A Comparative analysis of Technical Efficiency Study among Arable crop base and permanent crop base Enterprise combination in Edo State, Nigeria.

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1 Australan Journal of Basc and Appled Scences, 6(13): 74-79, 2012 ISSN A Comparatve analyss of Techncal Effcency Study among Arable crop base and permanent crop base Enterprse combnaton n Edo State, Ngera. J. Egbodon Ph.D and C.I Ada-Okungbowa Ph.D Department of Agrcultural Economcs and Extenson Servces, Unversty of Benn P M B 1154,Benn Cty, Edo State, Ngera. Abstract: The soarng populaton n Ngera has created a growng demand for food that the avalable land may not be able to meet due to competng demand for land by other sectors. Ths paper examnes the productvty and techncal effcency of smallholder farmers nvolved n permanent crop based and arable crop based enterprse combnaton n Edo State, wth a vew of dentfyng gaps that may help optmze the use of avalable nputs, partcularly land and plantng materals. The smple random samplng technque was employed n selectng 240 respondents drawn from a farm famly populaton of 180,000 n Edo State. Emprcal estmates from that analyss showed return to scale of whch s an ndcaton that the two groups of farmers were operatng at the rratonal stage of producton. Techncal effcency values ranged from o.33 to 0.98, wth a mean value of 0.68 and wth mean value of 0.81 respectvely. Ths s an ndcaton that, on the average, the farmers were operatng 32% and 19% below the fronter. Techncal neffcency coeffcents of educaton level, crop combnaton, seed, land source and age jontly contrbuted to the techncal neffcency of the arable crop based farmers whle crop combnaton, seed source, and age jontly contrbuted to the techncal neffcency of the permanent crop based farmers n the study area. These estmates ndcate the exstence of gaps n the current producton effort and nterventon ponts that would help mprove techncal effcency and productvty of the two groups of farmers. The recommendaton s that the exstng extenson system be strengthened for capacty buldng and effectve dssemnaton of techncal nnovatons that would mprove the farmer s productvty and techncal effcency n the study area. Key words: Maxmum lkelhood estmate, Permanent Crop-based Enterprse, Producton Elastcty, Smallholder Farmer, Techncal Effcency. INTRODUCTION Farm enterprse combnaton s a basc relatonshp n agrcultural producton economcs nvolvng the allocaton of gven resources between two or more enterprses (Olayde and heady, 1982). A small holder permanent crop farmer would want to choose a combnaton of crop enterprses that wll maxmze output from a gven set of nputs wth mnmal usage. Permanent crop based enterprses gve crop enterprses cultvated n combnaton whch the major remans as the sole crop for contnuous harvest. Examples of such combnaton nclude yam/maze/ol palm and maze/melon/plantan. In Ngera today farm enterprse combnaton has become a fundamental opton for most small holder farmers snce n recent tmes human populaton exploson has arses wth a growng demand for land for estate development, road constructon, buldng, market constructon and recreatonal centres. In ths crcumstance farm enterprse combnaton has the capacty for economc use of land, ncrease producton n dversty at the smallholder farm level and has the potentals as an attractve opton. To generate output wthout necessarly ncreasng avalable land. Productvty effcency means the attanment of the producton goal wthout waste whle enterprse neffcency nvolves the dsproportonal and excessve usage of nputs. Irz and Mklenze (2002) opned that when producers are hghly effcent n the use of avalable nputs large productvty gans could only come from new technologes developed from nvestments n research. However mprovng farm management by converted techncal know-how s lkely to be the most effcent means of rasng productvty at the small hold farm level, (Ojo, 2007). The low level of crop producton n Ngera that has warranted the naton s expendng more on the mportaton of food commodtes to meet wth the aggregate growng demands s manly the result of low productvty and techncal neffcency of the farmers. Ths paper examnes the productvty of some of the resources nvolves n crop producton.e arable crop based and permanent crop based enterprses among small hold farmers. It also examnes the factors nfluencng the productvty and techncal effcency of the farmers n the study area wth a vew to dentfyng; Correspondng Author: Dr. John Egbodon, Department of Agrcultural Economcs and Extenson Servces, Unversty of Benn P M B 1154,Benn Cty, Edo State, Ngera. E-mal: dregbodonjohn@yahoo.com 74

