TECHNICAL EFFICIENCY OF SMALL HOLDERS MILK PRODUCTION: THE CASE OF HAWELLA – TULLA SUB CITY, SIDAMA ZONE, SOUTHERN ETHIOPIA

Milk production is found to be an important enterprise and have the potential to be economically viable and greatly contribute to poverty alleviation, food security, improved family nutrition and income and employment generation. However, farmers in study area were not optimizing on their milk outputs due to input utilization and other related constraints of milk production. The objective of this study is therefore to measure the existing level of technical efficiency in milk production in the study area and identify determinant factors that cause efficiency variation. The study used a cross sectional data obtained from a field survey using structured questionnaire from a random sample of 203 smallholder milk producers in Hawella-Tulla Sub City of Zone, Southern Ethiopia. Both descriptive and econometric methods of analysis were used. The maximum likelihood parameter estimates showed that the labor, improved fodder and dry fodder supplied have positive and significant effect on milk production. The results also reveal that the labor has the highest elasticity, then improved fodder, followed by dry fodder supplied. The analysis further shows that the mean technical efficiency of farmers is 61% implying that on average about 39 percent of output can be realized with the existing technology and resource in the study area only by improving milk producers’ technical efficiency. From the result we concluded that milk production in the study area is subject to increasing returns to scale of about 1.23. On the other hand the estimates of tobit model indicated that, gender of household head, Age of household head, experience on dairy farming, education level of household head, off-farm income, credit access, and training on dairy farming, water source availability and frequency of disease prevalence were found to be the significant determinants of technical efficiency of milk production in the study area. Therefore, there is a need for suitable interventions by the government planners and other stakeholders specifically targeting the farms/farmers with low technical efficiency level by addressing the listed factors that significantly affecting technical efficiency of milk production in the study area, to bring about significant increase in milk production in a study area in particular and in a country in general.