Economic Efficiency of Smallholder Farmers in Wheat Production: The Case of Abuna Gindeberet District, Oromia National Regional State, Ethiopia

Abstract

In Ethiopia, increasing population pressure and low levels of agricultural productivity have aggravated the food insecurity situation by widening the gap between demand for and supply of food. Increasing productivity and efficiency in crop production could be taken an important step towards attaining food security. This study was aimed at estimating the levels of technical, allocative and economic efficiencies of smallholder wheat producers; and to identify factors affecting efficiency of smallholder farmers in wheat production in Abuna Gindeberet district, Oromia National Regional State, Ethiopia. A two stages sampling technique was used to select 152 sample farmers to collect primary data pertaining of 2016/17 production year. Both primary and secondary data sources were used for this study. Cobb-Douglas production function was fitted using stochastic production frontier approach to estimate technical, allocative and economic efficiencies levels, whereas two limit Tobit model was employed to identify factors affecting efficiency levels of the sampled farmers. The stochastic production frontier model indicated that input variables such as mineral fertilizers, land and seed were the significant inputs to increase the quantity of wheat output. The estimated mean values of technical, allocative and economic efficiencies were 78, 80 and 63% respectively, which indicate the presence of inefficiency in wheat production in the study area. A two-limit Tobit model result indicated that technical efficiency positively and significantly affected by sex of the household head, education, extension contact, off/non-farm activity and soil fertility but negatively affected by land fragmentation. Similarly, age, education, extension contacts and off/non-farm activity positively and significantly affected allocative efficiency. In addition, economic efficiency positively and significantly affected by sex, age, education, extension contact, off/non-farm activity and soil fertility. The result indicated as there is a room to increase the efficiency of wheat producers in the study area. The policy measures derived from the results include: expansion of education, strengthening the existing extension services, establish and/or strengthening the existing off/non-farm activities and strengthening soil conservation practices in the study area