M K .

M I K R O E KO N O M I M A D YA
P e m b i n a : D r. L i e s
Sulistyowati

ANALYSIS OF TECHNICAL, ALLOCATIVE AND

ECONOMIC EFICIENCY OF BROILER PRODUCTION
USING CLOSED HOUSE SYSTEM IN MALANG
DISTRICT OF EAST JAVA INDONESIA
UNANG
150130150509

Source: S Pakage, B Hartono, Z Fanani and B A Nugroho

Livestock Research for Rural Development 27 (9) 2015

INTRODUCTION
Livestock farming is part of agriculture which produces meat as a protein source that
is of paramount import.
According to the Ministry of Agriculture, in 2010 the national meat consumption
reached 7.75 kg /capita / year. As many as 49% or as much as 3.80 kg / capita / year
of national meat consumption are from chicken meat consumption.
Broiler production using closed house system is one of technological innovations
which attempts to accommodate the fairly extreme weather changes, and is
expected to minimize the adverse effects of the environment or climate change
outside of the cage.
Combination of the use of production factors in broiler business is an absolute
requirement to generate prot.
Broiler farmers' income is inuenced by a combination of the use of production
factors such as Day Old Chick (DOC); feed; Medicine (drugs, vitamins and vaccines);
labor; electricity and fuel.
Studies how farmers broilers use the closed house system allocates production
factors to obtain the maximum production at minimum costs in order to obtain high
prots need to be done.
Therefore, it is necessary to examine factors affecting the production function, cost
function and the achievement of level of technical, allocative and economic efcie

RESEARCH METHODS
Studi area and data
It was conducted in the Sub-districts of Pangelaran, Dampit, and Bantur Malang
District of East Java, Indonesia.

Model specication
Factors affecting broiler production are: Day Old Chicks (DOC), feed, medicine,
electricity, fuel, and labor. Cobb-Douglas functional form is mathematically formulated
as follows

Where Y = Production of broilers per production period (kg / pp),

X1 = Numbers of DOC per production period (head / pp),
X2 = Amount of feed per production period (kg / pp),
X3 = Amount of medicine per production period (kg / pp),
X4 = Total electricity used per production period (kwh / pp),
X5 = Number of Fuel per production period (liters / pp),
X6 = Numbers of labor used per production period (person / pp),
0 = constant,
1-6 = suspected non-xed input variable parameter,
Ln= Natural logarithm e = 2.718,
Vi = Error occurred due to random sampling,
Ui = Effects of occurred technical efciency

Research Methods
Technical inefciency effects method used is based on the technical inefciency effects model
developed by Battese and Coelli (1995). The ui variable is to calculate the effects of technical
inefciency. Distribution of value parameter of technical inefciency in this study is as follows

i = technical inefciency effects; Z1 = Age of farmer (years); Z2 = Education Level of breeder (years), Z3 = Business
experience (years), Z4 = Numbers of dependents (people), Z5 = Dummy gender 0 = Female 1 = Male, 0 = constant,
15 = Variable inefciency parameter

Factors affecting the cost function of broiler farming business are: cost of Day Old Chicks (DOC),
the cost of feed, medicine cost, electricity cost, fuel cost, labor costs and production. The
mathematical formula is as follows

Where: Ci = cost of broiler production per production period (IDR/ pp); W1 = Cost of DOC per head (IDR/ head); W2 = Cost of
feed per kilogram in one production period (IDR/ kg); W3 = cost of medicine per unit in one production period (IDR/ unit); W4
= Cost of electricity used per production period (IDR/ pp); W5 = cost of fuel per liter in one production period (IDR / liter); W6
= Cost of labor used per production period (IDR/ day); Y = Total broilers production per production period (kg / pp); a0=
Constant; a1- a6= assumed input variables parameter; Ui = Effects of occurred economic efciency

RESULT AND DISCUSSION

Analysis of factors
affecting
production

The analysis showed that the input

variables affecting broiler
production in study area is Day Old
Chicks (DOC), feed and medicine
(drugs, vaccines, and vitamins.
Variables which do not affect the
broiler production are electricity,
fuel and labor

A positive correlation obtained shows that the electricity assists broiler to eat and drink at
night, although it does not signicantly inuence the results of the production. The addition of
the number of fuel and labor in fact decrease the broiler production.
Based on the analysis result, the value of the RTS is 1.032. This value indicates that the
production of broilers is on stage II (decreasing positive return to scale) meaning that if all
inputs are simultaneously increased by 10%, broiler production will increase by 10.316%.

