Analysis of profit efficiency among smallholder sheep farmers of N8 development corridor Free State, South Africa
Abstract The livestock sector is the largest agricultural-sub sector in South Africa contributing approximately 30% to the agricultural output. The aim of this research is to measure the profit efficiency of smallholder sheep farmers and to identify the factors affecting profit efficiency of the farmer, in order to propose better strategies for sustainable livestock production among smallholder farmers in the Free State. A stochastic profit frontier approach was used to evaluate the profitability and efficiency of 217 smallholders in the N8 development corridor Free State, South Africa. The results found that the farmers are not efficiency and have great capacity to improve profitability in sheep production. The result showed that Profit efficiencies of the farmers varied between 15.5% and 80.4% with a mean of 65.1% implying that an estimated 34.9% of the profit is lost due to a combination of economic and allocative inefficiencies in sheep production. The study found that profit efficiency is positively influenced by level of education and household size (members below 18 years old) while gender and sheep loss increase profit inefficiency. Profit efficiency of the farmers can be significantly increased through effective education and training of farmers.