Differences in efficiency among Kansas beef cow producers

Beef cow producers must manage costs of production and improve production efficiency to compete with hog and poultry and other beef cattle producers. A sample of 46 beef cow enterprises from the Kansas Farm Management database was used to measure technical, economic, and overall efficiencies. On average the farms were 92% technically efficient, 80% economically efficient and 73% overall efficient. Our results suggest that 5% increases in economic and scale efficiencies would increase profit per cow by $20 and $24, respectively.


Introduction
The hog and poultry industries have increased their production efficiencies through economies of size and the adoption of new technologies.These changes have increased the competitive pressure on the beef cattle industry.
For beef cattle producers to remain competitive with hog and poultry producers, they must continue to improve production efficiency and manage costs of production.High-cost producers need to evaluate their management practices and search for more efficient ways to produce a pound of beef.Inefficient producers will lose money and be forced to exit the industry because they are not cost competitive.The objective of this study was to evaluate the efficiencies of a Experimental Procedures costs of production, inputs, and outputs.Output was measured as total pounds of beef produced, which included weaned calves and culled breeding stock.Input costs included labor, feed, capital, fuel and utilities, veterinary expenditures, and miscellaneous.Labor costs included both hired and unpaid operator labor.Feed costs included pasture costs as well as raised and purchased feeds.Capital costs included interest, repairs, depreciation, machinery hired, and opportunity costs associated with owned assets.All input costs were converted to real 1996 dollars, and all the figures were averaged for each operation over the 5-year period.
Table 1 presents the statistical summary for gross revenue, profits, costs, and other relevant characteristics of the operations.On average, the producers lost $95.77 per cow during the 5 years.Net return per cow ranged from -$388 to $48.About 39% of the opera-Table 2 reports the statistical summary tions had an average return per cow that was for the efficiency measures.Technical effiless than -$100.Another 54% had an average ciency ranged from 0.58 to 1.00.Approxireturn per cow that was between -$100 and mately 42% of the operations in the sample $0.The remaining operations (7%) had an were technically efficient (technical efficiency average return per cow that was above break-measure = 1.00).On average, technical even.Feed was the most costly input of all efficiency was 0.92, indicating that output 46 farms, accounting for about 48% of the could be increased by 8%, if all the farms in total cost.Capital comprised about 26% and the study possessed a technical efficiency labor costs about 46% of the total costs.The measure of 1.00.average herd size was about 114 cows, and nearly 561 pounds of beef were produced per The average economic efficiency measure cow from weaned calves and culled breeding for the sample was 0.80.If all of the farms in stock.
the study were economically efficient, the A series of mathematical programs was duced with 20% less cost .About 15% of used to determine the technical, economic, the farms were economically efficient.and overall efficiencies.Technical efficiency measures whether or not the producer uses Average scale efficiency (not shown in the most up-to-date technologies.A techni-Table 2) was 0.93.If all farms had been cally inefficient farm does not produce as producing at the scale-efficient size (120 much as other farms with the same inputs.cows), cost could have been reduced by 7%.Economic efficiency measures how well the Scale-efficient size is the farm size that proproducer minimizes costs for a given level of duces with the lowest average cost; this farm output.Economic inefficiency can be attrib-also possesses a scale efficiency measure of uted to technical inefficiency or allocative 1.0.Over 70% of the farms had scale effiinefficiency (failure to utilize the optimal ciency indices over 0.90, indicating that scale input mix).Scale efficiency measures whether inefficiency was a minor problem.a firm is producing at the optimal size.Overall efficiency (the product of technical, Overall efficiency ranged from 0.50 to allocative, and scale efficiencies) determines 1.00 and averaged 0.73.The same level of the minimum cost of producing a given out-output could have been produced using 27% put level under constant returns to scale less cost, if all farms had been economically technology.Overall inefficiency can be and scale efficient.Only one farm in the attributed to economic inefficiency or not sample was overall efficient.producing at the most efficient size.
Regression analysis was used to deter-relationships between profit per cow and mine the relationship between economic and economic and scale efficiencies.Based on scale efficiencies and profit per cow.Specifi-that analysis, a 5% increase in economic cally, the impact on profit per cow of 5% efficiency would result in a $20 increase in increases in economic and scale efficiencies profit per cow.A 5% increase in scale effiwas evaluated.
ciency would increase profit per cow by

Results and Discussion
same level of output could have been pro-Regression analysis indicated significant $24.Given the average levels of economic and scale efficiencies in this study, signifi-Because average economic efficiency was cant room for improvement exists.
lower than average scale efficiency, inefficient farms should focus on input cost control before changing operation size.