Dairy farming was introduced in Brazil at the beginning of the 16^th century when expeditions led by the Portuguese brought the first animals to Vila São Francisco. This activity did not undergo any significant changes until  the 1950s, when dairy farming in Brazil entered its modern phase (Oliveira, 2008). However, it was only after a series of economic changes took place during the 1980s that a cycle of change  could  be  observed  to  which  the sector had to adapt itself (Reis et al., 2001).

 

These changes were the result of factors such as the end of controls over milk prices, open-trade policy, the country’s economic stabilization plan, the deregulation of the market and an increase in consumer awareness (Vilela et al., 2002). Within this context, the entire production chain realized the need to adopt new strategies in order to optimize the use and management of factors of production, leading to a subsequent increase in revenues and the production of higher quality products. According to Rubez (2003) and Oliveira and Silva (2012), few sectors of the Brazilian economy went through such structural change in such a short space of time.

 

The production chain of the dairy industry holds an important position in Brazil’s agro-industrial sector. According to IBGE (2006), the net value of milk production has reached around 10 million USD. The highest percentage of dairy farms out of the total number of rural establishments is concentrated in the Southern part of the country (41%) and Central-West (39%) regions. Family farming has a significant role in the generation of employment and income within this sector, and in 2006 it was responsible for 59% of the GDP (Gross Domestic Product) generated by dairy farming (Guilhoto et al., 2007).

 

Given the importance of this activity and the transformation of the relationships within its production chain, the dairy market became competitive and demanding. According to Lopes et al. (2007), dairy farming in Brazil, has become a structure typical market oligopsony, with a large number of sellers (farmers) and a small number of buyers (industries) that have great bargaining power over producers. Rural producers were therefore the most significantly affected part in the dairy production chain. As they work within a traditionalist industry that has always operated on a low technology level that is still restricted in terms of the technological and managerial support which hinder them to keep up with the changes that have taken place in Brazilian dairy sector (Alencar et al., 2001).

 

A producer’s success within this activity is associated with their knowledge and efficient management of factors of production, as it is only through using tools for planning and cost control that they can increase their revenues. According to Bressan (1998), the union of small production units into credit or production cooperatives with their own niches in the market can allow an economy of scale to be improved, principally through cost reduction. According to Carvalho et al. (2009), scale of production is one of the fundamental success factors in dairy farming, as it tends to reduce the average costs associated with this activity.

 

Reducing production costs is the first strategy that must be adopted in order to increase the viability of this activity (Carvalho et al., 2009). This requires technological innovation and higher levels of technical and managerial expertise,   however, which leads to a significant percentage of producers abandoning their activities due to their inability to make further investments. Therefore, if this activity is not carried out with cooperation between small producers, advances in technology, reductions in cost and increases in bargaining power are hindered and producers tend be held hostage to the market (Pfau, 2002).

 

Taking into account these changes and the needs of the sector, which are often more pronounced in small municipalities where there is usually a lack of technical support, it is important to understand how rural producers manage their farms and the resources available for them.

 

Therefore, the general objective of this study was to carry out a diagnostic of the use and management of factors of production used in dairy farming in the Northwest of Paraná. More specifically, the intention was to: (a) evaluate the management and organizational profile of the region’s milk producers; (b) characterize the region’s dairy industry in terms of its technological and management profile; (c) evaluate the production and financial results obtained by these producers.

Description of the study area

 

The study was carried out in the Northwest region of Paraná, which has a predominantly Humid Subtropical mesothermic climate with hot summer and occasional frost, rainfall is concentrated in the summer months (IAPAR, 2012).

 

The predominant soil type in the region is sandy Red-Yellow Argisol (EMBRAPA, 2006). The most common agricultural and animal raising activities in the region are beef and dairy cattle breeding, poultry farming, cultivation of cassava, sugarcane and horticulture. The dairy farming occupies 22.5% of the municipal area and is the activity with the highest number of producers (EMATER, 2012).

 

Data collection and analysis     

 

Data was collected from October through December 2012. Farmers were interviewed using a semi-structured questionnaire. The questioner designed to contains necessary information that can be used to evaluate the factors of production management.

