The Levels and Determinants of Profit Efficiency in Fodder Production: A Case of Southern Rangelands of Kenya

This study examines the profit efficiency and the responsible factors for inefficiency in the selected forage production in selected areas of Kenya by using the maximum likelihood stochastic profit frontier function. This study proves that forage production is profitable with an average profit efficiency being 76.22% and 86.57% for the entire sampled population for grasses and leguminous crops, respectively. The result of the coefficients reveals some variability, which confirms that the firms in the sample have different profit frontiers. For coefficients that are significant but heavily negative in terms of magnitude is a clear indication that such variables would result in a high decrease in return to scare with respect to profit margin and vice versa. The policy implication in forage production based on these findings is that profit inefficiency can be reduced significantly by improving the cost of land preparation, land harrowing, cost of planting materials, and weed management, although other costs evaluated are also relevant.