American Journal of Rural Development, 2018, Vol. 6, No. 2, 49-58 Available online at http://pubs.sciepub.com/ajrd/6/2/4 ©Science and Education Publishing DOI:10.12691/ajrd-6-2-4 Farm Level Efficiency of Crop Production in the Central Highlands of Ethiopia Beneberu Teferra 1,2,* , Belaineh Legesse 2 , Jema Haji 2 , Girma T. Kassie 3 1 Debre Birhan Agricultural Research Center, Debre Birhan, Ethiopia 2 School of Agricultural Economics and Agribusiness, Haramaya University, Ethiopia 3 ICARDA (International Center for Agricultural Research in the Dry Areas), Addis Ababa, Ethiopia *Corresponding author: beneberu2001@yahoo.com Received June 23, 2018; Revised August 02, 2018; Accepted September 02, 2018 Abstract The gap between demand for and supply of food can be minimized by improving productivity either through introduction of modern technologies, reallocation of resources or improving the efficiency of production. It is however almost impossible to increase production by bringing more land and capital resources as they are very limiting in the rural parts of the developing world. Wheat, faba bean (horse bean) and lentil are the three most important crops in the central highlands of Ethiopia and enhancing the farm level efficiency of their production is a crucial component of the food security strategy of the government. This study aims at analyzing level and determinants of production efficiency of these crops by smallholder farmers in North Shewa zone. The study generated data from 480 randomly selected smallholder farmers in the 2015/16 production season. The study estimated, technical, allocative and economic efficiencies using Data Envelopment Analysis technique. The results showed that mean technical, allocative and economic efficiencies were 77%, 69% and 53%, respectively, indicating a substantial inefficiency in the production of these important crops. Analysis of determinants of efficiency using a double-bounded Tobit model indicates that age, education, off/non-farm income, livestock holding, credit access, extension contacts, market distance, distance to all weather road and average farm plots distance significantly affect efficiency of production. The findings of the study show that the production efficiency of these crops can be significantly improved through increased integration of the crop and livestock subsystems, investment of basic education and infrastructure, and improvement of the agricultural extension system and the rural credit services. Keywords: allocative efficiency, economic efficiency, technical efficiency, data envelopment analysis Cite This Article: Beneberu Teferra, Belaineh Legesse, Jema Haji, and Girma T. Kassie, “Farm Level Efficiency of Crop Production in the Central Highlands of Ethiopia.” American Journal of Rural Development, vol. 6, no. 2 (2018): 49-58. doi: 10.12691/ajrd-6-2-4. 1. Introduction Agriculture in Ethiopia accounts for 85% of employment, about 36.7% of the annual GDP and 85% of the foreign earnings [1]. The issue of improving agricultural productivity has always been among the key development agenda of the Ethiopian government due to, among others, considerable increase in population and food price [2]. Given fixed or declining supply of agricultural land, labor and other inputs, economic growth in countries like Ethiopia can hardly depend only on agriculture. Crop production in North Shewa Zone of central Ethiopian highlands is constrained by technical, economic and environmental factors. These factors made the productivity of wheat, faba bean and lentil very low. The existence of production inefficiency at farm level, lack of and inexistence of improved production technologies are accountable for the low productivity of selected crops, among others [3]. Yet, there is no any reliable data or information on the level of productivity and/or efficiency per unit of the limiting factors. Most of the previous empirical efficiency studies in Ethiopia [4-10] are limited to either the estimation of technical efficiency; focused on land renting and sharecropping efficiency; or they analyzed specific crop production efficiency. However, this study differs from the previous studies is that it analyzed both technical, allocative and economic efficiency on multiple crops. Currently, access to improved agricultural technologies and farm inputs is a long-lasting challenge Ethiopian farmers have been living with. Hence, measuring level of production efficiency and the extent of resource use inefficiency given the existing technology and input levels is critically important. Therefore, a question arises as to how farmers are using or combining the available scarce resources to produce the maximum output and sources of inefficiency differentials among farm households. These are key issues whose investigation can be useful for the formulation of policies to strengthen and improve the efficiency of crop production in the study areas. This research focuses on taking a step towards filling the above mentioned problems by collecting cross-sectional data from smallholder farmers of central highlands of Ethiopia. Hence, this research aimed at measuring technical,