Farm Efficiency and Its Determinants in Different Farm Size and Altitude Categories: A Case of Organic Coffee Cultivation in Nepal

Coffee farmers typically operate without knowledge of their actual and potential economic efficiency. Understanding the technical relationships between inputs and outputs is the key to increasing the efficiency of production. This research estimated the level of Technical Efficiency (TE), and the key factors affecting farm level efficiency, of organic coffee cultivation in the hill region of Nepal. TE of 280 organic coffee farms was related to farm size and farm altitude categories. Increasing returns to scale was observed in 43.21% of organic farms suggesting that greater efficiency could be achieved through enlargement. The mean technical efficiencies of small, medium and large farms were 84.7%, 90.7%, and 90.6% respectively and in low, medium and high altitude locations were 89.6%, 86.1% and 91.9% respectively. Approximately 46%, 43% and 39% of the coffee farms in low, medium and high altitude areas were found to be technically efficient. Similarly, about 43%, 50% and 56% of small, medium and large coffee farms respectively were technically efficient. Tobit regression revealed that the variation in technical efficiency was related to education, farm experience and training/extension services.