Profit Efficiency among Dairy Farmers in Southern India: An Application of Stochastic Frontier Profit Function

Abstract

Background: Dairy farming has emerged as an important profitable enterprise in India as it is a source of income, especially for small and marginal farmers;the study aims to understand the reasons for increased profit of dairy farmers of South Indian states. Methods: The present study was undertaken in Southern Indian states during 2020-21 to estimate the profit efficiency of milk producers across different herd-size categories. Result: Maximum likelihood estimates (MLE) of specified profit function revealed that overall, prices of green fodder (0.1873), prices of concentrate (0.1072), veterinary service rate (0.0569) and herd size (0.7545), had a positive and significant impact on normalized profits, whereas prices of dry fodder (-0.0277) and labour wages (-0.1652) had a negative and significant impact on normalized profits, respectively. Overall, the mean profit efficiency of dairy farmers was found to be 58.65 per cent indicating 41.35 per cent of profit efficiency was lost due to technical and allocative inefficiencies in milk production. Results from the profit inefficiency model revealed that overall, education, herd size, herd composition and experience in dairy farming had a negative and significant impact on profit inefficiency.

Profit Efficiency of Milk Producers in Ethiopia: Empirical Evidence from Western Shewa Milk Shade, Walmara District

“…This result indicates that concentrate feed is the most important input in a dairy farming business. This result is against the finding reported by (Binita Kumari et al, 2020;Lakshmipriya et al, 2023) Roughage feed cost also negatively and significantly affected the profit efficiency of dairy farmers at 1%. The sign of the coefficient is as expected, and it could be inferred from Table 4 that increasing roughage feed cost by 1% will result in a 0.309% reduction in the profit of dairy farmers.…”

“…This result in Table 4 indicates that a 1% increase in labor cost will result in a 0.056% reduction in the profit of the dairy farmers. This result supports the finding reported by (Acharya et al, 2021;Lakshmipriya et al, 2023). The cost of concentrate feed also negatively and significantly affected the profit efficiency of dairy farmers at 1%.…”