The study intended to identify economic efficiency level of Teff producers and associated factors based on data from 142 households. The Cobb-Douglas stochastic frontier production and its dual cost functions estimated. Among six input variable used by household the result of production function revealed land, labor, seed and chemical inputs turned significant factor in teff production with the expected sign in coefficients. The mean level technical efficiency, alloactive efficiency and economic efficiency of small scale teff producers found to be to be 47.88%, 53.59%, 39.88% indicates wide inefficiency. If inputs efficiently used, would increase teff output by 52.12% of current output level without additional inputs with current technology on average or decrease cost of inputs by 46.88% without decreasing current level of production. In general household could increase teff output by 60.12% through simultaneous proper use of inputs and reduction of cost of inputs. Tobit regression used to identify source of efficiency differentials showed being female household head, family size, and distance to crop market found negatively and significantly affected technical efficiency of household while age of household have positive relationship. Family size, distance of household from nearest office (Kebele), access to credit and nonlocal teff variety usage contributed to allocative inefficiency of teff producers. Family size, distance from nearest office (kebele), distance from extension service, contributed to inefficiency of household in teff production while distance from asphalt road, and local teff variety usage found to contribute to economic efficiency of teff producers in the area. There was possible potential Teff output increment by technical, alloactive and economic efficiency improvement without additional input or with the same level of cost incurring in Teff production with existing technology through adjusting policy variables that related to efficiency in Teff production of the study area.

Keywords: Borana zone, stochastic frontier, economic efficiency, Tobit regression, Teff.