Open Access

Netsanet Fentie Ambaw

• Teff and wheat are key staple crops for household food security and national output, yet productivity remains well below potential. Rising input costs, market volatility, and environmental pressures make optimizing current resources essential for sustaining livelihoods. This study analyzed farm income patterns, technical efficiency (TE), allocative efficiency (AE), and cost efficiency (CE) in teff and wheat farming among 103 smallholder households in Bahir Dar City Administration, an underrepresented area in previous efficiency research. TE, AE, and CE were estimated to be using an input-oriented Data Envelopment Analysis (DEA) under Variable Returns to Scale (VRS) with bootstrap correction. Socio-economic and agronomic determinants were identified using Second-stage Tobit regression. Mean TE was 0.505 (95% CI: 0.469–0.541) for teff and 0.522 (95% CI: 0.487–0.557) for wheat, indicating potential input reductions of 47%–50% without lowering output. AE averaged 0.654 (95% CI: 0.622–0.686) for teff and 0.846 (95% CI: 0.820–0.872) for wheat, showing more optimal resource allocation in wheat. CE was lowest 0.30 (95% CI: 0.272–0.328) for teff and 0.44 (95% CI: 0.408–0.472) for wheat highlighting substantial cost inefficiencies, especially in teff. A “two-tier” pattern in teff revealed a few highly efficient farms and many low performers, while wheat efficiency was polarized, with about 40% of farms below CE = 0.20 and minima of 0.04–0.10, alongside 46% scoring CE ≥ 0.50. The study concludes heterogeneity and untapped potential to diffuse best practices. Policy recommendations include giving adequate attention to optimizing existing resources by expanding irrigation services not only infrastructure but also operational support to ensure that available schemes are fully utilized throughout the growing season. Extension systems should emphasize accurate farm recordkeeping and prioritize the adoption of cereal-legume crop rotations to enhance soil fertility and sustainability. Timely dissemination of market information for both inputs and outputs, along with improved availability of locally appropriate mechanization for timely and efficient field operations, should be coupled with stronger market integration to maximize profitability and resilience in smallholder cereal systems