Effects of scale, intensity and farm structure on the income efficiency of Irish beef farms

Abstract

Data envelopment analysis (DEA) was employed to develop a model of income and scale efficiency for Irish beef farms. The objective was to identify and quantify management, farm structural and intensity indicators of efficiency for over 400 representative farms over two production systems and two years. Bootstrapping techniques were employed to measure and correct efficiency scores for sampling bias. Less than 10% of the sample exhibited constant or increasing returns to scale. The remaining farms exhibited decreasing returns to scale meaning that they were larger than optimal scale. Greater income efficiency was associated with lower levels of concentrate feeding and lower overhead costs per livestock unit (LU). Fragmentation, paid labour and capital investment were significantly negatively associated with income efficiency. There was a positive relationship between market gross output per LU and income efficiency. Negative market net margins tended to be subsidised by greater off-farm income on smaller (more scale efficient) farms and by greater direct payments on larger (more scale inefficient) farms. Consequently, prospects for increasing beef output via scale expansion are negative in an external environment of declining subsidies and reduced off-farm employment in rural areas. Increased output from Irish beef farms must therefore come primarily from farm system structural changes rather than scale changes, otherwise farm income efficiency will decline.

Co-Operation among Irish Beef Farmers: Current Perspectives and Future Prospects in the Context of New Producer Organisation (PO) Legislation

“…The Irish beef supply chain is characterised by diverse actors spanning inputsuppliers, farmers, and numerous sales outlets, processing, distribution and retailing outlets. Figure 1 illustrates the complexity of the Irish beef supply chain and the heterogeneity of beef production systems at farm-level (Finneran and Crosson, 2013). There is wide-ranging heterogeneity in the Irish beef herd in terms of the systems (for example cattle rearing, cattle finishing), types of beef animals (ranging from suckler cows, calves, heifers, young cattle, bulls and steers) and breed variety (see Figure 1) (Hocquette and Chatellier, 2011;Finneran and Crosson, 2013).…”

Input saving possibilities and practices contributing to more efficient beef production in Sweden

“…However, this study showed that larger farms apply less efficient input-saving technology, so H:FS1 was rejected. In two recent studies, Manevska-Tasevska et al (2013) and Finneran and Crosson (2013) found respectively that Swedish and Irish beef production exhibit decreasing returns to scale, implying that farms are larger than the optimal scale. In both cases, structural changes rather than scale changes are suggested.…”

“…However, feeding lower levels of concentrate increases the income efficiency of e.g. Irish beef farms (Finneran and Crosson 2013). Overall, grazing is typically considered the most cost-effective way of meeting the nutritional needs of cattle.…”

“…The impact of capital use on the efficiency of Swedish beef farms thus remains unclear. Previously, Ramsey et al (2005) and Finneran and Crosson (2013) found that investment on beef farms in US and Ireland, respectively, is unrelated to higher economic benefits. Manevska-Tasevska et al (2013) claim that even the investment subsidy has not succeeded in improving the TE of Swedish beef farms.…”

Co-Operation among Irish Beef Farmers: Current Perspectives and Future Prospects in the Context of New Producer Organisation (PO) Legislation

“…The Irish beef supply chain is characterised by a diverse range of actors spanning input-suppliers, farmers, multiple animal sales outlets, processing, distribution and retailing outlets. The Irish beef supply chain is characterised by heterogeneity of beef production systems at farm-level (for example cattle rearing, cattle finishing), types of beef animals (ranging from suckler cows, calves, heifers, young cattle, bulls and steers) and breed varieties [17][18][19].…”