STOCHASTIC FRONTIER ANALYSIS OF MAIZE FARMERS IN AZAD JAMMU AND KASHMIR, PAKISTAN. Khurram Nawaz Saddozai*, Umme Rubab* and Abass Ullah Jan*

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1 Pakstan J. Agrc. Res. Vol. 28 No.4, 2015 STOCHASTIC FRONTIER ANALYSIS OF MAIZE FARMERS IN AZAD JAMMU AND KASHMIR, PAKISTAN Khurram Nawaz Saddoza*, Umme Rubab* and Abass Ullah Jan* ABSTRACT:- The research study was carred out to analyze the techncal effcency of maze growers through Cobb-Douglas type Stochastc Fronter Analyss n four vllages of Muzaffarabad dstrct, Azad Jammu and Kashmr (AJK), Pakstan. The proportonal samplng allocaton samplng technque was adopted to collect prmary data from 80 sampled respondents n The maxmum lkelhood estmates of major nputs showed that seed, tractor hours, FYM and labor days have contrbuted sgnfcantly to ncrease the maze yeld. However, the DAP and urea have shown no effect on maze yeld. The mean techncal effcency was estmated at 83%, mplyng that the farmers can stll enhance ther techncal effcency by 11% wthn the gven nputs and technology. The results have demonstrated that maze crop s lucratve crop n the study area as maze growers have receved ncreasng return to scale.e., 1.90 (Ep>1), hence economes of scale exsts. The varance parameter lambda (λ) and gamma (Γ) both were sgnfcant ndcatng the good ftness of model and neffcency mpact, respectvely. The estmated value for Γ was 0.77 underscores that 77% varaton n the producton fronter was explaned by techncal neffcency effect. The neffcency ndces showed that farmers wth more schoolng years and more number of contacts wth extenson agents were more effcent. Contrarly, age of the farmer and large farm sze have nverse relaton to techncal effcency of the farmers. Ths research study concludes that the use of more labor and applcaton of farm yard manure s contrbutng sgnfcantly. It s recommended that the hgh nput prces may be levelled off by the regulatory authortes so that farmers can apply the requred crop nputs such as DAP and urea n study area. Key Words: Maze; Techncal Effcency; Stochastc Producton Fronter; Cobb- Douglas; Producton; Pakstan. INTRODUCTION Maze s one of the most common cereal crops grown globally and ranked at thrd most common crop n the total food gran producton after wheat and rce worldwde (Anupama et al., 2005). The global world producton of maze was estmated to be 950 mt for whch s an ncrease of about 9% from The US s the leadng producer 338 wth the producton of about 40% of total maze output followed by Chna, whch s contrbutng mt to total world producton. Brazl, European Unon and Argentna produced 67, 65.5 and 25 mt, respectvely. Pakstan's agrculture sector employed 43.7% of labour force that fulflls ther own food requrements and ensures avalablty of food for the rest of naton and value-added * Department of Agrcultural and Appled Economcs, The Unversty of Agrculture, Peshawar, Pakstan. Correspondng author: ksaddoza@hotmal.com

2 KHURRAM NAWAZ SADDOZAI ET AL. actvtes (GoP, 2014). In Pakstan, maze s thrd mportant cereal after wheat and rce and contrbutes 0.4% to overall Gross Domestc Product (GDP) and 2.1% to value added of agrcultural output. Maze was planted on about 1.08 mha wth producton of 3.3 mt (GoP, 2013). Maze s a sgnfcant cereal crop of Azad Jammu and Kashmr (AJK), Pakstan and remaned the sngle largest cereal crop n AJK for many decades. It was the staple food among Kashmres (local resdent of Kashmr) before the avalablty of substtute crops such as wheat and rce. Maze s stll grown n a wde range of agro-ecologcal zones and growng alttude ranges from 1,828 m to 3,656 m. Ths research study has made an effort to address the maze producton fronter and techncal effcency aspect of the maze growers. The objectves of present study are to estmate the techncal effcency of maze growers, analyze the factors (f any) causng neffcency n maze yeld and suggest polcy gudelnes for maze growers. MATERIALS AND METHOD Study Area The study was undertaken n the four vllages of dstrct Muzaffarabad of AJK, Pakstan, namely Komm, Majho, Garh Dupatta and Nowshehra. The ratonale of selecton of these four vllages was that maze producton s relatvely hgher as compared to rest of the vllages of dstrct Muzaffarabad. Samplng Desgn The proportonal allocaton samplng technque was utlzed to select the 80 sampled respondents (maze growers) n the study area as prevously used by Chaudhry (1998). The formula used for proportonal allocaton technque s as follow: n = N/N*n......I where, n = No. of sampled respondents th n vllage n = Total sample sze N = Total number of farmers n research area N = Total number of farmers n each vllage The estmaton of proportonal allocaton formula was made to obtan the requred sample for each vllage. The lst of all the maze growers of aforesad vllages was taken from agrculture department of AJK and desred sample sze of 80 respondents were derved by employng Proportonal Allocaton technque as follows: n (Majho) = 205/865 *80= 19 1 n (Komm) = 240/865 *80 = 22 2 n (Garh 3 Dupatta) = 255/865*80 = 24 n (Nowshehra) =165/865*80 = 15 4 Data Type and Analyss Procedure The prmary data were collected from the selected farmers through ntervew schedule for The collected data was analyzed by usng computer software STATA and Fronter 4.1. Conceptual Modelng The Cobb-Douglas type Stochastc Fronter Producton Model s utlzed for ths study. Ths model was demonstrated by Farrell (1957) followed by Agner et al. (1977) and Meeusen and Broeck (1977) who amalgamate the further bass for ths model. The general form of ths model can be mathematcally expressed as follows: ln q = β + β ln x + v - u o 1 339

