Characteristics of dairy farms with different levels of technical efficiency

Dairy farming is essential for Brazilian agriculture and, especially, for the Minas Gerais State. The understanding of technical efficiency and its impacts on the economic performance of dairy farms contributes to the development of the milk production chain. In the context of organizations, the Firm Theory helps in understanding how production factors affect the economic performance of these organizations, which are little studied in dairy farming. The objective of this study was to identify the main characteristics that differentiate dairy farms in the state of Minas Gerais, Brazil. For this purpose, dairy farms with different levels of efficiency (high, medium and low) were compared using data envelopment analysis (DEA), descriptive statistics and mean difference tests, analyzing socioeconomic, cost and economic performance variables. To increase the technical efficiency of dairy farms, it is important to reduce the total operating cost (TOC) and effective operating cost (EOC) by optimizing their components. However, spending on feeding (concentrated) and electricity should be increased so that the analyzed dairy farms become more efficient. In addition, the increase in the technification of dairy farms must happen, but always with caution, so that depreciation costs do not rise disproportionately. This research contributes to the advancement of scientific knowledge by applying the assumptions of the Firm Theory to dairy farming, an incipient topic in the literature. For rural producers, this research can be especially useful when presenting efficiency indicators and parameters for dairy farms, such as food costs, which must be more than 60% of the EOC.