Estimating Economic Efficiency Levels and Identifying Its Determinants for Milk Producers’ Households in North Shewa Zone, Oromia Region, Ethiopia

Abstract

This study aimed to estimate economic efficiency levels and identifying its determinants for milk producers’ households in North Shewa Zone, Oromia Region, Ethiopia. Three stages random sampling technique was used to select 400 sample farmers. The data was analyzed using descriptive statistics and econometrics model. The result of stochastic frontier model showed significant and positive elasticity of lactation cow, green forage and crop residue. The estimated mean values of technical, allocative and economic efficiency were 58%, 77.6% and 44.7% respectively. The yield gap due to technical inefficiency was 9.6 liter per cow per day. A two-limit Tobit model result shows that education, amount of concentrate feed used, grazing land, type of breed and frequency of extension contact contributed significantly and positively to technical efficiency. Moreover, total land, dairy farm experience, dairy membership and type of breed affect allocative efficiency significantly and positively while the amount of concentrate feed used had a significant and negative effect on allocative efficiency. Economic efficiency also affected significantly and positively by education level, total land, grazing land, type of breed and frequency of extension contact. To improve the efficiency level of farmers, due attention should be given to use concentrate feed , improving feed availability, adequate and proper management of grazing land, using of improved breed and dairy cooperatives.

Keywords: Efficiency, Ethiopia, Milk, Stochastic Frontier, Two-limit Tobit

DOI: 10.7176/JNSR/13-17-02

Publication date:October 31^st 2022