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Calculating full costs for Swiss dairy farms in the mountain region using a maximum entropy approach for joint-cost allocation

Markus Lips

International Journal of Agricultural Management, 2014, vol. 03, issue 3, 9

Abstract: Using data from the Swiss Farm Accountancy Data Network (FADN), this paper derives the full cost for all enterprises–also called ‘activities’ or ‘production branches’–of a sample of 44 Swiss dairy farms in the mountain region. For the joint-cost assignment among enterprises, we apply an approach based on maximum entropy, leading to a disproportionate allocation. The costs per kilogram of milk are calculated on the basis of enterprises involved in dairy production such as roughage, dairy-cow husbandry and calf rearing. Said costs come to CHF 2.40 on average and CHF 2.13 for the median farm. Both results are over three times higher than the producer price, highlighting the significance of other income sources such as direct payments. Labour and machinery are the most important cost items, accounting for 62% and 14% of total costs, respectively. Furthermore, the analysis reveals significant negative correlations between the full costs for milk on the one hand, and farm size measured in livestock units and farm income per family annual labour unit on the other.

Keywords: Livestock; Production/Industries (search for similar items in EconPapers)
Date: 2014
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