Dairy Farm Management and Long-Term Farm Financial Performance

Abstract

The financial performance and relationships between several management factors and financial performance are examined in a panel of 107 New York dairy farms. A panel regression model with fixed effects is estimated in an effort to identify management factors that influence profitability. The model is estimated with two-stage least squares to account for endogenous farm size and debt use variables. Production management factors such as farm size, rate of milk production, and milking system had a positive impact on farm profitability. Financial management variables for the type of accounting system used and the debt use were also significantly related to profitability. Unlike the findings of many other studies, measures of human capital did not have a statistically significant impact on profitability.

Factors influencing the long-term competitiveness of commercial milk producers: evidence from panel data in East Griqualand, South Africa

“…El-Osta and Johnson (1998), El-Osta and Morehart (2000), Short (2000) and Gloy et al (2002) used dairy herd size as a measure of dairy farm size. For the purposes of this study, the natural logarithm of dairy herd size, LNCOWS it , was used.…”

“…El-Osta and Johnson (1998), Short (2000) and Gloy et al (2002) found that milking rate (production per cow) is related positively to farm profitability. According to Gloy et al (2002), milking rate is assumed to contain latent characteristics of the milk producer's knowledge, experience, husbandry policy and feeding practices.…”

“…Previous research found a strong link between farm size (total number of cows), milking rate (production per cow) and dairy farm profitability (El-Osta & Johnson, 1998;Short, 2000;Gloy et al, 2002). Other factors that significantly affected dairy enterprise profitability were forage and feed costs per cow (El-Osta & Johnson, 1998), milkings per day and debt-to-asset ratio (DA) (Gloy et al, 2002;Short, 2000), and specialisation in milk production (El-Osta & Morehart, 2000;Short, 2000).…”

“…Some studies have focused on production cost measures of competitiveness (Vink et al, 1998;Blignaut, 1999;Tauer, 2001), whilst others have used profitability measures such as gross margin per litre (Hopps & Maher, 2007), return on assets (ROA) (Gloy et al, 2002) and net farm income (NFI) (El-Osta & Johnson, 1998;Short, 2000). Previous research found a strong link between farm size (total number of cows), milking rate (production per cow) and dairy farm profitability (El-Osta & Johnson, 1998;Short, 2000;Gloy et al, 2002).…”

“…Some studies have focused on production cost measures of competitiveness (Vink et al, 1998;Blignaut, 1999;Tauer, 2001), whilst others have used profitability measures such as gross margin per litre (Hopps & Maher, 2007), return on assets (ROA) (Gloy et al, 2002) and net farm income (NFI) (El-Osta & Johnson, 1998;Short, 2000). Previous research found a strong link between farm size (total number of cows), milking rate (production per cow) and dairy farm profitability (El-Osta & Johnson, 1998;Short, 2000;Gloy et al, 2002). Other factors that significantly affected dairy enterprise profitability were forage and feed costs per cow (El-Osta & Johnson, 1998), milkings per day and debt-to-asset ratio (DA) (Gloy et al, 2002;Short, 2000), and specialisation in milk production (El-Osta & Morehart, 2000;Short, 2000).…”