91-Article Text-269-2-10-20220108

INTERNATIONAL JOURNAL OF SOCIAL AND MANAGEMENT STUDIES (IJOSMAS)
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
Analyzing the Efficiency of Dairy

Production in the Philippines
Hannah Ericka C. Hernandez#1, Thea Elaine S. Mercado#2, Emee Marie J. Sobremonte#3, Marie
Antoinette L. Rosete#4
#
Undergraduate Students of the Business Economics Department at the University of Santo Tomas España
Blvd., Sampaloc, Manila, Philippines
1
hannahericka.hernandez.comm@ust.edu.ph
2
theaelaine.mercado.comm@ust.edu.ph
3
emeemarie.sobremonte.comm@ust.edu.ph
4
mlrosete@ust.edu.ph
Abstract — The efficiency of the dairy industry in the Philippines is determined by the sector’s productivity in
relation to investments, imports, and exports that it is making. The use of Total Factor Productivity (TFP) in
this paper is to examine the connection between the dependent variable and independent variables. More so,
this research aims to evaluate the efficiency of the dairy industry along with the objective of assessing the
impact that investments, imports, and exports have. Quarterly data from 2006 to 2017 helps to obtain results
and use for further interpretation using regression analysis. The study shows that investments, imports, and
exports do affect the productivity of the dairy industry in the Philippines. It leads to rejecting the null hypothesis
in this paper. The research findings may address these issues by giving attention to exports and investments
mainly to machineries and other technologies that contribute to dairy operations. The researchers also
recommend that to be able to improve productivity, investments, imports, and exports of the dairy industry, the
government should provide more funding and assistance to dairy farmers.
Keywords — Investments, Imports, Exports, Productivity, Efficiency, Dairy
I. INTRODUCTION
To be categorized as a dairy product, food must be produced from the milk of cows, buffalo, goats, etc.
(Burke et al., 2018). The dairy sector includes food such as liquid milk, milk powders, cheese, butter, and yogurt,
as well as ice cream and several factors including genetics, and breed of animal, environment, stages of lactation,
parity, and nutrition, together determine the final composition of milk (Burke et al., 2018). According to the
National Dairy Authority, the dairy industry in the Philippines started during the 15th century where Filipinos
and Spaniards enjoyed the soft cheese made out of the carabao’s milk. Later on, in the 1900’s two American
businessmen, N. S. Schober and M. Teague built the first milk processing plant in the Philippines, then 25 years
later, a local company named San Miguel Corporation bought the plant and up until now it is still in the market
known as the Magnolia Dairy Plant. After five years, three milk processing and bottling plants were established
alongside with the growing demand for milk, then Philippines started to import milk such as Marca Oso (now
“Bear brand”) and Senorita (now “Milkmaid”), then through the years different local and foreign companies
entered the market to supply dairy products. The dairy industry continues to find ways on maximizing the
available resources through efficiency in production to be able to meet local demand for dairy products.
The world’s milk is predominantly cow’s milk, followed by buffalo milk. The leading producers include,
Asia (30%), followed by the EU (28%), North and Central America (18%), South America (9%), other
European countries (9%), Africa (5%), and Oceania (5%) (burke e al., 2018). However, during the start of 2019,
USDA said that the Philippines will set its highest record for imports of dairy products adding 21% to the last
year’s number of imports. Dairy products are currently the country’s third largest agricultural import after wheat
and soybean meal and the major suppliers are New Zealand at 39 percent, US 21 percent and Australia seven
percent (Simeon, 2019). The Philippine is incapable of sustaining local demand because it only produces less
than 1% of its annual total demand for dairy products and depending on the remaining balance from the imports.
According to the Food and Agriculture Organization of the United Nations (2016), milk is one of the most
produced and valuable agriculture commodities worldwide. Globally, the dairy sector is rapidly growing. It is
87
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
projected that milk production around the world would increase by 177 million tons by 2025, at an average
growth rate of 1.8% per annum in the next 10 years. The consumption of dairy is also expected to increase per
capita by 0.8% and 1.7% per year in developing countries, and between 0.5% and 1.1% in developed countries.
People have been drinking milk coming from dairy animals for a thousand years, and even up until now,
milk is one of the most demanded necessities by many households all over the world. Its wide range of usage
and its nutritious components are what makes it more demandable by people; it is consumed by babies,
teenagers, adults, and old people. According to FAO (2013), milk contains numerous nutrients and it makes a
significant contribution to meeting the body’s needs for calcium, magnesium, selenium, riboflavin, vitamin B12
and pantothenic acid (vitamin B5), supported by Burke et al. (2018), milk and dairy products are significant
sources of protein, essential minerals (calcium, potassium, magnesium, phosphorous, sodium, iodine) and
several vitamins, (the fat-soluble vitamins A, D, E, K, and B1, B3, B6, B12). The milk proteins contain the nine
essential amino acids required by humans, making it an important human food (Burke et al., 2018). However,
milk does not contain enough iron and folate to meet the needs of growing infants, and the low iron content is
one reason animal milks are not recommended for infants younger than 12 months old (FAO, 2013). When
investigating the relationship between dairy products and health, it is important to consider that the human diet
is complex and is not defined by the inclusion or exclusion of one food, but by its totality (FAO, 2013). Dairy
industry is not only focused on the production of milk, rather there are many other dairy products that are
commonly consumed by people namely; cheese, butter, yogurt, cream, ice cream, etc. These dairy products have
been known to be useful in many different ways; for cooking, for baking, for beauty products, bath products, etc.
Not only are milk and dairy products a vital source of nutrition for these people, they also present livelihood
opportunities for farmers, processors, shopkeepers and other stakeholders in the dairy value chain. (Muehlhoff et
al., 2013). The rapid rise in aggregate consumption of meat and milk is propelled by millions of people with
rising incomes diversifying from primarily starch-based diets into diets containing growing amounts of dairy
and meat and the underlying forces driving these trends are set to continue, and the potential for increased
demand for livestock products remains vast in large parts of the developing world (FAO, 2013). According to
FAO (2013), growing consumption of dairy and other livestock products is bringing important nutritional
benefits to large segments of the population of developing countries, although many millions of people in
developing countries are still not able to afford better-quality diets owing to the higher cost.
Based on the data of the United States Department of Agriculture, the annual consumption level of dairy
products in the Philippines increased from 10.31% in 2018 to 20.56% in 2019 but it decreased by 10.85% in the
year 2020. Unfortunately, when COVID-19 pandemic happened in the year 2020, the country’s economy
declined, people’s purchasing power had weakened, citizens lose their jobs and some were laid-off, some
businesses were forced to close due to bankruptcy; many industries were greatly affected and the dairy sector
wasn't different from them. Bosire et al. (2019) stated that Crosson and Anderson (1994); Herrero et al. (2014);
Regmi and Dyck, (2001); Schneider et al. (2011) said that consumption can be expected to increase in countries
with accelerating urbanization and economic development.
This supporting research aims to evaluate the efficiency of the dairy industry in the Philippines. This
research intends to: (1) identify the factors that contribute to the productivity of Philippine dairy industry (2)
assess the impact of investments, imports, and exports on the efficiency of the Philippine dairy industry (3)
measure the dependent variable and independent variables by using the gathered data.
The content of this research will contribute to the improvement of the overall productivity of the dairy
industry in the Philippines. It can also contribute knowledge to various dairy-related organizations as well as to
the higher institutions.
1.1 Scope and Limitations
The study focused on the efficiency of dairy production in the Philippines by considering productivity,
inventory, imports, and exports as the variables. The collected data was secondary and it only covered years
from 2006 to 2015. Majority of these gathered data came from the Philippine Statistics Authority. Other
independent variables that were not mentioned but may possibly impact productivity will not be discussed in
this paper. Each variable has its corresponding measurement. However, due to data insufficiency, Total Factor
Productivity (TFP) as the chosen indicator for productivity was not measured by using the ratio of input and
output index. In that case, the volume of production index of the manufacturing sector in dairy products was
used as a proxy in order to determine TFP.
88
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
Research Problem
Dairy is the third largest agricultural import of the Philippines after wheat and soybean meal. Clearly, the
dairy sector of the Philippines is dominated by imported products. Given this information, the research problems
that will be discussed are (1) The Philippines heavily relies on imported dairy products rather than its local
production; (2) the dairy industry in The Philippines lacks funding and technological investments; and (3) The
Philippines is not self-sufficient when it comes to its dairy products.
II. LITERATURE REVIEW

