An Analysis of Technical Efficiency in the Presence of Developments Toward Commercialization: Evidence from Tanzania’s Milk Producers

Abstract

The level and determinants of technical efficiency in milk-producing households are examined in connection with households’ level of commercialization. A sample of 469 milk producers are modeled using Stochastic Frontier Analysis (SFA). Average Technical Efficiency (TE) is estimated to be 80%, with variation among regions and generally reflecting levels of commercialization. Results show that assuming milk producers are rational, TE is increased by increasing the number of cattle, cows, and crossbreeds, and by additinal veterinary and feed inputs. These results support much existing research, and our contribution is the extension of analysis to actions and characteristics of the value chain due to commercial behaviors. We identify both direct and indirect potential effects of commercialization and identify mechanisms for their operation in development programs for commercial value chains. We find that credit access, training, group membership, market participation, and female household all improve TE while non-cattle income would reduce TE. We present sub-groups of households to better contrast levels of productivity and compare a limited number of the sub-groups' characteristics and actions. We provide commentary and explanation regarding commercialization and its direct and indirect connections to productivity. Recommendations include partnerships and facilitating actions that support commercialization, in association with improving efficiency in Tanzanian dairy.

Factors Influencing Technical Efficiency in the EU Dairy Farms

“…Other differences such as soil quality, temperature, and rainfall can also be expected [16,17]. Regional differences have also been noted by Batha et al [18].…”

“…The positive relationship between herd size and efficiency was also confirmed by Demircan [50]. According to Batha et al [18], technical efficiency increases with an increasing number of cattle. Priyanka et al [21] showed that technical efficiency was high for all herd size categories.…”

“…Some studies have evaluated the factors affecting the technical efficiency with respect to the abolition of quotas [11][12][13], to new and old EU member states [14,15], to regions [16][17][18], subsidies drawing [19,20], herd size [18,21,22], the ratio of the total number of dairy cows to the total number of cattle [23], and the economic size [24]. Technical efficiency in agriculture is influenced by many other factors such as technology, quality of factors, management and organisation on the farm, political and institutional conditions, farm economies of scale, etc.…”

Exploring social indicators in smallholder food systems: modeling children’s educational outcomes on crop-livestock family farms in Madagascar

“…The outcome variable for Phase I's SFA is liters of milk produced, captured in surveys as the total volume of milk produced on-farm in the prior year. Explanatory variables for analyzing dairy productivity with SFA typically include: farmer characteristics such as age, education, and years of experience; cow herd size and breed type; measures of labor; inputs such as feed and veterinary costs; climate data; water availability; access to markets, credit, and extension services; and household size (Masuku and Sihlongonyane, 2015;Masunda and Chiweshe, 2015;Nakanwagi and Hyuha, 2015;Hassan et al, 2018;Girma, 2019;Bahta et al, 2021). Unfortunately, the available dataset did not include climate data on temperature or rainfall, nor variables reflecting water availability or extension services, but other variables mentioned were available for testing in the frontier and the inefficiency model.…”

Measurement and Evaluation of the Efficiency and Total Productivity of Dairy Farms in Poland

“…Jan et al [37], when assessing the long-term technical efficiency of Swiss dairy farms located in mountain areas, while taking into account both social, economic and environmental resources, have shown that technical efficiency is positively influenced by: farm size, a focus on non-agricultural income, milk production intensity and ecological production system, and that negative impacts on the technical efficiency of dairy farms are: part-time work, off-farm work, intensity of feed and concentrate use, age and education of the farmer. Bahta et al [38], by analyzing the level and determinants of technical efficiency on dairy farms in Tanzania with the use of SFA, have proven that increasing the number of cattle, additional veterinary and fodder inputs increase the technical efficiency of dairy farms. The efficiency of dairy farms also improves access to credit, training, and membership in producer groups.…”