Productivity and returns to resources in the beef enterprise on Victorian farms in the South-West Farm Monitor Project

Abstract

Productivity change and real returns to resources are measured for a sample of farms in south-west Victoria that produce beef. A stochastic frontier production model is estimated from which annual production frontiers and individual farm technical inefficiencies are calculated during the survey period from 1995-96 to 2004-05. Results suggest that best-practice beef producers in this region (those operating on the production frontier) modestly improved their productivity during the period. Technically inefficient farms seem to be achieving productivity increases lower than their top-performing counterparts and are on average falling behind the productivity levels of the latter. A single factoral terms of trade index is also estimated for each farm as a measure of the real returns to resources used in the beef enterprise. The mean annual index increased substantially after declining during the first year of the survey period. This measure showed much greater volatility than the productivity measure, principally because of fluctuations in beef prices.