DECOMPOSITION MEASURES OF TECHNICAL EFFICIENCY FOR ONTARIO DAIRY FARMS

Technical efficiency measures for Ontario dairy farms are computed and decomposed into purely technical, congestion and scale efficiency measures using a non-parametric programming approach. Approximately 42% of the farms in the sample are technically efficient, while the major sources of inefficiency for the remaining farms are due to pure technical allocation and to non-optimal scale of production. A censored regression indicate that herd size, milk yield and butterfat content of milk has a positive influence on efficiency, while negative effects are found from the proportion of total feed purchased and overcapitalization. The variation in optimal scale between herd sizes implies a range of farm sizes will continue to exist, provided the appropriate technology for the scale of operation is chosen.