Economic Efficiency of Cow Milk Production in West Hararghe Zone, Oromia National Regional State, Ethiopia

Abstract

Livestock play great roles in developing countries, especially to improve and augment livelihood of the poor in the rural setup. In Ethiopia's, milk has a significant social and economic role since it provides food and a source of income for dairy farmers. Understanding the production efficiency outcomes would be a significant step toward improving food securities conditions, while ensuring sustainable and increased agricultural production. Therefore, this study examines economic efficiency of cow milk producers’ using a cross-sectional data obtained from 385 randomly selected sampled households from West Hararghe Zone, Oromia National Regional State of Ethiopia. The data were analyzed using descriptive statistics and econometric models. The Stochastic frontier model result revealed that the mean technical, allocative and economic efficiency scores were found to be 76, 57 and 41 percent, respectively. This indicated that there exist considerable inefficiencies in milk production in the study areas. The Tobit model result also indicate that extension contacts, farm size and ownership of improved breed has positively and significantly affected technical, allocative and economic efficiencies, and sex of household head, and market information was also found significantly and positively influence allocative and economic efficiencies. Technical and allocative efficiency was positively and significantly influenced by education, while technical efficiency was positively and negatively influenced by livestock owned and age, distance to water source. This study suggests that the government should focus on creating favorable policy environment for dairy enterprise development, and encourage use of crossbred cows and upgrading local cow performance, strengthening the provision of formal and informal education, promoting and empowering young people in dairy production and delivering market information timely.