An econometric analysis of the economic and environmental efficiency of dairy farms in the KwaZulu-Natal Midlands

Mkhabela, Thulasizwe (2011-03)

Thesis (PhD(Agric) (Agricultural Economics))--University of Stellenbosch, 2011.

Thesis

ENGLISH ABSTRACT: This dissertation is an analysis of dairy production in the Midlands district of KwaZulu-Natal. The analysis of agricultural production generally ignores undesirable outputs that are produced alongside desirable outputs. This research attempted to integrate a model of nitrate leaching from dairy production into a multiple input/output representation of the production technology, together with the analysis of technical efficiency. Estimation of both technical efficiency and environmental efficiency were done following the parametric econometric stochastic frontier (SFA) and the nonparametric mathematical programming data envelopment analysis (DEA) approaches. The study used unbalanced panel data from 37 individual highly specialized dairy farms for the period 2000 to 2007 and totals to 2130 observations. Production functions for the three outputs; milk, animals and farm produced feed, were fitted as a simultaneous system to model the farms’ production activities for the econometric SFA estimation of technical efficiency. A single equation reduced form was fitted as a frontier to allow for the estimation of the relative efficiencies of the individual farms. The results showed that with data this detailed it was possible to refine the model until it fits very tightly. Indeed, in the gross output model that includes cows, there was nothing left to call inefficiency and what was clearly a frontier becomes a mean response function. Technical efficiency was further calculated using the nonparametric DEA approach using the same dataset. The estimation of environmental efficiency was done using both SFA and DEA approaches. Undesirable emissions of nitrate were represented within the models by calculating nitrogen surplus (kg/ha) for each farm. This nitrogen surplus value was based on the intensity of the use of nitrogen containing inputs and the nitrogen content of marketable products specific information and from farm data which were used to calculate a farm nitrogen balance. The stochastic estimation of environmental efficiency used the same data that were used for the estimation of technical efficiency. However, for the DEA calculation of environmental efficiency, a balanced cross-section dataset for 34 farms participating in a pasture-utilization programme was used. This dataset was used because it had quantities of nitrogen fertilizer and other nitrogen containing inputs. Results indicate that there was minimal “over-usage” (over production) of milk thus reducing milk output alone will not lead to improved environmental efficiency. Farm size, herd size, and quantity of nitrogen fertilizer applied, present the best scope of reducing nitrogen surplus thus improving environmental efficiency of the dairy farms. Reducing imported feed by relying more on home grown feed can also help reduce nitrogen surplus. This is feasible because dairy farmers in the KwaZulu-Natal Midlands can produce most of the feed on farm. In summary, to obtain environmental efficiency milk production would have to be reduced by 80 litres per hectare; farm size by 73.69 ha; herd size by 33 cows, nitrogen fertilizer application by 74.3 kilograms per hectare; and imported feed by 13.4 kilograms of dry matter per hectare. The adjustments that would be required if environmentally inefficient farms were to adopt best practice technology and move towards their environmental production frontiers indicate that the production of pollutants (nitrogen surplus) could be reduced at negligible cost to milk production. The positive correlation between technical and environmental efficiencies indicates that improving environmental efficiency could be associated with improvements in technical efficiency. Thus, policies aimed at improving both efficiencies could have substantial rewards.

