ANALYSIS OF ECONOMIC EFFICIENCY OF WHEAT PRODUCTION: THE CASE OF ROBE DISTRICT, ARSI ZONE, OROMIA NATIONAL REGIONAL STATE, ETHIOPIA

Abstract

Ethiopia is known to be one of the food insecure countries in the world. One way of solving the food insecurity problem is through enhancement of efficiency in agricultural production in general and in wheat production in particular. This study was conducted with the general objective; of assessing the economic efficiency of smallholder wheat producers in the Robe District of Arsi zone, Oromia Regional State, Ethiopia. Both primary and secondary data sources were used for this study. A total of 203 wheat farmers were selected randomly to collect cross-sectional data in 2018/19 production year. Stochastic production frontier model with Cobb.Douglass production functional form was used to estimate the level of efficiencies. The result of the model indicated that input variables such as land, labor, NPS, seed and organic-fertilizer significantly and positively affected wheat output at different significance levels. The obtained return to scale from summation of Elastilities was 1.56%, which indicated that a one percent increase in all inputs proportionally increase the total production by 1.56% showing an increasing returns to scale. The estimated mean values of technical, allocative and economic efficiencies were 85.8%, 80.3% and 69% respectively, which shows that the presence of inefficiency in wheat production in the study area. The result from the Tobit model showed that farming experience, soil fertility, cooperative membership, crop rotation, plot ownership, extension contact, amount of credit, training and combiner had significant positive effect on technical efficiency while family size in adult equivalent, total landholding, plot distance and method of sowing had a significant negative effect. Allocative efficiency was positively and significantly affected by frequency of extension visit, amount of credit used and nonfarm income but negatively and significantly affected by distance from farmer training center and distance from market. In addition, economic efficiency was significantly and positively affected by frequency of extension visit, amount of credit used, plot ownership and non-farm income, soil fertility and cooperative, but significantly and negatively related with distances from market and farmer training center. Generally attention should be given by government and other concerned bodies on the above mentioned factors to improve the efficiency of wheat farmers.