Cost Efficiency of Rice Production in Vietnam: An Application of Stochastic Translog Variable Cost Frontier

Abstract

Overuse of inputs in rice production results in not only lower profit but also environmental pollution. This study aimed to estimate the cost efficiency and to identify the determinants of efficiency gaps. Stochastic Translog variable cost was applied to the data of 199 rice farmers in An Giang, Mekong Delta. The study showed that the mean cost efficiency score was 90% suggesting that on the average these farmers could proportionally reduce their current variable cost by 10% without any reductions in the output level. The mean overused cost was estimated at 3,651 thousand VND (equivalent to 167.74 USD) per ha. This value is equal to the sales of 702.24 kg of output per ha or 10% increase in output level. To improve cost efficiency, rice farmers should cultivate three crops per year and use collective pumping. Regardless of output price, Jasmine and IR50404 rice varieties and the numbers of paddy plot had negative relationship with cost efficiency. The study further suggests that rice farmers are still using input mix inefficiently.