Production efficiency and risks in limited resource farming: The case of Bulgarian peanut industry

Abstract

We used a stochastic production frontier and a Tobit model to evaluate technical efficiency and inefficiency of Bulgarian limited resource peanut farms for the period 2000/2002. We used a Just-Pope model to examine risks related to on-farm yield adjustments. Technical efficiency of farms ranged from 77 to 97%, with an average 92%, a median of 93%, mode of 90%, and skewness -1.49. The technical efficiency of these farms are largely influenced by on-farm decisions, the quantity of seeds, phosphate, fungicide, the amount investment capital, hours of manual labor used, and leased mechanized labor. The results indicate that efficiency is more crop specific than farm size dependent. Farm inefficiency was unrelated to size but rather to gender and age of operator. Farmers used less than the optimum levels of seeds and phosphate but there was risk associated with an increase in application rates of these inputs. These findings indicate that limited resource Bulgarian peanut farms are approaching efficiency, and adjustment to attain greater efficiency may be influenced by socio- demographic factors and limited government intervention.