 

Five dimensions for analysis were considered, these dimensions were then used to evaluate producers’ farming profiles and their use of factors of production. The dimensions of analysis used were: (a) personal and social factors (of the producers); (b) herd factors; (c) market factors (commercialization); (d) knowledge factors (information and technology) and (e) land use factors. Within these dimensions, the specific variables used to evaluate the main difficulties uncovered and the strong and weak profiles of the producers were analyzed. The questionnaire contained the following variables for each dimension:

 

Dimension 1: Personal and social factors: It illustrate the producer’s socio-cultural profile, which affects decisions in seeking and adoption of new technology and management strategies. The main variables in this dimension were: Age; level of education; marital status; time spent on farm to produce milk) as well as of-farm activities.

Dimension 2: Herd factors: It illustrate the dairy  cows  management in terms of nutritional status, vaccination and the management style adopted and productivity. The collected variables were: Total number of animals –number of lactating animals; daily milk production – average milk production per animal; monthly milk production – average monthly production; the predominant breed within the herd; feed supplementation; vaccination; differences in management systems between dry and rainy seasons.

Dimension 3: Market factors: These include the management of financial resources and sales and purchases. The variables adopted were: Income, percentage of income out of dairy farming; product delivery, who is it delivered to, quantities and prices; inputs, where were they obtained and at what percentage; animals’ categories, calves, heifers, and young bulls.

Dimension 4: Knowledge factors: It illustrates the sources of technical and management information available to producers that maximize the use of factors of production. The variables adopted were: Support, where does technical and management support come from; relationships, participation in associations, cooperatives or syndicates; information, if they research technical and market information.

Dimension 5: Land factors: These include the farm and the carried out activities. The variables adopted were: size, the size of the farm; soil, soil fertility, fertilization and analysis conditions; pastures, predominant pasture type; activities, activities carried out prior to dairy farming, other activities carried out on the farm; improvements, the improvements and machinery available on the farm; industrialization, industrialization products on the farm; storage, how are the inputs stored on the farm; labors, are they belongs to family members or hired labors.

 

Field data collection was carried out through individual interviews with 19 producers chosen at random. To define the number of producers interviewed, standard deviations were obtained from the production variable (daily milk production values obtained from the local dairy) according to the method proposed by Milone (2004).

 

 

Where, N = sample size to be interviewed; z = desired degree of confidence; e = permitted error, and σ = estimated standard deviation of the sample;

 

To define the sample size, it was considered that: Z = desired degree of confidence (95% = 1.96); e = permitted error (20% of the average production (0.20 × 271.55 L)), giving an error of 5431 L; σ = estimated standard deviation of the sample (181.04 L). This resulted in a sample size (N) of 19 dairy farmers.

 

The data obtained was submitted to descriptive statistics analysis to characterize the region’s dairy farming and the profile of its rural producers and their farms, with respect to the characteristics and use of factors of production.

In the studied region, dairy farming is mainly carried out through family farming on farms that range in size from five to fifteen hectares. The majority of dairy farmers were involved in this activity for a period of five to fifteen years, they are married, have not fully completed either primary or secondary education and do not have any other off-farm activities, Table 1 shows the producer profile, personal and social factors of milk producers in the Northwest region of Paraná.

 

 

Upon analyzing the resources available to farmers and the way in which they use and manage it (Tables 2 and 3), a lack of information and support was observed. There is no form of technical support available to 63.5% of farmers, and the 36.5% that do have access to support do not obtain it through farming cooperatives despite 100% of them being associated with some form of entity. This could be related to the fact that the regional cooperatives are mainly concentrated, its activity on grain production and do not have the technical ability to support their associates in dairy farm management.

 

 

 

From Table 2, it can be observed that 63.16 and 89.48% of the interviewed farmers do not seek out production or market information respectively, resulting in the alienation of the farmers and reaffirming their position as actors with little bargaining power in the production chain. However, it worth noting that EMATER is the only organization pointed out by the farmers as a source of production information.

 

In their study, which was carried out in the west of Santa Catarina State, Oliveira and Silva (2012) have emphasized the importance of rural extension in the distribution of technology and information in that region. However, this agent’s activities have been hindered in recent years due to a lack of investment (Arieira, 2010).

