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Technology introduction and the intensive use of resources, particularly in smallholder farming systems, are at the core of debates about future food security and sustainable livelihoods. In Brazil, land use changes promoted by competing agricultural chains require a search for alternative modes of production for family farms. We analyse the technical and economic viability of intensification of dairy farming by smallholders in the “Balde Cheio” (Full Bucket) programme. On average, family farmers who joined the programme increased milk production three-fold whereas at regional level there was a significant reduction of 8% between 2003 and 2009. Comprehensive datasets from São Paulo state and four other regions across Brazil were collated and analysed to explore for whom, how and when intensive dairy production is a feasible option. Data envelopment analysis allowed us to compare inefficiencies among farms and highlight different strategies for technological changes. The empirical evidences in this study indicate the technical viability of the more intense use of resources towards family-based dairy farming systems. Higher productivity was due to a combination of more lactating cows/area (31%), higher productivity/cow (24%), better labour performance (37%) while using less land area (−7%). The gross margin/area almost doubled although milk prices had increased by only 7%. The economic outcome of the intensified systems was on average R$ 3000/ha which was competitive with R$ 600/ha for sugarcane leasing and R$ 700/ha for soybean production. Despite the smaller returns on land, large landowners can have a good household income with sugarcane or soybean, but for smallholders the intensification of dairy is the only option. Compared with the alternative of wage jobs in urban areas, we found it very competitive for 40 out of 50 farmers in the sample in terms of income per family member involved in the production process.
