An excellent example of applied policy analysis using cost of production data and structural change in the sector (click on link).
In recognition that policy tools affect different farms in different ways, this US study reviews structural changes in the dairy industry, the role of cost of production in influencing the evolution of farm structure and returns, and how policy impacts on farm and international competitiveness.
A new US dairy policy, put into place in 2014, was designed in consideration of structural changes/farm cost/returns implications, as well as changing global and national demand for dairy products. Dairy policies dating back to 1949 relied on different instruments ranging from market intervention, setting floors on milk prices, direct payments aimed to compensate for low milk prices to the most recent policy package which subsidizes insurance programs aimed at avoids financial risks due to volatility in margins between milk and feed prices.
Of relevance for work in Tunisia and Senegal, through an FAO joint project on identifying typologies of farm enterprises, is the clear evidence of policy impact on selected farms. The structural change identified on US farms include those related to farm size, farm ownership and organization, the location of production and farming practices. While US analysis is informed by the agricultural census and the annual agricultural resource management survey (ARMS), the work in Tunisia and Senegal will develop representative farms, supported by synergies with on-going census work, to inform the dialogue on structural change in the agricultural sector.
It is clear that improved analysis of farms, their costs, returns, prices and markets is critical for informing policy. The financial risks linked to agriculture, a sector importance for economic growth and food security in developing countries, necessitates a new look at the structure of farm enterprises and innovative policy options which favorably influence returns to agriculture, across all farm types (a summary of the FAO/Tunisia/Senegal project is attached). Additional information on best practices in identifying farm typologies/plus the manual on cost of production estimation approaches can be found at the website of the Global Strategy for Improving Ag. Statistics.


Nancy Morgan
Agricultural economist/investment officer
(Agro-Economiste charge de l’Investissement)
FAO, Sub-regional office, Tunis
216-71-906-553 office, 216-98-703-269 cell phone