Economic Efficiency of Soybean Production in Ogo-Oluwa Local Government Area of Oyo State, Nigeria

Abstract

This study estimated the technical, allocative and economic efficiencies indices and further examined the factors influencing technical efficiency for the sampled soybean farms in Ogo-Oluwa Local Government Area of Oyo State (LGA). The study made use of a cross-sectional data obtained from sampled soybean farmers in the Ogo-Oluwa of Ogbomoso zone of Oyo State Agricultural Development Project (ADP) that were purposively selected because of the higher concentration of soybean farms compared to other LGAs in the zone. Eighty respondents were randomly chosen from a list of soybean farmers obtained from the Apex Farmers Association of Nigeria (AFAN). Data collected was analysed using the stochastic frontier model. The overall technical efficiency was estimated with no effort of broken it down into pure and scale efficiencies. It was observed from the findings that the range of efficiencies index varies great with minimum of 0.827, 0.135 and 0.128 and maximum of 1.0 for technical allocative and economic efficiencies respectively. The mean efficiency which indicate the average potential there in soybean production in the study area 0.94, 0.892 and 0.839 for technical, allocative and economic efficiency respectively. Of 80 soybean farmers involved in the analysis only one was found to be technically allocatively and economically efficient. The measures of relative allocative and technical efficiency provide evidence as to the source of deviations from overall cost-minimising behaviour. Many sampled soybean farms employed the ‘wrong’ input mix, given input prices, so that, on average, costs were 11 per cent higher than the cost minimizing level. However, farms have the potential to reduce their physical input, on average, by 6 per cent, and still produce the same level of soybean output. In conclusion, there was a great potential to improve the output of soybean farms and save cost if variable inputs were adjusted to the optimal level along the short-run isoquant. Farmer’s age, extension visit and education significantly influence technical, economic and allocative efficiencies respectively. Inefficiency results in large part from allocative rather than from technical inefficiency.