Economic Efficiency of Smallholder Sweet Potato Producers in Delta State, Nigeria: a Case Study of Ughelli South Local Government Area

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1 Research Journal of Agrculture and Bologcal Scences, 7(): , 011 ISSN Ths s a refereed journal and all artcles are professonally screened and revewed 163 ORIGINAL ARTICLES Economc Effcency of Smallholder Sweet Potato Producers n Delta State, Ngera: a Case Study of Ughell South Local Government Area Gbgb, Meb Theophlus Department of Agrcultural Servces, Mnstry of Agrculture and Natural Resources, Asaba, Delta State, Ngera. ABSTRACT Wth declnng sweet potato producton trends n Delta State, ths paper dentfes and analyses factors that nfluence the economc effcency of smallholder sweet potato producers n Delta State by drawng on data from random sample of 100 smallholder farmers from Ughell South Local Government Area. The study employed stochastc fronter and Tobt model to measure the level of economc effcency and ts determnants n sweet potato producton. Emprcal results show decreasng returns to scale n producton. The mean economc effcency s 0.61 wth a range of 0.13 to Educaton, access to extenson, access to credt and membershp of farmers cooperatve postvely and sgnfcantly nfluence economc effcency. Innovatve nsttutonal arrangements that enhance extenson and farmer tranng accompaned wth mproved access to credt s lkely to enhance sweet potato producton effcency. Key words: Economc effcency, smallholders farmers, sweet potato productvty, stochastc fronter functons. Introducton Agrcultural producton n Ngera s domnated by smallholder farmers and s known to produce more than 90% of the food consumed n the country. The agrcultural sector has been major export earner for the country pror to the dscovery of crude ol. Sweet potato (Ipomoea batatas) s a root crop n tropcal Afrca belongng to the famly convolvulaceae. It s large, starchy, sweet tastng tuberous roots are an mportant root vegetable. The young leaves and shoots are sometmes eaten as green of the approxmately 50 genera and more than 1000 speces of convolvulaceae, I. batatas s the only plant of major mportance, some others are used locally, but many are actually posonous. Sweet potato has a hgh yeld potental that may be realzed wthn a relatvely short growng season and an adaptablty to a wde ecologcal range of 0 to 000 meters above sea levels and 30 0 N to 30 0 S. Among the root and tuber crops, t s the only one that had a postve per capta annual rate of ncrease n producton n sub-saharan Afrca. Accordng to FAO (000) producton of sweet potato n Ngera ncreased from 149,000 metrc tones n 1961 to,468,000 metrc tones n 000. Area of cultvaton ncreased from 13,000 ha to 381,000 ha whle yeld decreased from 11t/ha to 6.8t/ha over the same perod. However, estmates of sweet potato producton n Ngera vary wdely among dfferent sources. FAO found that 80 percent of the sweet potato produced n Ngera was used for human food. It s an mportant revenue earner for the country and employer of labour for rural people who are engaged n producton of sweet potato. Sweet potato producton n Ngera has been low arsng from lack of captal to boost producton, use of mproved plantng materals amongst other factors. To harness the current potentals for sweet potato producton and export, ts producton must be mproved. Varous government supported research and development actvtes have been undertaken n an effort to rase productvty of smallholder farmers. Efforts towards development of the sweet potato ndustry n Ngera have focused on development and dssemnaton of hgh yeldng varetes (Gbgb, 001). Despte the efforts drected at mprovng sweet potato producton over the years, low productvty remans a major challenge n the sub-sector. The study hope to establsh the current levels of economc effcency of smallholder sweet potato producers Correspondng Author: Gbgb, Meb Theophlus, Department of Agrcultural Servces, Mnstry of Agrculture and Natural Resources, Asaba, Delta State, Ngera. Emal: Gbgbtheophlusmeb@yahoo.com Tel:

2 Res. J. Agrc. & Bol. Sc., 7(): , n Delta state, Ngera and to dentfy factors nfluencng levels of farm producton and economc effcency. In so dong t s hope to provde nsghts to constrants to mproved sweet potato producton and provde avenues for possble polcy nterventon towards mproved potato producton n Delta State, Ngera. Materals and method Study Area: The study was carred out n Delta state. Ughell south local Government Area of Delta State was purposvely chosen for ths study because of the prme mportance of the local government area n terms of arable crops producton. Major crops grown are sweet potato, cassava, cocoyam, yam, plantan and banana. Random samplng procedure was employed to get representatve sample. Farmers are selected at random from the vllages wthn the samplng frame. The samplng frame conssts of 10 vllages from the local government area. Then farmers were selected at random for ntervew from each of the vllages resultng n a total of 100 respondents. The respondents are farmers who produce sweet potato regardless of whether or not they produce other arable crops. Resources on whch data were obtaned nclude land, famly and hred labour, quantty of fertlzer, quantty of seed and quantty of pestcdes were collected. Input and output prces for nput and output was collected as well. Analytcal Framework: Followng Bravo-Ureta and Pnhero (Bravo-Ureta, 1997) we use a parametrc stochastc effcency decomposton approach