The study aimed to analyze the technical efficiency and profitability of potato production by smallholder farmers in Dinsho District of Bale Zone of Ethiopia. Cross sectional data collected in 2015/16 production year from 147 surveyed households was utilized in achieving these objectives. Non-parametric net crop revenue analysis and Cobb-Douglas stochastic frontier approach were used to analyze enterprise profitability and to estimate the technical efficiency levels in potato production, respectively. The result of net crop revenue analysis indicated that potato production was profitable wherein the producers had earned net return of about 11,740.9 ETB (Ethiopian Birr). Further analysis of the gross and net income data showed wide variation of the results between harvesting seasons and off-peak season. The test result of Cobb-Douglas stochastic frontier indicated that the relative deviation from the frontier due to inefficiency was 94%. The mean technical efficiency of farmers in the production of potato was 0.89. The estimated stochastic production frontier model indicated that area of the plots, amounts of NPS fertilizers, amount of seed and labor in man-days were positive and significant determinants of production level. The estimated SPF model together with the inefficiency parameters showed that age, age square, education, land ownership status, extension contact, number of plots (fragmentation), household size and livestock significantly determined efficiency level of farmers in potato production in the study area. To this end, the attention of policy makers to improve agricultural production should not revolve solely around the introduction and dissemination of new technology to increase yield, but also more attention should be given to improve the existing level of efficiency.
Key words: Ethiopia, potato, profitability, stochastic production frontier model, technical efficiency.
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