2.1. Efficiency
According to Oliveros (2019), dairy improves nutritional status of people and the dairy industry brings
about socio-economic transformation by providing employment and contributes to the Gross Domestic Product
(GDP) of the country. There is so much room for growth for dairy farming in Asia and they recognize the need
to expand the industry to address issues on food security (Oliveros, 2019). According to Ondarza et al. (2017),
in today’s marketplace, sustainability is a new indicator of quality. It can be tempting to use dairy efficiency
metrics to address consumer and retailer questions about sustainability, however, although each measure has
merit for describing a segment of dairy efficiency, no one measure can entirely describe a dairy’s efficiency or
be applicable across all farms (Ondarza et al., 2017). According to Ondarza and Tricarico (2017), each
calculated measure of dairy efficiency has its own advantages and limitations, and dairy efficiency goals should
be considered to be moving targets that are specific for the current situation of individual dairy enterprises with
the focus placed on continuous progress.
In contrast to cost accounting, efficiency analysis takes the whole farming system into account,
including non-monetary inputs (Allendorf, Wettemann, 2015). Technical efficiency is based on the concept of
the production frontier, which represents the maximum output allowed by technology (Cachia, et. Al, 2018).
The major interest behind measuring technical efficiency levels is to know what factors determine the
inefficiency differences among farmers (Yilmaz, Gelaw, Speelman, 2020). Several methods can be used when
quantifying technical efficiency and all of them aim to identify the share of productivity growth resulting from
efficiency changes through the measurement of the distance between observed productivity and a theoretical,
optimal, or average productivity (Cachia, Lys, Mechri, 2017). These methods can provide farm-level estimates
of technical efficiency. Researchers have spent much effort examining managerial performance in agriculture,
which is often proxied by technical efficiency (TE), and a considerable share of this work has focused on dairy
farming (Moreira et al., 2016).
Technical efficiency is a different concept from productivity. Technical efficiency is one factor that
contributes to productivity growth and measures how well a farm is able to combine the different inputs and
factors of production to be able to produce a maximum amount of output. Meanwhile, productivity measures
how much output can be produced out of a given amount of resources. The US dairy industry has realized
tremendous improvements in efficiencies of production (Martin and Mitra, 2001, 2013), achieved in part by
investing in technology and productive assets, and paid for by economies of scale (von Keyserlingk et al., 2013).
On the other hand, agricultural productivity and efficiency are also at the forefront of debates, policies,
and measures when it comes to the agricultural sector. Productive efficiency is one of the key prerequisites for
the competitiveness of enterprises in every business (Spicka, Smutka, 2014). Meanwhile, production efficiency
improvements can come from minimizing waste, maximizing the dairy milk production of a dairy cow, and
maximizing the proportion of their life spent in peak milk production without sacrificing animal health and well-
being (Place, Mitloehner, 2010). Moreover, for developing countries facing an increasingly globalized economic
environment, productivity growth and improving competitiveness is essential to ensure the prosperity of
agriculture and contribute to poverty reduction (Thirtle et al., 2003, 2016; World Bank, 2003, 2008, 2016).
Although, despite the importance of agricultural productivity, data has been scarce and inadequate in developing
countries. There is a lack of statistics in regards to agricultural productivity. However, over the years, significant
contributions have been made towards the better understanding, measuring, and analyzing of agricultural
productivity.
89
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
One factor that can affect the productivity of the dairy animals is their feeds. According to Kiel (2013),
from an economic point of view, feed cost is the single most important factor affecting the profitability of dairy
farms. The cost of feeding usually accounts for more than 50% of the total cost of milk production (Hemme,
2010, 2013). However, through feed efficiency and according to Food and Agriculture Organization of the
United Nations (FAOSTAT, 2013), such improvements have allowed for a two-fold increase in total global milk
production in the last 50 years alone and have consistently placed whole fresh cow milk among the first- or
second-ranked agricultural commodity in the world for production value during the last decade. Research
focusing specifically on feed efficiency of dairy cattle is less prevalent and only recently has appeared
consistently in the scientific literature (Berry, 2009, 2014). One reason for the lag is that dairy cows present an
additional challenge in estimating net feed efficiency because of the large fluctuations in their energy balance
that occur throughout the annual lactation cycle, particularly the contribution of energy mobilized from body fat
during early lactation (Connor, 2014). In their investigation of the technical efficiency of dairy farms in
Australia, for example, Kompas and Che (2006, 2020) found that total grains and concentrates used per cow has
a positive and significant effect on technical efficiency, although the effect was small in absolute value.
Furthermore, the dairy processing sector is continually upgrading its plant to handle greater volumes of milk,
produce a wider range of products for domestic use and export and improve efficiency (New Zealand Institute of
Economic Research, 2017).
Agricultural intensification is technically defined as an increase in agricultural production per unit of

