Analysis of profit efficiency among smallholder sheep farmers of N8 development corridor Free State, South Africa

Abstract

3The livestock sector is the largest agricultural-sub sector in South Africa contributing 4 approximately 30% to the agricultural output. The aim of this research is to measure the profit 5 efficiency of smallholder sheep farmers and to identify the factors affecting profit efficiency of the 6 farmer, in order to propose better strategies for sustainable livestock production among 7 smallholder farmers in the Free State. A stochastic profit frontier approach was used to evaluate 8 the profitability and efficiency of 217 smallholders in the N8 development corridor Free State, 9 South Africa. The results found that the farmers are not efficiency and have great capacity to 10 improve profitability in sheep production. The result showed that Profit efficiencies of the farmers 11 varied between 15.5% and 80.4% with a mean of 65.1% implying that an estimated 34.9% of the 12 profit is lost due to a combination of economic and allocative inefficiencies in sheep production. 13 The study found that profit efficiency is positively influenced by level of education and household 14 size (members below 18 years old) while gender and sheep loss increase profit inefficiency. Profit 15 efficiency of the farmers can be significantly increased through effective education and training of 16 farmers. 17 18

Assessment of Profit Efficiency for Spinach Production under Small-Scale Irrigated Agriculture in the Eastern Cape Province, South Africa

“…This might be due to the fact that educated farmers were eager to disseminate technology that they were able to receive and interpret information, disseminating new information and making use of improved technologies, such as improved seeds, fertilizers, and pesticides for farming. These results concur with Nyam et al [35] and Kaka et al [30]. Education plays a crucial role in farming.…”

“…The gamma (γ) (which is the ratio of the variance of the inefficiency component to the total error term) value of 0.66 implies that about 66% of the variation in the output of spinach farmers was due to differences in their profit efficiencies (the total variation in output is due to the presence of production inefficiency). These results correspond with the works of Nyam et al [35] and Kamu [36] in that profit efficiency (PE) is a substantial contributor to the total deviation of output. This suggests that the one-sided random inefficiency factor strongly outweighs the measurements error and other random disturbances.…”

“…A lack of visits by extension agents affected farmers negatively as they were restricted in their access to new information, techniques of production, understanding new practices, and use of modern inputs, which in turn would improve their profit efficiency. These results were in line with the work of Nyam et al [35] and Mukwalikuli [37]. Access to extension services decreases profit inefficiency in spinach production among smallholder farmers as farmers lack knowledge of which agricultural techniques to use and lack market information important for improving farm returns.…”

“…Thus, profit efficiency is defined as the farms' ability to attain maximum profit given the variable input prices and the level of fixed factors of the farm. Profit inefficiency, therefore, is referred to as the loss of profit for not operating at the maximum level possible [35]. The stochastic production frontier model suggests that the inefficiency effects can be expressed as a linear function of explanatory variables, reflecting farm-specific characteristics [36].…”

“…However, if it were not correctly managed, it would have an adverse effect on production and productivity. The advantages of farm labour include affordability, availability, and ease of allocation in different farm activities [30,35,42]. The large household size tends to restrict the attainment of higher profits because the income derived is consumed in ensuring that the numerous needs of the household are met, thereby drawing on the financial resources beneficial to the farm.…”