International Journal of Horticulture, 2018, Vol.8, No. 2, 8-15
9
level of resource productivity and efficiency of the vegetable farms in the study area. An efficient production
system is necessary to ensure increased production through efficient allocation of productive resources and
thereby improve the producer’s income.
1 Materials and Methods
The study area is Oyo State in Southwestern Nigeria. The state is located between latitudes 2°38¹and 4°35¹east
of the Greenwich meridian. The state has two distinct ecological zones- the western rain forest to the south and the
intermediate savannah to the north with an area of
28,454 square kilometres. The climate is equatorial, notably
with dry and wet seasons with relatively high humidity. The dry season lasts from November to March while the
wet season starts from April and ends in October. Average daily temperature ranges between 25°C and 35°C
almost throughout the year.
A three stage sampling technique was used in selecting four Local Government Areas (LGAs) in the study area.
Ten villages were chosen to be included in the study; five farmers were selected per village. A total of 200
vegetable farmers were sampled using simple random selection at each sampling stage. Data collection occurred
between October and December 2016 and involved the use of structured questionnaire and personal interviews.
The questionnaire was covered information on socio-economic characteristics of the vegetable farmers, quantity
and prices of inputs and output of the vegetable. Data collected were analyzed using descriptive analysis,
budgetary analysis and stochastic frontier analysis.
1.1 Budgetary analysis
An enterprise budget approach was used to estimate the costs and return of the vegetable production enterprise so
as to determine the farmer’s income/profitability. Production costs/ total costs refer to the total expenditure or
expenses incurred during a given period on a specified enterprise by the firm. The components of the enterprise
budget are:
(1) Total revenue (TR) = Output (Q) x Unit price (P)
(2) Total cost (TC) = Total variable cost (TVC) + Total fixed cost (TFC)
(3) Gross Margin (GM) = Total income (TI) – Total variable cost (TVC)
(4) Profit
= Gross margin (GM) – Total fixed cost (depreciated value)
(5) Benefit Cost Ratio (BCR) = Total income (TI) / Total cost (TC)
Depreciation was calculated by the straight line method as follows:
(6) Depreciation = (Cost of purchase – Salvage value) / Useful life
Other Profitability ratios include the following:
(7) Profitability Index (PI) or Return on sale = NI / TR
(8) Rate of return on Investment (RRI) = NI / TC * 100
(9) Rate of return on variable cost (RRVC) = TR – TFC / TVC *100
(10) Operating ratio (OR) = TVC / TR
Where NI = Net Income.
(11)
=
1.2 Stochastic frontier analysis
The stochastic frontier production function with assumed presence of technical inefficiency of production can be
written as:
(12) Y = f (X
i
; β) exp (V
i
- U
i
), i= 1, 2 ….n
Where Y is the quantity of vegetable output,
X
i
is input quantities used by i
th
farm.
β
is vector parameters. V
i
is a
symmetric error, which accounts for random variations in output due to factors beyond the control of the farmers
while U
i
is representing inefficiency in production. Empirically, the stochastic production function frontier for the
analysis of technical efficiency of the vegetable production is specified as:
(13) InY
ij
= ln β
o
+ β
1
lnX
1
ij
+ β
2
lnX
2
ij
+ β
3
X
3
ij
+ β
4
X
4
ij
+ β
5
X
5
ij
+
∈
