Identifying efficiency trends for Queensland broad-acre beef enterprises

Productivity and efficiency improvements in agriculture have recently been targeted as FederalGovernment priorities in Australia. This research examined a dataset of 116 broad-acre beefenterprises from Queensland who participated in a program, Profit Probe, developed to improvemanagement and profitability of enterprises.The aim of this research was to identify the sources, if any, of productivity growth for this sampleof enterprises. Two potential sources of productivity growth were identified: 1. Technologicalprogress involving a contraction (expansion) of the cost (output) frontier, and; 2. Efficiencyimprovements involving a convergence of the average production function toward the frontier.Given these two potential sources of productivity growth, the Stochastic Frontier Analysisapproach was ideally suited to discern and measure technological change and efficiency change.Changes over time were observable due to the unbalanced panel nature of the data with 116enterprises observed over a range of years from 1999 to 2008.A Cobb-Douglas functional form for the cost function was estimated following testing of theTranslog form which showed higher order terms were not significant. An input oriented minimumcost frontier was chosen over the output oriented production frontier approach due to theconsideration that output decisions were largely exogenous whilst input decisions wereendogenous. Deterministic predictors of inefficiency were included using the panel inefficiencyeffects frontier of Battese and Coelli.There was no evidence of technological progress in the ten years from 1999 to 2008 for thissample of enterprises. There was however evidence of efficiency improvements despite preexistinghigh efficiency levels. In particular there was evidence that the Profit Probe programsignificantly contributed to efficiency improvements for participating firms with improvementscontinuing with repeated participation in the program. Additionally cost efficiency was shown tobe an important component of profit maximisation but most likely was not a sufficient conditionwith output prices, as a quality and market indicator, being highly significantly related to profitlevels.