Technical Efficiency of Dairy Production Under the Extensive Management: The Case of Eastern Dry Zone in Sri Lanka

Extensive cattle rearing system is predominant among rural dairy farmers in Sri Lanka, where the selections and opportunities for other economic activities are limited. In Sri Lanka, approximately 60-70% of domestic dairy requirement is still dependent on imports due to the lack of domestic milk production. In this context, the study was carried out to a) analyse technical efficiency and b) its determinants of dairy production in rural areas of Batticaloa district in the Eastern Province of Sri Lanka in order to facilitate the dairy productivity. Manmunai South West Division is one of the poorest divisions in Batticaloa, which contributes 11.4 per cent to the total cattle population in the district. Data were collected from randomly selected 52 farmers using a structured survey schedule during November to December in 2016. Data on herd composition, input costs, and output per year immediately preceding the current period were collected. Cobb Douglas production function was used to model input-output relationships. Stochastic Frontier was estimated using Stata 13 and Technical Efficiency (TE) of the sample was estimated. TE scores were regressed against the selected farm and producer characteristics to find determinants of technical inefficiency. Regression coefficients of the proportion of improved/cross bred cows and the proportion of cows in lactation were positive in Stochastic Frontier model. Regression coefficients of age of the farmer, education level and herd size were negative in inefficiency model, which reflected the higher values of these variables, reduce inefficiency. The average TE of the sample was implying that there is about 50% scope of improving the production with the same input level. The study concludes that increasing the proportion of improved/cross bred cows and proportion of cows in lactation as potential interventions in increasing efficiency of farmers from rural areas of Batticaloa who follow extensive management system.