3 STOCHASTIC FRONTIER ANALYSIS OF MAIZE FARMERS q = exp (β 0 + β 1 ln x + v - u ) q = exp (β 0 + β 1 ln x ) exp where, exp (β + 0 (v ) exp(- u ) β lnx ) = Determnstc Compo- 1 nent exp(v ) = Nose exp(- u ) = neffcency = 1, 2, N (Number of farmer) x β v f (x ; β) = Sutable functonal form th y = Output level of samp u led farm th = Inputs used for the farm = Parameters to be estmated = Accounts for random varaton that are not n the control of farmers havng normal dstr- buton that s V ~ N (0, 2 σ v). = A non-negatve techn- cal neffcency effect whch s assumed to have half normal dstrbuton. Model Specfcaton The model specfcaton of ths research study s as follow: lny = β + β lns + β lnth In Y β S n kg ha TH β lndap + β lnurea β lnfym + β LAB D MAJ + D Komm D3Nowsh + (V - U ) = Natural Logarthm = Log transformed yeld n m ha = Parameters to be estmated = Log transformed seed = Log transformed trac- tor ploughng hours ha th DAP UREA FYM LAB DMAJ = Log transformed DAP Fertlzer n bags ha = Log transformed Urea Fertlzer used n bags ha = Log transformed farm yard manure n trolleys ha = Log transformed labor n person days per acre for hoeng/weedng/ harvestng = Dummy varable = 1 f farmer of the vllage Majho and 0 otherwse DKomm = Dummy varable = 1 f farmer of vllage Komm and 0 otherwse DNowsh = Dummy varable = 1 f farmer of vllage Nowshehra and 0 otherwse V = A random varable wh- ch s assumed to be ndependently and normally dstrbuted U wth 0 mean and con- 2 stant varance σ v = A non-negatve techncal neffcency effect whch s assumed to have half normal dstrbuton Estmaton of Techncal Ineffcency Level of Maze Producers The followng model was used to estmate the techncal neffcency n maze producton where, U = δ + δ EDU + δ AGE δ CONT + δ FSZ 3 4 µ = Ineffcency effect δ = Coeffcents to be estmated EDU = Educatonal level of the farmer (years of schoo- 340

