Do Large Farms Make Better Choices?
New member research published in AEPP
New research published in the Applied Economic Perspectives and Policy investigates a linkage between farm size and Dairy Margin Coverage (DMC) program choices and finds that larger operations are more likely to participate in DMC and make margin coverage choices that maximize the net returns. This finding implies that the larger operations are more likely to fully capture the benefit from the program.
In the new article, “Do Large Farms Make Better Choices: Evidence from Dairy Margin Coverage Program Participation Patterns,” Jisang Yu from Kansas State University and Georgi Gabrielyan from the USDA-FPAC, investigate if larger farms are more likely to participate in the Dairy Margin Coverage Program and whether their program choices lead to greater returns from the program.
The authors say, “Our findings provide useful insights on the future budgetary implication of the program, particularly in the context of the ongoing consolidation of the dairy industry. We provide a back-of-envelop budget prediction for some consolidation scenarios and find that the program cost increases most when the consolidation occurs in a form that smaller dairies become larger. This is because the increase in the likelihood of making the program choice that maximizes net benefit is greater for smaller dairies compared to larger ones when their sizes become larger.”
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ABOUT AAEA: Established in 1910, the Agricultural & Applied Economics Association (AAEA) is the leading professional association for agricultural and applied economists, with 2,500 members in more than 60 countries. Members of the AAEA work in academic or government institutions as well as in industry and not-for-profit organizations, and engage in a variety of research, teaching, and outreach activities in the areas of agriculture, the environment, food, health, and international development. The AAEA publishes three journals, the Journal of the Agricultural and Applied Economics Association (an open access journal), the American Journal of Agricultural Economics and Applied Economic Perspectives & Policy, as well as the online magazine Choices and the online open access publication series Applied Economics Teaching Resources. To learn more, visit www.aaea.org.
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