Astudy Of Production Evolution And Total Factor Productivity On China’s Dairy Farms

Dairy farming is a grain-saving, high efficiency and high industrial linkage sector. Compared with developed countries in the world dairy, China’s dairy farming technology, farm size and productivity are lower. In order to measure total factor productivity on China’s dairy farms and identify its major determinats, it is necessary to find and define a specific model for those dairy farms in a trasition economy, like China. Using the 2004-2008 microscopic provincial dairy farm production cost survey data and employing a stochastic frontier distance function model, this thesis estimates the growth trends and patterns of total factor productivity on China’s dairy farms, and evaluates the ability and the potential of fresh milk over various producing areas, and finally the thesis has drawn some important conclusions and provided some policy recommendations based on the estimated results as follow:First, after reviewing the fresh milk production, the thesis investigates the regional distribution, production evolution and cost-feeding features on China’s dairy farms over time. Then, an extended Nerlovian model is used to study the response mechanism of fresh milk supply for China. The results show that‘three pillars’production setting has been formed for the past two decades. The three core producing areas are Northeast China, North China and Northwest China, respectively, among which, output of fresh milk from Inner Mongolia, Xinjiang, Hebei and Heilongjiang accounts for nearly 60% of national total fresh milk production. In addition, backyard farming system still accounts for a large part of dairy cattle, while large size farming system is the second form in term of fresh milk production. The estimated parameters show that the lagged production has the maximum positive effect on fresh milk supply, and the price variable of fresh milk is lack of flexibility, which will interfere with the stability of raw milk productionSecond, the thesis uses a stochastic frontier distance function to estimate the total factor productivity of fresh milk production. It is found that total factor productivity grows slowly, with average annual growth rates of 1.15%. It is important to find that technical efficiency is the most important factor that drives total factor productivity growth, while technological change actually deteriorates total factor productivity. The TFP contribution is low to output growth, and fresh milk production is excessively dependent on investment increase on China’s dairy farm sector.Third, we study the changes of the technical efficiency of fresh milk production and identify the key factors affecting technical efficiency. The results show that the average technical efficiency of fresh milk production is 78.3% and the regional differences of technical efficiency are gradually reduced over the study period. Feed input composition, consumer demand, consolidated revenue, dairy farm size, farmgate fresh milk price and other factors all significantly play a role in the improvement of technical efficiency on fresh milk production in China.Finally, the output elasticity of production factors and the returns to scale are also researched. The results show that concentrated feed has the maximum output elasticity, and therefore, it is the primary way to improving the level of fresh milk production. Both quantity and quality of the labor force need to be improved, they are the factors restricting productivity. Dairy farming sector in China is in the stage of its increasing returns to scale, and therefore it should be encouraged to expand to its current dairy farm size.