to measure the economc effcency n sweet potato producton. Ths s an extenson of Kopp and Dewert (198) economc effcency estmaton procedure. The advantage of ths approach s the applcaton of a stochastc fronter model wth a dsturbance term specfcaton that captures nose, measurement error, and exogenous shocks beyond the producton unt. The stochastc fronter producton functon model s specfed as follows: Y = f(x ; B)+ Î (1) Where Y measure the quantty of output; X s a vector of the nput quanttes; B s a vector of parameters to be estmated; f(x; B) s a fronter producton functon; and Î s a composte error term (Agner, 1977). Followng Agner et al (1977) the composte error term s gven as; V. where V s assumed to be ndependently and V N v ~ (0, ) () dentcally dstrbuted as random error and represents random varablty n producton that cannot be nfluenced by producers m s a non-negatve random varable assocated wth techncal neffcency n producton and s dentcally and ndependently dstrbuted (d) as half-normal,. ~ N(0, ) The fronter producton functon f ( X ; B) measures the maxmum potental output for a gven nput vector, X. Both V and cause actual producton to devate from the fronter. Usng a Cobb-Douglas functonal specfcaton to model sweet potato producton technology, the fronter producton functon n equaton (1) s estmated usng maxmum lkelhood estmaton procedures whch provdes estmators for B and varance parameters, v and / To emprcally measure effcency, devatons from the fronter are separated nto a random (v) and an neffcency (m) component. Followng Jondrow et al. (198) and gven the dstrbuton and ndependence assumptons on V and μ n addton to the ftted values of 0 the condtonal mean of µ can be estmated as:

3 Res. J. Agrc. & Bol. Sc., 7(): , f E 1 F (3) where v f s the standard normal densty functon and F s the dstrbuton functon both functons beng evaluated at. From ths calculaton, estmates of V and µ may be determned. Accordng to Bravo-Ureta et al. (1997) the th frm effcency s measured usng adjusted output. Ths output s derved by subtractng the random error V from both sdes of equaton (1). Thus: Y f( X ; B) Y V Y YI where s the adjusted output of the th frm; and s obtaned from equaton (3). Adjusted output s then used to derve the th frm techncally effcent nput vector X t by smultaneously solvng equaton (4) and the observed nput ratos two nputs n the producton of Y X K 1 X 1 (4) where K s equal to the observed rato of the. Gven the assumpton of Cobb-Douglas technology the fronter producton functon s self-dual (Sharma, 1999). The dual cost fronter can be derved analytcally from the producton functon n equaton (1) thus: C hp, Y, (5) where C s the mnmum cost of the th frm assocated wth output Y, P s a vector of nput prces for the th frm and φs a vector of parameters to be estmated. The economcally effcent nput vectorfor th frm, X e, s derved by applyng Shephard s Lemma (Shephard, 1970) and substtutng the frm s nput prce and adjusted output levels nto the derved system of nput demand equatons gven by dc P k X e P, Y; where φ s a vector of estmated parameters. The observed and economcally effcent costs of producton of the th frm are equal to and X P, XeP respectvely. These cost measures are used to compute the economc (EE) effcency ndex for th frm as follows; X ep EE X P To determne the relatonshp between soco-economc and nsttutonal factors and the computed ndces of economc effcency we use a two-lmt Tobt Procedure. The Tobt model was adopted because the economc effcency scores Le wthn the range of 0 to 1. Results and dscusson Producton Performance: (6) (7)

4 Res. J. Agrc. & Bol. Sc., 7(): , The summary statstcs of varables nvolved n sweet potato producton s presented n Table 1. The mean output of the sweet potato harvested by farmers was 73.51kg wth a large varablty as shown by t`he standard devaton of 1,4.40kg. Ths mples that the farmers operated at dfferent levels of farm szes. Whle the analyss of the nputs revealed an average farm sze of 0.83ha per farmer an ndcaton that the study covered small scale, famly managed farm unts. The labour used n sweet potato producton had an average of man-days and standard devaton of man-days, the fndngs ndcated that producton of sweet potato requres a lot of labour for effcent productvty. Labour was ntensvely used whch requred both the use of hred and famly labour for the work to be done and for more output to be acheved. On average kg of seed, 105.4kg of fertlzer are used by farmers gram of pestcdes used, whle the analyss of Gender of household had an average of 0.70 per farms. The average age of the sample farmers was 48 years. The average educatonal level of the farmers was 11 years. The average farmng experence of farmers was 19 years. The sweet potato farmers receved an average of three extenson vst per year. About 63.5% of the farmers had access to credt whle 60.3% belong to a farmers co-operatve. The mean household sze s 5.4 wth standard devaton. Estmate of Stochastc Fronter Producton Functon: The estmates of parameters of the stochastc fronter producton functon are presented n table. All the parameter estmates are statstcally sgnfcant n the fronter model. The followng elastctes were obtaned: Farm sze (t=.93), labour 0.05 (t=.156), seed (t=1.96), fertlzer (t=3.13) and agrochemcals (t=3.01). The sum of the output elastctes s mplyng decreasng returns to scale. Farm sze has the largest elastcty followed by labour. Agrochemcals recorded the lowest elastcty. Ths suggest that productvty would be