CROP PRODUCTIVITY, EFFICIENCY AND COMMERCIALIZATION OF SMALLHOLDER FARMERS IN THE HIGHLANDS OF EASTERN ETHIOPIA

Abstract

The agriculture sector is the most important segment in the Ethiopian economy. This is because of its contribution to the national GDP (38.5%) where crop accounted for 27.4%, and provides employment for 72.7% of the total population. Despite efforts made to commercialize and transform Ethiopian agriculture from subsistence to production of high value crops, the sector’s performance has been below expectations. In light of the problems and the research gaps identified, this study seeks to address and generate information on the important factors influencing crop productivity, efficiency and commercialization of smallholder farmers in the highlands of eastern Ethiopia. Field surveys were conducted during 2014/15 cropping season on a total of 385 sample farm households that were randomly drawn from 8 Kebeles in four Weredas selected through a multi-stage sampling technique. The data were analyzed using descriptive statistics and econometric models including doublehurdle, Heckman two-stage selection, Tobit, 2SLS, and DEA models. The doublehurdle model result pointed out that sex, experience, land allocated to khat and location dummy negatively and significantly influenced commercial orientation, whereas, cultivated land size, off/non-farm income, fertilizer, crop diversification and on-farm income positively and significantly influenced it. On the other hand, results of the second-hurdle indicated that level of crop market orientation is negatively and significantly influenced by dependency ratio, social capital, khat land, town and road distances. Heckman two-stage selection model result indicated that crop output markets participation are influenced by sex, experience, livestock holding (excluding ox), cultivated land size, khat land, off/non-farm income, fertilizer, on-farm income, market distance, crop diversification and location dummy. Moreover, farm households’ intensity of crop output market participation is found to be influenced by the proportion of irrigated land, social capital and dependency ratio. Results of 2SLS regression indicated that TFP was strongly and positively influenced by the endogenous commercial orientation index. In addition, oxen holding, market distance, xvi extension visits, manure used, labor and location dummy significantly influenced TFP. The overall average farm households’ TE, AE, and EE scores obtained from DEA model results were 66, 72 and 46%, respectively. Inefficiency factors estimated using Tobit model confirmed that TE was significantly influenced by market distance, distance to FTC, crop diversification, oxen and other livestock holdings. Moreover, sex, market distance, distance to FTC, oxen and other livestock holdings were important factors affecting EE. Further, AE of crop growing farm households were significantly influenced by sex, market distance, khat land, and oxen holdings. The overall results imply that the major improvements related to smallholder farmers’ crop commercialization and production efficiency would require attention on the identified significant factors. Generally, there is no single and best (universal) strategy that can be recommended to solve farm households' problems and factors limiting their commercial orientation as well as production efficiency. Hence, the findings of this study unveil the need for implementing differential policies that separately target and address the specific determinants of farm households’ crop commercialization and production efficiencies.