Profit Efficiencies in Smallholder Rain-Fed Rice Farmers in Bench Sheko Zone: A Case of Guraferda District

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.