Production Efficiency of Smallholder Farmers in Malawi : A Quadratic Programming Approach

Abstract

Smallholder farmers in Malawi have become more diversified over the past two decades as a result of crop market liberalization. This has been seen mainly in the expansion of the area under tobacco production. However, just as in any other developing country, smallholder farmers in Malawi face substantial risk of farm income fluctuation. Farm income is subject to price more important for poor farmers because risk plays a role in their decision making regarding risk, which is significant because of unstable market conditions. Risk considerations are the adoption of technologies and allocation of resources. Risk also contributes to their low incomes. The aim of this study, therefore, was to support the decision making of smallholder farmers in view of market risk. A quadratic risk programming model was applied to estimate the minimum income variance and develop an expected income-variance (E-V) e cient frontier for smallholder farmers producing tobacco in the central region of Malawi. Data used in this study were from production and marketing records ( ) of farmers belonging to Chiyambi Producers and Marketing Cooperative a farmers’ organization in Dowa district, in the central region of Malawi. The results indicate that production e ciency varied among farmers according to their production technology. Moreover, they suggest that farmers on average should change the land area used for growing maize, tobacco, groundnuts, and phaseolus beans by . , . , . , and . , respectively, to optimize risk. Farmers’ attitudes toward risk and development of expectation methods for generating time-series data that take into account dependencies in the data are important issues that should be considered in the future studies.