The effect of socio-economic factors and soil properties on technical efficiency of paddy production in Malaysia

Malaysia is experiencing low paddy productivity, which lowers the self-sufficiency ratio (SSR) and threatens food security. Farmers' technical inefficiency is the leading cause of low paddy productivity. Aside from socio-economic factors, soil plays an important role in determining farmer technical efficiency and paddy productivity. Soil properties vary across fields, leading to differing plant responses. Ignoring these factors can result in inaccurate and biased efficiency estimates and a failure to address the core issue. Thus, this study expands existing frontier methods for estimating efficiency by controlling for soil property components, focusing on Malaysia’s three main paddy granaries: Kemubu Agricultural Development Authority (KADA), Muda Agricultural Development Authority (MADA), and Integrated Agricultural Development Area Barat Laut Selangor (IADA BLS). The study employed Stochastic Frontier Analysis (SFA) as the primary method, with models estimated using the Maximum Likelihood Estimation (MLE) technique. In addition, the study also applied the Data Envelopment Analysis (DEA) method. The empirical findings revealed that labour, fertiliser, pesticide, and land had significant effects on paddy productivity, while soil nitrogen, phosphorus, and the calcium-to-potassium ratio also played critical roles in influencing productivity. Controlling for soil properties in the frontier model resulted in a lower estimate of technical inefficiency. Meanwhile, the yield gap analysis indicated that achieving self-sufficiency requires addressing both efficiency and resource yield gaps. The study suggests that relevant agencies should regularly assess soil properties and implement corrective measures to improve soil quality. Furthermore, it is imperative to increase the utilisation of production inputs to achieve self-sufficiency. Looking ahead, the study advocates for comprehensive technical efficiency estimations that account for all forms of heterogeneity, including weather conditions, soil physical condition, and water management systems, to ensure more accurate and insightful assessments