input such as labor, land, time, fertilizer, seed, supplementary feed, or cash (FAO, 2004; Salou et al., 2017,
2020). As land is a strongly limiting input for agricultural production, the trend toward intensification seems
unavoidable globally (Ma W. et al., 2020). In the dairy sector, intensification involves different strategies such
as increasing off-farm inputs (e.g., fossil fuels, chemical fertilizer, pesticides, and the amount of supplementary
feed) and using better plant cultivars that are lower in fiber and higher in protein and energy (Lean et al., 2008;
Chobtang et al., 2017; Salou et al., 2017, 2020). Intensification often requires increased investment by the
smallholder farmers, thereby also increasing the risk of losing this investment if production fails (Udo et al.,
2011, 2019). According to Ma, Bicknell, Renwick (2020), these strategies allow producers to increase stocking
rates (the number of cows milked per hectare of land), which is often associated with higher levels of
productivity and profitability. Several reasons for this transformation have been identified, including to increase
the volume of production, to respond to seasonal weather patterns, and to react to public pressure concerning
animal welfare through a desire to improve cow body condition (Stafford and Gregory, 2008; Mounsey, 2015;
Ma et al., 2019, 2020). Second strand analyzes the effect of intensification on technical efficiency (i.e., the
effectiveness with which a given set of inputs is used to produce an output) of dairy production (e.g., Kompas
and Che, 2006; Abdulai and Tietje, 2007; Alvarez et al., 2008; Basset-Mens et al., 2009, 2020)
Quite a few studies have been devoted to the estimation of the total factor productivity (TFP) growth in
the Indian dairy industry (Ohlan, 2013). SINGH (2004, 2013) sought to scrutinize the performance of the Indian
dairy industry applying a non-parametric method called data envelopment analysis using the data for the period
1980-1997. According to Ohlan (2013), they briefly outline the Tornqvist index used for estimating total factor
productivity (TFP) growth and data envelopment analysis (DEA) models, viz. CHARNES et al. (1978) and
BANKER et al. (1984) applied for efficiency measurement.
A farm is said to be technically inefficient if it does not produce the maximum level of output that can
be expected given the resources available (Global Strategy, 2017, 2018). Moreover, results from Brazilian dairy
industry suggested that the focus on specialization in added-value products and operating in high scales may
contribute to higher pure technical efficiency scores. However, in the long term, it could demonstrate that the
inefficiencies will be much more concentrated in the small dairies as they do not have specialized added-value
products. Therefore, it can be one of the main causes of the recent decrease in the number of small dairies and
the production concentration in a small number of large dairies (Lima et al., 2018). An increase in technical
efficiency raises productivity as well since more output can be produced using the same resources. Improvement
in technical efficiency in milk production requires adequate and quality veterinary services, augmentation of
feed and fodder resources at the farm, integration with a formal marketing system, and scaling-up of the dairy
enterprise (Spicka, Smutaka, 2014).
2.2. Production
According to Lokuruka (2016), worldwide, the dairy sector is one of the fastest growing food sectors
both in terms of volume output, sales and real commodity prices. In parallel to global initiatives, such as the
2030 Agenda for Sustainable Development, several countries have introduced policies to improve agricultural
90
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
productivity, especially in countries where agriculture is a major economic sector and the productivity gap
among the primary sector and other industries and services is the widest and Enhancing productivity in
agriculture is important because of its effective contribution to poverty reduction through better food security
and higher farm incomes (FAO, 2017). Sustainable dairy production must return a profit for the dairy enterprise
and produce quality milk for consumers while maintaining optimal cow well-being and practicing
environmental stewardship (von Keyserlingk et al., 2013, 2017). While the national government has
continuously adopted a “stop-gap” measure, it also recognizes that developing the local dairy sector is a more
sustainable and empowering approach for Filipinos, thus, current government initiatives are anchored on multi-
pronged strategies that include massive herd build-up, provision of support to post-production infrastructure,
establishment of market linkages, human resource development, and deployment of livestock research and
development instruments (Palacpac, 2010).
According to the United Nations Food and Agriculture Organization (2014), production is led by the
United States; they are the largest producer of cow’s milk in the world. At the same time, there is growing
demand from consumers and policymakers for milk that is produced sustainably and with low environmental
impact (Niles et al., 2019).
The demand for dairy products is expected to increase at a rapid rate in the Asian countries and
changing food habits will have an important role to play in the increase in the demand for dairy production in
the Asian market (Ingavale, 2012). According to Burke et al. (2018), changing consumer demand patterns are
affecting food production. The “Traditional” value drivers of price, taste, and convenience have been
complemented by newer and “Evolving” drivers such as health and wellness, safety, social impact, and
experience and central to all of these drivers is a need for transparency from food companies, thus given the
ever-changing nature of the consumer food value drivers, dairy producers must look to their production
processes to innovate with new products and to optimize output without compromising on quality and safety
(Burke et al., 2018). Many developing countries aim to increase production to meet both the growth in demand
by the wealthy consumers and concurrently commit to poverty alleviation through implementing interventions
that enhance smallholder farmers’ engagement in market-oriented economic activities leading to improved
livelihoods (Herrero et al., 2014; Schneider et al., 2011; Thorpe et al., 2000, 2019).
According to the Food and Agriculture Organization of the United Nations (2018), the measurement of
productivity has been the subject of several academic papers, manuals and guidelines, since the foundational
work of Solow (1957) and Diewert (1980). Productivity is at the centre of economic growth, at the micro-
(farm), meso- (sector) and macro-levels (economy- wide) and with everything else equal, higher productivity
results in higher production (more output is produced out of the same input base) and higher profits or income
(FAO, 2018). According to Moreira et al. (2016), analysis of productivity growth over time and productivity
differentials between countries, regions, and farms have been and remain important subjects of formal analysis
in agricultural and development economics (Berry and Cline, 1979; Carletto et al., 2013).
According to Gollin (2018), a large literature in development economics has focused on the so-called
“inverse relationship” between farm size and land productivity (typically measured as physical output per unit of
land, which is more simply termed “crop yield”). Sen (1962, 2018) suggests that this relationship arises from
imperfections in land and labour markets, such that poor households use family labour intensively on small plots,
leading to high land productivity – but also associated with low labour productivity.
Productivity, as discussed by the Organisation for Economic Co-operation and Development (2001), is
the relationship between the volume of inputs and outputs used to produce another output. The output that is
being considered in measuring productivity can be in terms of the number or volume of goods and services
produced using the factors of production or inputs available. Productivity should be increased in a sustainable
manner so that the environment is not further degraded, management practices are both socially acceptable and
economically favorable, and future generations are not disadvantaged (Toma et al., 2013).
Productivity is one of the bases of economic growth. Higher productivity means higher production and
when the economy is able to produce more using the same number of resources as the previous production, it
will yield an increase that can help boost the economy. The growing population of the world created a
continuous increase in demand for agricultural goods which also includes dairy products over the years and due
to the increasing number of demands, a huge increase in agricultural productivity is needed and it has been
91
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
proven by Ruttan (2002), Rao and Coelli (2004), Chen, Yu, Chang, and Hsu (2008), and Fuglie (2010).
Productivity is used as a measurement of performance of various sectors and industries in a country. Data from
statistical agencies or companies that produce data are used to measure the productivity of a certain sector or
industry; data collection/data gathering is the first step to measure productivity together with the derivation of
other variables that affects the level of productivity. Thus, it can be described as the ratio of inputs and outputs;
substantial ratio of inputs and outputs is associated with great performance. It also determines whether a certain
industry is able to sustain the demands of the growing market using limited resources, that is why it can also be
used as a measure for sustainability. In a macroeconomic perspective, the more efficient use of resources and the
reallocation of the surplus to the other economic activities lead to an increase in national income. As stated by
the Food and Agriculture Organization of the United States (2016) the procurement process of data and statistics
gathered by agencies, method of data collection, instruments used to gather data up to the establishment of
related variables and to its proper interpretation must be reliable, relevant, and of best quality in order to
produce a good measure of productivity.
Productivity indicators are generally found in two forms: partial factor productivity and multifactor
factor productivity. When only one input is considered, the term “single productivity indicators” is used, while
“multifactor (or total factor) productivity” considers all major factors of production and intermediate inputs
(Food and Agriculture Organization of the United Nations, 2016). Partial productivity or Single-factor
productivity simply refers to the measurement of the volume of outputs produced using only one particular input.
There are many factors that need to be considered to be able to show the productivity level of a farm. This
method of measuring productivity is prone to misrepresentation of the farm that is being studied because inputs
are interconnected with one another. Solely basing the level of productivity of a farm using a measurement that
only considered single input and completely ignoring all the other major factors of production that might be
affecting the farm and the chosen input to be considered in the study is not advisable to use in measuring
agriculture level of productivity. This method should be used together with other major indicators that can
measure all the related inputs which is accounted for in the second form of productivity indicators known as the
Multifactor Productivity (MFP) or also called the Total Factor Productivity (TFP). However, these two have a
difference with each other, the former accepts the fact that it is not possible to include all inputs and TFP only
apprehends the main ones. TFP is often considered as a growth rate, and that it only represents the change in
agricultural output but it doesn’t speak for all or some of the inputs that were included namely; land, labour,
capital, and intermediate inputs.
The dairy sector includes food such as liquid milk, milk powders, cheese, butter, and yogurt, as well as
ice cream. In many respects, dairy production may be viewed as being in a unique position compared with the
other sectors in agriculture (Douphrate et. al., 2013). The dairy industry has several features that distinguish
itself from the other sectors of agriculture. An example would be how much transportation costs for milk. Since
milk is harvested every day and is perishable with a limited shelf life, high-transportation costs are needed.
Another unique characteristic of the dairy industry is the socioeconomic position of dairy producers. Majority of
farmers are small-scale producers who have a vulnerable place in the dairy market. The nature of the business
does not allow them to adjust to market changes freely. They are only allowed to adjust in a limited, slow, and
gradual way. Due to these limitations, dairy producers are considered as price takers and not price setters.
On the other hand, since milk is harvested every day, this provides a daily income for dairy farmers
despite its limitations in production and marketing process. Milk production also provides a lot of employment
opportunities since it is labor-intensive. Opportunities can be found not only on the farming aspect of milk
production but also in the transport and processing of milk and the agricultural supplies and services sectors.
This is also the reason why the dairy industry is considered vital for the sustainability of rural areas.
China had experienced changes in their dairy farm structure ever since there was a drastic decrease in
the number of backyard farms and had caused a decrease in the number of dairy cows. However, despite these
changes, herd numbers of large farms increased all at the same time; numbers were increased by 18.8% for the
small farms, 22.2% for medium farms, and 80.8% on large farms. China changed their method of measuring
technical efficiency from total factor productivity to stochastic production frontier. The estimated results
indicate that patterns of productivity growth appear to have shifted in the 2000s compared with the 1990s, from
generally driven by technological change to exclusively driven by technological change on backyard and small
farms and uniquely driven by the improvement of technical efficiency on large farms (Ma et al., 2012).
92
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
Analysis of productivity growth over time and productivity differentials between countries, regions,
and farms have been and remain important subjects of formal analysis in agricultural and development
economics (Berry and Cline, 1979, 2016; Carletto et al., 2013, 2016).The measurement and analysis of
productivity has attracted the attention of economists for a long time, and has resurfaced as a topic of interest
particularly in the context of poverty alleviation within the Millennium Development Agenda (Hazell et al.,
2007, 2016) and more recently the Sustainable Development Goals (United Nations, 2015, 2016).
Volume of production or total output in connection with efficiency was also acknowledged. According
to Aristovnik et al. (2012), the measurement of efficiency generally requires an estimation of output. It also
determines the link between input, output, and outcome as a main component of efficiency indicator.
Furthermore, the greater the output for a given input or the lower the input for a given output, the more efficient
the activity. Efficiency analysis in agricultural production is generally associated with the possibility of farms
producing a certain level of output from a given bundle of resources or a certain level of output at least cost
(Girei et al., 2013). According to Simonyan et al. (2012, 2013), a production process may be technically
inefficient if it fails to produce maximum output from a given bundle of inputs. Also, it is known that a unit can
be made efficient by increasing the output level with the same input level (output orientation) (Banaeian et al.,
2011).
2.3. Imports
According to Borawski et al. (2015), international trade is an important factor in the development of a
country and the formation of the Gross Domestic Product and is often regulated by laws and policies. The
development of foreign trade in agri-food is influenced by demand growth abroad, the competitive prices of
products, and product quality (Borawski et al., 2015)
In 2020, liquid milk imports have dropped as the use of liquid milk in food in coffee shops has declined
due to COVID-19 lockdowns (Ang, 2020). Similarly imports of butter and other dairy spreads as well as cheese,
mainly from New Zealand and Australia due to the duty-free of those suppliers are also seen to drop due to the
economic slowdown and reduced food service operation (Ang, 2020).
According to Ang (2020), dairy products are currently the country’s third largest agricultural import
after wheat and meal. Post projects total dairy in 2020 to to 2,800 MMT (in Liquid Milk LME) due to a
slowdown in demand for dairy products caused by the COVID induced economic slowdown, however, 2021
dairy imports are forecast to increase marginally as economic activity starts to recover, as the outbreaks are
contained (Ang, 2020).
According to Lokoruka (2016), improved milk output reduces importation of dairy products. This
spares foreign exchange and makes milk more available to citizens which in return, improves the nutritional
status of poor families and farmer households whose source of protein is usually milk. Net import demand for
dairy products would grow faster than net export supply through 2013, with demand growth coming primarily
from developing economies in Asia, Latin America, North Africa and the Middle East and this will lead to a
“latent demand gap” (global shortfall between consumption and production forecasts) of ~100,000 metric tons
of dairy protein by 2013 (equivalent to ~7 billion pounds of milk) (Vitaliano, 2016) supported by the study of
Davis et al. (2018) that Southeast Asian countries with significant imports of SMP in 2015 included the
Philippines, Indonesia, Malaysia, Singapore, Thailand, and Vietnam and with price, tariffs, and other trade
policies being the factors to be considered when importing milk products, differences in the amount of imports
per countries differ. Relationships between prices from one country to another are expected to have effects on
the proportions of SMP imported from each country (Davis et al., 2018), for example Global Trade Atlas (2016)
stated that the United States was the top supplier for skim-milk powder (SMP) in the Philippines accounting for
35% of the import share different to Singapore wherein US import share was only accounted for 5% in
Singapore’s total import share.
According to Sharma (2014), accessing a variety of imported inputs can potentially improve the
productivity of firms. This channel could be vital in sectors requiring a large variety of specialized inputs in the
production process. Imported inputs may also enhance the productivity of domestic firms by providing access to
advanced technologies that are not available domestically (Lawrence & Weinstein 1999, 2014). Trade in general
and imports in particular stimulate productivity growth through emulation. This happens because market
competition and exposure to multinational firms speeds up technological acquisition, which lead to more rapid
93
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
technological and productivity improvements (Gerschenkron 1952, 2014). Main findings show that an increase
in import competition spurs firm-level productivity growth. Furthermore, the productivity growth effect
attributable to imported intermediate inputs is significantly stronger than the effect due to imported final
products (Olper et al., 2016).
The abolition of milk quotas, which is in concordance with the World Trade Organization liberalization
process, will expose EU farmers to international market competition, meaning an increase in milk production
associated with raw milk price cuts (Areal et al., 2012). According to Areal et al. (2012) under the new scenario,
only the most efficient producers will have the chance to remain in business, therefore, it is relevant, particularly
for policy makers, to understand how the use of the quota market and its abolition may affect farm technical
efficiency.
H01: Imports do not increase productivity.
2.4. Exports
According to Borawski et al. (2015), exports allow countries to specialize in their strengths, which
translates into better competitiveness for the economy. Economic theory identifies well-known channels through
which trade can influence economic growth thus, international trade promotes efficient resource allocation,
enables the country to realize economies of scale, facilitates knowledge diffusion, promotes technological
advancement as well as fosters competition in domestic and international markets and new product development
(Blavasciunaite et al., 2020). Due to the growing population of the world, demand for different types of goods
also increases alongside the growing numbers of suppliers coming from all over the world. Some countries
specialize in the production of one particular good and imports goods that are of limited supply in their country.
In addition, an Indian dairy industry study of Ingavale (2012) expressed that export potential of any product
depends largely on two factors: size of the foreign market & bargaining power of the exporting country. Thus, in
developed countries, due to the slow growth of population coupled with negligible change in the existing dietary
pattern, the demand for dairy products is less in these countries in the times to come.
Exports are expected to remain low despite duty-free advantages from the ASEAN free trade
agreement due to increasing cost of imported dairy inputs and strong competition from other dairy producers
(Ang, 2020). Substantial attention has been paid to the examination of trade balance effects on economic growth
as it becomes an important indicator of a country’s competitiveness and is important in assessing the country’s
economy and its relations with the rest of the world (Topalli and Dogan 2016; Kang and Shambaugh 2016;
Akbas and Lebe 2015, 2020).
The complexity of national and global dairy chain structures and possible changes in export
competitiveness are of increasing private sector and public policy concern (Pinior et al., 2012, 2014). Dairy
chain export competitiveness on global markets is a crucial factor for the economic sustainability in the global
