Technical Efficiency of Milk Production: Concept and Global Scenario

Abstract

This review presents the concept, importance, global scenario and determinants of technical efficiency of milk production. Technical efficiency of milk production is basically a measure of how well the individual dairy farmer transforms inputs into output/milk based on a given set of technological and economic factors. Technical efficiency of milk production can also be defined as the ability of a dairy farmer to produce maximum output under given set of inputs and technologies. It is also expressed as the ratio of a farmer‟s observed output to the technically maximum possible output/ production frontier at the given level of resources. Measurement of farm level efficiency of milk production is useful in providing insights into the competitiveness of the farms, potential for raising their productivity and improving resource uses. Improving technical efficiency is important to reap the potential benefits of the existing technology rather than searching for new technology. Embarking on new technologies alone is meaningless unless technical efficiency using the existing technology is achieved to its full potential. Improvement in technical efficiency which in turn maximizes milk production is the key to meet the growing demand for milk and milk products in the years to come. Increasing the efficiency in milk production is an important factor of productivity growth and this can be achieved by using better technologies along with better management of inputs, which are at the disposal of the farmers. Technical efficiency measures for dairy farms have been reported for many countries in a wide range of studies however, efficiency analyses reports in Africa in general and in Ethiopian dairy farms in particular are scanty. Technical efficiency of farmers is mainly affected by the socio-economic and demographic factors. Variables like size of the farm, age, training, extension services and education level of the farmers appeared significant in explaining differences in technical efficiency across the dairy farms. Therefore, studying farm efficiency and the potential sources of inefficiency are important from a practical and a policy point of view as farmers could use this information to improve their performance and the policy makers could use this knowledge to identify and target public interventions to improve farm productivity and farm income and thereby improve the general livelihood of the dairy farmers.