Modelling pasture-based beef production costs using panel data from farms with different soil quality

The objective of this paper is to analyse the cost structure of pasture-based beef production in Ireland. Specifically, the paper assesses (i) farmers’ capacity to respond to price changes by substituting inputs; (ii) the optimality of the scale of production; and (iii) the optimal utilization of land. As differences in soil quality may alter the size of utilized land and affect farmers’ dependency on purchased or home-produced feed, a short-run translog cost model was estimated separately for three groups of farms with differing soil quality. For empirical implementation, Irish beef farm data from 2000 to 2011, obtained from the Teagasc National Farm Survey (NFS), were used. Results suggest that substitution possibilities are limited in Irish beef farms. The lack or limited substitution possibilities between types of feed suggests that beef farms are vulnerable to feed price increases. We find statistically significant evidence of allocative inefficiency irrespective of the quality of soil, which takes the form of over-utilization of purchased cattle relative to other inputs. Moreover, cost advantages can also be achieved if Irish farmers decrease beef production. Given that increases in methane emissions from higher cattle numbers could jeopardise the achievement of climate neutrality by 2050, the implications of results are of interest to agricultural and broader policy makers, industry stakeholders and society as a whole.