ECONOMIC EFFICIENCYAND MARKETING PERFORMANCE OF SMALLHOLDER FARMERS IN TURMERIC PRODUCTION: THE CASE OF, BENCH-SHEKO AND SHEKA ZONES, IN SOUTH WESTERN ETHIOPIA

Abstract

The aim of this study was to estimate the level of technical, allocative and economic efficiencies, identifications of determinants of technical, allocative and economic efficiencies, and analyzing the market performance of turmeric production in Sheko and Yeki districts. Two-stage random sampling technique was used to select 360 household heads and interviewed using a semi-structured questionnaire during 2018/19 production season. In addition 36 traders were selected using simple random sampling technique. Structureconduct and performance model was used to assess the performance of turmeric market. The result revealed that the major turmeric markets actors were producers, local collectors, local wholesalers and big wholesalers. Turmeric markets in the areas were characterized by noncompetitive nature with concentration ratio 78.5 and 64.2% at Sheko and Tepi market, respectively. Indicates that existence of oligopoly market structure in both markets. Entrance and exit in the turmeric market was blocked by licensing and access to channel. A channel that links producers to exporters through big wholesalers was more efficient in terms of large volumes of sales. However, performance of the turmeric market was affected by the existence of few big traders and limited access to information. Stochastic frontier (Cobb-Douglas production function) and two-limit Tobit regression models were used to analyze efficiency levele and determinate respectively.Accordingily,the mean technical, allocative and economic efficiencies were 73.72, 60.78% and 44.71, respectively. The average technical and allocative efficiencies implies that there exists a possibility to increase turmeric production by 26.28% without using extra inputs and decrease cost of inputs by 39.22%, respectively. The Cobb-Douglas production function result indicated that, turmeric output was positively and significantly influenced by land, labor, oxen, Seed, herbicide and urea. Likewise, a two-limit Tobit model showed that economic efficiency was positively and significantly affected by frequency of extension contact, credit utilization and market information and variables like, number of plots affected it negatively. The results showed that there is an opportunity to increase the efficiency of turmeric production in the study area. Therefore, attention neads be given to alleviate the problems to improve the performance of the turmeric market. Finally, policies target to motivate and increase the provision of credit, strengthen the existing agricultural extension system and provision of relevant marketing information needs to improve economic efficiency of smallholder turmeric producers