Determinants of Broadacre Farming Efficiency in Western Australia: A Stochastic Frontier Analysis

Tim Lefroy and James Key

Economic Papers, 2018, vol. 37, issue 2, 180-196

Abstract: We analyse a rich panel dataset of farm production to determine the potential for broadacre farms in Western Australia to increase productivity through exploiting economies of scale and increasing technical efficiency. Using stochastic frontier analysis, we find that the majority of farms are operating below the optimal scale and would benefit from expansion, suggesting that a documented trend towards larger farms is desirable. We also observe a reasonable proportion of farms significantly below the efficient frontier, while differences between regional production functions and the metafrontier further contribute to inefficiency. Determinants of technical inefficiency were examined in the efficiency effects model; the adoption of technologies was aligned with reducing inefficiency, particularly in the cropping sector. This suggests the deployment of existing technologies should be a priority for both farmers and policy‐makers to further improve the efficiency of broadacre farms.

Date: 2018
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