 Analysis of factors affecting

production costs
Partial test results show that the
variables that signicantly affect the cost
of produc-tion of broilers at = 0.01 of
condence intervals are variables of
expenses of DOC, feed costs and the
cost of electricity
It implies that if one of the inputs is
upturned, the cost of broiler production
will increase with the assumption of
ceteris paribus.

The value of gamma () obtained is 0.99, indicating that the variation of errors caused
by economic efciency is 99.99%.
The difference between the actual cost of production and the possibility of maximum
production costs among farmers of 99.99%is triggered by the differences in economic
efciency and 0.11% due to stochastic effects such as measurement error.
The LR test values obtained are far greater than the value of 2 = 3.842, showing that
nearly all of the variation in the output of the frontier production can be considered as
the result of the level of attainment of cost efciencies related to the managerial
matters in the management of broiler farm business

Technical efciency analysis

Present results show that
the level of technical
efciency achieved per
individual farmers varied.
The variation is caused by the
differences of managerial ability,
especially in the term of setting,
formulating and using factors of
production to yield a number of
products.
If the average farmer in the sample area were to reach the TE level of
its most efcient counterpart, then the average farmer could
experience a cost saving of 5.10 percent (1- [0.93 / 0.98] x100).
The same condition applies to the farmers whose technical efciency
is on the lowest level. If farmers are able to achieve the highest
efciency, they will be able to save about 25.51% (1- [0.73 / 0.98]
x100).

Analysis of the
sources of the
inefciency
Estimate of the effects of the
technical inefciency of the
Stochastic Frontier production
function in broilers farms using
closed house system pattern shows
that statistically all determinant
variables included in the model are
not signicant

Analysis of economic
efciency
The economic efciency predicted is the
opposite of the cost efciencies of which
value is varied among farmers. The value
of economic efciency ranged from 0.860
to 0.999 of which average was 0.931.
The range of the economic efciency value indicates that the farmers were quite efcient in using
production factors by the lowest possible cost for gaining the highest possible yield of production.

The results of the analysis of economic efciency in Table 5 show the inefciency effects of
the broiler production costs.
If the average farmer is able to achieve the highest possible level of economic efciency as the most
efcient farmers do, the average farmer will able to save costs by 7% (1- (0.93/ 0.99) x100).

Analysis of
allocative efciency
Based on the allocative efciency
analysis results in Table 6, it can be
seen that there is a difference among
farmers.
Allocative efciency values ranged
from 0.88 to 1.31 of which average is
1.01.

The value of allocative efciency suggests that if the average farmer in the sample is able to reach
the level of allocative efciency of the most efcient farmers, the average farmer will be able to
save 23% of costs (1- (1,01 / 1,31) x100).
The same calculation applied to a farmer who is not efcient provides data in which they can save
cost by 33% (1- (0.88 / 1.31) x100). Based on the distribution value of allocative efciency that
47,3% are in the interval from 0.90 to 0.99.
The lowest value achieved allocative efciency suggests that farmers in the study area is quite
efcient in producing broiler. This shows that the breeder has efcient in minimizing the cost to
produce broilers

CONCLUSIONS

1.

Variables affecting broiler production applying pattern of closed house

system are DOC, feed, medicine (drugs, vaccines and vitamins) and input
variables such as the cost of DOC, feed and electricity which give highly
signicant effect on the cost of production.

2. The determinant variables which gave positive inuence on the technical

inefciency are the business experience and the number of dependents.
However, age, sex and age education level had no negative effect on the
technical inefciency.
3. Broiler farms using closed house system pattern in Malang district have
not been technically and economically efcient despite its high level
achievement of the average technical efciency. The average level of
technical and economic efciency was 0.93 and 0.92, respectively. On the
other hand, both groups of farmers have been efcient allocatively.

Thank you