marketing environment for the dairy sector (Bojnec, Ferto, 2014). According to MacDonald, Cessna, Mosheim
(2016), the congress reorganized the policy in the Agricultural Act of 2014 (2014 Farm Bill) and it created a
new program, the Dairy Margin Protection Program, aimed at providing farmers with financial protection
against adverse movements in milk and feed prices, however, the Dairy Product Price Support Program, the
Dairy Export Incentive Program, and the Milk Income Loss Contract Program expired after they were not
renewed in the Act. The new program was initiated in response to wide fluctuations in milk and feed prices, and
in particular to events in 2009, when falling milk prices combined with still-high feed prices exert
unprecedented financial stress on the industry. Dairy policy has long been concerned with milk pricing and with
financial risks facing dairy farmers, and the 2014 initiatives adjusted risk-management policies in light of
ongoing changes particularly in farm structure and in dairy products that affect industry performance and
influence dairy policy (MacDonald et al., 2016). Furthermore, according to MacDonald et al. (2016), gradual
changes in U.S. and European Union (EU) dairy policies have helped drive the expansion of U.S. exports and
the convergence of global dairy product prices. It also discussed that changes in EU dairy policies have had
major effects on world dairy markets. Among other programs, the EU supported its dairy market through an
intervention program (similar to the U.S. price-support program) and an export restitution program (similar to
the U.S. DEIP program). Traditionally, EU dairy export subsidies had a strong influence on world prices. Dairy
products are changing and (MacDonald et al., 2016) changes in the dairy product mix may also alter dairy price
relationships, and hence may affect dairy price volatility.
94
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
Several studies find a positive correlation between TFP and exporting status (Casas et al., 2015).
According to Casas et al. (2015), using data from Slovenia, De Loecker (2007, 2015) finds that firms that decide
to export become more productive. See examples using data from Taiwan and Korea (Aw, Chung, and Roberts
2000, 2015), data from Chile (Pavcnik 2002, 2015), and data from sub-Saharan Africa (Van Biesebroeck 2005,
2015). Following the model presented by lerides, Lach, and Tybout (1998, 201 ), Lo pez (2006, 201 ) finds
that e porters are more productive e ante, and that the productivity of e porting firms increases with their
e posure to international markets. Similarly, Echavarr a, Arbela ez, and osales (2006, 201 ) finds that total
factor productivity increased with trade liberalization, since liberalization allowed for the technological progress
of firms participating in foreign markets. Other studies that analyze the causes of this positive relationship
between productivity and export status include Fernandes and Isgut (2005, 2015), Eslava et al. (2004, 2015), and
Parra Oviedo (2003, 2015).
In order to benefit from the opportunities offered by demand and trade growth, to stabilize the dairy market and
to ensure a fair functioning of the dairy supply chain a strong and efficient dairy industry is required. (Vlontzos
et al., 2013).
H02: Exports do not increase productivity.
2.5. Investments
According to a study by Britt et al. (2018), the demand for dairy products and technologies will grow
during the next 50 yr for 2 reasons, first, increased per capita income worldwide will boost demand for dairy and
other food products from animals, and these products increasingly will provide essential nutrients in developing
countries. Britt et al. (2018) also stated that in order to supply increased demand for dairy products in the
decades ahead, there must be a sustainable balance between products produced within the country and imports.
This provides opportunities for developed and developing exporting countries to provide dairy products as well
as dairy equipment and technologies to expand dairy farming in countries where suitable land resources exist
(Gerosa and Skoet, 2012, 2018). As demand for dairy products increases, it is important to understand global
dairy production today and how it may change during the decades ahead (Britt et al., 2018).
According to Muia et al (2011), the increased costs of transportation and distribution systems due to the
poor road network and long distance to markets resulted in high costs of inputs (supplements, animal drugs and
vaccines, pesticides, fertilizers, and herbicides) and their unavailability. High cost and unavailability of
electricity in rural areas reduced investments especially in cold storage facilities and processing of the highly
perishable goods such as milk and dairy products and the cost of credit, limited use of land as collateral for
financing farming, and the limited number of banks in the rural areas are some of the factors that made it
difficult for farmers to access credit from the formal banking industry (Muia et al., 2011). According to Staal et
al (2003, 2017) and Kibiego et al (2015, 2017), smallholder are able to remain competitive and has above
normal profits than those of rural wages in Kenya, however, constrained by poor infrastructures and inadequate
support like lack of collateral needed for bank loans (Kembe et al 2008, 2017). It is therefore important to note
that carefully targeted development assistance to the dairy sub-sector especially the smallholder farmers is likely
to translate into substantial benefits in terms of nutrition, improvement of livelihoods and creation of
employment for rural poor (Waitituh, 2017).
Capper et al. (2009, 2011) highlighted the need to adopt management practices and technologies that
improve productive efficiency to meet increasing product demand. Smallholder agricultural development in
developing countries faces challenges and constraints related to persistent food insecurity, food price volatility,
food safety and sustainability concerns, but also is experiencing increased opportunities arising from growing
domestic and global agricultural market demand (McCullough et al., 2008; World Bank, 2006, 2007, 2012).
According to Kilelu, Klrekx, Leeuwis (2013), such a dynamic context requires the sector to continually innovate
if it is to contribute to sustainable socio-economic development. In this regard, the agricultural innovation
systems (AIS) approach has gained currency as a framework for understanding bottlenecks and identifying
opportunities for enhancing the innovation capacity of agricultural systems, particularly in sub-Saharan Africa
(SSA) (Hounkonnou et al., 2012; Spielman et al., 2009; Sumberg, 2005; World Bank, 2006, 2013). AIS thinking
recognizes that innovation occurs through the col- lective interplay among many actors – including farmers,
researchers, extension officers, traders, service providers, processors, development organizations – and is
influenced by factors such as technology, infrastructure, markets, policies, rules and regulations, and cultural
practices (actors’ values and norms) (Kilelu et al., 2013). Thus, innovations are not just about technology but
also include social and institu- tional change, and have a systemic and co-evolutionary nature (Biggs, 1990;
Leeuwis and van den Ban, 2004, 2013). According to Bosire et al. (2019), for smallholder farmers, it is thus
95
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
important to invest in practices that facilitate adaptation to increasingly limited land resources and water scarcity,
failure to adapt would restrict their ability to produce the quantities of food demanded by the rising and
urbanising populations.
The public sector has traditionally been the driving force behind these advances and represented the
lion’s share of agricultural research and development ( &D) e penditures, with global public sector &D
(Jaruzelski et al., 2017). But more recently, constrained fiscal policies in many countries have slowed public
sector R&D growth. (Jaruzelski et al., 2017). According to Jaruzelski et al. (2017), private investment in
agricultural innovation has resulted in new technologies and production techniques with significant promise to
boost productivity. Coe et al. (2009, 2020) showed that domestic and foreign R&D capital stocks have a
measurable impact on TFP, even after controlling for the impact of human capital and institutions.
Andersen and Babula (2009, 2020) identified the channels through which international trade may affect
the economic growth: (i) it provides access to foreign intermediates and technologies; (ii) it facilitates the
dissemination of knowledge internationally; (iii) it expands the market size for new product varieties. With the
development of new technology, there are now equipment that could help in delivering fresh milk. In modern
day dairy operations, certain tasks are being automated. New technologies include automatic feeding systems,
cow separation systems, and robotic milking. Electronic cow identification is also in use. Electronic cow
identifications are used to decide which pen a cow should be housed, if it needs to be separated for treatment or
reproductive reasons, or simply because of how much feed it needs to receive based on its level of milk
production and consumed feed. Other factors such as temperature, location, and movement sensors can also help
provide information of cow health. Lack of technology can cause the milk to be perishable and fragile (Akbar et
al., 2020).
There are three major types of production system when it comes to Dairy Farming in Asia (Moran,
Chamberlain, 2017). These are classified as mixed farming, wherein milk production only contributes a
relatively small proportion of total farm income. Second is the essentially smallholder dairy farms wherein milk
production has improved and becomes a major contributor to farm income. Lastly is the larger specialist dairy
farms which produce raw milk. Meanwhile, dairy development is also classified into two (Staal et. al., 2008,
2017). Traditional smallholder systems and commercial large-scale industrial systems are categories that were
developed for the convenience of global dairy policymakers. Traditional smallholder systems are small-scale
farm household systems often associated with informal milk marketing systems that predominate in many
developing countries while commercial large-scale industrial systems represent industrialized production
systems and marketing observed in most developed countries. Commercial large-scale industrial systems are
usually single enterprises with large herds and high levels of farm inputs and outputs.
The way animals are raised on farms has changed greatly over the past century, including a growth in
farm size and increased technology (Fraser, 2008, 2016). When it comes to milking systems, there are two types
that are used in modern dairy production which are tie stall or stanchion and milking parlor systems. In a tie stall
or stanchion system, milking units are brought to a tethered dairy cow for milking and milk is collected in a
pipeline system. A worker will stand between a tethered cow and kneel or squat to attach a specialized milking
equipment to the udder of the cow. This system is usually used in farms with smaller herd sizes. Meanwhile, the
parlor systems involve cows being housed in dry-lot or loose housing facilities and moved into a milking parlor
with stationary stalls where they are milked simultaneously with specialized milking equipment. Parlor systems
can accommodate large numbers of dairy cattle and is ideal in large-herd dairy operations.
Social and technological developments of the past few decades have significantly influenced the
variety of dairy products available (Food and Agriculture Organization of the United Nations, 2013). Membrane
technology also plays a major role in modern day dairy processing. According to Kumar et. Al., (2013),
membrane technology is used in the clarification of the milk, increase in the concentration of the selected
components, and the separation of the specific valuable components from milk or dairy by-products. Membrane
technology is a suitable alternative to many processing stages of milk in the dairy industry which are
centrifugation, bactofugation, evaporation, and the demineralization of whey. Membrane technology also helps
improve the economics of dairy by reducing the cost of production as well as generating new revenue resources
(Siebert et al., 2001. 2013). Technological advances like My Dairy Dashboard. Virtus had previously acquired
Farmeron, a Croatian startup that developed a cloud- based software platform for data management and
agricultural production performance optimized for dairy farmers (Jaruzelski et al., 2017). According to
Jaruzelski et al. (2017), My Dairy Dashboard will provide data aggregation for the dairy farm industry, to help
enhance production and streamline operations. R&D activities or technology innovation abroad create new
96
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
intermediate goods that are different from or better than existing ones and by importing these new intermediate
goods, domestic producers can improve their production efficiency (Choi, et al., 2010). Many empirical studies
have found some evidence for this knowledge spillover effect through international trade by using either
country-level data (Coe and Helpman, 1995, 2010) or industry-level data (Keller, 2002, 2010).
H03: Investments do not increase productivity.
2.6. Synthesis
From the literature that the researchers have gathered, studies show that demand for dairy products has
increased in Asia, Latin America, North Africa, and the Middle East. This will lead to a latent demand gap or a
global shortfall between consumption and production. However, a study by Blavasciunaite et al. (2020) states
that international trade boosts the global economy and at the same time can become an important driver of the
country’s economic growth. International trade also promotes efficient resource allocation, enables a country to
realize economies of scale, facilitates knowledge diffusion, promotes technological progress, and fosters
competition in domestic and international markets, leading to production processes optimization and new
product development. On the other hand, the development of new technology helps in increasing the
productivity level of dairy farms. A study conducted by Jaruzelski et a. (2017) states that private investment in
agricultural innovation has resulted in new technologies and production techniques with significant promise to
boost productivity.
The research placed emphasis on three independent variables to see the significance on the productivity of
the dairy industry in the Philippines and by which, to the efficiency as well. The dependent variable productivity
represents the ability of a farm to convert production inputs into production inputs (Kimura, Sauer, 2015). It is
measured through the use of Total Factor Productivity (TFP) by taking into account the volume of production
index as a proxy to the index of total outputs and index of total inputs. TFP designs to capture how efficient a
farm uses total inputs to produce total outputs. Moreover, imports, exports, and investments like FDI are
impactful channels of external total factor productivity (TFP).
2.7. Conceptual Framework
III. METHOD
3.1 Research Design
The study made use of regression research design. The method took into account the independent
variables; investments, imports, and exports, and their respective significant relationship with the dependent
variable, productivity. With the use of this method, the study was able to determine whether the independent
variables affect or imply certain changes on the dependent variable. The study made use of the existing
productivity measurement called Total Factor Productivity (TFP).
3.2. Data and Sources
97
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
The study utilized the report made by the Philippine Statistics Authority and the United States
Department of Agriculture. The report was annual time series data for the Philippine Dairy Industry; its volume
of production, imports, and exports starting from year 2006 up to year 2015.
3.3. Research Model
The relationship of independent variables specifically, investments, imports, and exports together with
the dependent variable, productivity were measured using the regression analysis.
The model above was adopted from the study of Ohlan (2013) which is entitled “Efficiency and Total
Productivity Growth in Indian sector. The adopted model was modified by using different measurements in each
variable and by narrowing the number of independent variables from 8 to 3. By which, it shows TFP as the
volume of production index in dairy products (proxy for the ratio of output index and input index), INV as the
inventory in machineries of the dairy sector, IMP as the total volume of dairy product imports, EXP as the total
volume of dairy product exports, and as the error term.
IV. RESULTS AND DISCUSSION
The research placed emphasis on three independent variables to see the significance on the productivity
of the dairy industry in the Philippines and by which, to the efficiency as well. The dependent variable
productivity represents the ability of a farm to convert production inputs into production inputs (Kimura, Sauer,
2015). It is measured through the use of Total Factor Productivity (TFP) by taking into account the index of
total outputs over an index of total inputs. TFP designs to capture how efficiently a farm uses total inputs to
produce total outputs. Moreover, imports, exports, and investments like FDI are impactful channels of external
total factor productivity (TFP).
The results using Gretl application can be found below: (refer to appendices Table 1).
It is clear that imports played a very important role in production as the dependent variable as can be
seen in the coefficient below as well as in the t ratio and p value. In the case of imports, the predictor variable
coefficient is −4. 4739e-07 that means as import decreases, production decreases by −4. 4739e-07. However,
as exports increases by 1.46897e-05, production increases by 1.46897e-05. Finally, for investments as it
decreases by −0.0003462 6, production increases by −0.0003462 6. As such, the significant predictor here is
imports with a standard error of only 1.33067e-06. However, the p value is not significant since it is greater than
0.05. However, exports are statistically significant with a p value lower than 0.05.
Several studies find a positive correlation between TFP and exporting status (Casas et al., 2015).
According to Casas et al. (2015), using data from Slovenia, De Loecker (2007, 2015) finds that firms that decide
to export become more productive. See examples using data from Taiwan and Korea (Aw, Chung, and Roberts
2000, 2015), data from Chile (Pavcnik 2002, 2015), and data from sub-Saharan Africa (Van Biesebroeck 2005,
2015). Following the model presented by Clerides, Lach, and Tybout (1998, 2015), Lo pez (2006, 2015) finds
that exporters are more productive ex ante, and that the productivity of exporting firms increases with their
e posure to international markets. Similarly, Echavarr a, Arbelaez, and osales (2006, 2015) finds that total
factor productivity increased with trade liberalization, since liberalization allowed for the technological progress
of firms participating in foreign markets. Other studies that analyze the causes of this positive relationship
between productivity and export status include Fernandes and Isgut (2005, 2015), Eslava et al. 2004, 2015), and
Parra Oviedo (2003, 2015).
According to Lokoruka (2016), improved milk output reduces importation of dairy products. This
spares foreign exchange and makes milk more available to citizens which in return, improves the nutritional
status of poor families and farmer households whose source of protein is usually milk. Net import demand for
dairy products would grow faster than net export supply through 2013, with demand growth coming primarily
from developing economies in Asia, Latin America, North Africa and the Middle East and this will lead to a
“latent demand gap” (global shortfall between consumption and production forecasts) of ~100,000 metric tons
of dairy protein by 2013 (equivalent to ~7 billion pounds of milk) (Vitaliano, 2016) supported by the study of
98
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
Davis et al. (2018) that Southeast Asian countries with significant imports of SMP in 2015 included the
Philippines, Indonesia, Malaysia, Singapore, Thailand, and Vietnam and with price, tariffs, and other trade
policies being the factors to be considered when importing milk products, differences in the amount of imports
per countries differ. Relationships between prices from one country to another are expected to have effects on
the proportions of SMP imported from each country (Davis et al., 2018), for example Global Trade Atlas (2016)
stated that the United States was the top supplier for skim-milk powder (SMP) in the Philippines accounting for
35% of the import share different to Singapore wherein US import share was only accounted for 5% in
Singapore’s total import share.
during the next 50 yr for 2 reasons, first, increased per capita income worldwide will boost demand for dairy
and other food products from animals, and these products increasingly will provide essential nutrients in
developing countries. Britt et al. (2018) also stated that in order to supply increased demand for dairy products
in the decades ahead, there must be a sustainable balance between products produced within the country and
imports. This provides opportunities for developed and developing exporting countries to provide dairy products
as well as dairy equipment and technologies to expand dairy farming in countries where suitable land resources
exist (Gerosa and Skoet, 2012, 2018). As demand for dairy products increases, it is important to understand
global dairy production today and how it may change during the decades ahead (Britt et al., 2018).
At any rate, based on the results run by Gretl, the independent variables, imports, exports, and
investments were significant in the over-all as computed through ANOVA (Analysis of Variance) with a
significant p value lower than 0.05 which is 0.0027. However, in terms of the most significant predictor variable,
it is exports that had the most predictor value with a p value that is lower than 0.05.
Table 1. Ordinary Least Squares
Model 1: OLS, using observations 1-48
Dependent variable: Production
Variable Coefficient Std. Error t-ratio p-value

