Estimating Profit and Technical Efficiency of Small-scale Irrigation Shallot Farming: A Case Study of Godino Peasant Association in Ada Woreda, Oromiya Region, Ethiopia

Abstract

Limited information exists on the economics of horticultural production in Ethiopia. For instance, while the yield of shallot is fairly known, its production  costs and benefits are grossly unknown. The objective of this study was, therefore, to estimate the profit and technical efficiency of small-scale irrigation  farming by monitoring the costs incurred. Based on farm-level data from 106 small-scale irrigation producers, the farm level profit and output-oriented  technical efficiency indices were determined using the SPSS computer package and stochastic production function, respectively. The average cost to  produce one kilogram of shallot was estimated at Birr 0.72 whereas the average farm gate price was estimated at Birr 1.87. This indicated that producing  shallot under smallscale irrigation farming is a financially viable venture, and it significantly contributed to household cash income and food security. The  profit levels at the the three studied areas ranged from24-145%. The stochastic frontier results revealed mean technical efficiency of 0.77 for all the farms.  This means that average levels of farms were below the frontier by 23%, which otherwise means that the total output of shallot could be  increased by up to 23% above the actual output levels attained in the study area during the survey year. The most limiting factors for small-scale irrigation  farming were the demand of the irrigation husbandry for strenuous efforts of the farmers (95%), lack of fertilizer (91%), input-costs (70%), lack  of credits (45%) and shortage of water in May (30%).