Commercialisation Of Smallholder Agriculture In Selected Tef-Growing Areas Of Ethiopia

Abstract

The poverty-reduction strategy adopted by Ethiopia seeks to achieve growth through the commercialisation of smallholder agriculture. Commercialisation of agriculture is also a core research theme of the Future Agricultures Consortium.

The empirical research reported in this paper focuses smallholders, that are farming households, who are established growers of highly marketable crops, in areas already well-linked to markets. Two commodities were selected for the study: coffee and tef. Both are important to the national economy, and both are grown and marketed by millions of smallholders. The two commodities have both similar and contrasting characteristics. Both are labour-intensive crops with seasonal labour-demand peaks, met partly by migrant workers. Both are produced primarily by smallholders (although there are also a few large enterprises growing coffee). Both commodities command export as well as domestic markets, although tef has been primarily a domestic product in the past while coffee is a major national export. Most obviously, tef is both a food and a cash crop, and is therefore fungible either for farm consumption or sale. Coffee, by contrast, is a non-food crop grown primarily for the market. The study on coffee is reported separately.

The level of commercialisation in the study areas is far higher than the national average. The average farmer sold almost half (49.7%) of his or her crop production (in value terms). The degree of commercialisation, however, differs widely across sampled households, which implies a correspondingly wide variation in the potential and constraints for further commercialisation. Therefore, any agricultural commercialisation strategy should be customized for different groups of farmers. Despite the relatively high degree of market orientation in the study areas, the size of market (per seller) is very thin. The volume of trade is constrained by low per capita production. The size of farmland owned and cultivated is very important to farmers\' participation in output markets. Similarly, both the total value of farm production and the proportion of land allocated to tef (the major cash crop) had a positive and significant impact on a household\'s degree of market participation, measured in terms of gross income from crop sales. On the other hand, the effect of household self-sufficiency in food (measured as the percentage of consumption that is self-produced) was negative. This implies that households who depend more on the market for their food access also participate more in output markets. In other words, their participation in food markets is high both as sellers and buyers.

The findings of this study broadly support the PASDEP\'s dual strategy of increasing agricultural commercialisation while promoting non-farm economic growth. Higher levels of household commercialisation appear to be associated with better standards of welfare (including food consumption), confirming that smallholders can benefit directly from greater engagement with markets. At the same time, a minority of farmers even in these relatively commercialised areas are leading marginal and largely subsistence-oriented farming livelihoods, supplementing their production income through renting out land. Combined with the finding that higher non-farm incomes are associated with lower agricultural commercialisation, this underlines the importance of developing sources of non-farm employment alongside intensification of agriculture, in order to provide favourable conditions of exit from farming for some less productive farmers and landless youth. The suggested direction of change is towards a more diversified rural economy, aiming for higher returns from agriculture alongside a wider range of local income and livelihood options.


Ethiopian Journal of Economics Vol. 16 (1) 2007: pp. 57-88