Journal of Natural Sciences Research www.iiste.org ISSN 2224-3186 (Paper) ISSN 2225-0921 (Online) DOI: 10.7176/JNSR Vol.9, No.13, 2019 32 Analysis of Technical Efficiency of Wheat Production in Horo District of Horoguduru Wollega Zone, Oromia region, Ethiopia Hika Wana* 1 Lemmessa Dhugasa 2 1.Wollega university, department of agricultural economics, shambu campus, P.O.Box 38 2.Commercial bank of Ethiopia, assistant manager at shambu, Horo branch, P.O.Box 38 Abstract The aim of the study was to measure the levels of technical efficiency of wheat producers and identify factors affecting them in Horo district of Horoguduru Wollega Zone, Oromia Region, Ethiopia. The study was based on cross-sectional data collected in 2016/17 production season from 124 randomly selected farm households. Stochastic production frontier model was used to estimate technical efficiency levels and used to identify factors affecting efficiency levels. Accordingly, the mean technical efficiency of sample household’s was 63.9%.The results indicated that there was substantial amount of in efficiency in wheat production in the study area. Land, seed, DAP and chemical were the variables that positively affected the production of wheat. Results of the factor model revealed that family size, experience in wheat production and extension contact positively and significantly affected technical efficiency. Total cultivated land had a significant negative effect on technical efficiency. Results indicate that there is a room to increase the efficiency in wheat production of the study area. Therefore, government authorities and other concerned bodies should take into consideration the above mentioned socio economic and institutional factors to improve the productivity of wheat in the study area. Keywords: Horo district, technical efficiency, wheat, stochastic DOI: 10.7176/JNSR/9-13-03 Publication date:July 31 st 2019 1. INTRODUCTION 1.1. Background of the Study Agricultural sector is a cornerstone of many developing countries including Ethiopia, in promoting economic growth and development of the economy. It accounts 46% of GDP, over 90% of the foreign exchange earnings, 83% of employment generation and providing 70% raw material for the industries in the country (EPOSPEA, 2015). The livelihood of about 90% of the poor is fully or partly dependent on this sector (Yu et al., 2011). Besides, 95% outputs obtained from the sector was mostly depends on rain-fed production system that dominated by smallholders (MoARD, 2011). Thus, it is not surprising that policy action in Ethiopia is largely based on influencing the dynamism of the agricultural sector. Agriculture has always been an important sector in Ethiopia. About 85% of the population is directly or indirectly engaged in agriculture. This occupational status placed the smallholder farmers as a central focus of development policies and strategies. The sector is also the main source of foreign currency for it accounts for about 45% of the total export of the country. The export diversification prospect is mainly focused on agricultural products and this would also bolster the contribution of agriculture for the export sector. Moreover, agriculture contributes about 50% of the gross domestic product of the country. Befkadu and Berhanu (2000) indicated that the performance of the Ethiopian macro economy is highly correlated with the performance of the agricultural sector. In the years that nature generously provided the rains in the appropriate times, we also see a reasonably good overall macroeconomic performance. All these facts direct development policies, strategies and objectives towards improving the agricultural sector and the rural population. In view of this various efforts were made by the preceding regimes. However, the sector could not produce enough food to support the rapidly increasing population. Amare (1998) by fitting exponential growth function to the production of major crops for the year 1979/80-1993/94 found that the average growth rate was 0.3% per annum. Nevertheless, the population is reported to be increasing at about 3% per annum (Amare, 1998). Consequently, food aid is increasing at 16.2% perannum. Therefore; the country’s dependence on external food aid is growing at an alarming and rapid rate. The study zone that has been one of the sources of grain crops for other areas is now becoming dependent on external aid. In fact, CSA (2015 and 2016) reported that there was an increase in the total production. However, increment in production of wheat from 39,251,741.35 quintal in 2013/14 to42, 315,887.35 in 2014/15 was not attributed to productivity improvement alone. There was also an increase in area of cultivated land in the same years. However this reported increase in production was brought at the cost of environmental degradation. Those lands that should have been left idle, for environmental maintenance are recently brought into cultivation. Due to this main reason, soil degradation is highly aggravating than ever before. Hence, increasing the cultivated land at the cost of land degradation is not sound not only due to environmental degradation but also it is not also a sustainable way of solving food insecurity. The growth rate was