Economic efficiency of rice farming: a stochastic frontier analysis approach

The future of agriculture is dependent on an increase in the use of resources at disposal, it is therefore imperative that strategies to increase agricultural growth should be directed towards increasing efficiency of smallholder farming operations and resource utilization. This study examined the economic efficiency of rice production. A multistage sampling procedure was used to select 240 rice farmers and data were obtained with the use of a structured questionnaire. Data collected were analyzed with descriptive techniques, stochastic frontier analysis (SFA) and the Tobit regression model. The SFA result revealed that input variables such as seed, herbicide and pesticide were positive and had a significant effect on rice output. Rice farmers were able to maximize their output by 74% at the lowest minimum cost possible. Furthermore, economic efficiency was positively influenced by age, level of education, membership in farmers’ associations, access to the public market and access to healthcare facilities; while household size, farming experience, poor road conditions and distance to the nearest marketplace had negative effects. The study concluded that rice farmers were inefficient. Therefore, in order to increase rice production efficiency and improve the livelihood of smallholder farmers, farmers should receive formal and informal education. As it is a key policy issue in the study area, farmers should strengthen the existing association structures and organize new farmers’ associations. Also, local and regional governments were encouraged to provide good road networks and a public market that will enable farmers to dispose off their produce at attractive places and prices of their choice.