2 Aust. J. Basc & Appl. Sc., 6(13): 74-79, Contrbuton of each resource nputs to output 2. Presence of techncal neffcency n the producton process 3. Predctng the techncal effcency of the farmers n the study area. Analytcal Framework/Lterature: The analytcal frame work for the study was based on the concept of techncal effcency of resource utlzaton and producton fronter proposed by Farrel (1957). Techncal effcency shows the success of a farm frm enterprse as t ndcates an ablty of a farm to produce maxmum output from a set of nput appled (Coell, 1995). From Farrels analyss, a farm that s sad to be techncally effcent n resource use operates on the producton fronter, whle a techncally neffcent farm n resource use operate below the producton fronter. Hence the poston of each farm enterprse relatve to the fronter could be nfluenced by some factors wthn the control or wthout the control of the farm decson unt. (Sal,1997). Techncal effcency of an ndvdual farm enterprse s defned n terms of the observed output Y to the correspondng fronter output y*. The Y* s maxmum output achevable gven the necessary exstng technology and assumng 100% effcency n resource utlzaton. Y * X E (1) Y TE * (2) Y f X, exp V U TE exp U (3) f X, exp V The stochastc fronter producton functon (SFPF) n effcency studes was adopted n ths study. In the analyss of SFPF, the error term (E) s assumed to have two components, V and U. The V account for the random effects on the farm enterprse combnaton actvtes whch are outsde the control of the decson unt whch the U measures the techncal neffcency effects whch are behavoral factors that come under the control of the decson unt. These factors are controllable f effcent management technques are put n place. The stochastc fronter approach s mostly preferred for agrcultural research because of the nherent varablty of agrcultural producton due to the nter play of clmatc factors, sol, pest, dsease and the ecosystem. Many small hold farm enterprses lack adequate and accurate record keepng ablty and avalable producton data are subject to measurement error. The stochastc fronter producton functon model s specfed as follows: Y = f(x β) + E (4) Where Y s output of farm enterprses combned n specfc unt, X denote the actual nputs vectors, β s s the vector of producton functon parameter and E s the error term that s decomposed nto two component parts V and U. The V s a normal random varable that s ndependently and dentcally dstrbuted wth zero mean and constant varance (δ u 2 ). It s ntroduced to capture the whte nose n the crop enterprse combnaton producton process. The V are factors that are not wthn the control of the farmers. The U measures the techncal neffcency relatve to the fronter producton functon whch s attrbuted to controllable factors. It s half normal dentcally and ndependently dstrbuted wth zero mean, constant varance. The varance of the random error δv 2 and that of the techncally neffcency effect δ u 2 and overall model varance are thus related. δ 2 = δ u 2 + δ v 2 And the rato y = δ u / δ 2 s called gama. It measures the total varaton n output from the fronter, whch can be attrbuted to techncal neffcency. MATERIALS AND METHODS The study was conducted n the three agro ecologcal zones of Edo State, Ngera. The prmary data were collected wth the ad of a well structured Questonnare and asssted wth personal ntervew. Two hundred and forty (240) small holder arable crop based and permanent crop based farmers were selected from the farm famly of 180,000 n the state (Edo ADP, 1995), through a smple random samplng technque. The frst stage nvolved a random samplng of two local government areas (LGA) from each of the ecologcal zones of the state to get Esan West, Igueben from Edo Central; Egor, Ikpoba-Okha from Edo South and Etsako West, Owan West from Edo North, whch gave a total of sx local government areas for the study. 75