 

The municipal government and EMATER were mentioned again by the producers when questioned about technical support. However, this assistance only reaches 36.84% of producers, in other words, a representative number of these do not have access to technical support or updated information.This situation compromises farmers productivity, as information is one of the main inputs for the development of dairy farming and operational and financial results are compromised without it (Lopes et al., 2009). It has previously been established that small producers do not often have access to trustworthy sources of information, resulting in decisions being made based on: experience, tradition, the potential of the region, a lack of other options and the availability of financial resources and labors (Oliveira et al., 2001).

 

This lack of access to information is reflected in the situation of dependence of the producer in relation to the other stakeholders in the production chain. This can be observed in the question on product delivery, in which 100% of farmers marketed their products to local dairies and 100% obtained their inputs through the cooperatives operating in the region (Table 3). This impedes the producer’s negotiating power along the production chain, giving them little capacity to influence the price of their product or the terms of purchase for their inputs. This situation confirms the statement made ??by Lopes et al. (2007) that the Brazilian dairy industry is a market structure that most closely resembles the oligopsony which to perfect competition, being composed of many small producers and few large industries.

 

It was observed that despite limited access to information, lack of control over cost and low levels of technology, the majority of farmers did not have off-farm activities (Table 3). This information shows that dairy farming within the region is deeply rooted and many producers remain within this activity because of the monthly income which guarantees the survival and subsistent for their families, this fact was also proven by Oliveira and Silva (2012).

 

Operating in a competitive and demanding market, family farming faces a variety of difficulties, as has already been observed, and is dependent on the actions of other actors (principally agribusiness) to maintain their position within the market (Reis et al., 2001). Conversely, family farming allows small producers to sustain their families and provides them with a sufficient income to cover their monthly expenditures (Oliveira et al., 2001).

 

According to Paraná State dairy farming association, Conseleite PR (2013), the value of milk in March and April of 2013 varied between USD $0.38 and USD $0.39. It was observed that 10.53% of the farmers interviewed received USD $ 0.40 L^-1, which is a value above the average price paid in the period. Moreover, most farmers receive a maximum of USD $ 0.36, that is, the lower limit of the range of rates. This shows that there is great disparity between the prices received for products by the lack of homogeneity between the production processes, production volume and product quality. This shows that the majority of farmers have received low payments for their products. This situation is aggravated by production scale producers because the farms have between  seven to nine hectares, and none are larger than 15 ha, which indicates a typical household production (Table 4). According to Carvalho et al. (2009), one of the factors that boosts milk production activity the most is scale of production, which is a limiting factor within the farms studied. 

 

 

The producers that obtain the highest prices are those that invest in technology and seek out information. These producers store inputs on their farms and own milk coolers, demonstrating that investment in equipment and improvements on farms has a direct impact on final revenues (Table 4).

 

The current lack of support, information and investment is also reflected in the use of factors of production. In this study, basic management techniques such as soil analysis and fertilization are practiced by only 21% of the producers, while 36.84% of the farmers have applied fertilization and the majority (42.11%) did not use any forms of maintenance on their pastures (Table 4).

 

Sant’Ana and Tarsiato (2009) discussed the important of soil management as a fundamental factors of technological modernization, and according to their analysis, dairy farming in the Northwest region of Paraná is not an activity that uses modern technology because it is small the use of technological inputs in this region. It is possible that the lack of knowledge among farmers about the importance of analysis and correction of soil is responsible for the low use of these techniques and the consequent technological delay.

 

In terms of fertilization, only 21.05% of the farmers admitted applying after soil analysis. This situation demonstrates that extractive and traditional farming methods still exist in the region’s dairy industry.

 

Use of family labor is predominant (42.11%), and just 21.05% of farms employ salaried workers (Table 4).

 

It worth to note that a minority of farmers use modern dairy farming machinery such as milking equipment (36.84%) or milk coolers (10.5%) (Table 4). When analyzing dairy farming in Minas Gerais, Lemos et al. (2003) noted that the use of this type of equipment (milking equipment and milk coolers) was a factor indicative  for  specialization  within  the  dairy  sector. In addition, the low level of value added to the product within the farm and the small proportion of farmers prepared to store inputs and products emphasizes rural producers’ position as the weak link in the milk production chain, as they depend on other actors to carry out these activities.

