Economic Efficiency among Commercial Dairy Farms in Kerala: Costs and Returns Perspective

The study was conducted in the state of Kerala to assess the technical and allocative efficiency of commercial dairy farms (CDF). Primary data were collected from 180 commercial dairy farms using a pre-tested interview schedule across three districts: Wayanad, Palakkad, and Thiruvananthapuram. The economic efficiency of commercial dairy farms was 0.74, with technical efficiency of 0.88 and allocative efficiency of 0.84. The efficiency was found to be higher in large CDFs than in small and medium ones. When comparing across the district, Wayanad was found to be more economically efficient than Palakkad and Thiruvananthapuram. Variables such as milk price, milch number, all feed and fodder, and labour cost were found to be significant and positively affecting milk yield when estimated using the stochastic frontier production function. It was also found that the overall returns across all the CDFs were positive. Determinants such as education, experience, operational holding, and social involvement are important and have a favourable impact on the technical effectiveness of dairy farms. Mechanisation significantly enhances the efficiency of Commercial Dairy Farms (CDFs). Accordingly, development authorities can propose subsidies for mechanisation equipment, recommending financial assistance covering at least one-third of the equipment cost to accelerate technology adoption.