Abstract:
In many parts of Ethiopia, rice could grow suitably including guraferda district. Thus, the aim of
this study was to measure the level of profit efficiency and to identify factors affecting profit
efficiency level in Guraferda district. The two-stage random sampling technique was used to
select 410 sample household heads and interviewed using a structured questionnaire during
2018/19 production year. Cobb-Douglas profit function was fitted using a stochastic profit
frontier approach to estimate the efficiency level, whereas OLS estimation method was used to
identify determinants that affect efficiency levels of the sample farmers. The results showed
existence of high level of inefficiency in rice farming because the gamma ratio was
comparatively large (γ = 0.89). Cobb-Douglas profit function result indicated that, rice profit
was positively and significantly influenced by Seed price, fertilizer price, labour wage, land size
and value of fixed capital. The profit efficiencies varied widely between 11.38% and 90.74%. On
average, farmers realized 60.34% of their frontier profit, with an estimated 39.66% of the profit
lost due to inefficiency. Similarly, the result of OLS exposed that profit efficiency was positively
and significantly affected by farming experience, extension access, row planting, market access
and non-farm income and variables like, distance to the main road, age of the household head,
and social responsibility affected it negatively. It is therefore, recommended that there is
potential for farmers to extend rice profit by adopting projects or programs that will support
non-farm income activities, strengthening awareness creation on row planting technology,
strengthen the existing agricultural extension system and development of market and road
infrastructures requirements to improve profit efficiency of rice producers.
