# Moskalenko A., Kolosha V. Specialization as a factor for efficiency forming in dairy farming

**UDC 338.436**

**DOI: 10.31359/2312-3427-2019-4-2-336**

**_**Anatolii Moskalenko, Doctor of Economic, Associate Professor**_**

**_ekomam2017@gmail.com_**

**_0000-0001-7223-6862_**

**_**Institute of Agricultural Microbiology and Agroindustrial Manufacture, National Academy of Agrarian Sciences**_**

**_**Valerii Kolosha,**_**

**_**Director at Private Agricultural Enterprise ‘Piskivske’**_**

**_piskivske@ukr.net_**

**_0000-0003-3946-6775_**

****SPECIALIZATION AS A FACTOR FOR EFFICIENCY FORMING****

****IN DAIRY FARMING****

_The problems of the influence of the level of specialization on the efficiency of milk production at the agricultural enterprises of the Region of Chernihiv and Kharkiv are reviewed. It is emphasized that along with the concentration of production, the leading factor in the formation of both the efficiency of livestock and other sectors of agricultural production, is specialization. The specialization of production is a form of social division of labour as if we consider its global sense._

_The share of milk in the structure of marketable products was chosen as a criterion for the level of specialization. The grouping and correlation method was used. The analysis of the obtained results has established that the increase in the share of sales revenue of milk in the structure of marketable products is accompanied by an increase in the number of cows and milk production, including per 100 hectares of agricultural land, i. e. an increase in sector concentration. In parallel, there was a consistent intensification of the sector, which manifested itself in the form of increasing the cost per cow and productivity._

_The created correlation models revealed the non-linear nature of the relationship between the level of specialization and milk production efficiency. According to the data for 2016 at the agricultural enterprises of the Region of Chernihiv, the highest level of profitability (97.8 %) was in enterprises in which the share of milk in the structure of marketable products was 38.8 %. At the agricultural enterprises of the Region of Kharkiv the highest level of profitability (29.6 %) was in enterprises with a milk share of 52.4 % in the structure of marketable products._

_According to the results for 2016 at_ _the agricultural enterprises of the Region of Chernihiv, the maximum level of productivity of cows (6,239 kg) was achieved with a milk share of 32.7 % in the structure of marketable products. According to the results for 2018 at the agricultural enterprises of the Region of Kharkiv, the maximum level of productivity of cows (7,876 kg/head) was at the enterprises where a milk share in the structure of marketable products was 65.8 %. It is concluded that the greatest success in terms of efficiency is achieved by highly specialized enterprises._

****Target setting.**** Along with the concentration of production, specialization is the leading factor in the formation of both the efficiency of livestock farming and other branches of agricultural manufacture. As you know, the specialization of production is a form of social division of labour if consider it in a global sense. Specialization allows companies to increase the level of competitiveness in the product market, improve its quality, increase productivity. At the same time, specialization has negative consequences, among which, first of all, increase in the level of production risk due to the limited types of output should be highlighted. This, in turn, can lead to significant company losses during periods of change or fluctuations in the situation for these products. Thus, the problem of the relationship between specialization and the level of efficiency is of particular importance for each sector. This also applies to the dairy farming.

****Analysis of the novel studies and publications******.** The problem of efficiency is one of the central ones in economics. According to Academician of NAAS V. H. Andriichuk, the category ‘efficiency’ has the following meaning: ‘… the effectiveness of a certain process, action, measured by the ratio between the result obtained and the costs (resources) that caused it.’ [1, p.440] But this emphasizes the versatility of this category, which in turn is due to the existence of many types of effects and the variety of costs (resources) that caused them. Further, the author cites the definition of economic efficiency as an effect obtained precisely from economic activity with economic resources spent on it, which are limited and require constant recovery.

The question also arises about the relationship between the categories of ‘economic efficiency’ and the categories of ‘productivity’ and ‘effectiveness’. According to the author, the first category is narrower and is one of the forms of its manifestation. The second category is not completely independent, but exists in conjunction with different categories, including ‘efficiency’. Also V. H. Andriichuk suggests to allocate the following types of efficiency:

  1. technologic;
  2. economic;
  3. social;
  4. ecologic [the same, p. 441].



Economic efficiency can be considered from different points of view: 1) in certain areas of the reproduction process (efficiency of production, circulation, consumption); 2) by factors (elements) of the production process (efficiency of capital investments, labour power, etc.); 3) by areas of economic activity (efficiency of production location, planning, etc.); 4) by a territorial characteristics (efficiency at the national level, at the level of region, etc.); 5) by sectors and areas of production (crop production, livestock farming, pork production, etc.) [2, p. 21].

