Association between technical and economic performance indexes and dairy farm profitability

ABSTRACT This study aimed to evaluate the determinant profitability indexes of typical dairy farms located in Brazil. The empirical sample included detailed technical and financial information of 61 Brazilian dairy farms across a longitudinal data set (10 years). Numerous technical and economic indexes were estimated, and Pearson’s correlation coefficients were calculated to determine the relationship between each index and profitability. After selecting the significant indexes, regression equations were generated to determine the relationship between each index and profitability. The results of the analysis revealed significant interactions between different combinations of technical and financial indexes. Milk production per lactating cow and area were the indexes most positively correlated with profitability. In contrast, total unit cost in relation to the price of milk, total operating cost in relation to total revenues, and total unit operating cost in relation to the price of milk were the indexes most negatively correlated with profitability. Overall, these results indicate that profits could significantly increase if dairy farm production is conducted with more intensive use of inputs and production factors and better combinations of inputs and outputs.