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Measuring and Explaining Technical Efficiency of Dairy Farms: A Case Study of Smallholder Farms in East Africa

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  • Gelan, Ayele
  • Muriithi, Beatrice Wambui

Abstract

This paper measures and explains technical efficiency of 371 dairy farms located in seventeen districts in East African Countries. Four output and nine input types were used to calculate the efficiency scores for each farm. A two-stage analysis was conducted to measure and explain the efficiency scores. First, the efficiency scores were measured by using a data envelopment analysis (DEA) approach which was implemented with a linear programming method. About 18% of the farms were fully productive, each with efficiency scores of unity, which meant this group is currently operating on the production possibility frontier. On the other hand, about 32% of the farms have efficiency scores below 0.25, which means about a third of the dairy farms would need to expand dairy production by at least 75% from the current level without any increase in the level of inputs. Second, a fractional regression method was used to explain the efficiency scores by relating then to a range of explanatory variables. The findings indicate that technology adoption factors such as the existence of improved breeds; feed and fodder innovations (e.g. growing legumes) have positive and statistically significant effects on the level of efficiency. Similarly, zero-grazing seem have positive and highly significant effects. As far as marketing variables are concerned, interestingly selling milk to individual consumers or organizations seems to contribute to dairy efficiency positively and significantly than other marketing outlets such as traders of chilling plants. Membership of dairy cooperative has a positive effect but this is not statistically significant.

Suggested Citation

  • Gelan, Ayele & Muriithi, Beatrice Wambui, 2010. "Measuring and Explaining Technical Efficiency of Dairy Farms: A Case Study of Smallholder Farms in East Africa," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 96187, African Association of Agricultural Economists (AAAE).
  • Handle: RePEc:ags:aaae10:96187
    DOI: 10.22004/ag.econ.96187
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    References listed on IDEAS

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    1. Esmeralda Ramalho & Joaquim Ramalho & Pedro Henriques, 2010. "Fractional regression models for second stage DEA efficiency analyses," Journal of Productivity Analysis, Springer, vol. 34(3), pages 239-255, December.
    2. O'Donnell, Christopher J. & Coelli, Timothy J., 2005. "A Bayesian approach to imposing curvature on distance functions," Journal of Econometrics, Elsevier, vol. 126(2), pages 493-523, June.
    3. Guy Nkamleu, 2004. "Productivity Growth, Technical Progress and Efficiency Change in African Agriculture," African Development Review, African Development Bank, vol. 16(1), pages 203-222.
    4. Papke, Leslie E. & Wooldridge, Jeffrey M., 2008. "Panel data methods for fractional response variables with an application to test pass rates," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 121-133, July.
    5. Tim Coelli & Gholamreza Hajargasht & C.A. Knox Lovell, 2008. "Econometric Estimation of an Input Distance Function in a System of Equations," CEPA Working Papers Series WP012008, School of Economics, University of Queensland, Australia.
    6. Resti, Andrea, 1997. "Evaluating the cost-efficiency of the Italian Banking System: What can be learned from the joint application of parametric and non-parametric techniques," Journal of Banking & Finance, Elsevier, vol. 21(2), pages 221-250, February.
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    Cited by:

    1. Gelan, Ayele & Muriithi, Beatrice W., 2015. "Examining Returns to Scale in Smallholder Dairy Farms in East Africa," Quarterly Journal of International Agriculture, Humboldt-Universitaat zu Berlin, vol. 54(3), pages 1-23, September.
    2. Msangi, Haji Athumani, 2017. "Examining The Inverse Relationship Between Farm Size And Efficiency In Tanzanian Agriculture," Research Theses 276448, Collaborative Masters Program in Agricultural and Applied Economics.
    3. Bardhan, D. & Sharma, M.L., 2012. "Determinants and Implications of Smallholder Participation in Dairy Co-operatives: Evidence from Uttarakhand State of India," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 67(4), pages 1-20.
    4. Rahman, Sanzidur & Awerije, Brodrick O., 2014. "Marketing efficiency of cassava products in Delta State, Nigeria: A stochastic profit frontier approach," International Journal of Agricultural Management, Institute of Agricultural Management, vol. 4(1), October.
    5. Awerije, Brodrick O. & Rahman, Sanzidur, 2014. "Profitability and efficiency of cassava production at the farm-level in Delta Stae, Nigeria," International Journal of Agricultural Management, Institute of Agricultural Management, vol. 3(4), pages 1-9.

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    Keywords

    Livestock Production/Industries;

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