4 KHURRAM NAWAZ SADDOZAI ET AL. lng) AGE = Age of the farmer (years) CONT = No. of farmers contacts wth extenson agents (nclude farmers vsts ether to extenson agent offce for mproved knowledge, demonstraton plot or other extenson events). FSZ = Farm sze n ha RESULTS AND DISCUSSION Descrptve Statstcs of Major Varables Maze yeld can be affected by many factors such as seed, tractor hours, DAP, urea, FYM and labor days. In the present study these explanatory varables were consdered as a reason for varaton n maze yeld. The results revealed that the mean value of seed used was kg wth a standard devaton of 7.48 (Table 1). The mnmum amount of seed used by the respondents was kgha and the maxmum was reported as kgha. Seed had the hghest standard devaton among all the other ndependent varables whch showed the hgh varablty of seed usage among the respondents. Quantty of tractor hours ranges between 2.47 h as mnmum and h as maxmum ha wth mean value The fertlzers such as DAP and urea had the mean of 0.57 and 1.20, respectvely. The maxmum amount of the DAP and urea appled by the farmers was 2.50 and 3.70 bags ha, respectvely. The results llustrated that the use of both these fertlzers was very low n the study area and the respondents had more relablty on FYM. All of the sampled respondents were usng FYM n dfferent amounts. Table 1. Descrptve statstcs of major nputs of maze crop Crop nputs Obs. Mn. Max. Mean Seed (kg h ) Tractor (h ) DAP (bags h ) Urea (bags h ) FYM(tractor trolleys)** Labor Days (N) Source: Prmary Data, 20134, *1 bag = 50kg, **1 tractor trolley = 500 kg The mnmum amount of FYM was 3.47 tractor trolley and the maxmum was 11 tractor trolleys wth a mean value of 7.00 tractor trolley. In the study area the number of labor days range from to wth a mean of The results further revealed that labor days had the major contrbuton towards maze productvty. Stochastc Fronter Producton Analyss The maxmum lkelhood estmates of Cobb-Douglas producton functon revealed that majorty of the explanatory varables had contrbuted sgnfcantly to the maze producton. It s evdent that the coeffcents of all the explanatory varables had postve sgn and are accordng to economc theory (Table 2). However the results for chemcal fertlzers.e., DAP and urea had shown nsgnfcant contrbuton. The nsgnfcant effect of both fertlzers mght be because of ther low use n the study area. Ths result s consstent wth the prevous research study of Sadq et al. (2009). The results further revealed that among the ndependent varables seed s sgnfcant at 5% level of sgnfcance (P<0.05). Maze output showed the 341

5 greatest elastcty to labor among all the explanatory varables. Ths stuaton underscores that the maze crop s labor ntensve and had the maxmum response to the use of labor followed by FYM and tractor hours. All the other ndependent varables except DAP and urea were sgnfcant at 1% level of sgnfcance (P<0.01). The elastcty sum of all nputs was 1.90 (Ep>1) whch suggests that the growers n the study area had the ncreasng returns to scale. These results are consstent wth those reported by Bozulu and Cehan (2007), and Zalkuw et al. (2010). The four vllages of the study Table 2. STOCHASTIC FRONTIER ANALYSIS OF MAIZE FARMERS Source: Prmary Data, 20134, * and ** = Sgnfcant at 5% and 1% level, respectvely. area were assgned as dummy varable to compare the maze producton level among these vllages. The vllage Ghar Dupatta was taken as reference vllage whle vllages Majho, Komm and Nowshehra were compared wth the reference vllage. It s evdent from the estmated data that maze producton of Majho and Komm s sgnfcantly dfferent from referenced vllage. However, Nowshera s nsgnfcant mplyng that maze producton of Nowshehra s almost same as to correspondng vllage. The computed value of λ was whch s sgnfcantly dfferent from zero suggests that the employed stochastc Independent varables Coeffcent S.E t-rato P-Value Constant ln Seed * ln Tractor hours ** In DAP In Urea ln FYM ** ln Labor ** Sum of elastcty of nputs Dummy for Majho ** Dummy for Komm ** Dummy for Nowshehra Varance parameters Maxmum lkelhood estmates for techncal effcency Sgma-v Sgma-u Sgma Lambda (λ) Gamma (Γ) Maxmum lkelhood value

6 producton model was good ft and t correctly measured the composte error term. The gamma parameter was estmated at 0.77 whch underscores that 77% varaton n the stochastc producton functon was due to the neffcency factors, the factors that are unexplaned by the producton functon. Ineffcency Estmates The results of neffcency model llustrated that the negatve sgn wth two varables.e., educaton and contact wth extenson agents depcts that hgher level of educaton and more number of contacts of farmers wth extenson agent had an nverse relaton wth neffcency (Table 3). Ths mples that an ncrease n educaton of farmer can decrease the neffcency by 0.08%. The results are consstent wth the prevous study by Battese et al. (1996) and Owens et al. (2001). The results further llustrate that the age of the farmers was postvely related wth the neffcency mplyng that f the age of the farmers ncreased by 1% t wll ncrease the neffcency by 0.15%. The reason can be that aged farmers can't look after ther feld properly than the young energetc farmer. The results are consstent wth the prevous fndngs (Battese and Coell, 1995; Mathjs and Vranken, 2000). The coeffcent of farm sze was found sgnfcant and Table 3. KHURRAM NAWAZ SADDOZAI ET AL Major factors affectng techncal neffcency had drect relaton wth techncal neffcency. The reason for ths nverse relaton mght be that t s easer to manage the operatons for small farm sze as compared to the large farm sze. Ths fndng s consstent wth the results of Laura and Langemeer (1999) and Bozulu and Cehan (2007). The descrptve statstcs of the estmated techncal effcency score for maze growers revealed that the techncal effcency estmates ranges between 62% and 94% (mean = 83% ). The average techncal effcency of 83% showed that the farmers n the study area were about 1% below the producton fronter. Ths confrms that the farmers n the study area were not completely techncal effcent and the maze output could be ncreased by 11% wth the gven resources and technology. CONCLUSION AND RECOMMENDATION The stochastc producton fronter analyss llustrated that labor was the major contrbutng nput for maze producton. The mean techncal effcency n study area was 83% whch revealed that stll there s potental to mprove the producton by 11% wthn gven nputs and technology. The computed gamma was 0.77 underscores that 77% varatons n the maze output was explaned by techncal Varables Coeffcent S.E t-rato P-value Contact Educaton (schoolng year) Age (years) Farm sze (acres) Extenson agent contacts (No.) Source: Author's Own Estmates 343

