Production Efficiency of Swamp Rice Production in Cross River State, Nigeria: Stochastic Frontier Approach

Abstract

This study compares profit maximization, output optimization and resource use efficiency in production of two varieties of swamp rice by farmers in Cross River State of Nigeria. Data were collected from 224 rice farmers from twelve Local Government Areas in Cross River State were interviewed using three-stage stratified random sampling procedure involving simple random sampling technique was used to selected respondents. Data collected were analyzed using descriptive statistics and stochastic frontier function that incorporated inefficiency effects were estimated using the Maximum Likelihood Estimate (MLE). The result showed that the sum of elasticity of 1.33 and 1.65 for local and improved varieties of swamp rice respectively indicates that local and improved varieties of swamp rice farmers in the study area were operating in the inefficient stage (ΣP is greater than 1; increasing return to scale region). The gamma(γ) were 0.60 and 0.75 for local and improved varieties of swamp rice respectively and significant at the 1% level. It is an indication that 60 and 75 percent variation in output of local and improved varieties of swamp rice respectively are attributed to technical inefficiency. The sigma-square(δ2) on the other hand were 0.45 and 0.51 for local and improved varieties of swamp rice respectively and significant at the 5% level. The Likelihood Ratio Test(LRT) for local variety of swamp rice (25.61) and improved variety of swamp rice (20.53) were technically inefficient. The result of the study shows that improved variety of swamp rice farmers were more efficient than local variety of swamp rice farmers. The result of the finding also shows that small-scale farmers were more efficient than medium and large-scale farmers. The R2 was 0.63 for local variety of swamp rice and 0.61 for improved variety of swamp rice, indicates that the predictor variables explained about 63 percent and 61 percent of the variation in output for local and improved varieties of swamp rice respectively. The F-ratios were 15.39 and 10.50 for local and improved varieties of swamp rice respectively and was significant at 1 percent. The result of the finding shows that a net return of N145,667.00K with N6.27K made on every naira invested in local variety of swamp rice produced in the study area. Comparatively, improved swamp rice farmers realized a net return of N277,397.00k with N9.80K made on every naira invested in improved variety of swamp rice produced in the study area. Rice farming business is a profitable business, with attractive net return on investment. Therefore, unemployed youths in Cross River State are encourage to start rice farming and they should form Young Rice Farmers Cooperative or joint existing cooperative groups to enable them obtain loans from banks to invest in rice production.Keywords: Efficiency, Resource use, Production, Profit maximization, Output optimization, Swamp rice