International Journal of Agriculture and Crop Sciences.
Available online at www.ijagcs.com
IJACS/2013/5-19/2318-2321.
ISSN 2227-670X ©2013 IJACS Journal
Determining the Optimal Size and Economic
Efficiency of Paddy Farms in KB Province, Iran
Behrooz Hassanpour
Assistant Professor, Center of Agricultural & Natural Resources Research, KB Province,
P.O. Box 351, Yasuj, Iran
Corresponding author : Behrooz Hassanpour
ABSTRACT: In this paper the optimal size of rice farms using cost functions, technical, allocative
and economic efficiency of paddy farms of Kohgiluye-va-Boyerahmad (KB) province were calculated
using data envelopment analysis (DEA). The data was collected in sectional from by a questionnaire
and using stratified random sampling. A total of 132 farmers were interviewed in the province. The
mean technical, allocative and economic efficiency of paddy farmers in KB province was estimated
62.1, 74.3 and 44.6 percents respectively. The difference between the economic efficiency of the
best farmer and the sample mean was calculated 55 percent. Thus, there is a huge gap in the ability
of the farmers in gaining the maximum profit regarding the consumption amount and input prices and
the product that can be optimized by improving the efficiency of the farmers. The optimum size of
paddy field in the province is about 1.7 ha. Therefore, land utilization policies in the future shall be so
that the integrity of the land and land parts approach the border of 1.7 ha.
Keywords: Optimal size of farms, Rice, DEA, Economic efficiency, KB province
INTRODUCTION
There are numerous springs and rivers in the province of Kohgiluye-va-Boyerahmad (KB) province
preparing the field for paddy farming; so that in terms of acreage, the second irrigated crop is rice. KB province
has the seventh rank in Iran in terms of rice production (Ministry of Agriculture, 2010). Population growth on the
one hand and limited agricultural resources, such as land, water, fertilizers, seeds, etc., on the other hand
require increased productivity of inputs. In other words, the effective utilization of inputs is the way towards the
development of the agricultural economy of any region and country. Besides, the ability of farmers to achieve
maximum production with a fixed set of resources, the so-called technical efficiency, is a very important factor in
increasing agricultural production and achieving self-sufficiency boundaries that must be investigated (Coelli,
1995). Given the importance of rice production, trade and employment for farmers and national importance of
the crop in terms of low self-sufficiency ratio and the share of imports and lack of economic research in this area
the necessity of this study is identified. On the other hand, the need to determine the optimum size of farm in
helping support policies in the fields of optimization and integration, the present study tries to specifically
determine optimized size of land parts for rice farms of KB province, which is among the prone areas of Iran for
rice production. Several studies have examined the economic efficiency of agricultural production and the
optimum size of farm in the world and some studies have also been performed in Iran. Songqing et al (2006),
using generalized quadratic cost function studied the size and economic efficiency of farms in China's
agricultural research farms. Their results indicate that there are economies of size in new species such as corn
and wheat. Boussemart et al (2006), in a study entitled optimal farm size and economies of scale in Estonian
dairy industry, studied dairy farming performance in four ways. Gervais et al (2006) studied the economics of
scale in Canadian food industry. They used translog cost function to calculate the output for scale of the
production units for meat, bread and milk. In Iran Rohani (2002) used production and cost performance
estimation and econometric methods in order to calculate the optimal farm size in rural production cooperatives
in Hamedan province. The optimal farm size to achieve a minimum cost of irrigated wheat was 12.8 ha1 and for
dry land wheat was 74.4 ha. Hosseinzad et al (2009) in their study on the optimal size of rice fields in Gilan
estimated the cost function using a questionnaire gathered from 280 farmers. The results indicate that there are
ascending returns to scale. In their study optimal farm size for rice was estimated 2.17. Encouraging farmers to
integrated managements is proposed in this research. Sharzei et al (2002) in their study concluded that it is
possible to reduce production costs by increased production of rice. Regarding the necessity to determine the
1
A hectare (symbol ha) is a unit of area equal to 10,000 square meters.
Intl J Agri Crop Sci. Vol., 5 (19), 2318-2321, 2013
optimum size to help optimization policy and farm integration, in this study the optimal size of the farms are
specifically tried to be determined for rice farms in KB province, which is one the capable areas to produce rice
in Iran.
Theoretical Framework And Methodology
a) Optimum size of farm
Optimal size or optimal agricultural unit shows a combination of production factors having the highest
economic efficiency in production of a certain amount of product. To obtain the optimal size of the farm
mathematical function assessment can be used to estimate the average optimum cost of production
(Boussemart et al, 2006; Hassanpour, 2002; Hosseinzad et al, 2009). According to microeconomic theory, the
larger the size of the plant or farm, the more the average cost of production; and when the unit size is smaller,
the average cost will decrease to some extent and then it will increase. Therefore, using data from a sample of
farmers' average production cost using multiple regression methods that will come in the form of a parabola and
then estimating its derivative based on economic theories, the minimum average cost of the optimal amount of
land could be acquired (Ronald, 1988).
b) Economic efficiency of paddy farmers
Theories of discussions related to the efficiency were first proposed by Farrell (1957). He suggested
that the comparison of the function of a production unit with the function of the best production units in that
industry would create a criterion for the efficiency of that unit. Farrell divides economic efficiency into two parts:
technical efficiency and allocative efficiency. Defined according to Farrell, the ability of a production unit to
achieve maximum performance with a fixed set of resources is called technical capability and the ability of that
unit to allocate resources optimally with minimum cost, is called allocative efficiency. Economic efficiency shows
the ability of production unit in gaining the maximum possible profit considering the price and the input levels,
and is calculated through multiplying the technical efficiency by allocative efficiency. To determine economic
efficiency and its components or technical and allocative efficiency of agricultural and horticultural plants in the
last two decades is revived in developed and developing countries. Various methods have been proposed by
economists to estimate the efficiency (Coelli, 1995; Singh et al, 2000 and Bravo-Uretaand and Evenson, 1994).
A common method which can be estimated using mathematical programming is Data Envelopment Analysis or
DEA. In this method using mathematical programming based on a series of optimization, all data from one or
some products and their production factors and the cost of production factors are covered and for this reason it
is called data envelopment analysis (Coelli, 1995). These calculations can be done by DEAP 2.1 software
designed by Coelli (1995).
c) Data collection
In a survey research framework, the required information was collected by interview and questionnaire.
The population in this study was all rice farmers in KB province and sampling method was stratified random
sampling. A total of 132 farmers were interviewed in the province. To achieve the research goals, it is necessary
to analyze the data from questionnaire using SPSS software and to determine the optimal size of farm quadratic
regression of cost function was used. Then using DEAP software in the next stage, technical, allocative and
economic efficiency of paddy farmers in KB province were estimated.
RESULTS AND DISCUSSION
As mentioned earlier, to obtain the optimal size of the farm, mathematical function assessment can be
used to estimate the average optimum cost of production (Boussemart et al, 2006; Hassanpour, 2002;
Hosseinzad et al 2009).The average regression function of cost for production of rice, which is a second rate
directrix was estimated using data from 132 growers in the province. In this directrix Y is the average cost of a
production unit and X is the amount of land used for paddy. Then, the derivative of this function yields the
optimal amount of land by minimum average:
Y = 628.41 – 379.01 X + 112.24 X2
t : (17.642) (-6.828) (7.090)
2
R = 0.281
F = 25.243 Signif. F = 0.000
Y
 0 – 379.01 + 224.48 X = 0
X
X = 379.01 / 224.48
X = 1.688 ha
The optimal size of rice farming in KB province is 1.7 hectares. Unfortunately, according to statistics
obtained from the sample, more than 85 percent of paddy farmers in the province have less land than this
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Intl J Agri Crop Sci. Vol., 5 (19), 2318-2321, 2013
amount. To reduce the average cost of production and increase the economic efficiency of rice farmers and to
increase the economic efficiency of rice farmers, the integration policy should be implemented with the support
of the government.
