Doctoral Degrees (Agricultural Economics)

Permanent URI for this collection

https://scholar.sun.ac.za/handle/10019.1/514

Browse

Browsing Doctoral Degrees (Agricultural Economics) by Author "Mkhabela, Thulasizwe"

Now showing 1 - 1 of 1
  • Thumbnail Image
    Item
    An econometric analysis of the economic and environmental efficiency of dairy farms in the KwaZulu-Natal Midlands
    (Stellenbosch : University of Stellenbosch, 2011-03) Mkhabela, Thulasizwe; Thirtle, C.; Piesse, J.; Vink, N.; University of Stellenbosch. Faculty of AgriSciences. Dept. of Agricultural Economics.
    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.