 

The data presented in Table 5 shows satisfactory values for nutrition and vaccination, since only 21.05% of producers did not use dietary supplementation and 73.68% of them used concentrated. Practically all producers carried out the main recommended vaccinations (foot and mouth, 100%  and Brucellosis, 94.73%) (Table 5). This is necessary for the development of activity in Brazil, because according to Lucena et al. (2010), for the dairy farming to expand into new markets, it is necessary to control the health condition of the herd, preventing infectious diseases that decrease production, milk quality and the return of the producer, and that can be contained using vaccines, assertion ratified by Valente et al. (2012).

 

 

The predominant herd phenotype is Holstein Friesian (Table 5). However, in the region there is no ascertained genetic control of animals, which could ensure their blood purity, and most animals is mixed between Holstein Friesian and other races. Interbreeding is often necessary and is used as a production strategy, as it combines the resistance the zebu cattle has to the region’s tough climate with the high productivity of European breeds, mainly Holstein Friesian and Jersey (Perotto et al., 2010), strengthening the herd’s genotype-environment interaction, as described by Paula et al. (2009).

 

In terms of herd productivity, 73% of farms presented good results (above 16 kg/cow/day) compared to results obtained in a study carried out in high-technology farms using confinement and semi-confinement production systems (15.62 and 22.25 kg/cow/day) respectively (Lopes et al., 2012).

 

The majority of farmers (57.89%) did not change their management during the dry season, which can result in a reduction in production per animal as nutritional demands and pasture conditions greatly vary due to the climatic changes that occur during dry period. Inadequate diet may affect the quality of the milk produced and the health of the animals (Marques et al., 2010). It can also cause significant oscillations in the production volume obtained by farmers between these two periods (dry and wet), and subsequently affects revenues and profitability. This situation has also been verified by Lopes et al. (2010). While studying the technical characteristics of 16 low-scale production farms, it was observed that all of these presented a high seasonal variations and a fall in production during the dry season.

 

Even so, the average production per animal observed among the region’s producers varied between 10 and 25 L/cow/day (Table 5), while the national average oscillates from 4 L to over 17 L/cow/day (EMBRAPA, 2007). This data shows that the region is well suited to dairy farming and that larger investments into management and technology may generate significant increases in production and revenues.

 

In contrast to current practice on the majority of the farms reviewed in this study, lactating cows should be managed on high quality pasture in sufficient quantity to ensure enough for each animal, and good quality roughage should be supplied in adequate concentrations and with the appropriate mixture of minerals (Barbosa et al., 2002).

 

Barbosa et al. (2002) indicate that dietary supplementation given to lactating cows should vary along the production cycle and highlight that the stage of lactation that the cows are in should influence the type of supplement to be used, as this affects both the composition of the milk and the cows production level.

 

The situation observed in this region can be observed throughout Brazil. A study by Gomes (2000) shows that dairy farming is made up of a large number of small producers with low production rates, and a small number of large producers that achieve higher production rates. Despite their low production rates, small farms are highly important within the production chain. Guilhoto et al. (2007) emphasize the extent and importance of family farming in Brazil’s dairy industry, which was responsible for 59% of the total national production in 2006.

It was concluded that the producers of northwestern Paraná still have traditional managerial profile, with little use of techniques for planning, management and control of activity, exploring the business of amateur and familiar way. Regarding the technological profile of the farm, still verified the predominance of semi-intensive farming,  with little use of modern production inputs, such as equipment, soil improvement techniques and specialized animals. Moreover, the region has productivity above the national average and some actions in order to specialize the activity being effective. With regard to economic aspects, the producer has a low bargaining power in the supply chain, the price received for milk is low and it has no influence on the formation of the same, being totally at the mercy of dairy. Thus, dairy farming in the region is in a state of transition between the traditional model found in most Brazilian regions, and a modern system of milk production, that characterizes the major producing countries and some of the leading and most advanced dairy regions in Brazil.

The authors have not declared any conflict of interest.