Masters Thesis
The overall objective of the study was to analyse the profit efficiency of smallholder dairy farmers in Njombe District. The specific objectives were to: (i) To analyse the profit profile of smallholder dairy farmers in Njombe District with respect to socio-economic and technical factors (ii) To analyse the profit efficiency of smallholder milk production in Njombe District (iii) To identify factors that influence profit efficiency. Data for the study were collected from 235 milk producers, 155 are under association and 80 are non- associated. Variation in profitability among smallholder milk production in Njombe District was analyzed by cross tables based on profit terciles for selected famer attributes and other economic factors in the production area using the Student t or Chi square test. Farmers who are; Illiterate, distant from the market, practice indoor feeding system, without access to credit, obtained low profit while farmers who are literate, near to market, practice outdoor feeding system, with access to credit obtained a higher than profit. The profitability of every farmer selected for the study was computed in Tshs per litre using a normalized unrestricted profit function. The results showed that the non-associated earned higher profit by Tshs 176 per litre compared to associated dairy farmers, due to milk price differences. The Profit efficiency of smallholder milk production in Njombe District was analyzed using a Cobb-Douglas profit frontier. It was found that the cost feeds, vetenary services, labour and herd size were significant in influencing profit (p < 0.05). Among inputs feed had the largest influence on profit elasticity equal to 0.6 for associated dairy farmers and 0.3 for non-associated. The efficiency of farmers in the association and non- association was significantly affected by farmer’s education, experience, occupation and distance to the market (p < 0.05). The study concludes that the socio-economic and the technical factors hypothesized for the study tend to constrain the profitability and profit efficiency of farmers and hence dairy development in Njombe District. It is recommended that education should be provided to illiterate and young farmers on dairy best practices. It is also proposed to devise proper input use to overcome the challenge of high prices for dairy feeds and formulate policies that will enable households increase their profit efficiency.