Investigating technical and scale efficiency of dairy farms in south-western Victoria: a non-parametric approach

The aim of this article is to investigate issues related to technical efficiency and scale of dairy farms in south-western Victoria, Australia. Data envelopment analysis (DEA) is the technique used and is applied to a sample of 59 farms in the 1999-2000 lactating season. The key result is that 51 per cent of the farms are operating at optimal scale, 34 per cent are below and 15 per cent are above optimal scale. On average, the optimal size for a south-western dairy farm is estimated at a land area of 215 hectares with a dairy herd of 305 animals, assuming the optimal input use for other inputs. Average overall technical efficiency is high for the sample; estimated at 94 per cent.