3 Aust. J. Basc & Appl. Sc., 6(13): 74-79, 2012 The second stage nvolved a purposve selecton of four rural communtes each from the selected LGA to have a total of 24 communtes; fnally 10 farmers comprsng arable crop and permanent crop based farmers were randomly selected to get a total of 240 respondents used for the study. Baselne nformaton on socoeconomc characterstcs of farmers, nput used, output as well as unt prces of nputs and outputs were collected. Analytcal Technques: Descrptve statstcs were used to examne the respondents. A multple regresson model based on stochastc producton fronter functon that assumed a Cobb-Douglas form was employed to estmate the techncal effcency of the arable crop based and permanent crop based farmers n the study area. The model s expressed n log lnear form as: In Y = β 0 + β 1 In X 1 + β 2 In X β 7 In X 7 + V U (5) Where In = natural logarthm, Y = total output of crop base combnaton measured n (kg) a gn equvalent factor was appled to have unform weght from the farmers outputs. X 1 = farm sze (hectares), X 2 famly labour (man day), X 3 = Hred labour (man day), X 4 = plantng materals (kg), X 5 = deprecaton (Nara), X 6 = operatng cost (nara), X 7 = farm dstance (km), V = random error as prevously defned and U = techncal neffcency effects as stated earler. Estmated techncal neffcency model s as presented below: U = δ 0 + δ 1 Z 1 + δ 2 Z 2 + δ 3 Z δ 6 Z 6 (6) Where U = neffcency model effects, Z = educaton level (years) Z 2 = crop enterprse combnaton (arable base and permanent crop base) Z 3 = farmng status (dummy fulltme = 1, part tme = 2) Z 4 = land source (dummy from farmers store = 1, otherwse = 2) Z 5 = seed source (dummy from farmers store = 1, otherwse = 2) Z 6 = Age (years), δ 0 = constant and δ 1 s = unknown parameters to be estmated. Equaton (5) and (6) are jontly estmated by maxmzng the lkelhood functon (Udoh and Akntola, 2001). RESULTS AND DISCUSSION Socoeconomc Characterstcs of Respondents: Soco-economc characterstcs of Respondents are presented n table 1.0. the analyss showed that the farmers had an average age of 42 years, farmng experence of 22 years, farm sze of 3.9 hectares, household sze of 5 on the average, the average educaton level was secondary school level whch accounted for 51.5% and majorty of the farmers were marred whch also accounted for 72%. The mean arable crop based and permanent crop based enterprse combnatons were yam/maze/melon and yam/maze/plantan respectvely. Ths result s conssted wth Nwaru and Ekumankuma, 2002 who reported mean age of 42 years and 49 years for men and women crop farmers; whch ndcated that the bulk of the farmers are stll energetc and should be reasonable enterprsng. Table 1: Soco-Economc Characterstcs of Respondents. Varables Mean Educaton level (dummy, secondary=1,others=2) 51.5%(secondary) Crop combnaton(arable crop base, permanent crop base) 3 Farm sze(hectare) 3.9 ha Household sze(male and female) 5 Farmng experence(years) 22 years Martal status(marred=1,others=2) 72%(marred) Age(years) 42 years Source of land(dummy) 56% (rented) Farmng status(dummy) 57% (part tme) Source: Computed from feld survey, Productvty Analyss: The estmated coeffcents presented n table 4 for the arable crop based and permanent crop based enterprse combnaton were the elastcty of the producton varables ncluded n the SFPF for the Cobb- Douglas functonal form used. The elastcty of producton shows the change n output relatve to a unt change n nput (Mbanasor and Oboha, 2003). The elastcty of producton for the two groups of farmers was between 0 and 1 whch ndcated that the varables were utlzed n stage II whch s the relevant economc regon of producton. Also the 76

4 Aust. J. Basc & Appl. Sc., 6(13): 74-79, 2012 coeffcents of return to scale for arable crop based (1.075) and permanent crop based ( ) were greater than unt ndcatng an ncreasng return to scale. Ths mpled that wth respect to overall usage (RTS=1.0936), both group of farmers were operatng at the rratonal regon of producton. To mprove on ths, overall producton factors should be ntensfed for both groups of farmers and resources expanded to advance producton to stage II where there s effcent and economc use of resources. The return to scale result confrm prevous fndngs by Ahmadu, (2011) n whch both upland, lowland and rrgated rce producton exhbted ncreasng returns to scale. However returns to scale was hghest among the permanent crop based enterprses whch agree wth apror expectaton that there were more economc returns from permanent crop producton Techncal Effcency Analyss: Techncal effcency