Profit efficiency analysis among groundnut farmers from Malawi

Abstract

This study analyzes the profit efficiency and its determinants in groundnut production, applying a stochastic profit frontier model on survey data collected from 400 groundnut growing households in Malawi. The result indicated that the inefficiencies in groundnut production hindered profitability in the sector. The profit efficiency ranged from 1% to 89% (with a mean of 45%). Significant association was observed between efficiency and both farm specific and institutional factors. Efficiency appeared to be significantly and positively associated with access to extension service (p<0.05), household size (p<0.05) and, soil quality (p<0.000). Distance to the local market from the homestead (p<0.000), and land size (p<0.000) allocated to groundnut production were found to reduce the profit efficiency. Male-headed households, on the average were six percent more efficient compared to female headed households. The study indicated potential for increasing groundnut profitability by 55% by improving the access to extension services and markets, which underscores the need for increased resource allocation to support the delivery of extension services and to the improvement of market infrastructure for the enhancement of groundnut profitability.