TECHNICAL EFFICIENCY OF SMALLHOLDER COW MILK PRODUCERS IN YABELO DISTRICT OF OROMIA REGION, ETHIOPIA

Livestock plays important economic contribution both at national and household level in agriculture sector. This study measures the level of technical efficiency of smallholder cow milk producers using stochastic production approach of Cobb-Douglas production form and identified the possible cause for inefficiency in cow milk production. The study was based on cross sectional data collected from 177 sample household randomly selected from pastoral and agropastoral kebeles of Yabelo district. The result indicated that the mean technical efficiency of cow milk producers of 71.42% showing a wide range in technical inefficiency of cow milk producer. This means if producers are producing in fully efficient way, they can save on average 28.56% of their current input to produce their current output or increase their current milk output by 28.56% without additional inputs requirement. The gamma parameter, ℽ, which measure the deviation of actual output from potential output due to inefficiency, was found to be 0.70. This shows 70% of the deviation of actual output from potential output was due to technical inefficiency. Among the inputs used, milk output was positively and significantly the function of labor, grazing land, and hay forage. Milk production of the study area was found to be an increasing return to scale. If all significant inputs used in milk production increased by 1%, milk production would be increased by 1.1%. The result of Tobit regression model shows that family size, size of livestock holding, extension contact, distance to veterinary clinic, distance to water positively and significantly contributed to inefficiency while age and education level of household head negatively and significantly affecting inefficiency of milk producers. Evidently intervention on access to water source, veterinary clinic, education, family planning and productivity oriented livestock holding will improve technical efficiency of cow milk producer of the study area.