Dairy supply chain modernisation in Poland - what about those not keeping the pace?

This paper studies the determinants and consequences of heterogeneous market participation among dairy farmers in Poland. It uses a unique data set on supply chain characteristics and individuals with different relationships to the market. First, the study estimates the factors that cause households to choose not to participate in the market. Then, based on semi-parametric methods, it analyses their current revenues and compare with that of similar households that remained in commercial milk production. The key finding is that farms that decided for quitting milk sales perform worse than those that maintained commercial dairy business. However, more detailed analysis shows that this difference could be attributed to supply chain modernisation and becomes insignificant once subsistence farmers are compared to commercial farms supplying traditional marketing channel. Our estimates suggest that severing relations with the market is mainly determined by worse endowment of farms with dairy specific assets, smaller cow herds and older age of the farm manager. This publication forms part of the Regoverning Markets project.