results are presented n tables 4 and 5 for the arable crop based and permanent crop based farmers.te range from and values wth mean values of 0.81 and 0.68 n tables 5 and 6 respectvely. Ths results ndcated that the arable crop based farmers were operatng 19% below the fronter whle the permanent crop based farmers were operatng 32% below the fronter whch also shown that the arable crop base farmers were more techncally effcent n the study area. However, techncal effcency vary largely more among the arable crop based enterprses wth gama value of than the permanent crop based enterprses wth gama value of These results ndcated that about 72.55% and 14.76% varaton n the output of the two groups of farmers were due to techncal neffcency respectvely. The loglkelhood test rato also confrm the presence of techncal neffcency effects n the operatons of the two groups of farmers and rejected the null hypothess (H 0 ) that there were no neffcency effects n the crops enterprse combnaton producton processes. thus at p=0.05 about 99 percent varaton n the output of the sample farmers were manly due to techncal neffcency effects wth only 1 percent varaton n the output due to random effects. Wth ths fndng the tradtonal response functon (ordnary least square) was found not approprate for the estmaton of the producton analyss; Based on ths model 1 of tables 2 and 3 was not employed for further econometrc and economc analyss therefore model 2 was used. The large proporton of these farmers (72%) havng larger techncal effcency s consstent wth the fndngs of Ojo (2007) Esobhawan (2007) and Egbodon (2011) who asserted that the vast majorty of the small holder farmers had hgh level of techncal effcency gans gven ther state of technology and resource condton. Techncal Ineffcency Analyss: Techncal neffcency s ncluded n tables 2 and 3 respectvely. The sgn and magntude of the coeffcent of the varables of the neffcency model are mportant n the determnaton of techncal neffcency of the farmers. Wth respect to the arable crop based enterprses the coeffcent of farmng status was negatve, whch ndcated that ths varable ncreased techncal effcency of the these farmers n the study area. But the varables educaton level, crop combnaton, seed source and age were postve whch ndcated that these varables jontly contrbuted to ncreased n techncal neffcency of the farmers whle for the permanent crop based enterprses, the coeffcent of educaton level ( ), farmng status ( ), farmng system. ( ) and land source ( ) were negatve, whch s an ndcaton that these varables jontly contrbuted to the farmers techncal effcency n the study area. But the varables crop enterprse combnaton (0.1554), age (0.2064) and seed source (0.1180) were postve whch ndcated that these varables ncreased techncal neffcency of the farmers n the study area. However the coeffcent of educaton level wth respect to the arable crop base farmers s not consstent wth apror-expectaton that educaton could enhance the capacty of farmers for the crop enterprse combnaton actvtes gven the World Bank report that output of educated farmers s about 13% hgher than the uneducated. The obvous reason for ths s that the educated or lterate farmers has the added advantage of knowng wth lttle promptng the rules of applcaton of producton nputs n order to acheve optmum result (Erhabor and Emokaro, 2007). These results are ndcatons that most of these farmers are stll used to plantng unmproved plantng materals and poor plantng methods hence techncal neffcency recorded among the farmers. Concluson: Results from the analyses showed that techncal effcency vared mnmally and nsgnfcantly more among the permanent crop base farmers for the varous crop enterprse combnatons n the study area. The RTS showed that overall productvty of the two dfferent crop combnatons were been carred out n the rratonal stage of producton, gvng room for mprovement n the manner the crop enterprses were beng combned. It was also observed n the analyses that age of farmers was postvely contrbutng to techncal neffcency of the farmers n the study area. Therefore the polcy opton wll be for Government to begn to encourage the youth n the area to actvely partcpate n agrcultural producton by provdng ncentves to attract the youth. The state 77