const. 203.387 104.962 1.938 0.0591 *
Imports -4.54739e-07 1.33067e-06 −0.3417 0.7342
Exports 1.46897e-05 5.18051e-06 2.836 0.0069 **
Investments -0.000346256 0.000532177 -0.6506 0.5187 *
The other regression variables were computed by Gretl as follows:
Table 2
Other Regression Variables
Mean dependent var 247.7063 S.D dependent var. 114.3217

Sum squared resid 446756.4 S.E. of regression 100.7648
R-squared 0.272697 Adjusted R-squared 0.223108
F(3, 44) 5.499161 P-value (F) 0.002691
Log-likelihood -287.4347 Akaike criterion 582.8694
Schwarz criterion 590.3542 Hannan-Quinn 585.6979
The confidence interval for coefficients are as follows:
99
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
Table 3a
Confidence Interval for Coefficients

t(44, 0.025) = 2.015
Variable Coefficient 95% confidence interval

constant 203.387 (-8.14930, 414.923)
Imports -4.54739e007 (-3.13652e-006,
2.22704e006)
Exports 1.46897e-005 (4.24905e-006,
2.51303e005)
Investments -0.000346256 (-0.00141879, 0.000726277)
Table 3b
Coefficient Covariance Matrix
Constant Imports Exports Investments

11016.9 -0.000111640 -0.000304922 0.0165591 Const
1.77067e012 3.84779e013 -5.34058e010 Imports
2.68377e011 6.49917e010 Exports
2.83213e007 Investments
during the next 50 yr for 2 reasons, first, increased per capita income worldwide will boost demand for dairy and
other food products from animals, and these products increasingly will provide essential nutrients in developing
countries. Britt et al. (2018) also stated that in order to supply increased demand for dairy products in the
decades ahead, there must be a sustainable balance between products produced within the country and imports.
This provides opportunities for developed and developing exporting countries to provide dairy products as well
as dairy equipment and technologies to expand dairy farming in countries where suitable land resources exist
(Gerosa and Skoet, 2012, 2018). As demand for dairy products increases, it is important to understand global
dairy production today and how it may change during the decades ahead (Britt et al., 2018).
The collinearity test can be seen in Table 4 below:
Since the indices for the independent variables were less than 10, no collinearity problems were
detected.
Table 4
Collinearity
Variance Inflation Factors

Minimum possible value = 1.0
Values > 10.0 may indicate a collinearity problem
Imports 2.678
Exports 1.223
Investments 2.826
VIF(j) = 1/(1 - R(j)^2), where R(j) is the multiple correlation coefficient between variable j and the other
independent variables
100
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
Belsley-Kuh-Welsch collinearity diagnostics: variance

proportions lambda cond const Imports Exports Investme~
3.700 1.000 0.001 0.001 0.007 0.005

0.251 3.842 0.001 0.001 0.219 0.132
0.041 9.554 0.160 0.052 0.702 0.463
0.009 20.589 0.838 0.946 0.072 0.401
lambda = eigenvalues of inverse covariance matrix (smallest is 0.00872815) cond =

condition index note: variance proportions columns sum to 1.0
According to BKW, cond >= 30 indicates "strong" near linear dependence, and cond
between 10 and 30 "moderately strong". Parameter estimates whose variance is mostly
associated with problematic cond values may themselves be considered problematic.
Count of condition indices >= 30: 0
Count of condition indices >= 10: 1

Variance proportions >= 0.5 associated with cond >= 10: const Imports
0.838 0.946
The analysis of variance (ANOVa) were computed in Table 4:
In the over-all, the predictor variables are significant with a p value of 0.027 which is lower than 0.05 (see Table
4).
Analysis of Variance:
Sum of squares df Mean square
Regression 167508 3 55836

Residual 446756 44 10153.6
Total 614264 47 13069.5
R^2 = 167508 / 614264 = 0.272697

F(3, 44) = 55836 / 10153.6 = 5.49916 [p-value 0.0027]
Test for normality of residual -
Null hypothesis: error is normally distributed Test statistic: Chi-

square(2) = 4.87475 with p-value =
0.0873899
Heteroskedasticity
What is heteroskedasticity test used for?
It is used to test for heteroskedasticity in a linear regression model and assumes that the error terms are
normally distributed. It tests whether the variance of the errors from a regression is dependent on the values of
the independent variables.
101
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
The test for heteroskedasticity can be found below;
Table 5
White's test for heteroskedasticity

OLS, using observations 1-48
Dependent variable: uhat^2
COEFFICIENT STD ERROR T-RATIO P-VALUE

