Study of Efficiency, Output Loss and Soil Erosion in Fiji's Ginger Industry

The ginger industry is one of the key industries identified by the Fiji government in its diversification strategy to accommodate the remnants of the withdrawal of the European Union’s sugar preferences. There is considerable pressure on small industries such as ginger in search of ways in which they can be made to operate efficiently and sustain the economy. Expansion of commercial agriculture into marginal land which is unsustainable adds enormous pressure on land causing soil erosion. Coupled with this is the quality issue which is a serious problem of ginger production and has reduced its competitiveness over the years. This study focuses on two types of losses in ginger production to provide an integrated approach to policy making and computing production losses. One is the observable output loss at the farm site that is not sold due to sub-standard quality related to disease and the other is the unobserved output loss due to inefficient production. The research attempts to answer the question of whether the Fiji ginger farmers are producing efficiently, and at what levels. The relative importance of each input in ginger production is examined. The study undertakes to determine the effects of key variables on farm efficiency. Also examined is the overall farm profiles based on the efficiency rankings of the ginger producers. Furthermore, this research attempts to determine factors that influence soil erosion, and those that influence the observed ginger loss. Using cross-sectional data from a ginger farm survey conducted in June 2007, this research estimates a stochastic production frontier which incorporates soil erosion as an input in the framework. Very few studies have looked at the impact of soil erosion in this context; hence, this study fills the gap by incorporating land quality in the analysis. Farms were found to produce at 69% of their maximum potential output and soil erosion resulted in 6.8% loss in ginger output. This also implies that using the same resources, technology and farming techniques efficiently can lead to a 31% increase in output. While unobserved loss to farm income is a 27% (F$4.6m) increase over the observable loss at farm site, the revenue loss to the whole industry is at least 30% (F$5.07m). Profit was a key determinant of both losses, but staying on farm, slope of land, manure use and hot water treatment affected the observed but not unobserved loss. Although farmer education had no effect on both losses, it was important for undertaking soil conservation. Fiji is in a good position to increase production as education, age and experience of farmers were not significant determinants of efficiency. Thus, displaced farmers from sugar cane farming (given serious concerns of the viability of that industry) can be encouraged to move with ease into ginger as an alternative livelihood. Lastly, the study highlights some practical implication which calls for an integrated package of policies related to use of best farming techniques, land tenure and, agricultural extension and support services for sustainable agricultural growth