It is also proposed to distinguish between the concepts of ‘production efficiency’ and ‘production capacity efficiency’ [3, p. 12]. At the same time, the author emphasizes that the production capacity efficiency is measured by the return per unit of resources. As for the concept of ‘production efficiency’, there is no reason to oppose this concept with the previous one, because the growth of resource use determines the increase in production efficiency.

**V. Kalinichenko addresses the efficiency category in two aspects: as the results of production with certain quantitative and qualitative parameters, as well as the amount of costs that led to these results**. At the same time, the following approaches to determining efficiency should be taken into account: 1) resource – economic results are compared with the amount of production resources used in the production process; 2) cost – economic results are compared with production costs are directly related to the formation of income [4].

In general, for the livestock sector, the parameters of economic efficiency are considered to be as follows: production of gross output per 1 average annual head of animals (on average in the sector – per conventional head), 1 man-hour, 1 centner of feed, units, UAH 1 of cost of feed, UAH 1 of expenditures; gross income per 1 head, per 1 man-hour; net income per 1 head, 1 man-hour, UAH 1 of expenditure; the level of profitability and labour expense; productivity of livestock and poultry [5, p. 363].

Similar parameters of milk production efficiency are also given by P. S. Berezivskyi [6], namely: the share of cows in the herd; herd density and gross output per 100 hectares of agricultural land; average annual milk yield per 1 cow; feed and labour costs per 1 centner of milk and per conventional head; the cost of 1 centner of milk; the level of marketability of products; revenue from sales of products per 100 hectares of agricultural land; profit (loss) from sales; profitability (loss) of production; volumes of gross and net income per 1 cow, the amount of dividends per 1 share; payback of costs for UAH 1 of sold products.

Proposals are also made to increase the efficiency of dairy farming via creation and development of specialized large commercial enterprises and integration associations – agricultural industrial and financial groups (AIFG) and new integrated production systems, where production at the agricultural enterprises and industrial processing of products acquire the optimal combination [7, 8].

It should also be considered that the Ukrainian Academy of Agrarian Sciences has developed guidelines for the formation of specialized agricultural enterprises for livestock production and justification of rational sizes of farms and complexes, using which it was determined that the rational size of dairy farms should be with livestock of 400–1,000 cows; fattening cattle – 2–3 thousand heads; fattening pigs – 8–10 thousand heads, and complexes: 1,000–1,200 cows, 3–6 thousand heads of cattle and 10–24 thousand heads of pigs, respectively [9].

At the same time, specific studies suggest that specialized enterprises manage to have a higher level of production efficiency than the average in the region or sector. In particular, O. Bezsmertna and N. Tarasyuk analysing the data of agricultural enterprises of the Region of Vinnytsia, which were engaged in the production of dairy products, came to the conclusion that increasing its level allows to increase the efficiency of milk production [10]. Studies conducted by O. Vasylchenko on the example of enterprises throughout Ukraine also allowed to state that the deepening of the concentration and specialization of milk production increases the level of efficiency of its production. Further, the author provides specific parameters that provide for the highest level of efficiency – the presence of at least 500 cows. This allows these enterprises to implement innovative technologies, which ensures the growth of productivity and quality of milk produced [11].

****Stating article objectives****.**** The objective of this work is to assess the influence of the level of specialization in milk production on the level of its efficiency.

****General information********.** **It was decided to assess the influence of the level of specialization on the efficiency of milk production bases on the statistical data of agricultural enterprises of the Region of Chernihiv and Kharkiv.

****The influence of the share of revenue from the sale of milk in the structure of marketable products on the condition and efficiency of its production in the enterprises of Region of Chernihiv, 2016****

