Stochastic frontier analysis and agricultural typologies: Applied to Mexico’s sugarcane industry

Abstract

This study identifies Mexican sugarcane-planting micro-regions with different productive potential (PP), technical efficiency (TE) and poverty, to propose targeted impact investments. Central to our analysis are three innovative approaches: estimating a Stochastic Production Frontier (SPF) model to precisely measure TE and PP, using spatial analysis including the climate and weather of the microregions, and incorporating stakeholder validation to ensure the real-world applicability of our findings. By integrating data from the 2019 National Agricultural Survey (Encuesta Nacional Agropecuaria - ENA), we investigated sugarcane production in Mexico, highlighting high-priority areas (HP) for investment, characterized by municipalities with medium to high PP, low to medium TE, and high-income poverty. Our findings identified 56 microregions across Oaxaca, Puebla, San Luis Potosí, and Veracruz as pivotal for strategic investments, which vary according to each region’s specific needs—from technological advancements and improved transportation infrastructure to the establishment of competitive rural banks. This multifaceted approach provides an in-depth assessment of sugarcane production while identifying high-priority areas for targeted short- and long-term investments to boost productivity, drive economic development, and reduce poverty.