Entry, exit and growth decisions in livestock production

• Applicant: Professor Dr. Uwe Latacz-Lohmann
• Subject Area: Agricultural Economics, Agricultural Policy, Agricultural Sociology
• Term: from 2014 to 2019
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 255599848

Structural change in agriculture has been the subject of agricultural economics research for decades. Inspite of the comprehensive insights gained in the past, there is need for further empirical research into the factors affecting entry to, exit from and growth of livestock enterprises. Given the drastic change in the basic conditions facing the livestock sector (high feed prices, increased profitability of arable farming, abolition of the milk quota, public perceptions of the sector, competition with biogas, etc.), structural change in the sector islikely to continue to accelerate. The processes underlying this change should be well understood, not least in order to gain a better understanding of the effect of tightened regulation of the livestock sector.The proposed project aims to identify empirically the determinants of growth, entry and exit decisions of German livestock farmers, thus contributing to a better understanding of structural change in the German livestock sector. The proposed empirical analysis at the farm level enables identification of interactions among livestock enterprises in a farm, thereby contributing to a better understanding of entry, exit and growth decisions in mixed farms. In addition, this study would be the first to analyse the adoption of livestockenterprises by arable farmers.The proposed analysis is based on a dataset of farm accounting data from circa 40,000 German farms, covering the financial years 1996/97 through 2010/11. The data was made available by Landdata GmbH. The Landdata dataset is complemented by a data source provided by the Landwirtschaftlicher Buchführungsverband Schleswig-Holstein, containing the annual accounts of farms located in Schleswig-Holstein and Mecklenburg-Vorpommern. The core of the work programme consists of econometric estimations in three stages: The first-stage estimations are centred around exit decisions (I). The second-stage estimations focus on the factors affecting entry decisions and the size of newly adopted livestock enterprises (II). The third stage of estimations is designed to identify the determinants of growth in existing livestock enterprises (III). Multinomial Logit models are employed for the stage I and II estimations, while multinomial Heckman models will be used to explore entry and growth decisions (stages II and III) in such a way that selection biases are appropriately taken into account. The estimations are carried out twice: for a time interval before and after the 2007/08 agricultural price boom. It is hoped that this analysis reveals potential differences in the patterns of structural change in the two time intervals, thereby underpinning the impact of the price boom with empirical evidence.

• DFG Programme: Research Grants
• Participating Person: Dr. Gunnar Breustedt