Profit efficiency in family-owned crop farms in Eastern Cape Province of South Africa: a translog profit function approach

Abstract

BackgroundFarm productivity on smallholder family-owned crop farms remains low despite several interventions to transform agriculture especially in developing countries. Farmers in rural areas face serious constraints that impede their productive capacities for the principal dietary staple, notably maize. Smallholder farmers have access to unprofitable markets that in turn make their enterprises less profitable. Efforts to commercialise smallholder maize production have not yielded desired results. This study, therefore, estimates profit efficiency and its determinants in the smallholder cropping systems in the Eastern Cape Province of South Africa.MethodologyA random sample of 158 smallholder maize farmers was selected. A normalised translog profit function was then fitted by means of a one-step estimation of technical efficiency and its determinants using the STATA software.ResultsThe results indicate that cost of fertiliser and area under cultivation for maize were the positive drivers of profitability. Complementarities among resources were very important determinants of profit.ConclusionThe study concludes that family-owned farms have a positive effect on crop production. Farm profits rise with cultivated area in maize farms. Therefore, the study recommends that policy favouring smallholder commercialisation would improve farm profits.