Analysis of Farm Households’ Price Efficiency in Production of Maize: The case of Bilo Nopa District, Illu Ababor Zone, Oromia Regional State, Ethiopia: An application of Stochastic Frontier Analysis and Dual Cost approach

Abstract

Even though agriculture is the backbone of Ethiopian economy, its performance is unsatisfactory and food production is very low as compared with population growth. As the possibility to improve production by bringing extra resources into use became more and more restricted, the efficiency with which the farmers use existing resources has received the utmost attention to block the gap between supply and demand of food. This study was carried out to analyze productivity and price efficiency of smallholder
farmers in maize production in Bilo Nopa district. To meet the objectives of the study, secondary data were used in addition to primary data. The Primary data was gathered via structured questionnaires from randomly selected 152 sample households during the 2020/21 production year as well as secondary data was collected from different sources. Cobb-Douglas production function was applied to analyze the productivity where as Tobit Model is used to estimate farm households’ price efficiency. The mean price efficiency was 70.9%. Thus, there exist considerable levels of price inefficiencies in production of maize in the study area. The Tobit model results revealed that livestock holding, frequency of extension contact, land fragmentation and off/non farm activity had a considerable effect on price efficiency. The result of the study shows that there exists an opportunity to boost the efficiency of maize producers in the study area. In addition, policy measures derived from the results of the study include: increasing the livestock production, strengthening the extension services, promote off/non farm activity and raising the
resettlement programs in the study area.