Does Cereal Commercialization Enhance Farm Households’ Input Use, Efficiency, and Productivity? A Conditional Mixed Process (CMP) Approach from Rural Ethiopia

Abstract

The paper explores how cereal commercialization affects farm households’ input
use, technical efficiency, and productivity in major teff-based mixed-farming areas of
Ethiopia. Analytical tools which included descriptive statistics, conditional mixed
process model, dose-response function, and three-stage least squares regression
model (3SLS) were employed. Our results indicate that farm households sell, on
average 38% of cereal crops produced with variability across the cereal crops. The
simultaneous equation model estimates confer that commercialization positively and
significantly increases farm households’ input use and cereal yield at 1% level.
Ceteris paribus, a 10% increase in the degree of commercialization increases
nitrogen fertilizer, agrochemical, and cereal yield in monetary terms per hectare by
6.8%, 23.4%, and 5.5%, respectively. The results also substantiate that
commercialization enhances the likelihood of using high-yielding varieties and
hiring additional labor to cultivate cereal crops. Hence, the more the farm
households are oriented to the market, the higher they invest in modern technologies.
The 3SLS estimation also confirmed the bi-directional causation between technical
efficiency and commercialization of farm households, signifying that improving farm
households’ input use efficiency leads to a higher degree of commercialization and
vice-versa. Moreover, the results show that the extent of cereal commercialization is
positively determined by sex of the household head, land size, credit service, mobile
phone ownership, improved seed, and agricultural assets, while negatively
influenced by family size, dependency ratio, and non-farm employment. Therefore,
the findings of this study call for policy efforts to mitigate bottlenecks in access to
modern inputs and address factors that hinder the commercial transformation of
farm households