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Resource-Use and Allocative Efficiency of Paddy Rice Production in Mada, Malaysia

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Resource-Use and Allocative Efficiency of Paddy Rice Production in Mada, Malaysia View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by International Institute for Science, Technology and Education (IISTE): E-Journals Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.7, No.1, 2016 Resource-Use and Allocative Efficiency of Paddy Rice Production in Mada, Malaysia Abiola, Olapeju Adedoyin 1 Mad Nasir Shamsudin 1* Alias Radam 2 Ismail Abd Latif 1 1. Department of Agribusiness and information system 2. Department of Management and Marketing, Universiti Putra Malaysia, Malaysia Abstract The study examined resource-use and allocative efficiency of paddy rice production in the MADA, Malaysia. A total sampling size of 396 rice farmers were selected using a multistage random sampling through a well- structured questionnaire. The independent samples F-tests, Ordinary Least Square analyses techniques, descriptive statistics, Gross margin analysis and Cobb-Douglas production function analysis that combines the conventional neoclassical test of economic and technical efficiencies was employed in the study. Findings revealed that all inputs used were positively significant. Rice production was found to be profitable as farmers realized RM2,054.03 per ha as Gross Margin in the study area. Result of the allocative efficiency of inputs confirmed that rice producers in the area did not attain optimal allocative efficiency, seed input (0.29) had the highest allocative efficiency while fertilizer input (0.06) showed the least allocative efficient input. The findings of the study emphasized the need to improve farm efficiency at all levels. It is therefore, recommend that the rice farmers be encouraged to use their inputs up to the point the values of the marginal products (MVPs) equates their factor prices (i.e. MVPs = PXs). Keywords: Resource -Use: Allocative Efficiency, Paddy Rice, MADA, and Malaysia. 1.0 Introduction As an important staple crop and a strategically agricultural commodity for food security, rice has always been given a special treatment by the Malaysian government in order to improve its production. The shifting from transplanting to direct seeding technology of planting of rice has been reported to increased weedy rice infestations resulting to crop loss per year at RM 180 million (Angin, 2004) causing no significant growth in yield as the mean yield is at 3.9 tons per hectare while the actual paddy farm yields varies from 3-5 tons per hectare below the neighbouring countries such as Vietnam and Indonesian at 5.5 tons per hectare and 4.9 tons per hectare respectively (Dos, 2013). Even with the vital use of rice, the increase in paddy production threatened by the land expansion is quite challenging presently due to constraints of suitable soil fertility, competition with industrial and domestic needs. A lots of problems arising in paddy farming, resulting out in excessive use of inputs such as chemical fertilizers, insecticides and pesticides, above a given recommendations. This has caused soil degradation, water pollution and an increased number of pests, which are resistant against the application of pesticides. About 0.7millions hectares with average growth of about 0.27% per year remain a constant cultivable land (Wong et al ., 2010). Further, Financial constraint of farmers in using sophisticated machinery that can help in boosting the yield of rice production is hampered. All these circumstances have a negative effect by threaten level of productivity, process of technology transfer and cannot guarantee self-sufficiency. This study aims to contribute to the literature by providing a micro perspective on measuring farm efficiency level. It will also serve as a guideline to all the researchers’, extension agents, policy maker and farmers involved in paddy rice production. Efficiency has been an area of concentration in the investigation of farm operations. According to (Sadoulet & Janvy, 1995), efficiency of a farm is defined as how available resources are effectively used for the purpose of profit maximization at given technology, available fixed factor and factor. It also means how a firm is being successful in producing as large as possible output from a given set of inputs when both the inputs and output are measured accurately. Economic efficiency can be decomposed into two parts namely; technical and allocative efficiency and when they occur jointly are referred to as economic efficiency (Yotopoulus and Nugent, 1976). Its aims in maximizing profit while minimizing costs. A farm is said to be allocative or price efficient if it maximize profit by equating marginal value of product (MVP) of each