Technological Change in Dairy Farming with Increased Price Volatility

Accompanied by steps towards market liberalisation, dairy farmers in the European Union have been confronted with increased price risk in recent years, which might affect their innovation behaviour. We examine technological change and technical efficiency of specialised dairy farms in West Germany before and during a phase of volatile milk prices. Additionally, we compare the results with mixed dairy farms, which might have an advantage by diffusing price risk through diversification. Our results indicate a slowdown in technological change in specialised as well as in mixed dairy farming coinciding with the start of a volatile market phase.