Parameters |  Groups of enterprises by the share of revenue from the sale of milk in the structure of marketable agricultural products, % |  Cumulatively in average  
---|---|---  
I |  II |  III |  IV |  V  
Up to 5.0 |  5.0– 20.0 |  20.0– 40.0 |  40.0– 60.0 |  Over 60.0  
Number of enterprises in the group |  20 |  38 |  43 |  24 |  17 |  28.4  
share of revenue from the sale of milk in the structure of marketable agricultural products, % |  1.1 |  8.7 |  28.3 |  47.6 |  71.0 |  10.2  
Average number of cows at the enterprise, head |  147.7 |  297.8 |  310.9 |  377.2 |  178.4 |  277.9  
Average milk yield per cow, kg |  3,954.8 |  4,470.2 |  5,308.6 |  5,643.2 |  4,776.3 |  5,027.5  
Average area of agricultural land, thous ha |  12,606.4 |  4,232.4 |  2,176.4 |  1,598.7 |  731.1 |  3,937.5  
Number of cows per 100 ha of agricultural land, head |  1.2 |  7.0 |  14.3 |  23.6 |  24.4 |  7.2  
Milk production per 100 ha of agricultural land, centner |  46.3 |  314.5 |  758.3 |  1,331.6 |  1,165.5 |  361.3  
Production costs per 1 cow, UAH |  17,331.6 |  20,708.0 |  21,990.0 |  20,059.5 |  17,501.7 |  20,686.1  
Input cost of 1 centner, UAH |  438.2 |  463.2 |  414.2 |  355.5 |  366.4 |  411.5  
Total cost of 1 centner, UAH |  501.9 |  539.4 |  463.7 |  382.2 |  416.5 |  459.4  
Sale price of 1 centner, UAH |  517.2 |  543.9 |  568.1 |  565.8 |  521.3 |  555.1  
Marketability level, % |  86.8 |  83.9 |  91.1 |  93.1 |  95.2 |  89.7  
Revenue from sale of milk per 1 cow, UAH |  17,755.8 |  20,408.8 |  27,471.8 |  29,731.2 |  23,705.9 |  25,042.1  
Profitability level, % |  3.1 |  0.8 |  22.5 |  48.1 |  25.1 |  20.8  
  
______________

Source: Calculated by the author using the data from Form 50-сг for 2016.

Moreover, data on the Region of Chernihiv were for 2016, and on the Region of Kharkiv – for 2018. As a criterion for the level of specialization, the parameter of the share of revenue from the sale of milk in the structure of marketable agricultural products was chosen. More detailed results of grouping are available Table 1.

Based on the analysis of the obtained results, it was established that the increase in the share of revenue from the sale of milk in the structure of marketable products is accompanied by an increase in the number of cows and milk production, including per 100 hectares of agricultural land, i. e. an increase in sector concentration. In parallel, there was a consistent intensification of the sector, which manifested itself in the form of increasing the cost per cow and productivity. This trend was changed only in the last fifth group.

Considering the above changes, the cost price of 1 centner of milk (both production and total) decreased from group to group, while its selling price, on the contrary, increased except for the last fifth group.

This ratio contributed to increase the overall level of profitability of milk production. And starting from the second group, where the average share of the company's revenue from the sale of milk in the structure of marketable products is 8.7 %, milk production is profitable and the level of profitability is 0.8 %. In the fourth group of enterprises, the level of profitability was even higher and amounted to 48.1 %. Thus, the results of the study showed that specialization creates the preconditions for efficient milk production.

An interesting point in this case was related to the existence of a maximum level of profitability of milk production depending on its share in the structure of marketable products. This relationship can be clearly seen in Figure 1.

In our case, between the value of profitability (x) and the share of milk in the structure of marketable products in agricultural enterprises (y) of the Region of Chernihiv in 2016, it was as follows

у = 25.392+0.2739x-0.0014*x2(2.1.)

As it can be seen, the value ‘–’ next to the argument x2 indicates that the function has a maximum. This in turn makes it possible to find a specific value of this maximum. As is well known from mathematics, to find the maximum of the function of a second-order parabola, it is necessary to find its first derivative, which we did:

Y´= 0.2739 – 2*0014x x2(1)

Питома вага молока у структурі товарної продукції - share of milk in the structure of marketable products, рівень рентабельності - level of profitability

****Fig. 1. Dependence between profitability and share of milk in the structure of marketable products at the agricultural enterprises of the Region of Chernihiv in 2016.****

______________

Source: own calculations

Hence: х = –0.2739/(–0.0028) = 97.8 %.

Substituting this value of the maximum in the equation of the parabola, we obtain _y_ , i. e. the proportion of the livestock sector at which the maximum level of profitability is as follows:

у = 25.392+0.2739*97.8 – 0.0014*97.82 = 38.8 %. x2(2)

Thus, in 2016, the highest level of profitability was at the enterprises in which the share of milk in the structure of marketable products was 38.8 %. Therefore, it can be concluded that it was achieved at the specialized enterprises. A similar analysis was also performed according to the relationship between the share of milk in the structure of marketable products and the level of productivity.

