The impact of land fragmentation on milk production

The effect of land fragmentation on agriculture has worried policymakers for a long time because it is expected to be a negative effect. Land consolidation policies are frequently implemented to soften the degree of land fragmentation. However, to the authors' knowledge, no study in the dairy sector has empirically analyzed the role of land fragmentation on farm productivity and profits. This study helps to fill this gap in the literature by evaluating the effect of land fragmentation on milk production. To accomplish this, a stochastic frontier production function was estimated. This empirical analysis uses information corresponding to a sample of Spanish dairy farms located in a region where dairy production is by far the most important agricultural product and land is highly fragmented. As policymakers in the region assume that land fragmentation has a negative influence on agricultural production, particularly in dairy production, a land consolidation process was developed. Thereafter, a simulation analysis was carried out to evaluate the increase in profits that could be obtained by reducing land fragmentation. The results show that dairy farms could increase their profits in a range between 9.4 and 14% by reducing the degree of land fragmentation in a proportion similar to that attained by the land consolidation process that is being carried out in the region.