5 Aust. J. Basc & Appl. Sc., 6(13): 74-79, 2012 government should resusctate the extenson servces department of the Edo Agrcultural Development project for effectve dssemnaton of nnovaton to our farmers and extend subsdy on mproved plantng materals to farmers. Table 2: 0 Estmated producton functon of OLS and MLE for the Arable crop base farmers. Varables OLS. Estmate Coeffcents Std MLE estmate Coeffcents Standard Constant (1.544) (1.0566) Farm sze (0.1268) (0.1042) Famly labour (0.1046) (0.1006) Hred labour (0.0701) (0.0645) Plantng materals ( ) (0.0758) Deprecaton (0.0810) (0.0695) Varable cost ** (0.1217) ** (0.0961) Dstance to farm (0.0604) (0.0597) Sgma square (δ 2 ) ** (0.2614) Gama (Y) (0.6285) Loglkelhood funct Ineffcency model Constant (1.098) Educaton level (0.0417) Crop combnaton (0.4735) Farmng status (0.3339) Land source (0.3302) Age (0.1837) Seed source (1.6458) Source: calculated from research sample data, 2008 ** 5% level of sgnfcance. Table 3: 0 Estmated producton functon of OLS and MLE for the permanent crop base enterprse combnaton Actvtes n the study area. Varables OLS. Estmate Coeffcents Std MLE Estmate Coeffcents Standard Constant ** (0.1696) Famly labour (0.1799) Hred labour (0.1370) Plantng materal (0.1075) Deprecaton ** ** (0.1337) Operatng expenses (0.1696) Dstance to farm ** (0.0880) Sgma square (0.2966) Gama (0.4529) Loglkelhood rato Ineffcent model Constant (0.1959) Educaton level (0.2392) Crop combnaton (0.1268) Farmng status (0.4236) Seed source ( ) Farmng system (0.3544) Land source (0.1243) Age (0.2987) Source: calculated from research sample data 2008 ** 5% level of sgnfcance Table 4:0 Elastcty of Producton and Return to Scale. Varable Arable crop base Elast. Of Prod Permanent crop base Elast. Of Prod Pooled Data Farm sze Famly labour Hred labour Plantng materal Deprecaton Operatng exp Lst to farm Age RTS Source: Computed from feld survey

6 Aust. J. Basc & Appl. Sc., 6(13): 74-79, 2012 Table 5:0 Dstrbuton of Techncal Effcency range for permanent crop base farmers. Effcency data Frequency Percent Mean value = 0.68, mnmum value = 0.33 maxmum value = 0.98 Source: Computed from survey data 2008 Table 6:0 Dstrbuton of Techncal Effcency Range for Arable crop base farmers. Effcency data Frequency Percent Mean value = 0.81 mnmum = 0.15, Maxmum value = 0.92 Source: Computed from survey data REFERENCES Ahmadu, J., Resource use effcency n Rce Producton n Ngera and Taraba State, Ngera. Unpublshed Ph.D Thess Department of Agrcultural Economcs and Extenson Servces, Unversty of Benn, Benn Cty, Ngera. Coell, T.J., Recent development n fronter modelng and effcency measurement Austraton Journal of Agrcultural Economcs, 39: Edo State Agrcultural development programme (1995): A farm famly survey monograph. Egbodon, J., Economc analyss of effcency of crop enterprse combnaton among small holder farmers n Edo State, Ngera Ph.D Thess, Department of Agrcultural Economcs and Extenson, Ambrose All Unversty Ekpoma Edo State, Ngera. Erhabor, P.O. and C.O. Emokaro, Effcency of Resource use and Elastcty of producton among catfsh farmers n Kaduna State, Ngera Journal of Appled Scence Research, 5(7): Esobhawan, O.A., An effcency analyss of artsanal fsheres producton n Edo State, Ngera. Ph.D Thess, Department of Agrcultural Economcs, Ambrose All Unversty Ekpoma. pp: 120. Farrell, M.J., The measurement of producton effcency J. Roy Statstcs Socal Seres. A General. 120: Heady, E.O. and S.O Olayde, Introducton to Agrcultural Producton Economcs, Ibadan Unversty press Ltd. Irz, X. and V. Mckenze, Proftablty and Techncal effcency of Agrcultural. A Comparson of Intensve and Extensve Producton System n the Phlpnes. A paper presented at Acton Thematque programme Adopton des system prsccole; compare. An Interworkshop on Comparatve Adopton n Aquaculture Systems Aprl CIRAD, Montpeller, Frame. Ogundar, K. and S.O. Ojo, An examnaton of Techncal, Economc and Allocatve effcency of small farms. The case of cassava farmers n Osun State, Ngera. Journal of Central European Agrculture. 7(3): Ojo, S.O., Improvng Effcency n food crop producton for food securty n Ngera. Agrcultural Journal, 2(1): 9-15 medwellonlne@gmal.com Sal, A Characterstc Approach to Adopton; The Case of Improved Rce Varetes n Southern Senegal Ph.D Thess, Department of Agrcultural Economcs, Kanas State Unversty Manthattan Ks pp: Udoh, E.J. and J.O. Akntola, Techncal effcency of crop farms n the south eastern regon of Ngera; Ng Journal of Economc and Socal Studes, 42: