Income risk and crop production patterns of small-scale farmers in Eastern Oromiya region of Ethiopia

Abstract

Income risk associated with crop production was analysed using the Quadratic Risk Programming Model for users and non-users of maize production technologies in Dadar district in Ethiopia. The E-V results revealed that both categories of farmers have the same degree of risk aversion as reflected by the degree of risk aversion coefficient (λ = 0.0008 ). In addition, the optimisation model results showed that improved maize production is associated with higher income risk as no more than the minimum subsistence constraint was chosen under higher degrees of risk aversion. While an increase in fertilizer prices reduced maize area cultivated for package users, the sensitivity analysis results for increases in maize prices showed a substantial rise in the area allocated to improved maize. However, for increased maize prices, area allocated to maize remained at subsistence level for non-users of the package. The development and promotion of new agricultural technologies need to take into account the yield and income risks associated with maize production in the area. In addition, expansion of rural road infrastructure, the promotion of post-harvest crop storage technologies and food processing industries should be given emphasis as strategies to stabilize prices and reduce income variability arising from crop production in the area.

Eastern Africa Social Science Research Review Vol. 22(1) 2006: 87-101