Profitability and Profit Efficiency in Wheat Farming: A Stochastic Frontier Analysis in Nineveh Governorate

Abstract

This research examines the capacity of contemporary technologies to improve both profitability and profit efficiency for wheat farmers in the Nineveh Governorate. Utilizing the stochastic profit frontier model through Frontier 4.1 software, we assess the profit frontier alongside the inefficiency function. The maximum likelihood estimation highlights the influence of technological and managerial elements on the economic performance of agriculture. Key production inputs analyzed include output prices, land rental costs, pesticide expenditures, labor hours (both manual and mechanical), water consumption, seed costs, and fertilizer expenses. The results indicate that profitability is positively affected by higher output prices, land rents, labor input, and water consumption, whereas rising prices for pesticides and seeds negatively impact profitability. Additionally, the study investigates the influence of managerial factors—such as family size, education, irrigation experience, and the age of the farmer—on production inefficiency. Findings reveal that larger family sizes and more extensive farming experience contribute to a reduction in inefficiency. In contrast, increased levels of education, particular irrigation experience, and an older age of the farmer correlate with heightened inefficiency. This underscores the importance of integrating modern technologies with effective human resource management to optimize profitability. In conclusion, the study confirms that adopting modern technologies alongside improved agricultural management practices is crucial for sustainable profitability. We recommend reassessing production volumes, optimizing land use, strategically organizing labor with technology, and embracing advanced irrigation systems. Additionally, the study emphasizes the need for credit support and training programs to equip farmers with the skills and tools necessary to manage rising production costs and enhance resource management, ultimately contributing to improved economic performance in the agricultural sector. There are studies estimating technical efficiency for different crops and measuring the impact of modern irrigation systems on economic and production efficiency.