Питома вага молока у структурі товарної продукції - share of milk in the structure of marketable products, середній удій молока на корову, кг – average milk yield per cow, kg

****Fig. 2. Dependence between productivity of cows and share of milk in the structure of marketable products at the agricultural enterprises of the Region of Chernihiv in 2016.****

_____________

Source: own calculations

The model of the relationship between the productivity of cows (x) and the share of milk in the structure of marketable products at the agricultural enterprises (y) of the Region of Chernihiv was as follows (Fig. 2):

у = 12.13+0.0066*x – 0.00000052896 *x2(3)

The calculations of the level of the maximum allowed to establish that the maximum level of productivity of cows (6,239 kg) was achieved at share of milk in the structure of marketable products equal to 32.7 %. This is a fairly high value, although lower than the previous maximum.

****The influence of the share of revenue from the sale of milk in the structure of marketable products on the condition and efficiency of its production in the enterprises of Region of Kharkiv, 2018****

Parameters |  Groups of enterprises by the share of revenue from the sale of milk in the structure of marketable agricultural products, % |  Cumulatively in average  
---|---|---  
I |  II |  III |  IV |  V  
Up to 5.0 |  5.0– 20.0 |  20.0– 40.0 |  40.0– 60.0 |  Over 60.0  
Number of enterprises in the group |  12 |  26 |  25 |  12 |  12 |  17.4  
share of revenue from the sale of milk in the structure of marketable agricultural products, % |  1.94 |  11.05 |  27.98 |  46.39 |  66.31 |  29.57  
Average number of cows at the enterprise, head |  49.0 |  198.8 |  367.5 |  607.3 |  620.7 |  341.1  
Average milk yield per cow, kg |  3,101 |  5,000 |  6,734 |  7,949 |  8,559 |  7,116  
Average area of agricultural land, thous ha |  2,047 |  3,181 |  3,366 |  4,123 |  2,096 |  3,058  
Number of cows per 100 ha of agricultural land, head |  2.4 |  6.3 |  10.9 |  14.7 |  29.6 |  11.2  
Milk production per 100 ha of agricultural land, centner |  74.2 |  312.6 |  735.2 |  1,170.7 |  2,533.8 |  793.9  
Production costs per 1 cow, UAH |  27,196 |  34,253 |  41,758 |  48,227 |  55,003 |  45,074  
Input cost of 1 centner, UAH |  877.0 |  685.0 |  620.1 |  606.7 |  642.7 |  633.4  
Total cost of 1 centner, UAH |  791.6 |  670.9 |  597.4 |  618.2 |  600.7 |  614.0  
Sale price of 1 centner, UAH |  550.0 |  735.8 |  735.8 |  797.5 |  755.0 |  757.2  
Marketability level, % |  71.9 |  94.1 |  98.2 |  95.8 |  100.4 |  97.5  
Revenue from sale of milk per 1 cow, UAH |  12,260 |  34,618 |  48,665 |  60,742 |  64,858 |  52,526  
Profitability level, % |  -30.5 |  9.7 |  23.2 |  29.0 |  25.7 |  23.3  
  
______________

Source: Calculated by the author using the data of statistical reports for 2018.

The influence of the level of concentration of production on the main parameters of the level of its efficiency was also assessed on the example of agricultural enterprises of Region of Kharkiv according to the data for 2018 (Table 2). We have also retained the same grouping intervals in order to have data comparability. First of all, we want to address the parameters that characterize the level of production efficiency. For example, the level of milk yield per head had a clear tendency to increase, while the share of livestock in the structure of marketable products increased. In particular, in the group with a share of livestock up to 5 %, the average annual yield per head was 3,101.2 kg/head, in the group with a share of livestock 20–40 % – 6,374 kg/head, and in the group with a share of livestock over 60 % – 8,559 kg/head. What is also very important, is the fact that this trend was not deviated in any group.

Удій на 1 голову, кг – milk yield per head, kg; питома вага виручки від реалізації молока у структурі ТП – share of revenue from sale of milk in the structure of marketable products.

****Fig. 3. Dependence between productivity of cows and share of milk in the structure of marketable products at the agricultural enterprises of the Region of Kharkiv in 2018****

_______________

Source: own calculations

At the same time, when considering from the point of view of individual enterprises, the situation is somewhat different. In this case, the dependence is also characterized as non-linear and one that has a corresponding maximum. It was determined by the above method. It was established that the maximum level of productivity of cows was at the enterprises where the share of milk in the structure of marketable products was 65.8 %. According to the obtained model of the dependence between the share of milk and the productivity of cows at a given _x_ , the value of _y_ (productivity of 1 head) will be equal to 7,876 kg/head (Fig. 3). Thus, as in the enterprises of the Region of Chernihiv, we have a non-linear dependence with a maximum point. It turned out to be higher than at the enterprises of the Region of Chernihiv both in terms of _x_ and _y_. However, the trend itself has not changed. It should also be emphasized that the level of specialization of milk producers at which the highest productivity is stated indicates that the greatest success for this criterion is achieved by highly specialized enterprises.

