Minimum economic scale of an efficient farms in dairy industry

Adrian Szilard Nagy, Tamas Dekan, Krisztian Lorinczi and Karoly Peto

No 58103, 113th Seminar, September 3-6, 2009, Chania, Crete, Greece from European Association of Agricultural Economists

Abstract: The aim of our research is to determine - on the grounds of the facts of an average dairy family farm – the necessary economic size to provide subsistence for a four member family, which solely has income from this activity. Our study used three different calculation models. The models featured considerable differences. In the first one the primary aim of the producer is to survive, therefore the achieved gross income in farming includes neither amortization costs, nor the arising costs of repair and maintenance. On the contrary, the primary aim of the second model is to keep up the technology and the stock, which could fulfil the requirements of simple reproduction. The third model assumes a technological development corresponding with 10% of the invested asset value besides consolidation, thus ensuring the potential of reproduction on an increasing scale. The above mentioned calculations cover the period of several years. The studied years show differences in terms of the buying up price of milk, aid for milk production and the price of used inputs. Our study compared farm sizes with the viable plant size defined according to the Standard Gross Margin. As for the SGM a farm is already viable with 10 dairy cows and their progenies. However, our calculations show that a 10 cowed farm is not able to provide sufficient income for a four member family, if their aim is not only survival, but also simple or enlarged reproduction. The calculations reveal that among the fast changing market conditions of the dairy sector minimal farm size cannot be determined solely on the basis of profit figures in a given year, as in many cases it might lead to the exhaustion of reserves.

Keywords: Agricultural and Food Policy; Food Consumption/Nutrition/Food Safety (search for similar items in EconPapers)
Pages: 6
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:ags:eaa113:58103

DOI: 10.22004/ag.econ.58103

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