hgher f more hand s brought under sweet potato producton, Table 3. The parameters of the Tobt model are presented n Table 4. The results reveal that the level of educaton, farmng experence, access to extenson, and access to credt each has a postve mpact on economc effcency. Membershp n a farmers co-operatve has a negatve and sgnfcant relatonshp wth economc effcency. The postve and hghly sgnfcant coeffcent of educaton at 1% level ndcates that farmers wth hgher levels of educaton tend to be more effcent n producton. Better performance by more educated farmers may be attrbuted to the fact that educaton gves the farmers the ablty to perceve, nterpret and respond to new nformaton and mproved technology such as fertlzers, pestcdes and plantng materals much faster than ther counterpart. However, Mbanasor and Kalu (008) n ther study of economc effcency of commercal vegetable producton system n Akwa Ibom State, Ngera found a negatve relatonshp between educaton and economc effcency. The estmated coeffcent of the varable representng the producers experence s postve and sgnfcant whch ndcates that effcency ncreases wth the number of years spent by the household n potato producton. Ths suggests that the sweet potato farmng n the study area s hghly dependent on the experence of farmers whch may lead to better manageral sklls beng acqured over tme. Ths corroborates the fndngs by Shehu and Mshela (Shehu, 007). Farm households who receve regular extenson vsts by extenson workers appear to be more economcally effcent than ther counterparts. The coeffcent for the access to extenson has a hghly statstcally sgnfcant postve relatonshp wth economc effcency (EE) at 1% level. Smlar results were reported by Bozoglu and Ceyhan (Bozoglu, 007) and Bnam, Tonye, Wandj and Akoa (Bnam, 004) n Turkey and Cameroon respectvely. The postve estmated coeffcent for contact wth extenson workers mply that economc effcency ncreases wth the number of vsts made to the farm household by extenson workers. Ths result s n lne wth the arguments by Gbgb (001) who ndcates that regular contact wth extenson workers facltates practcal use of modern technques and adopton of mproved agrcultural producton practces. Table 1: Summary statstcs of varables of the stochastc fronter producton functon for sweet potato producton n Ngera Varables Mean Standard Devaton Output of sweet potato (kg) ,4.40 Farm sze (ha) Labour (man-days) Seed (kg) Fertlzer (kg) Pestcdes (grams) Gender of household Age of household Educatonal level (years) Farmng experence (years) Extenson vst (No. of Vsts) Access to credt Farmers co-operatve Household sze Source: Feld Survey data, 010

5 Res. J. Agrc. & Bol. Sc., 7(): , Table : Estmates of Stochastc Fronter Producton Functon Varables Model 1 (OLS) Model (MLE) Constant (0.747) (0.616) Ln Farm sze 0.60 (0.146) 0.373(0.17) Ln Labour 0.41(0.103) 0.05(0.095) Ln Seed 0.16(0.113) 0.175(0.089) Ln Fertlzer 0.08(0.04) 0.071(0.0) Ln Pestcdes 0.033(0.011)) 0.031(0.010) 0.8(0.055) γ 0.854(0.074) Log Lkelhood functon Note: Values n Parenthess represent standard errors Source: Feld Survey Data, 010,, sgnfcant at the 10%, 5%, and 1% level, respectvely. Table 3: Elastcty of Producton and return to scale Varable Elastcty of producton Farm sze Labour 0.05 Seed Fertlzer Pestcdes RTS Table 4: Tobt model estmates for determnants of economc effcency sweet potato producton Varable Coeffcent Standard Devaton T-value Constant Gender of household Age of household Educatonal level Farmng experence Access to extenson Access to credt Membershp of co-operatve Log lkelhood Source: Feld Survey Data, 010,, represent sgnfcant at the 10%, 5% and 1% level respectvely The results also ndcate that access to credt has a postve and statstcally sgnfcant effect on economc effcency levels at 1% level, whch suggests, that on average, farmers wth access to credt tend to exhbt hgher levels of effcency. Ths fndng s consstent wth the results by Bnam et al. (004). Access to credt permts a farmer to enhance effcency by overcomng Lqudty constrants whch may affect ther ablty to apply nputs and mplement farm management decsons on tme hence use of credt therefore loosens fnancal constrants, ensures tmely acquston and use of nputs and results n ncreased economc effcency. It s of crucal mportance to provde smallholder farmers who are often cash constraned wth credt n order to facltate the tmely purchase of crtcal nputs such as norganc fertlzers and pestcdes. The results ndcate a negatve and sgnfcant relatonshp between membershp n a farmers cooperatves and effcency contrary to what could be expected. Ths could be attrbuted to nadequate efforts by the exstng farmers cooperatve n nfluencng technology uptake. However, ths study found no statstcally sgnfcant relatonshp of age and gender each on economc effcency. The frequency dstrbuton of the estmated economc effcency ndces for the sample sweet potato farms are presented n Table 5. The result ndcates that t ranged from a mnmum of 0.13 to a maxmum The mean economc effcency was The estmates show that for the average sweet potato farmer to attan the level of the most economcally effcent farmer n the sample, he or she would experence a cost savngs of (1 0.61/0.99%). The least economcally effcency farmer wll have an effcency gan of 13.13% (1 0.13/0.99%) n sweet potato producton f he or she s to attan the effcency level of most economcally effcent farmer n the state. The sweet potato farmers n the sample were economcally neffcent as a result of allocatve neffcency.