Const −3099 .8 104192 −0.297 0.7677
Imports 0.00125495 0.00240314 0.5222 0.6046
Exports -0.00624323 0.00913580 0.6834 0.4985
Investments −0.17 779 0.792660 −0.2218 0.8257
sq_Imports −1.03980e-011 1.61943e-011 −0.6421 0.5247
X2_X3 7.25073e-011 8.70256e-011 0.8332 0.4100
X2_X4 2.70630e-09 1.00772e-08 0.2686 0.7897
sq_Exports 2.41387e-010 3.14707e-010 0.7670 0.4478
X3_X4 −1.34398e-08 4.03874e-08 −0.3328 0.7411
sq_Investments −1.97387e-07 1.88694e-06 −0.1046 0.9172
Unadjusted R-squared = 0.267388
Test statistic: TR^2 = 12.834611, with p-value = P(Chi-square(9) >

12.834611) = 0.170234
Autocorrelation
Autocorrelation analysis measures the relationship of the observations between the different points in time,
and thus seeks for a pattern or trend over the time series. The measure is best used in variables that demonstrate
a linear relationship between each other. The test found autocorrelation significant since the p values were lower
than 0.05.
IV. CONCLUSION AND RECOMMENDATION
The research intends to identify the factors that contribute to the productivity of Philippine dairy
industry, assess the impact of investments, imports, and exports on the efficiency of Philippine dairy industry,
and measure the variables using the gathered data. Regression analysis is used as the research method to
determine the relationship between the independent and dependent variables. The study used secondary data by
utilizing reports from the Philippine Statistics Authority. Thus, quarterly time series data from 2006 up to 2017
of each variable was gathered.
With the use of regression and the result of analysis of variance, the researchers found that the
relationship of investments, imports, and exports do affect the productivity of the Philippine dairy industry,
leading to reject the null hypothesis of this study. It is visible that imports play an important role in the dairy
industry of the Philippines as it shows that when imports decrease, production of the dairy industry decreases as
well and that is why the Philippines is said to be more reliant on imported dairy products rather than the locally
produced dairy products. Production and exports variables have a positive relationship as one increases the other
increases as well. For investments, this variable has a negative effect on production because as investments
decrease, production increases. For the Philippine setting, firms that decide to export become more productive,
the same goes with countries such as Taiwan and Korea.
Since it appears that as investment increases, production decreases, the government should give more
attention to investment and control the factors that cause the negative effects on the production level of the dairy
industry in the Philippines. A possible reason that explains the negative relationship between investment and
102
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
production is that the money used for investment has a greater value than the value of the output produced from
where the money was invested to. The return on investment should be greater than the amount of the investment
itself so that productivity of the dairy industry increases alongside with the increase in investment. Another
reason might be that the human capital investment is lacking and that the government is more focused on
machinery and technology. The workers might be lacking in terms of skills and experiences when it comes to
new machineries and technologies that might have affected their total productivity. When new machines and
technologies are introduced, employees should have a proper understanding and knowledge on how to use this
equipment so that they can produce the maximum number of output that a certain machinery can produce at a
given time and amount of resources. In addition, no matter how many new machineries and technologies are
available, there is still a need for qualified and skilled workers that can effectively and efficiently use these
equipment and resources for them to have a higher total productivity.
5.1 Policy Implications
Given the research findings that independent variables do affect the dependent variable, it may help
socio-economic issues of the dairy industry here in the Philippines such as limited access to dairy production,
lack of working capital, and low spending on dairy. The research findings may address these issues by giving
attention to exports and investments mainly to machineries and other technologies that contribute to dairy
operations.
There have been several policies in regards to improving the dairy industry in the
Philippines. Republic Act 4041 or An Act to Develop the Dairy Industry was passed in 1964, with the goal of
promoting and encouraging the development of the dairy industry in order to achieve self-sufficiency, at the
very least in milk and dairy products, and to improve the health and standard of living of individuals, and to
financially assist dairy farmers. Another policy is Republic Act 7884 or the National Dairy Development Act of
1995. This act was created in order to create the National Dairy Authority to help in accelerating the dairy
industry in the Philippines. Also, according to the Australian Centre for International Agricultural Research,
Australia and the Philippines created a project with regards to the status of the dairy industry in the Philippines.
They published an article stating that the two countries launched a research initiative to unlock hidden potentials
coming from the Philippine Dairy Industry. Several agencies such as ACIAR, the Department of Science and
Technology - Philippine Council for Agriculture, Aquatic, and Natural Resources Research and Development
(DOST-P AA D), the University of Adelaide’s entre for Global Food and esources, and the Philippine
Foodlink Advocacy Cooperative are collaborating on the project that aim to analyze available markets, value
chains, strengths and weaknesses of the current programs for the dairy industry, and opportunities and
challenges for the sector. The project will be focusing on smallholder dairy farmers who run about 80% of the
Philippine’s dairy firms.
5.2 Recommendation
To be able to improve productivity, investments, imports and exports of the dairy industry, the
government should provide more funding and assistance to dairy farmers. Dairy farmers are typically small-
scale producers who own five to ten cows. They also farm on a small plot of land. Improved equipment and
machinery should be provided to them to help them produce dairy products more efficiently.
REFERENCES
[1] Akbar, M. O., Shahbaz khan, M. S., Ali, M. J., Hussain, A., Qaiser, G., Pasha, M., Pasha, U., Missen,
M. S., & Akhtar, N. (2020). IoT for Development of Smart Dairy Farming. Journal of Food Quality,
2020, 1–8. https://doi.org/10.1155/2020/4242805
[2] Allendorf, J. J., & Wettemann, P. J. C. (2015). Does animal welfare influence dairy farm efficiency? A
two-stage approach. Journal of Dairy Science, 98(11), 7730–7740. https://doi.org/10.3168/jds.2015-
9390
[3] Alqaisi, O. (July 6, 2012). Nutritional, ecological, and economic evaluation of dairy farming systems
and feeding strategies in semi-arid environments. Retrieved from, https://macau.uni-
103
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
kiel.de/servlets/MCRFileNodeServlet/dissertation_derivate_00004883/Othman_Alqaisi_PhD_Thesis.p
df
[4] Ang, P. (2020). Dairy Products Annual.
[5] Areal, F. J., Tiffin, R., & Balcombe, K. (2012). Farm Technical Efficiency under a Tradable Milk
Quota System. https://doi.org/doi: 10.3168/jds.2011-4638
[6] Aristovnik, A. (2012). The Impact of ICT on Educational Performance and its Efficiency In Selected
EU and OECD Countries: A Non-Parametric Analysis. SSRN Electronic Journal. Published.
https://doi.org/10.2139/ssrn.2187482
[7] Ballingall, J., & Pambudi, D. (2017). Dairy Trade's Economic Contribution to New Zealand.
[8] Banaeian, N., & Zangeneh, M. (2011). Study on energy efficiency in corn production of Iran. Energy,
36(8), 5394–5402. https://doi.org/10.1016/j.energy.2011.06.052
[9] Bell, M. J., Wall, E., Russell, G., Simm, G., Stott, A. W. (July, 2011). The effect of improving cow
productivity, fertility, and longevity on the global warming potential of dairy systems.
https://doi.org/10.3168/jds.2010-4023
[10] Blavasciunaite, D., Garsviene, L., Matuzeviciute, K. (July 1, 2020). Trade Balance Effects on
Economic Growth: Evidence from European Union Countries.
https://doi.org/10.3390/economies8030054
[11] Bojnec, S., & Ferto, I. (2014). Export Competitiveness of Dairy Products on Global Markets: The Case
of the European Union Countries. https://doi.org/http://dx.doi.org/ 10.3168/jds.2013-771
[12] Borawski, P., Dunn, J. W., Tuthill, J., Chenarides, L. (2015). Production and International trade of
Milk and Dairy Products in the USA. Retrieved from, https://wnus.edu.pl/sip/file/article/view/1040.pdf.
[13] Bosire, C. K., Rao, E. J. O., Muchenje, V., Wijk, M. V., Ogutu, J. O., Mekonnen, M. M., Auma, J. O.,
Lukuyu, B., Hammond, J. (November 15, 2019). Adaptation opportunities for smallholder dairy
farmers facing resource scarcity: Integrated livestock, water and land management.
https://doi.org/10.1016/j.agee.2019.106592
[14] Britt, J. H., Cushman, R. A., Dechow, C. D., Dobson, H., Humblot, P., Hutjens, M. F., Jones, G. A.,
Ruegg, P. S., Sheldon, I. M., Stevenson, J. S. (February 28, 2018). Invited review: Learning from the
future—A vision for dairy farms and cows in 2067. https://doi.org/10.3168/jds.2017-14025
[15] Burke, N., Zacharski, K. A., Southers, M., Hogan, P., Ryan, M. P., & Adley, C. C. (2018). The Dairy
Industry: Process, Monitoring, Standards, and Quality.
https://doi.org/http://dx.doi.org/10.5772/intechopen.80398
[16] Cachia, F., Lys, P., Mechri, A., & Bolliger, F. (2018). Guidelines for the Measurement of Productivity
and Efficiency in Agriculture.
[17] Cachia, F., Lys, P., & Mechri, A. (2017). Productivity and Efficiency Measurement in Agriculture.
[18] Cardoso, C. S., Hotzel, M. J., Weary, D. M., & Robbins, J. A. (2016). Imagining the Ideal Dairy Farm.
https://doi.org/http://dx.doi.org/10.3168/jds.2015-9925
[19] Choi, Y. S., Hahn, C. H. (March 2010). The Effects of Imported Intermediate Varieties on Plant Total
Factor Productivity and Product Switching: Evidence from Korean Manufacturing. Retrieved from,
https://www.eria.org/uploads/media/Research-Project-Report/RPR_FY2009_2_Chapter_3.pdf.
[20] Connor, E. E. (2014). Invited Review: Improving Feed Efficiency in Dairy Production: Challenges and
Possibilities. https://doi.org/doi:10.1017/S1751731114002997
104
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
[21] Douphrate, D. I., Hagevoort, G. R., Nonnenmann, M. W., Lunner Kolstrup, C., Reynolds, S. J., Jakob,
M., & Kinsel, M. (2013). The Dairy Industry: A Brief Description of Production Practices, Trends, and
Farm Characteristics Around the World. Journal of Agromedicine, 18(3), 187–197.
https://doi.org/10.1080/1059924x.2013.796901
[22] Davis, C. G., Cessna, J. G., Blayney, D. P. (May, 2018). Southeast Asia's import demand for skim milk
powder: Implications for US exporters. https://doi.org/10.3168/jds.2017-12848
[23] De Ondarza, M. B., & Tricarico, J. M. (2017). Review: Advantages and Limitations of Dairy Efficiency
Measures and the Effects of Nutrition and Feeding Management Interventions.
https://doi.org/https://doi.org/10.15232/pas.2017-01624
[24] Food and Agriculture Organization of the United Nations. 2017. The future of food and agriculture –
Trends and challenges. Rome.
[25] Food and Agriculture Organization of the United States. (2013). Milk and Dairy Products in Human
Nutrition. Retrieved from, http://www.fao.org/documents/card/en/c/5067e4f2-53f8-5c9a-b709-
c5db17d55c20/.
[26] Girei, A. A. (2014). Analysis of Productivity and Technical Efficiency of Cassava Production in Ardo-
Kola and Gassol Local Government Areas of Taraba State, Nigeria. Agriculture, Forestry and
Fisheries, 3(1), 1. https://doi.org/10.11648/j.aff.20140301.11
[27] Gollin, D. (December, 2018). Farm size and productivity. Retrieved from,
https://www.ifad.org/documents/38714170/40974017/Research+Series+34.pdf/64a10247-6fdd-e397-
b75b-3d45767d956c.
[28] Ingavale, D. (September, 2012). A Study of International Trade of Indian Dairy Industry. Retrieved
from,
http://citeseerx.ist.psu.edu/viewdoc/download;jsessionid=1B1BF712DDA543BFC9EEB0656C3D0F3
D?doi=10.1.1.685.3675&rep=rep1&type=pdf.
[29] Jaruzelski, B., Staack, V., Johnson, T. (2017). The Role of Private-Sector R&D in Agricultural
Innovation: Improving Yields, Equipment Productivity, and Sustainability. Retrieved from,
https://www.wipo.int/edocs/pubdocs/en/wipo_pub_gii_2017-chapter3.pdf.
[30] Kilelu, C. W., Klerkx, L., & Leeuwis, C. (2013). Unravelling the role of innovation platforms in
supporting co-evolution of innovation: Contributions and tensions in a smallholder dairy
development programme. Agricultural Systems, 118, 65–77.
https://doi.org/10.1016/j.agsy.2013.03.003
[31] Kimura, S. and J. Sauer (2015-08-06), “Dynamics of dairy farm productivity growth: ross-
country comparison”, OECD Food, Agriculture and Fisheries Papers, No. 87, OECD Publishing,
Paris. http://dx.doi.org/10.1787/5jrw8ffbzf7l-en
[32] Kumar, P., Sharma, N., Ranjan, R., Kumar, S., Bhat, Z. F., & Jeong, D. K. (2013). Perspective of
Membrane Technology in Dairy Industry: A Review. Asian-Australasian Journal of Animal Sciences,
26(9), 1347–1358. https://doi.org/10.5713/ajas.2013.13082
[33] Lima, L. P., Ribeiro, G. B., & Perez, R. (2018). The energy mix and energy efficiency analysis for
Brazilian dairy industry. Journal of Cleaner Production, 181, 209–216.
https://doi.org/10.1016/j.jclepro.2018.01.221
[34] Lokuruka, M. N. I. (2016). Overview of dairy processing and marketing in East African dairy value
chains: Opportunities and challenges. African Journal of Food Science, 10(11), 254–262.
https://doi.org/10.5897/ajfs2016.1465
105
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
[35] Ma, H., Oxley, L., Rae, A., Fan, C., Huang, J., & Rozelle, S. (2012). The Evolution of Productivity
Performance on China’s Dairy Farms in the New Millennium. https://doi.org/http://dx.doi.org/
10.3168/jds.2012-5529
[36] Ma, W., Bicknell, K., & Renwick, A. (2020). Production intensification and animal health expenditure
on dairy farms in New Zealand. Journal of Dairy Science, 103(2), 1598–1607.
https://doi.org/10.3168/jds.2018-16039
[37] MacDonald, James M., Jerry Cessna, and Roberto Mosheim. Changing Structure, Financial Risks, and
Government Policy for the U.S. Dairy Industry, ERR-205, U.S. Department of Agriculture, Economic
Research Service, March 2016.
[38] Moran, J., & Chamberlain, P. (2017). The Diversity of Dairy Farming Systems in Tropical Asia.
[39] Moreira, V. H., & Bravo-Ureta, B. E. (2016). Total Factor Productivity Change in Dairy Farming:
Empirical Evidence from Southern Chile. https://doi.org/http://dx.doi.org/10.3168/jds.2016-11055
[40] Muia, J. M. K., Kariuki, J. N., Mbugua, O. N., Gachuiri, C. K., Lukibisi, L. B., Ayako, W. O., Ngunjiri,
W. V. (2011). Smallholder dairy production in high altitude Nyandarua milk-shed in Kenya: Status,
challenges and opportunities.Retrieved from, http://www.lrrd.org/lrrd23/5/muia23108.htm.
[41] Niles, M. T., Horner, C., Chintala, R., Tricarico, J. (May 3, 2019). A review of determinants for dairy
farmer decision making on manure management strategies in high-income countries. Retrieved from,
https://iopscience.iop.org/article/10.1088/1748-9326/ab1059
[42] Ohlan, R. (2013). Efficiency and Total Factor Productivity Growth in Indian Dairy Sector. Retrieved
from, https://ideas.repec.org/a/ags/qjiage/155486.html.
[43] Oliveros, M. C. R. (2019). The Dairy Industry in Southeast Asia: Perspective, Challenges, and
Opportunities. https://doi.org/doi:10.1088/1755-1315/372/1/012068
[44] Olper, A., Curzi, D., Raimondi, V. (2016). Imported Intermediate Inputs and Firms’ Productivity
Growth: Evidence from the Food Industry. https://doi.org/10.1111/1477-9552.12164
[45] Palacpac, E. P. (2010). Spurring Dairy Buffalo Development in the Philippines through Cooperatives,
Negotiations, and Networks. Retrieved from,
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahU
KEwji9dS3vZzwAhWJIqYKHY5zDWAQFjAIegQIChAD&url=https%3A%2F%2Fageconsearch.umn
.edu%2Frecord%2F163883%2Ffiles%2FPalacpac%2520jrc38-
1_2010.pdf&usg=AOvVaw27ZIWM99BM1ei1M3-Xq2s4.
Philippines: Promoting dairy entrepreneurship through enterprise zones. (n.d.).

