Inputs-Oriented VRS DEA in dairy farms

TL;DR

This paper evaluates the efficiency of dairy farms in Tlaxcala, Mexico, using DEA and finds that most farms are underperforming with significant cost reduction potential.

Contribution

The study applies VRS DEA to assess dairy farm efficiency in Tlaxcala and identifies key cost areas for improvement.

Findings

The average efficiency for CRS, VRS, and scale efficiency was below 50%.

11 dairy farms served as reference points for efficiency.

Some farms had over 50% cost reduction potential to maintain milk production.

Abstract

Background: This paper aims to examine the efficiency of Mexico’s dairy farms within its four regions of Tlaxcala Stated.

Methods: The Envelope Data Analysis (DEA) applied to the variable returns to a scale model (VRS) for the year 2020. Also, the results reveal that Tlaxcala’s dairy farm efficiency, on the other hand, was adversely influenced by three inputs (costs): cost of investment in livestock, the total annual cost for feeding, reproduction, diseases and treatments, preventive medicine, sanitation, milking, fuel, and total labor.

Results: The main findings are as follows, first, the mean efficiency for CRS, VRS, and efficiency scale was poor, below 50%. Second, 11 dairy farms were found that acted as relative pairs or reference points in the efficiency frontier. Third, excesses (slack) are estimated by identifying the farms that needed to reduce their costs to maintain the optimal level of milk production. Fourth, it observed that there were farms with very high slack; therefore, in the cost reduction projections they exceeded 50% of the original costs.

Conclusions: Finally, It concluded that based on the DEA estimates of the efficiencies indicators, discovered that the mean efficiencies of the constant and variable returns to scale, and efficiencies scale is relatively poor but significant in this production process. As part of the study, provided The Policy suggestions.

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