TECHNICAL EFFICIENCY IN COW MILK PRODUCTION: THE CASE OF SULULTA DISTRICT, OROMIA SPECIAL ZONE SURROUNDING FINFINNE, ETHIOPIA

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.