http://www.fao.org/3/i0588e/I0588E09.htm.
[46] Place, S. E., & Mitloehner, F. M. (2010). Invited review: Contemporary environmental issues: A
review of the dairy industry's role in climate change and air quality and the potential of mitigation
through improved production efficiency. Journal of Dairy Science, 93(8), 3407–3416.
https://doi.org/10.3168/jds.2009-2719
[47] Sharma, C. (2014). Imported Intermediate Inputs, R&D, and Productivity at Firm Level: Evidence
from Indian Manufacturing Industries. The International Trade Journal, 28(3), 246–263.
https://doi.org/10.1080/08853908.2014.891958
[48] Špička, J., & Smutka, L. (2014). The Technical Efficiency of Specialised Milk Farms: A egional
View. The Scientific World Journal, 2014, 1–13. https://doi.org/10.1155/2014/985149
[49] Toma, L., March, M., Stott, A. W., & Roberts, D. J. (2013). Environmental Efficiency of Alternative
Dairy Systems: A Productive Efficiency Approach. https://doi.org/http://dx.doi.org/10.3168/jds.2013-
691
106
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
[50] Vitaliano, P. (2016). Global Dairy Trade: Where Are We, How Did We Get Here and Where Are We
Going?, 19(B).
[51] Vlontos, G., & Theodoridis, A. (2013). Efficiency and Productivity Change in the Greek Dairy
Industry, 14(2).
[52] Von Keyserlingk, M. A. G., Martin, N. P., Kebreab, E., Knowlton, K. F., Grant, R. J., Stephenson,
M., … Smith, S. I. (2013). Invited review: Sustainability of the US dairy industry. Journal of Dairy
Science, 96(9), 5405–5425. https://doi.org/10.3168/jds.2012-6354
[53] Waitituh, J. A. O. (2017). Smallholder dairy production in Kenya; a review. Retrieved from,
http://lrrd.cipav.org.co/lrrd29/7/atiw29139.html.
[54] Yilmaz, H.; Gelaw, F. and Speelman, S. 2020. Analysis of technical efficiency in milk production: a
cross-sectional study on Turkish dairy farming. Revista Brasileira de Zootecnia 49:e20180308.
https://doi.org/10.37496/rbz4920180308
APPENDICES
Table 1
Production, Import, Export, and Investments 2006 to 2017 (Quarterly)

Year Production Imports Exports Investments
2006 Q1 65 72,788,503 9,023,242 32,977

2006 Q2 233 78,619,175 8,640,016 40,867
2006 Q3 329 80,628,015 10,013,847 44,018
2006 Q4 403 77,837,155 11,351,296 45,878
2007 Q1 160 76,808,409 10,189,556 38,904
2007 Q2 257 85,342,608 9,819,373 49,014
2007 Q3 356 70,124,355 12,316,046 52,362
2007 Q4 473 71,779,762 10,810,475 57,547
2008 Q1 210 71,942,110 10,109,379 48,141
2008 Q2 316 63,125,615 12,967,700 61,707
2008 Q3 429 65,211,357 11,517,021 61,903
2008 Q4 560 73,144,533 12,185,677 54,248
2009 Q1 202 68,852,206 7,612,241 47,356
2009 Q2 279 90,898,326 6,484,344 45,196
2009 Q3 370 72,966,148 7,635,402 65,574
2009 Q4 447 96,879,521 8,519,971 51,708
2010 Q1 224 88,441,440 8,223,600 67,780
2010 Q2 339 82,145,605 10,796,741 68,300
2010 Q3 468 80,562,649 9,114,925 72,541
2010 Q4 585 88,199,459 11,507,188 81,959
2011 Q1 173 85,756,567 11,637,852 68,988
2011 Q2 229 82,259,605 10,428,598 53,444
2011 Q3 186 77,889,523 12,273,801 79,394
2011 Q4 195 77,455,349 11,846,712 67,179
2012 Q1 187 77,270,644 9,505,143 78,672
2012 Q2 195 83,862,163 9,361,860 82,846
2012 Q3 179 86,490,844 2,291,561 74,059
107
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
2012 Q4 197 83,284,571 2,846,952 92,902

