Exploring efficiency reserves in Hungarian milk production

This paper aims to explore the efficiency of Hungarian dairy farms. Based on FADN data representing more than 950 dairy farms in Hungary, our sample contains more than 6800 data points which we analysed by applying different Data Envelopment Analysis models. Results suggest that the average technical efficiency of the Hungarian dairy sector during the examined 10 years was 77.6%, meaning that output could be increased by 22.4% without changing the level of input (efficiency reserve). Large and small farms are more efficient (79.2%) than medium sized farms (59.2%). Moreover, large farms keeping more than 501 dairy cows were found to be more efficient (92.5%) than the other two size categories (77.9% and 65%, respectively). Farms located in Northern Hungary had less efficiency reserves (23.6%) that the farms operating in the Great Hungarian Plain, Central Hungary (34.8%) or in the Transdanubian Region (27.6%). All this suggests high reserves for potential efficiency growth.