Vertical Economies of Scope in Dairy Farming

Journal of Agricultural & Food Industrial Organization 01/2009; 7(1):8-8. DOI: 10.2202/1542-0485.1281
Source: RePEc


With the exception of Azzam and Skinner (2007), the economic literature on farm structure has largely neglected issues of vertical organization of the farm. In this article we estimate a multi-stage, multi-output cost function in order to measure vertical economies of scope in organic and conventional dairy farms. In particular, we model the integration of production of grains and forages on dairy farms. We find negligible vertical economies of scope for conventional dairy farms but significant vertical economies of scope in organic dairy production. The large vertical economies of scope for organic dairy farms are consistent with higher costs of obtaining organic feed through market transactions associated with an underdeveloped market for organic feeds.

Download full-text


Available from: Joseph V. Balagtas
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: We analyze the efficiency of organic pasture farming in Germany using data from 1994/95 to 2005/06. Five inputs and one output are analyzed by means of a stochastic frontier production function, allowing for heteroscedasticity and technical effects. Five sets of possible determinants of technical efficiency are considered in the model. These include: (1) farm structure and resources; (2) human capital and management capacities; (3) institutional choice; and (4) subsidies. To these factors that are commonly included in technical effects models, we add (5) a set of variables that capture localization and urbanization economies such as the share of organic farms in a region and the regional share of votes for the Green Party in recent elections. These regional effects are found to have a significant impact on the technical efficiency of organic farms. The evolution of efficiency on farms that are converting from conventional to organic farming is also analyzed.
    Full-text · Article · Sep 2012 · Renewable Agriculture and Food Systems