Determinants of economic efficiency in dairy cattle and sheep

Abstract

The objective of this study was to analyze the determinants of economic efficiency in milk production and milk and lambs production on dairy cattle and sheep farms, respectively. Economic efficiency was evaluated by the synthetic indicator of the total profit to cost ratio and by the individual indicator of the profit to individual costs-items for the database of farmers of the Animal Production Research Centre Nitra for the period 2006 to 2012. Economic efficiency with and without direct subsidies was expressed per kg of milk in dairy cattle and per ewe and year in dairy sheep. The average value of profit to cost ratio was - 9 % and - 48 % for cattle and sheep farms, respectively. Costs of feeds, depreciations and other direct costs were of higher proportion on the total costs in cattle and sheep. The profit to cost ratio on these costs items was the lowest. On the contrary, proportion of profit per unit of costs for repairs and services, management of overhead costs and for other direct material costs was higher in dairy and sheep analysed farms. Economic efficiency of milk production calculated in 2007 and 2008 for cattle farms was positively determined by lower value of costs per milk unit along with increase in milk price. The sharp fall in milk price, reduction in the number of cows per herd and savings in the feeds consumption resulted in the lower economic efficiency of milk production in period 2009 - 2012. In sheep farms, positive impact of demand for dairy products on the sheep milk price over the whole time period was found. Contrary, price of lambs remained on its low value. Size of flock and milk yield increased in the consequence. In spite of these facts and of reduction in some inputs, it was not sufficient for profitability in sheep. Level of animal performance, market price of dairy cattle and sheep commodities, input prices (feed, labour, other direct costs and depreciations) along with the value and scheme of subsidies were found as the most important determinants of economic efficiency in dairy cattle and sheep farms.