intensity for the largest farms [1,20] with ultimately a slightly positive welfare effect [38].…”

“…As stated by Philippidis and Waschik [11], technological change is connected with structural change and has an effect on both the agricultural milk production sector and the dairy processing sector, in perfect competition as well as imperfect competition. Sobczyński et al [14] consider the use of advanced technology to be a key factor in achieving a higher yield per cow in a chosen region of Poland, and, according to Žáková Kroupová et al [15], it influences the total factor productivity change.…”

Can Family Farms Depend on Price Information? Testing Butter and Curd Price Integration in Poland

“…The variable assumes the value of 1 for all observations falling in the period after the milk quota system expired. Many Polish dairy farms were preparing themselves for the expansion of milk production long before the system was abolished [34], and they were even ready to pay fines for exceeding the allocated quota [35]. The study empirically tests the actual effect of quota termination on butter and curd prices in two regions.…”