Table 1 Variables, corresponding hypotheses, and explanations of the expected effect on farm exit and farm type change (“+” increases, “−” decreases the probability)
From: Structural change in the dairy sector: exit from farming and farm type change
Variable | Exit | Change | Exit | Change |
|---|---|---|---|---|
Number of family workers | − | − | The more family members are working on a farm, the higher the farm household's dependence on agricultural income and the lower the probabilities to exit farming and to change to a less labour-intensive form of production such as suckler cow The higher the number of family workers, the higher the probability that a farm family member takes over the farm business | |
Age | + | −/+ | Older farmers quit farming shortly before or after exceeding the age limit to receive direct payments. This is the case if there is no successor (no children; children do not want to do farming or take over the farm—for economic or other reasons) | Changing the focus of production could occur either before handing over the farm (at higher age) or after taking over (by younger farm successor); therefore, a two-sided hypothesis is formulated |
Herd size (number of dairy cows) | − | − | The larger dairy herd size, the more profitable is this enterprise and the lower the probability to exit (change). Larger farms can better implement technical progress and hence increase labour productivity or improve working conditions | |
Intensity of production (stocking rate) | −/+ | − | A higher stocking rate can constitute farm specialisation, which could involve higher profitability (lower exit probability) On the other hand, a high stocking rate could result from scarcity of land and hereby mirror barriers of growth, which then could increase the exit probability | High stocking rates illustrate high intensity of production; under such circumstances, we would expect a lower change probability to extensive methods of production such as suckler cow production |
Organic production | − | − | Organic production can relatively easy be implemented in dairy production and allows higher added value. Hence, exit (change) probability decreases | |
Animal welfare housing system | − | − | Animal welfare housing systems involve investment in stables, which allows higher added value. Hence, exit probability decreases | |
Animal welfare: outdoor keeping | − | −/+ | Keeping dairy cows outdoor allows higher added value. Hence, exit probability decreases | Keeping dairy cows outdoor allows higher added value. Hence, exit probability decreases. However, the existence of grassland area around the farm could pave the way to grassland-based suckler cow production |
Specialisation (Herfindahl–Hirschman-Index) | −/+ | −/+ | Higher specialisation goes along with a stronger focus and professionalization (higher profitability). However, the more specialised a farm, the less diversified are farm risks. Hence, the relation to the exit (change) probability is theoretically ambiguous | |
Direct payments total | − | − | Direct payments (DP) contribute to farm income and hereby foster the given situation. The higher DP total, the larger a farm and the higher a farm's profitability. Hence, with increasing DP we expect a decreasing probability of farm exit (change) | |
Dependency from direct payments (share of DP in farm's standard output) | + | + | We interpret the dependency from direct payments measured as the ratio of DPs in relation to a farm's standard output as inverse of a farm's market orientation. The higher the dependency from DPs (and the lower the market orientation) of a farm, the higher the exit (change) probability | |
Milk price | − | − | The better the milk price (measured as three-year average), the lower the probability of farm type exit (change) | |
PDO cheese region with above average milk prices | − | − | Protected designation of origins helps to establish specific quality traits with links to the place of production. This qualitative differentiation contributes to added value. Raw milk for cheese production receives higher prices than milk for direct consumption. The milk prices for Gruyere and Raclette—both very successful cheeses in export—are particularly high within cheese milk. Therefore, we expect lower exit (change) probabilities for farms located in the corresponding PDO regions | |
Comparison salary | + | + | The higher the opportunity cost of working outside farming, the higher the probability to exit farming and the higher the probability to reduce farm labour requirements by stopping to milk and change to labour-extensive enterprises, such as suckler cows | |
Unemployment rate | − | − | The lower regional unemployment, the higher the opportunity cost of working outside farming and the higher the probability to exit farming and to change to labour-extensive enterprises | |
Difficulty of farm production | + | + | Swiss agricultural policy differentiates three regions according to climatic conditions (length of vegetation period), topography/relief (steep slopes), and transport infrastructure. With increasing difficulty of production, we expect an exit (change) probability increasing effect | |