An Estimation of Technical Efficiency and Return to Scale in Holstein Production Units in Guilan Province, using Data Envelopment Analysis Method



Efficiency is defined as a concept that determines the input output ratios in an economic system. Data Envelopment Analysis method is a useful tool to estimate the efficiency of a unit. The purpose of this study was to estimate technical efficiency and to determine Return to Scale of Holstein cattle farms in Guilan Province. Therefore, the information including the number of labor and dairy cows as well as the level of feed and milk production related to twenty Holstein cattle farms in Guilan province were collected in 2011 and their efficiencies estimated as based on production and economical performances. Among all the studied units, four were around 100 percent efficient while the remaining ones suffered from various degrees of inefficacy. The average technical efficiency was estimated to be 0.726, suggesting that each production input, including the number of labor, the amount of forage and concentrate, could be reduced on average by about 27.4 percent without any reduction resulting in the current level of production. Technical efficiency difference between the most efficient unit and the least one was 65.4 percent. Seventy percent of the Holstein cattle farms studied benefited from increasing returns to scale, 20 percent had constant returns to scale and 10 percent decreasing returns while. Therefore, in 70 percent of these units, given their input management as efficient, development of activity dimensions in terms of the number of labor and feed consumption could lead to even more production through an increasing return to scale.