ECONOMIC EFFICIENCY OF SMALLHOLDER FARMERS IN WHEAT PRODUCTION: SILTI WOREDA CENTERAL ETHIOPIA REGION ETHIOPIA

ABSTRACT

Due to a massive yield gap, Ethiopia, the largest wheat producer in Africa, is still a net importer. This dilemma is most evident in Silti Woreda, where smallholder yields remain stagnant at 1.5 t/ha. The purpose of this study was to evaluate the technical (TE), allocative (AE), and economic efficiency (EE) levels of smallholder wheat growers in Silti Woreda and to pinpoint the main institutional and socioeconomic elements that account for efficiency disparities. Both primary and secondary data sources were used. In order to select a representative sample, three stage sampling procedure was used, 196 randomly chosen wheat-growing households provided a cross-sectional dataset. Stochastic production frontier approach was employed. The stochastic production frontier model reveals that wheat production is influenced by labor, oxen, land, and DAP. The inefficiency coefficient is 0.74, highlighting diminishing returns in stage II production while suggesting opportunities for growth despite inefficiencies.The stochastic frontier technique reveals significant deferential efficiencies: mean technical (69.7%), allocative (48.95%), and economic (40.12%) efficiencies show that farmers may use their current resources to reduce expenses by 59.88% or raise output by 30.3%. Tobit regression revealed important factors, such as the beneficial benefits of market information, off-farm income, and extension contact; however, loan availability had a significant detrimental impact on allocative and economic efficiency, indicating that money is squandered without supervision. In order to increase productivity, lessen reliance on imports, and improve food security, the results highlight that inefficient use rather than input scarcity is the main obstacle. This calls for a policy shift toward interventions that combine credit with technical training, reorient extension to cost-minimizing allocation, and encourage practices like row planting.