Are farmers profit efficient? Evidence from groundnut farmers in Malawi

Groundnut growing is one of the major farming activities in Malawi, however, the extent of efficiency among the farming community has not been fully explored. This study analyzes the direct production efficiency by considering profit efficiency associated with groundnut production using stochastic profit frontier function and the inefficiency effect model specification. The results indicate that the profit efficiency in groundnut production ranges from 1% to 89% (mean of 45%). The relationship between efficiency and both farm and institutional characteristics was found to be significant. Efficiency appeared to be positively associated with farmer’s access to extension services (t=2.10), household size (t=1.78) and soil fertility (t=3.56), but associated negatively with distance to market (t=6.30) and size of land allocated to groundnut production (t=5.33). The implication of the results is that there is scope for increasing the production of groundnuts by about 50% by improving the access to extension, market and improving farm management.

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 Record created 2017-04-01, last modified 2017-08-29

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