7 STOCHASTIC FRONTIER ANALYSIS OF MAIZE FARMERS neffcency factors. Educaton and contacts wth extenson department showed negatve mpact towards the neffcency. To overcome these ssues extenson agents should tran the farmers regardng maze crop management practces to enhance the producton. Moreover, Government should take steps to keep the reasonable prces of maze nputs. LITERATURE CITED Agner, D.J., C.A.K. Lovell and P. Schmdt Formulaton and estmaton of stochastc fronter producton models. J. Econ. 6: Anupama, J., R.P. Sngh and R. K Techncal effcency of maze producton n Madhya Pradesh: Estmaton and mplcatons. Agrc. Econ. Res. Rev. 18: Battese, G.E. and T. Coell A model for techncal neffcency effects n a stochastc fronter producton functon for panel data. Emprcal Econ. (20): Battese, G.E., S.J. Malk and M.A. Gll An nvestgaton of techncal neffcences of producton of wheat farmers n four dstrcts of Pakstan. J. Agrc. Econ. 47: Bozulu, M. and V. Ceyhan Measurng the techncal effcency and explorng the neffcency determnants of vegetable farms n Samsun provnce, Turkey. 3: Chaudhry, S.M Introducton to statstcal theory. Ilm Ktab Khana, Kabr Street, Urdu Bazar, Lahore. 18 p. Farrell, J.M The measurement of productve effcency. J. Royal Stat. Soc. 120: GoP Pakstan Economc Survey, Economc Advser's Wng, Fnance Dvson, Government of Pakstan, Islamabad. p GoP Pakstan Economc Survey, Economc Advser's Wng, Fnance Dvson, Government of Pakstan, Islamabad. p Gow, L.R. and M. Langemeer An effcency analyss of cattle backgroundng n Kansas. Paper presented at Western Agrc. Econ. Laura and Langemeer (1999) Assoc. Annual Meetng, Fargo, ND. p Laura, G., M.S. and Langemeer, M., An effcency analyss of cattle backgroundng n Kansas. Paper presented at Western Agrc. Econ. Assoc. Annual Meetng, Fargo, ND. p. 12. Mathjs, E. and L. Vranken Farm restructurng effcency n transton evdence from Bulgara and Hungary. Amercan Agrc. Assoc. Annual Meetng, Tampa, July 30-August 2, Florda. p Meeusen, W. and J.V.D. Broeck Effcency estmaton from Cobb-Douglas producton functon wth composed error. Int. Econ. Rev. 18: Owens, T., J. Hoddnott and B. Knsey The mpact of agrcultural extenson on farm producton n resettlement areas of Zmbabwe. Workng Paper Seres Centre for the study of Afrcan Econ. Un. Oxford. p. 24. Sadq, G., Z. Haq, F. Al, K. Mahmood, M. Shah and Inamullah Techncal effcency of maze farmers n varous ecologcal zones of AJK. Sarhad J. Agrc. 25(4 ): Zalkuw, J.W., Y.Z. Da and R.Z. Da. 344

8 KHURRAM NAWAZ SADDOZAI ET AL Analyss of economc effcency of maze producton n Ganye. Adamawa State, Ngera. Report and Opnon. 2(7): 1. S. No AUTHORSHIP AND CONTRIBUTION DECLARATION Author Name Contrbuton to the paper Dr. Khurram Nawaz Saddoza Ms. Umme Rubab Mr. Abass Ullah Jan Results and ther nterpretaton, Supervsed data analyss, Overall management of artcle Introducton, Data collecton, Data entry, Revew of lterature and model development Results and dscusson, Concluson and recommendaton (Receved January 2015 and Accepted July 2015) 345