Sense and Nonsense in Dairy Farm Management Economic Analysis

Abstract

The standard analytical approaches and methods of farm management economics are simple, sensible and powerful. Still, examples of inappropriate nonsensical, approaches to farm management economics questions proliferate. In this paper, the focus is on some inappropriate, nonsensical, approaches to socalled management analysis of dairy farming operations. Included in the analytical eccentricities which abound are such things as trying to evaluate farm performance and changes but not distinguishing between cash (financial feasibility) and profit (economic efficiency), nor considering the time value of earning of capital invested; trying to estimate the cost of pasture; trying to show to lift productivity on one family farm by having a good hard look at the average performance of other farms; and the folly of inventing measures of performance such as Economic Farm Surplus, that are designed and adjusted to facilitate comparisons between farms, and then trying to use such measures for something mostly different, farm management analysis. It is as easy to get it right as it is to get it wrong; so more sense and less non-sense is the call.

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