Dairy Sector Productivity an Irish perspective

Transcription

1 Dairy Sector Productivity an Irish perspective Anne Kinsella Research Contributors: Dr. Fiona Thorne 1 Dr. Cathal O Donoghue 1 Dr. Thia Hennessy 1 Mr. Patrick Gillespie 1 2 Dr. Stephen Hynes 2 Dr. Darragh Clancy 3 Dr. James Carroll 4 Dr. Carol Newman 4 1 Teagasc 2 NUIG 3 Central Bank of Ireland 4 Trinity College Dublin

2 Research Objectives To establish the changes, if any, in TFP over the period Compare and contrast with previous estimates of TFP To examine the factors which influence technical efficiency Funding from Department of Agriculture - Effect of decoupling on technical efficiency levels

3 How does one measure Productivity & 'efficiency'? No straight-forward statistic Concept of Total Factor Productivity (TFP) Consideration of multiple outputs Measurement via distance functions - (In)efficiency measured as the distance from the frontier TFP broken down to components Technical change (TC) Scale efficiency change (SEC) Technical efficiency change (TEC)

4 Methodology Total Factor Productivity (TFP) & efficiency calculated for period Using National Farm Survey (NFS) data Stochastic Frontier Analysis (SFA) Model estimating the factors influencing efficiency The Effects of Decoupling on Efficiency Additional explanatory variables

5 Methodology Starting from a log transformed production function ln y = β + ln i 0 where y is output, x a vector of k inputs, and e the error term. k x ki + e i (The subscript i indicates that measures are farm-specific.)

6 Methodology Standard Stochastic Frontier Model for panel data ln y 0 ln v it u i it n xnit vit ui (Pitt and Lee, 1981) n 2 iidn(0, ) iidn v 2 (0, ) u Noise Efficiency..inefficiency is time-invariant..and no control for sources of technical inefficiency

7 Methodology Composite error term separates noise (v) from efficiency (u) However, farms are heterogeneous Fixed Effects (FE) or Random Effects (RE) models are a common way to account for this heterogeneity. farm effect term added as part of a composite error as an intercept. Adjustments necessary to avoid confounding heterogeneity and the measure of efficiency (u). If u is time-invariant, then separating into time-varying and time in-variant parts will then yield a 'clean' estimate of efficiency.

8 Methodology We construct Malmquist indices* using the parameters from a model of efficiency. *Break TFP into component parts

9 Methodology Greene (2005) accomplishes this in a one-step Maximum Likelihood approach. ln y K i, t = αi + k ln xkit +vit uit k 1 where the α's are farm-specific, time-invariant dummy variables, which capture the heterogeneity. This is the True Fixed Effects model (TFE).

10 Methodology If a Random Effects is more appropriate, then one can apply the True Random Effects (TRE) specification ln y K i, t = ( i wi ) + k ln xkit +vit uit k 1 where the w term is another time-invariant, farm-specific, random term intended to capture heterogeneity. True Effects Models

11 The Dataset - Dairy Teagasc National Farm Survey (NFS) Specialist Dairy producers - where dominant enterprise = specialist milk production Unbalanced panel, near 300 farms in most years Total of 4211 observations Dataset contains - Technical and economic micro-data

12 The Dataset Dairy Teagasc NFS: Dairy Tillage Sheep Output: Milk (Euro) Inputs: Herd Size Land (Forage Acres) Capital Direct Costs Labour (mandays) All allocated and deflated Cattle Rearing Cattle Other

13 Model and Results Based on previous work (Carroll et. al., 2008) TRE and TFE versions of Stochastic Frontier Analysis (SFA) perform best in context of Irish Dairy sector Application of this methodology to extended dataset Previously , now up to 2009 Will be extended for all years up to present

14 Model and Results True Random Effects TRE_TC TRE_TEC TRE_SC TRE_TFP Source: Gillespie et al (Ongoing) based on previous work Carroll et al (2008)

15 Model and Results True Fixed Effects TFE_TC TFE_TEC TFE_SC TFE_TFP Source: Gillespie et al (Ongoing) based on previous work Carroll et al (2008)

16 Annual Total Factor Productivity Growth Newman & Matthews (2004) Carroll et al Study (2008) Dairy 1.1% 1.4% Gillespie et al (Ongoing) updated to 2009 Updated Annual TFP Gillespie et al 2.0% 1.5%

17 Some Conclusions to date SFA provides a measure of u which allows for randomness in the data TFE and TRE continue to achieve statistical significance in model runs saw decrease in TC, TEC, and consequently TFP Recent data concurs with previous work s conclusion; Increasing returns to scale evident & exploited in Dairy Dis-improvement in Technical Efficiency Efficiency Determinants Extension use, AI, soil quality correlated with higher efficiency levels for Dairy TFP is driven by Technical Change (TC) for Dairy

18 Technical Performance indicators Irish Dairy farms Teagasc produces Annual factsheet for Dairy enterprise details both financial & technical performance Technical performance improved across all selected measures in 2011 Output measures increased Somatic cell count declined Concentrate feed usage per cow declined in line with increase in length of grazing season (average increase by 3 days across the country)

19 Technical Performance indicators Irish Dairy farms Average 2010 Average 2011 % change Production (litres per cow) 4,978 5, Milk solids (kgs per cow) Somatic Cell count ( 000 cells/ml) Concentrate feed usage (kgs per cow) Artificial Insemination (% of farms using AI) Source: Teagasc National Farm Survey, Dairy Enterprise Factsheet

20 Teagasc Road Map - Dairy Production Sets Key Performance Indicators (KPI) for farms for 2018 Teagasc National Farm Survey factsheets also focus on % of farms achieving a selection of these targets 2010 v s 2011 performance improved across all measures with the no. of farms achieving targets increasing

21 % of farms achieving selected Teagasc Dairy Road Map Targets Percentage 2010 Percentage 2011 Milk yield per cow: >= 5,200 litres Milk solids per cow: >= 378kg Protein Content: >= 3.4% Fat Content: >= 3.95% Somatic Cell count: <= 200,000 cells/ml Concentrate feed per cow: <= 750kg per cow Source: Teagasc National Farm Survey, Dairy Enterprise Factsheet

22 Useful links to earlier Research Carroll, J., Thorne, F. and Newman, C. (2008) An Examination of the Productivity of Irish Agriculture in a Decoupled Policy Environment. Available online from: Thorne, F. and Fingleton, W. (2005) Examining the Relative Competitiveness of Milk Production: An Irish Case Study ( ) Rural Economy Research Centre Working Paper, 05-WP-RE-09. Available online from: Boyle, G. (1987) How Technically Efficient is Irish Agriculture? Methods of Measurement Socio Economic Research Series No. 7. Dublin: Teagasc

23 Contacts Presenter: - Agricultural Economics and Farm Surveys Department Research Contributors: Teagasc PhD Walsh Fellow Head Rural Economy Development Programme & PhD Advisor Head Agricultural Economics and Farm Surveys Department & PhD Advisor - Agricultural Economics and Farm Surveys Department & PhD Advisor - Senior Researcher in the Socio-Economic Marine Research Unit, National University of Ireland, Galway & PhD Advisor

24 Thank you! Questions/Comments.