Influence of Scale Size on the Profitability of Cow’s Milk Production

Abstract

The issue of profitability of the agricultural production is often discussed within the framework of the problems of agricultural economics. The study showed a diversification in the profitability of the milk production depending on the cow herd’s size and identified the main determinants of positive economic results. The studies were conducted on commodity farms, which have been grouped according to the production scale, the criterion of scale was the number of dairy cows in the herd. Three scale ranges have been identified, i.e. small, medium and large. The data of 2014 and 2017 was used for the analysis. What was examined was the effectiveness of feeding cows in the identified farm groups and the technical and economic efficiency of the milk production. The full costs of the milk production (i.e. economic costs) were assessed and income from management activity was calculated. The results of the analyses show that as the number of cows in the herd increases, their milk yield and the price of milk are increasing. Farms with a large number of cows in the herd incurred the lowest full costs of the milk production, while obtaining the highest income from management activity per 1 cow and per 1 litre of milk. The measure of the milk production’s economic efficiency was the profitability index (revenues-to-economic costs ratio), the highest was recorded for the large-scale milk production, for the small scale this index did not exceed the profitability threshold.