Does cluster farming improve efficiency? A case of wheat farmers in Arsi Zone of Oromia Region, Ethiopia

Ethiopia has been advocating cluster farming as an approach to improve productivity and accomplish the SDGs of poverty eradication and ending hunger, yet there are insufficient studies on the impact of cluster farming on wheat farmers’ efficiency. This research aims to fill this gap using a sample of 422 wheat farmers within the Arsi zone of Ethiopia. In this study, the efficiency of wheat farmers was assessed using the parametric Cobb-Douglas stochastic frontier model, and it suggests that they are performing below the maximum efficiency level. To capture the impact of cluster farming on efficiency of wheat farmers, the two-stage endogenous switching regression model was estimated. In the 1st stage, the probit model was estimated, and the result confirms the positive correlation between cluster farming participation and age, land size, and education level among farmers. Conversely, increased distance from the main market, farmers’ cooperative, and road infrastructure was negatively associated with cluster farming participation. The impact assessment model result indicates that participation in cluster farming yields substantial gains in the technical efficiency of wheat farmers (15.08% for participants; 15.37% for non-participants) alongside notable enhancements in allocative (5.14%) and economic (8.11%) efficiency. The findings herein provide a compelling rationale for prioritizing policies and strategies that encourage cluster farming as a means of enhancing wheat farmer efficiency. This requires a concerted effort to support farmer education programs, improve access to market outlets and road networks, and enhance the provision and effectiveness of farmers’ cooperatives.