Profit Efficiency and its Determinants among Traditional Beef Cattle Farmers in the Meatu District of Simiyu Region, Tanzania

Abstract

Tanzania has taken great steps to commercialize the beef cattle industry since 1997. However, despite efforts, 22% of farmers live in poverty, and industry's contribution to GDP is low. This raises questions concerning beef cattle farmers' profit efficiency (PE). This study, thus, sought to gain empirical evidence on the level of profit efficiency (PE) and its determinants among farmers to discover ways to optimize the industry's commercialization to reduce poverty. This study uses field survey data from 393 farmers in the Meatu District of the Simiyu Region. Data were analyzed using descriptive statistics, Cobb-Douglas stochastic frontier profit function (CDSFPF), and Heckman treatment effect (HTE) models. The descriptive results showed that farmers had low levels of education, limited access to credit and veterinary services, and limited involvement in farmer cooperatives. Such limitations tend to lower profit maximization. Profit efficiency (PE) results showed that farmers lose 51% of their profits, with an average PE of 49%. Based on the maximum likelihood estimation (MLE) of CDSFPF, the cost of medications, supplements, labor, parasite eradication, marketing, transportation, and local breed beef cattle had a significant negative impact on PE at a 5% (P < 0.05) level. While grazing land owned and cattle herd size positively influenced PE at a 5% (P < 0.05) significant level. Thus, controlling variable costs to the utmost will increase PE and provide a substantial benefit. Besides, the estimated CDSFPF, along with the inefficiency variables and robustness test, show that access to market information, credit, educational level, farming experience, off-farm income, and cattle fattening all have a negative influence on profit inefficiency at the 5% (P < 0.05) significant level, thereby enhancing PE. Whilst the distance to the market increased the level of profit inefficiency, thereby decreasing PE. Therefore, the government should address factors that influence cattle production efficiency to boost farmers' income, the economy, and food security and reduce poverty.