Рівень рентабельності – level of profitability; питома вага виручки від реалізації молока у структурі ТП – share of revenue from sale of milk in the structure of marketable products.

****Fig. 4. Dependence between the level of profitability and share of milk in the structure of marketable products at the agricultural enterprises of the Region of Kharkiv in 2018****

______________

Source: own calculations

Regarding the income from the sale of milk per head, as well as the milk yield, it has a clear tendency to increase from group to group. However, the most interesting is the fact of non-linear dependence between the grouping parameter and the level of profitability. In the group with a share of up to 5 %, the level of loss was 20.8 %. In the following groups it was possible to state profitability already at the level of 12.6 %, 23.2 %, 29.0 % and 25.7 %, respectively. If we address these enterprises, the non-linear nature of this dependence is also clearly confirmed (Fig. 4). In this case, the function also has a maximum equal to the value of 52.4 % along the x-axis and 29.6 % along the y-axis. This means that on average, according to the obtained model of dependence, with the share of milk in the structure of marketable products of 52.4 % the level of profitability will be the highest and will be equal to 29.6 %.

**Conclusion.** The conducted study allowed to establish some patterns of influence of the level of specialization on the efficiency of milk production in agricultural enterprises on the example of actual data of enterprises of the Region of Chernihiv and Kharkiv. First of all, there is a dependence between the level of specialization and the amount of milk production per unit of land area, the level of production intensity. Secondly, a non-linear dependence was found between the level of specialization and the level of productivity and profitability of milk production. At the agricultural enterprises of the region of Chernihiv, the highest level of profitability (97.8 %) was at the enterprises in which the share of milk in the structure of marketable products was 38.8 %. At the agricultural enterprises of the Region of Kharkiv the highest level of profitability (29.6 %) was at the enterprises with a share of milk in the structure of marketable products of 52.4 %.

Regarding the dependence between the level of specialization and productivity of cows, the following was found. At the agricultural enterprises of the region of Chernihiv, according to the results of 2016, the maximum level of productivity of cows (6,239 kg) was achieved with a share of milk in the structure of marketable products equal to 32.7 %. At the agricultural enterprises of the region of Kharkiv, according to the results of 2018, the maximum level of productivity of cows (7,876 kg/head) was at the enterprises where the share of milk in the structure of marketable products of 65.8 %.

The established patterns can enable companies to optimize their production plans in order to obtain the maximum level of production efficiency.

****References.****

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****А.М. Москаленко, В.П. Колоша. Спеціалізація як фактор формування ефективності галузі молочного скотарства.**** У статті розглядаються проблеми впливу рівня спеціалізації на ефективність виробництва молока в сільськогосподарських підприємствах Харківської та Чернігівської областей. В якості критерію рівня спеціалізації обрано питому вагу молока в структурі товарної продукції. Робиться висновок, що спеціалізація тісним чином пов’язана з рівнем інтенсифікації виробництва. Відносно впливу рівня спеціалізації на ефективність виробництва молока було виявлено нелінійний характер даної залежності. На даних Чернігівської області за даними 2016 р. було встановлено, що максимальний рівень рентабельності мав місце при питомій вазі молока у структурі товарної продукції 38,8 %, у Харківській області за даними 2018 року при питомій вазі молока – 52,4 %.

****_Ключові слова:_**** ефективність, спеціалізація, продуктивність корів, інтенсифікація виробництва, рентабельність молочного скотарства.

****А.М. Москаленко, В.П. Колоша. Специализация как фактор формирования эффективности отрасли молочного скотоводства**.** В статье рассматриваются проблемы влияния уровня специализации на эффективность производства молока в сельскохозяйственных предприятиях Харьковской и Черниговской областей. В качестве критерия уровня специализации избран удельный вес молока в структуре товарной продукции. Делается вывод, что специализация тесным образом связана с уровнем интенсификации производства. Относительно влияния уровня специализации на эффективность производства молока было обнаружено нелинейный характер данной зависимости. На данных Черниговской области за результатами 2016 г. было установлено, что максимальный уровень рентабельности имел место при удельном весе молока в структуре товарной продукции 38,8 %, в Харьковской области по данным 2018 г. при удельном весе молока - 52,4 %.

****_Ключевые слова:_**** эффективность, специализация, продуктивность коров, интенсификация производства, рентабельность молочного скотоводства.