Cost and Return Analysis and Technical Efficiency of Small Scale Milk Production: A Case Study for Cukurova Region, Turkey

Technical efficiencies of small scale dairy growing farms in Cukurova region of Turkey were estimated with a stochastic frontier model. A cost and return analysis was also carried out. Data were obtained through a questionnaire study and face to face interviews with farmers. Five inputs (grains and concentrates, green and dry fodder, labor, veterinary costs and other costs) and four inefficiency variables (herd size, cow quality, source of labor and share of milk in gross return) were used in the analysis. Except labor, all inputs of the production function part of the model were found to have positive elasticities. Mean efficiency of the sample farmers is estimated to be around 78%, ranging from 0.43-0.98 indicating that there is significant scope for increasing efficiency under current technology. Results of the inefficiency analysis indicate that 96% of the variation in milk production is due to inefficiency. Efficiency levels are all affected in the expected direction by the selected determinants of the inefficiency model however, only cow quality variable was found to be statistically significant. Comparison of the technical efficiency scores with the results of the cost and return analysis showed that one third of the farmers are producing milk above their selling prices. It was concluded that in the short run efficiency could be improved through methods (such as training) without requiring higher costs. However, in the long run structural enhancement such as introduction of high breed milking animals would be required.