6 Res. J. Agrc. & Bol. Sc., 7(): , Table 5: Frequency dstrbuton of Economc Effcency Economc effcency ndex Frequency Percentage (%) < Total Maxmum economc effcency 0.99 Mnmum economc effcency 0.13 Mean economc effcency 0.61 Source: Feld Survey Data, 010 Concluson: Ths study estmates stochastc fronter producton for sweet potato farmers n Delta State, Ngera. The results ndcate a sgnfcant varaton n economc effcency among sample households. Estmated farm specfc economc effcency ndces ranged from 0.13 to 0.99 wth a mean economc effcency of 0.61 whch mples consderable producton neffcency. Nevertheless, ths results show that there s a substantal potental for enhancng proftablty by reducng costs through mproved effcency. On average, by operatng at full economc effcency levels sweet potato producton entrepreneurs would be able to reduce ther cost by 38.38% dependng on the method employed. Important factors drectly related to economc effcency are educaton, access to extenson, access to credt and membershp n farmers cooperatve. These results call for polces amed at encouragng new entrants to cultvate sweet potato and the experenced ones to reman n farmng. Mcro-credt from governmental and non-governmental agences should be made avalable to rural farmers, for ths wll go a long way n addressng ther neffcency problems. References Agner, D., C.A. Lovell and P. Schmdt, Formulaton and Estmaton of Stochastc fronter producton functon models. Journal of Econometrcs, 16(1): Bnam, J.N., J. Tonye, N. Wandj and M. Akoa, 004. Factors Affectng the Techncal Effcency Among Smallholder Farmers n the Slash and Burn Agrculture Zone of Cameroon. Food Polcy, 9: Bozoglu, M. and V. Ceyhan, 007. Measurng the Techncal Effcency and Explorng the Ineffcency Determnants of Vegetable Farms n Samsung Provnce, Turkey. Agrcultural Systems, 94: Bravo-Ureta, B.E. and A.E. Pnheno, Techncal, Economc and Allocatve Effcency n Peasant Farmng: Evdence from the Domncan Republc. The Developng Economes, 34: F.A.O., 000. FAO Producton Year Book, Rome. Gbgb, M.T., 001. Constrants to Adopton of New Technologes by Small Scale Farmers n Delta State. Unpublshed B.Sc. Project, Agrcultural Economcs and Extenson Department, Federal Unversty of Technology, Akure, Ngera. Jondrow, J., C.A. Lovell, I. Materov and P. Smth, 198. On the Estmaton of Techncal Effcency n the Stochastc Fronter Producton Functon Model. Journal of Econometrcs, 19(3): Kopp, R.J. and E.W. Dewert, 198. The Decomposton of Fronter Cost Functon Devaton nto Measures of Techncal and Allocatve Effcency. Journal of Econometrcs, 19: Mbanasor, J.A. and K.C. Kalu, 008. Economc effcency of commercal vegetable producton system n Akwa Ibom State, Ngera: A translog stochastc fronter cost functon approach. Journal of Tropcal and Subtropcal Agroecosystems, 8(3): Sharma, K.R.P., P. Leung and H.M. Zalesk, Techncal Allocatve and Economc Effcences n Swne Producton n Hawa. A Comparson of Parametrc and Nonparametrc Approaches. Agrcultural Economcs, 0: Shehu, J.F. and S.I. Mshela, 007. Productvty and Techncal Effcency of Small scale Rce Farmers n Adamawa State, Ngera. Journal of Agrculture and Socal Scences, 3(4): Shephard, R.W., Theory of Cost and Producton Functon. New Jersey: Prnceton Unversty Press.