Keywords: organic tea, smallholdings, technical efficiency, stochastic frontier analysis, Sri Lanka, farming
Technical efficiency of organic tea smallholding sector in Sri Lanka: a stochastic frontier analysis
Organic tea is emerging as a major farming activity in Sri Lanka. In this paper, using a stochastic frontier analysis, we analyse the technical efficiency of organic tea smallholdings in the mid country wet zone of Sri Lanka. The Cobb-Douglas functional specifications are found to be an adequate representation of the cross-sectional data obtained in 2002. Our results indicate that there is great potential to increase production by 55% through efficient use of the present technology. These results identify a significant relationship between compost application and labour on organic tea production. A significantly positive relationship is also found between technical efficiency and training of farmers. Large numbers of vegetative propagated tea plants in the farm enhance the efficiency. The characteristic crop diversification observed in the organic tea farming system has significantly reduced the efficiency. Finally, a specific policy for the development of the organic tea smallholding sector is suggested.