Production Efficiency of Major Crops among Smallholders Farmers in Central Ethiopia

Abstract

Agricultural production of most smallholders in Ethiopia is dependent with recurrent rainfall resulted in production variations. Limited input availability and precarious environmental conditions determine smallholders’ decisions on their production and the production efficiencies vary from farmer to farmer. This study was carried out with the aim of analyzing the technical, allocative and economic efficiencies of smallholder farmers in the production of major crops and their determinants in central Ethiopia, Oromia special zone surrounding Addis Ababa. Multistage sampling technique was employed to randomly and proportionally select 386 smallholders from ten PAs. Primary data were collected from smallholders through a semi structured questionnaire using face to face interview. Cross sectional data collected from sampled households in the study area were analyzed using mathematical and econometric methods. Mathematical programming technique selected for this study was Data Envelopment Analysis (DEA) using linear programming technique assuming multi-input and multi-outputs were handled. Tobit regression model was regressed against the socioeconomic, demographic, and institutional variables that are expected to affect the technical, allocative and economic efficiencies of sampled households. The results of estimated efficiency scores show the mean technical, allocative and economic efficiencies were 0.75, 0.60 and 0.45 respectively. The mean scores of efficiencies show underutilization of resources and the possibilities of smallholders to increase their agricultural production by 25%, and reduce cost of production by 40% and total cost by 55%. Marital status, level of education, farming experience, access to credit, cooperative membership, access to farming information, and off/non-farm income has positive influence on the technical, allocative and economic efficiencies. While age of the household head, access to training and livestock size has negative relations to efficiencies. Delivery of agricultural inputs and trainings on time by the government is the key policy implication to improve the efficiencies of smallholders.