Technology Adoption and Technical Efficiency: Organic and Conventional Dairy Farms in the United States

Abstract

We compare productivity and technical efficiency of organic and conventional dairy farms in the United States. We address self-selection into organic farming by using propensity score matching and explicitly test the hypothesis that organic and conventional farms employ a single, homogeneous technology. Utilizing the 2005 Agricultural Resource Management Survey on Dairy Costs and Returns Report data, we reject the homogeneous technology hypothesis and find that the organic dairy technology is approximately 13 percent less productive. However, we find little difference in technical efficiency between organic and conventional farms when technical efficiency is measures against the appropriate technology.Key words: dairy, organic, productivity, propensity score matching, stochastic frontier, technical efficiency Carlos D. Mayen is assistant professor in the Department of Agricultural Economics and Agricultural Business, New Mexico State University. Joseph V. Balagtas is assistant professor and Corinne E. Alexander is associate professor, both in the Department of Agricultural Economics, Purdue University.This research was supported by the Economic Research Service, United States Department of Agriculture, through the cooperative agreement # 43-3AEL-5-80064, and by the Purdue University Agricultural Experiment Station. The authors thank Michael Schutz, Jeffrey Dorman, and two anonymous reviewers for helpful comments. 1 Technology Adoption and Technical Efficiency: Organic and Conventional Dairy Farms in the United StatesAlthough the organic dairy sector in the United States is a niche market, it has exhibited potential for growth in the U.S. dairy sector. In 2005, certified organic dairy farms accounted for approximately 1 percent of the dairy cows in the U.S. and accounted for less than 1 percent of total U.S. milk production (McBride and Greene 2007). However, from 2003 to 2006, sales of organic dairy products nearly doubled, making organic dairy one of the fastest growing segments of organic agriculture in the United States, as well as a fast growing segment of U.S. dairy (Organic Trade Association). Growth in demand for organic dairy has been fueled by a complex mix of consumer concerns of food safety, nutrition, concern for the environment, and other factors (Klonsky 2000;Blank and Thompson 2004;Rotz et al. 2007). Growth in supply has been spurred in part by the promise of high returns relative to conventional dairy farming, as well as environmental concerns on the part of producers (McBride and Greene 2007). Proponents of the organic movement have held up the organic model as a potentially profitable alternative to conventional dairy production, especially for smaller operations as well as new farmers (Sato et al. 2005;Rotz et al. 2007).Yet little is known about the production practices of the organic dairy sector, not in small part because the industry is so new. In particular, little work to date has systematically addressed the effect of organic standards on the production process. Under standards d...

The adoption of technologies, management practices, and production systems in U.S. milk production

“…U.S. organic milk production costs shown to be $5 -$8/cwt higher than for conventional milk (McBride and Greene, 2009). No significant differences in technical efficiency found between U.S. organic and non-organic dairy farms (Mayen et al, 2010).…”

Farmer Participation in Supermarket Channels, Production Technology, and Efficiency: The Case of Vegetables in Kenya

“…However, the two-step Heckman procedure is less suitable for non-linear functions such as the stochastic frontier. We therefore use matching techniques similar to Mayen, Balagtas, and Alexander (2010) in their stochastic frontier analysis.…”

Technical Efficiency in Organic and Conventional Agriculture - A Gender Comparison

“…Madau (2007) and Tiede mann and LataczLohmann (2012) concluded that, organic agriculture is more technical inefficient than conventional agriculture. Mayen et al (2010) however intimated that, measured against the appropriate technology, organic and conventional agriculture (dairy) did not show any significant difference in technical inefficiency.…”