Profit Efficiency among Dairy Farmers in Southern India: An Application of Stochastic Frontier Profit Function

Abstract

Background: Dairy farming has emerged as an important profitable enterprise in India as it is a source of income, especially for small and marginal farmers;the study aims to understand the reasons for increased profit of dairy farmers of South Indian states. Methods: The present study was undertaken in Southern Indian states during 2020-21 to estimate the profit efficiency of milk producers across different herd-size categories. Result: Maximum likelihood estimates (MLE) of specified profit function revealed that overall, prices of green fodder (0.1873), prices of concentrate (0.1072), veterinary service rate (0.0569) and herd size (0.7545), had a positive and significant impact on normalized profits, whereas prices of dry fodder (-0.0277) and labour wages (-0.1652) had a negative and significant impact on normalized profits, respectively. Overall, the mean profit efficiency of dairy farmers was found to be 58.65 per cent indicating 41.35 per cent of profit efficiency was lost due to technical and allocative inefficiencies in milk production. Results from the profit inefficiency model revealed that overall, education, herd size, herd composition and experience in dairy farming had a negative and significant impact on profit inefficiency.