TECHNICAL EFFICIENCY OF DAIRY FARMS IN URUGUAY: A STOCHASTIC PRODUCTION FRONTIER ANALYSIS

The dairy sector is one of the most influential sectors and plays an important role in the economic and social structure of Uruguay. Assuring and enhancing the dairy sector productivity and efficiency represent an important challenge in order to improve the competitiveness of the sector and achieve a sustained economic growth. Consequently, the overall objective of this study is to analyze the efficiency performance of dairy farms in Uruguay. Using a crosssectional database this paper estimates a Cobb-Douglas stochastic production frontier and technical inefficiency model for dairy farms to determine the effect of each input in the production frontier and the principal factors that explain differences on farm efficiency. Results shows that highest effect on production is the number of milking cows followed by the total consumption of feed including concentrated feed, hay and ensilage. Although, veterinary, agronomic or accounting assistance matter, the major determinant of efficiency differences is the artificial insemination. Overall farm profiles indicate that those in the high efficiency group achieve a higher level of milk production than those less efficient; and they are larger in terms of the herd size, used labor, feed consumption and area under cultivated forage than those in lower efficiency group.