CoPS/IMPACT Working Paper Number G-129

Title: Scale Efficiency in the New Zealand Dairy Industry: A Non-Parametric Approach

Author: Mohammad Jaforullah and John Whiteman


The objective of this paper is to measure the scale efficiency of the New Zealand dairy industry and to examine the relationship between farm size and efficiency. Data envelopment analysis (DEA) is applied to a sample of 264 dairy farms. The results suggest that 19 per cent of these farms are operating at optimal scale, 28 per cent at above optimal scale, and 53 per cent at below optimal scale. On average the optimal size for New Zealand dairy farms is estimated at 83 hectares with a herd of 260 animals. Average technical efficiency is estimated at 89 per cent.

JEL Classification: D24.

Keywords: Data envelopment analysis (DEA), benchmarking partnerships, technical efficiency, optimal, supra-optimal and sub-optimal scale.

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