The economics and productivity of US dairy farms that use crossbred vs non-crossbred breeding technology (production systems)

Abstract

Purpose The purpose of this paper is to examine the rise in crossbred cow numbers in the US dairy herd. Methods used look at well managed herds to see if crossbreeding provides a management tool that producers are using to maintain profitability. Design/methodology/approach The authors estimate a Translog stochastic production frontier (SPF) for US dairy farms to examine the competitiveness of crossbred and non-crossbred dairy herds by system and region. Findings The bottom-line conclusion is that WM or highly efficient crossbred herds solidly compete on a financial basis with larger WM Western Holstein herds, the most technically efficient managed group, based on the SPF results in the authors’ study. The study finds that net return on assets for crossbred herds are not different from Western Holstein herds and that there is no significant difference in amount of milk per cow produced annually. Research limitations/implications Because of a need to unmask the advantages of crossbreeding as a technology it was necessary to separate WM herds from poorly managed herds. That was done by frontier estimates that robustly ranked operation and corrected for endogeneity, tested for selectivity bias, and incorporated the NASS survey design. Originality/value For the first time, the 2010 Dairy Cost and Returns questionnaire version of the Agricultural Resource Management Survey (Dairy CAR) design allows researchers to expand survey observations to represent the vast majority of the US dairy farm population and to sort dairy farms into crossbred/non-crossbred herds.