Determinants of the cost efficiency of Teff production in South Soddo District, Gurage Zone, Central Ethiopia Region, Ethiopia

Abstract This study examined the determinants of cost efficiency in teff production among smallholder farmers in the South Soddo District of Ethiopia. The primary objectives of this study were to estimate the level of cost efficiency among smallholder teff producers and to identify the factors contributing to their inefficiencies. Using stochastic frontier analysis, the research revealed an average cost efficiency of 89.2% among the sampled households, ranging from 37.2% to 97.4%, indicating a significant variation in cost efficiency. The findings suggest that, on average, farmers could reduce their input costs by 10.8% while maintaining current production levels, highlighting the potential for improved cost efficiency. The stochastic cost frontier analysis provided insights into the influence of various cost variables on production expenses. Land and labour prices were found to have the strongest effect, with elasticities of 0.276 and 0.244, respectively, underscoring their critical role in determining total costs. Seed, oxen, fertilizer, and herbicide prices also contributed significantly, although to a lesser degree. Several key factors were found to influence cost efficiency significantly. The age and education level of the household head, as well as family size, were negatively associated with cost inefficiency, suggesting that older, more educated farmers and larger households tend to increase cost efficiency. Conversely, land fragmentation was positively related to cost inefficiency, indicating that farmers managing multiple, scattered plots face greater challenges in terms of cost efficiency. The findings of this study provide valuable insights that can inform policy interventions and extension service strategies to increase cost efficiency in the teff production sector of the South Soddo District. The recommendations include targeted training programs, promoting agricultural education and knowledge sharing, addressing land fragmentation, and improving access to critical inputs such as land and labour.