Vertical Economies of Scope for Organic and Conventional Dairy Farms in the United States

Carlos D. Mayen, Joseph Balagtas () and Corinne Alexander

No 49409, 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin from Agricultural and Applied Economics Association

Abstract: Studies of dairy farm structure have neglected issues of vertical organization of the farm. In this study we model and measure the potential for dairy farms to reduce costs of production through vertical integration. We estimate a multi-stage, multi-output cost function to assess vertical economies of scope in organic and conventional dairy farms. We model the cost of producing grains and forages, which are then used as inputs in the production of milk. We find negligible vertical economies of scope for conventional dairy farms. In contrast, we find significant vertical economies of scope in organic dairy production, suggesting that there is an economic incentive for vertical integration into feed 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.

Keywords: Livestock Production/Industries; Production Economics (search for similar items in EconPapers)
Pages: 20
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea09:49409

DOI: 10.22004/ag.econ.49409

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