Dairy farmers productivity and optimal capital use in Chiang Mai province

Tanya Limkhumduang. Faculty of Agriculture. Multiple Cropping Center; Benchaphun Ekasingh. Faculty of Agriculture. Multiple Cropping Center; Boonserm Cheva-Isarakul. Faculty of Agriculture. Department of Animal Science; Kamol Ngamsomsuke. Faculty of Agriculture. Department of Agricultural Economics

Dairy farmers productivity and optimal capital use in Chiang Mai province

1998

Tanya Limkhumduang(Chiang Mai University, Chiang Mai (Thailand). Faculty of Agriculture. Multiple Cropping Center) | Benchaphun Ekasingh(Chiang Mai University, Chiang Mai (Thailand). Faculty of Agriculture. Multiple Cropping Center) | Boonserm Cheva-Isarakul(Chiang Mai University, Chiang Mai (Thailand). Faculty of Agriculture. Department of Animal Science) | Kamol Ngamsomsuke(Chiang Mai University, Chiang Mai (Thailand). Faculty of Agriculture. Department of Agricultural Economics)

This study estimated Cobb-Douglas milk production function to assess productivity and find the optimum level of capital use for different dairy farming groups classified by farm size and loan repayment performance. It identified borrowing and loan repayment practices among dairy farmers who were membership of the Bank for Agriculture and Agricultural Cooperatives (BAAC) in San Kamphaeng and the Mae On districts of Chiang Mai. Semi-structured interview and formal survey were conducted among 100 dairy farmers who were selected as samples from 528 dairy farms. It was found that dairy farmers with different farm sizes and loan repayment performance would have different optimal capital level for profit maximization. Dairy farmers with good and average repayment performance as one group,with 5, 10 and 20 cows would have optimal capital of around 61,900, 90,890 and 133,535 respectively. Sixty-eight percent of this was required as long term investment cost (excluding the value of cows) and about 32 percent was needed as working capital. While the dairy farmers with poor repayment performance who owned 5, 10 and 20 cows required optimally about 34,756, 51,087 and 75,026 baht of capital respectively, 68 percent of which was required as long term investment (excluding the value of cows) and 30 percent as working capital. For new dairy farmers starting with 5 cows, their optimal capital including the value of cows would be about 159,756 baht, 93 percent of which is required as long term investment costs and 7 percent as operational costs at 12.5 percent of interest rate.

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