variable input to its price. However, a farm is technically efficient if it produces a higher level of output from the same level of inputs as compared to another farm. Even, if the farmers are allocatively efficient, they may not be actualizing the technically feasible maximum production as a result of inefficient management of the resources. In such manner, a comparison of output in relation to inputs level used will reveal the main efficiency which is technical efficiency. Nicholson (1978) stated that economic efficiency is the same as Pareto efficiency. An allocation of resources is Pareto efficient if no one individual (or activity) can be made better – off without making someone else (or another activity) worse-off. The concept of Pareto efficiency can be employ to evaluate different ways of allocating resources (Hardwick et. al . 1988). Also, in agriculture, productivity is majorly measured in terms of the efficiency with which factor inputs, such as land, labour, fertilizer, weedicides, tools, and seeds etc are changed to output within the 49 Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.7, No.1, 2016 production process (Umoh and Yusuf, 1999). Resource use is a concept to designate the allocation of resources such as land, labor, capital and management in their various forms between competing alternatives (Olayide and Heady, 1982). They further defined agricultural productivity as an index of the ratio of farm output to the value of the total inputs used in producing the output. They also agreed that resource productivity is definable in terms of individual inputs or a combination of them. They opined that maximum resource productivity would imply obtaining the maximum possible output from minimum possible set of inputs. Thus optimal productivity of resources implies an efficient utilization of resources in production process. This implies that productivity and technical efficiency are synonymous. The objectives of the study include to: i) Examine the socio-economic characteristics of rice farmers in the region; ii) Determine the costs and return associated with rice production systems; iii) Measure the allocative efficiency of resource-use in rice production in the study area. 2.0 Methodology The study was carried out in MADA (Muda Agricultural Development Authority) in Malaysia. It is an area established to increase paddy production for the Malaysian community. It is the largest and the most vital “granary area” in Peninsular Malaysia with the Muda Irrigation Scheme that covers about 125,155 hectares of which 105,851 hectares are in the north-western part of Kedah State and 20,304 ha are in the southern part of Perlis State. There are two states in MADA namely Kedah and Perlis with four regions, namely Kangar region, Jitra region, Pendang region and Kota Sarang Semut region. MADA is located in northwest Peninsular Malaysia, situated at latitudes 5 o 5' to 6 o 40' and longitudes 100 o 05' to 101 o 08' with average percentage in temperature of 27.4°C to 30.5°C. MADA provides 40 per cent of national rice production and 22 per cent of rice cultivation area with an average yield of 5 tonnes per hectare per season, higher than the national average of 3.74 (MADA, 2010). 2.1 Data Collection and Sampling Method To achieve the study objectives, data were obtained from primary and secondary source with the aid of a structured questionnaire with interview. Secondary source of information comprises of journals, text books, internet search, websites, published and unpublished materials relevant to the study. The study used multistage random sampling technique to select the sample respondents of 396 paddy farmers. In the first stage, four regions were selected; Kangar region, Jitra region, Pendang region and Kota Sarang Semut region. In the second stage, 25 localities were randomly selected from 27 localities in each region. A total number of 396 paddy farmers in each locality were randomly selected at the last stage as the sample size for the research. 2.2 Method of Data Analysis The analytical tools that were employed for this study include descriptive statistics, gross margin analysis, production functions, regression analysis, and marginal value product (MVP) with the use of APP, MPP, and MFC. Descriptive statistics such as frequency, percentage and rank order was used. This technique was used to assess the socio-economic characteristics of rice farmers in the study area. Gross margin analysis was used to capture the second objective while MVP to MFC ratio was used to determine the economic efficiency of the resource used in paddy production. The study adopted the method used by (Oniah et al , 2008; Sani et al , 2010; Idumah et al , 2014 and Sadiq et al , 2015). The output elasticity of each production input was determined from the Cobb-Douglas
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