AFRIKAANSE OPSOMMING: In hierdie tesis word suiwelproduksie in die Middellande van KwaZulu-Natal van nader beskou. Met die ontleding van landbouproduksie, word ongewenste uitsette wat saam met gewenste uitsette geproduseer word, gewoonlik oor die hoof gesien. Hierdie navorsing poog om ’n model van nitraatvrylating uit suiwelproduksie in ’n veelvuldige inset/uitset verteenwoordiging van die produksietegnologie, te integreer by die analise van tegniese doeltreffendheid. In opvolging van die benaderings tot die parametriese ekonometriese stogastiese front (SFA) en die omvattingsanalise ten opsigte van die nie-parametriese matematiese programmeringsdata, is beramings van sowel tegniese as omgewings doeltreffendheid gedoen. In die studie is gebruik gemaak van paneeldata van 37 individuele hoogs gespesialiseerde melkplase vir die tydperk 2000 tot 2007, wat altesaam 2130 waarnemings beloop. Produksiewerksaamhede vir die drie uitsette; melkproduksie en diere- en plaasgeproduseerde voer, is as ’n gelyklopende stelsel ingepas om die plase se produksiewerksaamhede vir die ekonometriese SFA-beramings van tegniese doeltreffendheid weer te gee. ’n Enkele vorm om gelykmaking te verminder is daargestel as ’n front vir die beraming van die relatiewe doeltreffendhede van die individuele plase. Die resultate het bewys dat data van hierdie omvang dit moontlik maak om die model sodanig te verfyn dat dit net-net inpas. By die bruto uitset-model waarby koeie ingesluit is, was daar inderdaad niks wat op ondoeltreffendheid gedui het nie en wat eers ’n duidelike front was, het ’n betekenisvolle responsfunksie geword. Voorts is tegniese doeltreffendheid bereken deur aanwending van die nie-parametriese DEAbenadering, deur gebruik te maak van dieselfde datastel. Die beraming van omgewingsdoeltreffendheid is gedoen deur gebruikmaking van sowel SFA- as DEA-benaderings. Ongewenste nitraatvrylatings is in die modelle gevind deur die stikstofsurplus vir elke plaas te bereken (kg/ha) Die waarde van hierdie stikstofsurplus is gebaseer op die intensiteit van die gebruik van stikstofbevattende insette en bepaalde inligting oor die stikstof-inhoud van bemarkbare produkte, sowel as van plaas data, wat gebruik is om ’n stikstofbalans vir die plaas te bereken. Dieselfde data wat aangewend is vir die beraming van tegniese doeltreffendheid, is gebruik om die stogastiese beraming van omgewingsdoeltreffendheid te bepaal. Vir die DEA-berekening van omgewingsxii doeltreffendheid, is egter ’n gebalanseerde kruisseksie datastel gebruik vir 34 plase wat aan ’n weidingsbenuttings-program deelgeneem het. Die bepaalde datastel is gebruik omdat dit dosisse stikstofbemestingstof en ander stikstofbevattende insette bevat het. Resultate het op minimale “oorgebruik” (oorproduksie) van melk gedui en daarom sal die vermindering van slegs die melkuitset nie lei tot verbeterde omgewingsdoeltreffendheid nie. Plaasgrootte, kuddegrootte en die dosis stikstof wat toegedien is, verskaf die beste beeld van verminderde stikstofsurplus, wat dus tot verbeterde omgewingsdoeltreffendheid op melkplase lei. Die vermindering van ingevoerde voer deur meer op plaasgeproduseerde voer staat te maak, kan ook meewerk om stikstofsurplus te laat daal. Dit kan gedoen word omdat melkboere in die Middellande van KwaZulu-Natal die meeste van die voer op die plaas kan produseer. Ter samevatting kan gesê word dat om omgewingsdoeltreffendheid te bereik moet melkproduksie met 80 liter per hektaar verminder word, plaasgrootte met 73.69 ha, kuddegrootte met 33 koeie, stikstofbemestingtoediening met 74.3 kilogram per hektaar en ingevoerde voer met 13.4 kilogram droë materiaal per hektaar. Die aanpassings wat nodig sal wees indien omgewingsdoeltreffende plase beste praktyk-tegnologie sou aanvaar en sou aanbeweeg na hulle omgewingsproduksiefronte, dui daarop dat die produksie van besoedelende stowwe (stikstofsurplus) verminder kan word teen geringe koste aan melkproduksie. Die positiewe verband tussen tegniese en omgewingsdoeltreffendhede, dui daarop dat die verbetering van omgewingsdoeltreffendheid, in verband gebring kan word met verbeterings in tegniese doeltreffendheid. Beleid wat op verbetering van beide doeltreffendhede gemik is, kan daarom aanmerklike voordele inhou.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/6768
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