2013 Q1 165 77,106,664 2,793,431 73,843
2013 Q2 186 84,833,775 2,732,945 87,117
2013 Q3 179 89,368,199 4,949,596 103,654
2013 Q4 197 88,577,904 2,231,591 136,939
2014 Q1 197 83,677,153 5,589,547 112,197
2014 Q2 191 66,914,527 7,042,938 97,115
2014 Q3 188 78,359,898 3,685,878 115,119
2014 Q4 197 91,909,228 3,783,321 104,942
2015 Q1 165 106,731,659 2,854,412 109,274
2015 Q2 191 111,244,986 3,250,810 92,266
2015 Q3 185 93,819,501 7,679,950 114,613
2015 Q4 168 99,592,173 8,454,092 127,628
2016 Q1 170.33 118,441,958.73 7,860,556 133,475
2016 Q2 189.67 123,331,026.94 7,358,578 126,619.00
2016 Q3 174.37 131,544,345 8,369,164 173,898
2016 Q4 177.43 121,169,997.21 4,560,608 204,591
2017 Q1 164.57 120,946,081 5,869,007.89 165,008.00
2017 Q2 185.20 112,885,917.32 5,594,151.90 166,587.00
2017 Q3 183.77 136,481,476.02 7,952,945.77 193,197.00
2017 Q4 192.37 108,004,908.76 7,405,269.69 224,776.00
The model estimation range of Production as well as the fitted and residual estimates were computed
by Gretl as follows:
Table 2
Model estimation range: 1 - 48
Standard error of residuals = 100.765
Year Production fitted residual

2006 Q1 65.1333 291.417 -226.284
2006 Q2 232.970 280.404 -47.4343
2006 Q3 329.230 298.581 30.6491
2006 Q4 402.870 318.853 84.0175
2007 Q1 159.600 304.670 -145.070
2007 Q2 256.530 291.850 -35.3201
2007 Q3 356.230 334.287 21.9432
2007 Q4 472.570 309.622 162.948
2008 Q1 209.930 302.506 -92.5765
2008 Q2 315.770 343.806 -28.0362
2008 Q3 428.700 321.480 107.220
2008 Q4 560.300 330.345 229.955
2009 Q1 202.430 267.501 -65.0712
2009 Q2 279.030 241.655 37.3747
2009 Q3 369.930 259.663 110.267
2009 Q4 446.870 266.583 180.287
2010 Q1 224.300 260.502 -36.2020
108
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
2010 Q2 338.500 300.983 37.5167

2010 Q3 467.730 275.529 192.201
2010 Q4 585.470 303.937 281.533
2011 Q1 172.500 311.459 -138.959
2011 Q2 228.900 300.668 -71.7676
2011 Q3 186.300 320.775 -134.475
2011 Q4 194.700 318.928 -124.228
2012 Q1 186.700 280.636 -93.9357
2012 Q2 194.800 274.088 -79.2884
2012 Q3 179.400 172.075 7.32502
2012 Q4 196.700 175.167 21.5329
2013 Q1 164.500 183.790 -19.2896
2013 Q2 185.800 174.791 11.0092
2013 Q3 179.400 199.565 -20.1649
2013 Q4 196.700 148.472 48.2277
2014 Q1 196.900 208.595 -11.6953
2014 Q2 190.800 242.790 -51.9899
2014 Q3 188.100 182.037 6.06259
2014 Q4 197.200 180.831 16.3690
2015 Q1 164.500 158.946 5.55444
2015 Q2 190.800 168.605 22.1948
2015 Q3 185.200 233.854 -48.6541
2015 Q4 168.200 238.094 -69.8943
2016 Q1 170.330 218.779 -48.4492
2016 Q2 189.670 211.556 -21.8860
2016 Q3 174.370 206.296 -31.9256
2016 Q4 177.430 144.439 32.9909
2017 Q1 164.570 177.467 -12.8968
2017 Q2 185.200 176.548 8.65225
2017 Q3 183.770 191.254 -7.48397
2017 Q4 192.370 185.224 7.14625
Note: * denotes a residual in excess of 2.5 standard errors The forecast can be found in Table 3 below:
For 95% confidence intervals, t (44, 0.025) = 2.015
Observation Production Prediction Std. Error 95% Interval

2006 Q1 65.1333 291.417 103.491 (82.8440,
499.990)
2006 Q2 232.970 280.404 103.304 (72.2093,
488.599)
2006 Q3 329.230 298.581 103.311 (90.3712,
506.791)
2006 Q4 402.870 318.853 103.502 (110.259,
527.446)
2007 Q1 159.600 304.670 103.355 (96.3710,
512.968)
2007 Q2 256.530 291.850 103.524 (83.2103,
500.490)
109
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
2007 Q3 356.230 334.287 104.268 (124.148,

544.426)
2007 Q4 472.570 309.622 103.188 (101.660,
517.585)
2008 Q1 209.930 302.506 102.923 (95.0794,
509.934)
2008 Q2 315.770 343.806 106.621 (128.926,
558.686)
2008 Q3 428.700 321.480 104.902 (110.063,
532.896)
2008 Q4 560.300 330.345 103.937 (120.874,
539.817)
2009 Q1 202.430 267.501 103.426 (59.0602,

475.942)
2009 Q2 279.030 241.655 105.833 (28.3619,
454.949)
2009 Q3 369.930 259.663 102.823 (52.4373,
466.888)
2009 Q4 446.870 266.583 106.006 (52.9415,
480.225)
2010 Q1 224.300 260.502 102.472 (53.9842,
467.020)
2010 Q2 338.500 300.983 102.728 (93.9492,
508.017)
2010 Q3 467.730 275.529 102.083 (69.7945,
481.264)
2010 Q4 585.470 303.937 103.394 (95.5595,
512.315)
2011 Q1 172.500 311.459 103.477 (102.915,
520.002)
2011 Q2 228.900 300.668 103.014 (93.0569,
508.278)
2011 Q3 186.300 320.775 104.361 (110.449,
531.101)
2011 Q4 194.700 318.928 103.570 (110.196,
527.661)
2012 Q1 186.700 280.636 102.569 (73.9222,
487.349)
2012 Q2 194.800 274.088 102.081 (68.3574,
479.819)
2012 Q3 179.400 172.075 106.703 (-42.9710,
387.121)
2012 Q4 196.700 175.167 105.456 (-37.3665,
387.701)
2013 Q1 164.500 183.790 106.440 (-30.7270,
398.306)
2013 Q2 185.800 174.791 105.519 (-37.8697,
387.451)
2013 Q3 179.400 199.565 102.888 (-7.79133,
406.921)
110
Vol. 3 No . 1 (2022) e-ISSN : 2775-0809
2013 Q4 196.700 148.472 107.228 (-67.6310,

364.576)
2014 Q1 196.900 208.595 103.649 (-0.294739,
417.485)
2014 Q2 190.800 242.790 106.735 (27.6801,
457.900)
2014 Q3 188.100 182.037 106.621 (-32.8425,
396.917)
2014 Q4 197.200 180.831 103.727 (-28.2179,
389.880)
2015 Q1 164.500 158.946 105.695 (-54.0696,
371.961)
2015 Q2 190.800 168.605 108.247 (-49.5517,
386.762)
2015 Q3 185.200 233.854 102.161 (27.9621,
439.746)
2015 Q4 168.200 238.094 102.823 (30.8681,
445.321)
2016 Q1 170.330 218.779 105.308 (6.54585,
431.013)
2016 Q2 189.670 211.556 107.217 (-4.52553,
427.637)
2016 Q3 174.370 206.296 108.830 (-13.0373,
425.628)
2016 Q4 177.430 144.439 108.071 (-73.3645,
362.243)
2017 Q1 164.570 177.467 105.247 (-34.6441,
389.578)
2017 Q2 185.200 176.548 104.620 (-34.3006,
387.396)
2017 Q3 183.770 191.254 110.295 (-31.0305,
413.538)
2017 Q4 192.370 185.224 115.186 (-46.9177,
417.365)
111

91-Article Text-269-2-10-20220108

Uploaded by

Document Informationclick to expand document information

Copyright:

Available Formats

91-Article Text-269-2-10-20220108

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

91-Article Text-269-2-10-20220108

Uploaded by

Copyright:

Available Formats

INTERNATIONAL JOURNAL OF SOCIAL AND MANAGEMENT STUDIES (IJOSMAS)

Vol. 3 No . 1 (2022) e-ISSN : 2775-0809

Analyzing the Efficiency of Dairy

Keywords — Investments, Imports, Exports, Productivity, Efficiency, Dairy

1.1 Scope and Limitations

II. LITERATURE REVIEW

Agricultural intensification is technically defined as an increase in agricultural production per unit of

H01: Imports do not increase productivity.

H02: Exports do not increase productivity.

H03: Investments do not increase productivity.

2.7. Conceptual Framework

3.1 Research Design

3.3. Research Model

IV. RESULTS AND DISCUSSION

Table 1. Ordinary Least Squares

Model 1: OLS, using observations 1-48

Dependent variable: Production

Variable Coefficient Std. Error t-ratio p-value

Other Regression Variables

Mean dependent var 247.7063 S.D dependent var. 114.3217

The confidence interval for coefficients are as follows:

Confidence Interval for Coefficients

Variable Coefficient 95% confidence interval

Coefficient Covariance Matrix

Constant Imports Exports Investments

The collinearity test can be seen in Table 4 below:

Variance Inflation Factors

Belsley-Kuh-Welsch collinearity diagnostics: variance

3.700 1.000 0.001 0.001 0.007 0.005

lambda = eigenvalues of inverse covariance matrix (smallest is 0.00872815) cond =

Count of condition indices >= 30: 0

Count of condition indices >= 10: 1

The analysis of variance (ANOVa) were computed in Table 4:

Sum of squares df Mean square

Regression 167508 3 55836

Total 614264 47 13069.5

R^2 = 167508 / 614264 = 0.272697

Test for normality of residual -

Null hypothesis: error is normally distributed Test statistic: Chi-

What is heteroskedasticity test used for?

The test for heteroskedasticity can be found below;

White's test for heteroskedasticity

COEFFICIENT STD ERROR T-RATIO P-VALUE

Unadjusted R-squared = 0.267388

Test statistic: TR^2 = 12.834611, with p-value = P(Chi-square(9) >

IV. CONCLUSION AND RECOMMENDATION

5.1 Policy Implications

[4] Ang, P. (2020). Dairy Products Annual.

Philippines: Promoting dairy entrepreneurship through enterprise zones. (n.d.).

Production, Import, Export, and Investments 2006 to 2017 (Quarterly)

2006 Q1 65 72,788,503 9,023,242 32,977

2012 Q4 197 83,284,571 2,846,952 92,902

Model estimation range: 1 - 48

Standard error of residuals = 100.765

Year Production fitted residual

2010 Q2 338.500 300.983 37.5167

For 95% confidence intervals, t (44, 0.025) = 2.015

Observation Production Prediction Std. Error 95% Interval

2007 Q3 356.230 334.287 104.268 (124.148,