Abstract
This paper aims to evaluate the technical efficiency and the total factor productivity change of dairy farms in EU countries. Analyses were carried out in order to determine which countries showed the best performance adaptations when the quota regime was relaxed and to evaluate the technical conditions of European farmers at the starting point of the new regime (milk quota abolition). A data envelopment analysis (DEA) was applied on aggregate data related to 22 European countries for the period from 2004 to 2012. The findings suggest that milk farms show small scope for improving efficiency using their own technical input. The estimation of total factor productivity and its components suggest that the European milk sector has suffered a decline in productivity. This means that external factors, independent of the farmers’ capacity to use technical inputs, can play a greater role than efficiency in conditioning productivity and profitability in the near future.
Highlights
The demand for milk and dairy products has grown dramatically throughout the world during the last decade
This study was carried out in order to estimate technical efficiency and total factor productivity change in the European dairy sector, with the objective being to evaluate whether efficiency can play in a role in the new policy scenario for conditioning productivity and, at the least, profitability
The findings from the analyses are that milk farms show small scope for improving technical efficiency and that the European milk sector has suffered a decline in productivity
Summary
The demand for milk and dairy products has grown dramatically throughout the world during the last decade. As regards cow’s milk, Thiele et al (2013) forecast that milk consumption would increase with an average growth of 12 million tons per annum until 2022, implying that demand will grow from today’s figure of more than 630 million tons to about 750 million tons. Even if all the analysts agree that demand will increase in the near future, some estimates of the rate of growth in milk and dairy consumption are lower than others over the 10 years, mostly because they predict a lower increase in Chinese demand (European Commission 2014). The European Union (EU) is the most important supplier of milk and dairy products in the world market. The EU provides 24% of the world’s supply of fresh cow’s milk (Table 1)
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