Elasticities for Milk Production: A Normalized Translog Profit Function Approach

The output supply and factor demand elasticities for milk production in Southern India were studied by applying a normalized translog profit function. The results indicated that most of the variable inputs found negative cross-price elasticities, reflecting complementarity in the relationship with exceptions dry fodder and concentrate, which act as substitutes for veterinary services. This suggested that combined input use enhances production efficiency. Among all inputs, demand elasticities for concentrate, green fodder and labour showed the highest responsiveness to milk price, highlighting their relative importance in the production process. Ensuring access to quality green fodder, concentrate and affordable labour was thus found essential for boosting milk output. Overall, dairy inputs appeared to be used at maintenance levels, indicating limited flexibility in input reduction despite rising prices. However, the positive relationship between milk price and input demand suggested that higher milk prices can incentivize increased input use, ultimately supporting greater milk production. JEL Classification: Q1, Q12, Q13