ECONOMIC EFFICIENCY OF RED PEPPER PRODUCTION: THE CASE OF SMALLHOLDER FARMERS IN ODA BULTUM DISTRICT, WEST HARARGHE ZONE, OROMIA REGION, ETHIOPIA

Abstract

Odabultum district is one of red pepper producing woredas of west harerge zone. There was great productivity difference among the farmers because of their efficiencydifference in using the existing resource.This study wasconducted to estimate economic efficiency of smallholder red pepper producers in the district and identity factors determining it. Both primary and secondary data were used for this study. Primary data were gathered from randomly selected 174 sample households during the 2019 production season. Descriptive statistics and econometric methods were used to analyze data. A Cob-Douglas stochastic frontier production function and dual cost Cob-Douglas functionswere used to estimate technical and allocative efficiencies of red pepper production respectively. Tobit model was used to identify the major factors that determine technical, allocative and economic efficienciesof red pepper producing farmers. The estimated results showed that the mean technical, allocative and economic efficiencies were 77.62%, 66.90% and 51.54% respectively. The result of Tobit model shows that the technical efficiency of red pepper producing farmers is determined byfamily size,slope of red pepper land, oxen owned, market information and off/non-farm activities positively and significantly, whereas land size affect it negatively and significantly. The allocative efficiency of the farmers was affected by educational status and livestock owned positively and significantly while distance from nearest market affect it negatively and significantly. The economic efficiency of farmers were affected by educational status, family size, slope of red pepper land, livestock owned, oxen owned, market information and off/non-farm activitiespositively and significantly. Land sizeand distance from nearest market affected economic efficiency negatively and significantly. This implies that there is great potential to increase the gross red pepper output with the existing resource base and technology. Hence, emphasis should be given to improve the economic efficiency of red pepper producing farmers by improving their education, asset ownership, market information, and sharing the experience of economically efficient farmersto inefficient farmers which help to increase the red pepper production in the area.