Analysis of managerial factors for dairy farmers

This study was an analysis of the returns to management to dairy farms in the Fourth Farm Credit District. The data for this study were obtained from the AGRIFAX division of the Federal Intermediate Credit Bank in the Fourth Farm Credit District. These were the records for 70 farms that were on the AGRIFAX program for the years 1976 and 1977. To be classified as dairy farms, at least 50 percent of the total income of each farm was required to have been obtained from the dairy operation, and no more than 15 percent from the sale of livestock.

The principal objective of this study was to develop a management index for classifying managerial quality of individual farms. In order to do this, regression analysis was used to estimate the value of farm production and total cost of the dairying business. The estimated returns to management was compared with the actual figure to develop a management index.

The farms were categorized into three groups based on the management index. Discriminant analysis and selected efficiency factors were used to classify farmers into low, average, and high levels of management ability.

The most important efficiency factor in the discriminant scores was pounds of milk sold per cow for both years.

This study was less than fully successful in consistently quantifying and measuring managerial quality.

Further research is needed to develop techniques for distinguishing the quality of management before using these models in evaluating borrowers for extending credit.