Abstract:
The present study was undertaken in Sululta district, Oromia Special Zone Surrounding
Finfinne, Ethiopia with the objectives of analyzing technical efficiency in cow milk
production and identifying factors that determine technical efficiency. Cross sectional data
from randomly selected sample of 130 milk producing households were collected to obtain
data pertaining to milk production, input usage, and other variables including natural,
socioeconomic and institutional factors during 2015/16 production year. Multi-stage
stratified random sampling technique is implemented to draw representative samples. Four
kebeles were selected randomly and sampling frame has been constructed on the basis of a
list provided by the district agricultural office. The estimated results of the Cobb-Douglas
frontier model with inefficiency variables show that the mean technical efficiency of the
farmers in the production of cow milk is 74%. This implies a sizeable inefficiency in milk
production. The discrepancy ratio gamma (γ), which measures the relative deviation of
output from the frontier level due to inefficiency, was about 91%. This implies that about
91% of the variation in milk production among the sample farmers was attributed to
technical inefficiency effects. The result revealed that milk output was positively and
significantly influenced by the number of cows, labor man-day, quantity of concentrate and
dry fodder. The positive coefficients of these parameters indicate that increased use of
these inputs will increase the production level to a greater extent. Hence, given these
inputs are used to their maximum potential, introduction and dissemination of these inputs
will enhance the production level of milk in the area. The estimated stochastic production
frontier model together with the inefficiency parameters show that, age, total livestock
holding, availability of grazing land, breed type, distance to market center and frequency
of extension contact negatively and significantly affected technical inefficiency of milk
production implying that improvement in these variables may improve technical efficiency.
However, age-square and land ownership of households positively and significantly
affected technical inefficiency of milk production showing that these variables have
negative influence on technical efficiency. Hence, emphasis should be given to improve the
efficiency level of those less efficient households by adopting the practices of relatively
efficient households. In conclusion, policies and strategies of the area should be directed
towards the improvement of the above mentioned determinants.