Productivity Change in the Australian Sheep Industry Revisited

Abstract

Recent estimates of total factor productivity change for wool producersin the Australian sheep industry indicate that they are struggling toimprove their performance. This evidence is at odds with the views ofmany technical observers of industry performance, prompting us to reestimatetotal factor productivity change for farmers in a benchmarkinggroup in south-west Victoria who had been the subject of such anegative finding. An important transformation in sheep production inAustralia in recent decades has been a change in enterprise mix,notably a greater presence of prime lamb production. This changecomplicates the process of computing efficiency and productivitychange. We demonstrate that a multi-input multi-output approach,based on the use of a stochastic output distance function, is essentialto obtain a realistic estimation of productivity change on farmsoperating both enterprises. Following this approach, we find substantialtechnical progress and productivity gains on specialist wool propertiesover the period, 1994/1995 to 2003/2004, and modest technicalprogress but static productivity on farms operating both wool and primelamb enterprises over the period, 1996/1997 to 2003/2004, after aninitial sharp decline in 1995/1996.