Figure 1 . The curve for average cost of rice farm to land size and optimum economic size
On the other hand, to evaluate and compare the economic performance of each paddy farmer with the
performance of the best farmers in the province, technical, allocative and economic efficiencies were used. To
estimate the mentioned efficiencies of paddy farmers of the province, DEA method like the study by Sing et al
(2000) was applied. The estimation results showed that the difference between the economic efficiency of the
best farmer and the sample average was 55 percent. Then, there is a huge gap between the ability of farmers to
obtain the maximum profit possible given the amount of consumption and price of inputs and produced
products. Therefore, if the difference is reduced to zero by increasing the average efficiency of farmers, the
income of the farmers in the province of KB province will increase 55 percent considering the current technology
and existing prices, which can be effective in employment and income for farmers in the province. Frequency
distribution of paddy farmers at different levels of technical, allocative and economic efficiency in KB province is
listed in Table 1. The result shows that the average technical efficiency of paddy farmers in KB province is
62.1% ranged from at least 14.6 up to 100 percent. The mean allocative efficiency was estimated 74.3% range
from 20.3 to 100 percent. The mean economic efficiency of paddy farmers was calculated 44.6% which is from
at least 11.9 up to 100 percent.
Table 1. Frequency distribution of paddy farmers at different levels of technical,
allocative and economic efficiency in KB province
Efficiency Levels
(Percent)
Less than 30
From 31 to 50
From 51 to 70
From 71 to 90
More than 90
Mean
SD
Minimum
Maximum
Range
Technical Efficiency
Frequency
Percent
6
4.5
47
35.6
31
23.5
19
14.4
29
22.0
62.1
25.1
14.6
100
85.4
Allocative Efficiency
Frequency
Percent
4
3.0
8
6.1
40
30.3
44
33.3
36
27.3
74.3
19.4
20.3
100
79.7
Economic Efficiency
Frequency
Percent
36
27.3
56
42.4
22
16.7
11
8.3
7
5.3
44.6
20.7
11.9
100
88.1
Source: Research findings
Impact of factors such as the integrity of the land, climate type and farm size on the economic efficiency
of paddy farms was studied. To test significant differences of mean economic efficiency, in different level of
these characteristics like studies by Bravo-Ureta and Evenson (1994) and Hassanpour (2002), analysis of
variance (ANOVA) was used. The results of this analysis are summarized in Table 2.
ACKNOWLEDGEMENT
This paper is part of the research project with financially supported by a research grant No. 116-19-79030 from KB Province Research Center for Agriculture and Natural Resources of Agricultural Research,
Education and Extension Organization (AREEO).
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Intl J Agri Crop Sci. Vol., 5 (19), 2318-2321, 2013
Table 2. Comparison of mean economic efficiency of paddy farmers considering their land size in KB province
Variable and its levels
Frequency
Percent
Mean of
Economic Efficiency
1. Size of rice field (ha)
Less than 0.5
From 0.5 to 1.6
More than1.6
F-Value
47
59
26
-
35.6
44.7
19.7
-
35.4
52.7
43.9
**
10.569
2. Integration of farms
Integrated farms
Non-integrated farms
T-Value
42
90
-
38.8
68.2
-
49.0
42.6
*
1.878
(*) and (**) are significant in probability levels of 0.05 and 0.01.
Source: Research findings
Results show that 45 percent of paddy farm sizes are between 0.5 and 1.6 ha which have the highest
mean economic efficiency in comparison with paddy farmers having lands less than 0/5 hectares which
constitutes 36% of the paddy farmer society and more than the 1.6 ha which were 19 percent of the paddy
farmers that was significant in the probability level of (P<0.01). The results also showed that the integrated farm
shad higher economic efficiency than non-integrated farms, that was significant in the probability level of
(P<0.05). Therefore, it can be concluded that those farmers who have less patches of land, enjoy greater
economic efficiency. This means that they have more ability to get the maximum benefit. Results obtained are
consistent with results of the study by Hosseinzad et al (2009).
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