Technical and cost efficiency of rural household apple production

Purpose - At the center of apple production province in China, how to increase apple per unit yield and to improve apple production efficiency in Shaanxi become big issues. The objectives of this paper are to investigate the technical efficiency (TE) and cost efficiency (CE) of apple orchard and to analyse determinants which affect apple production efficiency. The paper aims to discuss these issues. Design/methodology/approach - This paper conducts a two-stage DEA to achieve the objectives. In the first-stage, a cost minimization model is applied to measure apple production efficiency. Then, a Tobit model is provided to estimate regression coefficients which are used to adjust the efficiency scores in the first-stage. Findings - The results indicate that TE and CE are rather low in Shaanxi. The research also explores that the inefficient production of apple farmers is caused mainly by two aspects. One is the inefficient apple orchards operation of farmers. The other is the disadvantageous environmental conditions which heavily affect apple growth and fruit bearing situation. Originality/value - Most of the research are based on national statistical data, and only measure the TE. This paper primarily focuses on the estimation of efficiency scores with the data involved in both quantity and price information of traditional inputs and outputs based on 255 apple farmers in Shaanxi. Specifically, This paper also consider farmer's opportunity cost to which little literature refers. The results not only reveal the efficient determinants of apple production, but also provide suggestions for agricultural policy makers.