PRODUCTION EFFICIENCY AND MARKET SUPPLY OF SORGHUM: THE CASE OF SMALLHOLDER FARMERS IN KAFTA-HUMERA DISTRICT OF TIGRAY, ETHIOPIA

Abstract

Efficiency is an important factor for increasing productivity which leads to increase in market supply to achieve the goal of food security. In economics where resources are scarce and opportunities to use new technologies are limited, increasing efficiency remains the most reasonable means to raise productivity without necessarily developing new technologies or increasing the resource base. Low agricultural production efficiency or inefficiency rises because of failure of market. Failure of market leads to failure of adoption of new technology which is necessary for increasing productivity. So this study aimed to investigate level of production efficiency, factors affecting production inefficiency and market supply of sorghum small holder farmers in Kafta-humera district of Tigray Ethiopia. A multi-stage sampling technique was used to select 289 sample farmers who were interviewed using a semi- structured questionnaire to obtain data pertaining to sorghum production during the year 2016/2017.Stochastic production frontier model was used to identify production efficiency levels, where as Tobit models was used to estimate factors affecting production efficiency levels and supply of sorghum. Accordingly, the mean technical, allocative and economic efficiencies were 78.01 %, 65.21 % and 39.91 % respectively. This implies that output can be increased by 21.99 % or cost can be reduced by 34.79% with the existing level of technology and resources. Input variables such as land, labor, tractor plow power, chemicals, DAP and Urea fertilizers positively affects production of sorghum. The discrepancy ratio (γ) implied that about 91.91% of the variation in sorghum production was attributed to technical inefficiency effects. The likelihood of households to sell their sorghum in the output markets was 67.99%, which is clearly different from the descriptive results. Tobit model revealed that age, education, non-farm income, credit, extension service and training positively and significantly affected technical efficiency while age square and total livestock holding had negatively and significantly affected. Additionally age square, education and frequency of farm visit positively and significantly affected allocative efficiency, while age, non-farm income, credit and extension contact have a negative and significant affect. Economic efficiency was positively and significantly affected by age, education, non-farm income, credit, extension contact and frequencies of farm visit but negatively affected by age square. Quantity of sorghum supplied to the market was positively affected by credit, extension contact, training, sorghum farm size, current price of sorghum and education, while family size and lagged price of sesame negatively affected. These indicate that there is a room to increase in production efficiency and supply of sorghum in the study area. Therefore, government authorities and other concerned bodies should take into consideration the above mentioned demographic, socioeconomic and institutional factors to increase efficiency and supply of sorghum to the market in study area.