Profitability and Economic Efficiency Analysis of Dairy Farming In Faisalabad

Abstract

Employment of milk production methods in Pakistan falls well below the levels observed in other developed countries, yet milk requirements continue to increase each day. The determination of dairy farming efficiency remains an uninvestigated area in Pakistan. The study aimed to determine the technical, allocative, and economic efficiency levels of dairy farms. A well-structured questionnaire was used to acquire data from 100 dairy farms through convenient sampling. The Data Envelopment Analysis program calculates efficiency assessments at technical, allocative, and economic levels. The selected model for analyzing socio-economic determinants of economic efficiency is Tobit regression. The investigation employed the cost of medicine, vaccination, maintenance, feed, transportation, and semi-nation as input elements to analyze output revenue. This study utilizes experience, education level, marital status, and business location, and classification as socio-economic variables. The analysis of profitability makes use of gross margin (GM), together with net income (NI) and benefit cost ratio (BCR). The research findings indicated that cattle farming operations generated profit within the Pakistani market. The studied factors yielded technical efficiency at 67%, allocative efficiency at 43%, and economic efficiency at 31%.  The second model, Tobit regression analysis, reveals that marital status and residential place, as well as business type, explain significantly, but education and experience of dairy farmers do not impact the results. Dairy farm profitability analysis in Faisalabad served the purpose of the third stage research by employing GM along with NI and BCR. The results demonstrated that dairy farms generated annual revenue of 194717390 Pakistani rupees with a gross margin of 146567390 and total production costs reaching 55110500, while the net income (NI) amounted to 139606890, leading to a cost benefit ratio of 3.53, indicating dairy farming profitability.

Keywords: Technical efficiency, Profitability analysis, Gross margin, Net income profitability analysis, Tobit model, Data envelopment analysis