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Smallholder Commercialization, Performance and Smallholder Commercialization, Performance and Household Demographic Cycle: Household Demographic Cycle:

Some Results from a survey in Lume Wereda, Some Results from a survey in Lume Wereda, EthiopiaEthiopia

July 19 – 21July 19 – 21

Addis AbabaAddis Ababa

A study commissioned and conducted by Future Agriculture Consortium

(www.future-agricultures.org)

22

Background and objectiveBackground and objective Agricultural commercialisation is very low in Ethiopia. Agricultural commercialisation is very low in Ethiopia. CSA (2010), for instance indicates that 64 per cent of CSA (2010), for instance indicates that 64 per cent of

grain produced by smallholders was used for own grain produced by smallholders was used for own consumption. (only 16 – 18% grain produced was consumption. (only 16 – 18% grain produced was marketed). marketed).

This is indicates that the driving forces for agricultural This is indicates that the driving forces for agricultural commercialisation are neither sufficient nor attractive:commercialisation are neither sufficient nor attractive: Internal dynamism within the smallholder sector makes asset Internal dynamism within the smallholder sector makes asset

accumulation and growth in per capita production hard. accumulation and growth in per capita production hard. Externally, lack/weak access to farm land and credit Externally, lack/weak access to farm land and credit

complicates the situation. complicates the situation.

Unless smallholders especially young farmers get some Unless smallholders especially young farmers get some kind of coordinated support, this kind of semi-kind of coordinated support, this kind of semi-subsistence agriculture will persist. subsistence agriculture will persist.

33

Background and objectiveBackground and objective Over the past decade, different kind of interventions Over the past decade, different kind of interventions

including small scale irrigated vegetable production and including small scale irrigated vegetable production and diversification into high value cash crops have been diversification into high value cash crops have been introduced. introduced.

Such kind of interventions have multiple objectives Such kind of interventions have multiple objectives including:including: commercialization of smallholder agriculture through commercialization of smallholder agriculture through

product diversification and better market access,product diversification and better market access, a means to overcome the negative effect of reduced access a means to overcome the negative effect of reduced access

to land and declining farm size especially on young farmers.to land and declining farm size especially on young farmers.

This study aims to appraise one of such interventions – This study aims to appraise one of such interventions – small-scale irrigation schemes launched in 2005 in small-scale irrigation schemes launched in 2005 in

Lume district to help small farmers produce high-value Lume district to help small farmers produce high-value vegetables (onion, tomatoes, and green pepper).vegetables (onion, tomatoes, and green pepper).

44

Specific objectiveSpecific objective To assess project outcomes in terms of To assess project outcomes in terms of

commercialisation and other performance commercialisation and other performance indicators – use of purchased inputs, productivity indicators – use of purchased inputs, productivity and employment. and employment.

How these outcomes vary across different hhs?How these outcomes vary across different hhs? What is the effect of the intervention on young What is the effect of the intervention on young

households. households. How young households exploit the new opportunity. How young households exploit the new opportunity.

Hypothesis:Hypothesis: Young households own few productive resources. This Young households own few productive resources. This

might hinder their participation in the might hinder their participation in the commercialisation scheme but they might seize the commercialisation scheme but they might seize the new opportunity through new opportunity through

allocating relatively larger portion of their land to high-value allocating relatively larger portion of their land to high-value crops or crops or

higher productivity.higher productivity.

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Data and Data and Both household survey and focus group discussions Both household survey and focus group discussions

were used to collect primary data.were used to collect primary data.

The survey includes 160 farm households both from The survey includes 160 farm households both from participant and non-participant groups (based on a participant and non-participant groups (based on a 50:50 ratio), though on average not more than 25% of 50:50 ratio), though on average not more than 25% of farmers take part in the program,farmers take part in the program,

Then farmers in selected villages were stratified Then farmers in selected villages were stratified based on their landholding and households selected based on their landholding and households selected randomly from different wealth strata. randomly from different wealth strata. based on recall data (for post-intervention period) based on recall data (for post-intervention period)

and baseline data for pre-intervention period.and baseline data for pre-intervention period.

the study employed largely descriptive methods the study employed largely descriptive methods (initial results might be tested further through multivariate (initial results might be tested further through multivariate

rregression egression econometric analysis).econometric analysis).

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Some results Some results

77

Commercialisation – output Commercialisation – output sideside

Commercialisation (proportion of output value sold) Commercialisation (proportion of output value sold) increased,increased,

This was accompanied with changes in cropping This was accompanied with changes in cropping pattern and crops’ rolepattern and crops’ role

2.5

2

17

26

11

24

7

5 45.

10.

16

1214

12 12

6.

4 5

010

2030

20 40 60 80 100 20 40 60 80 100

After (N=80) Before (N=80)

Value of crops sold (as total harvest value)

88

Apart from increase in cash income, the Apart from increase in cash income, the study shows that the number of cash crop study shows that the number of cash crop growers increased after the intervention. growers increased after the intervention.

About 14% of farm land allocated for the About 14% of farm land allocated for the production of staple food crops in pre-production of staple food crops in pre-intervention period, for instance, turned intervention period, for instance, turned into cash crops production. into cash crops production.

Similarly, the proportion of farmers that Similarly, the proportion of farmers that allocated half or more of their land to cash allocated half or more of their land to cash crops (both old and new) increased by crops (both old and new) increased by about 23% and reached 68%.about 23% and reached 68%.

Effect of intervention – the changes in land Effect of intervention – the changes in land use use

99

Effect of intervention – the changing role Effect of intervention – the changing role of cropsof crops

though nearly all farmers continue to though nearly all farmers continue to grow food crops and, in most cases, they grow food crops and, in most cases, they tried to meet their own food needs from tried to meet their own food needs from own production,own production,

Tef turned from a commercial to more of subsistence Tef turned from a commercial to more of subsistence crop (or relatively less important commercial crop). crop (or relatively less important commercial crop).

As a cash and also a food crop, tef brought on average about As a cash and also a food crop, tef brought on average about 60% of the cash income prior to the intervention. Its share, 60% of the cash income prior to the intervention. Its share, however, declined to 13% after the intervention. however, declined to 13% after the intervention.

Similarly, the share of wheat and haricot beans in Similarly, the share of wheat and haricot beans in generating cash declined from 14% and 10%, generating cash declined from 14% and 10%, respectively, to less than 5 %. respectively, to less than 5 %.

In contrast, new crops like onion and tomato In contrast, new crops like onion and tomato contribute about two-thirds of household cash contribute about two-thirds of household cash income and become the most important commercial income and become the most important commercial crops.crops.

1010

01

2

0 10000 20000 30000Cash income from farming m

Rented land (ha) Fitted values

02

46

8

0 10000 20000 30000

Cash income per farm

Use of hired labor

02

04

06

08

01

00

0 10000 20000 30000 Cash income per farm

Interest rate farmers paid Fitted values

Interest rates paid

Use of rented land/participation in land rental market

Participation in factor markets among farmers operated at different commercial level

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How young farmers react to the How young farmers react to the intervention? intervention? Do they seize the new opportunity?Do they seize the new opportunity? Does it help them to overcome emerging Does it help them to overcome emerging

challenges (like declining farm land)?challenges (like declining farm land)? What are the lesson and implication?What are the lesson and implication?

Young farmers and commercialisations

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Decomposing sample farmers into four age Decomposing sample farmers into four age groups groups

Sample farm hhs in four different age groups (N=46)

39 - 55 years39% 25 - 39 years

35%

<25 years17%

> 55 years9%

Age group Proportion (% in sample)

25 years or less (young) – 17%, 25 and 39 yrs (young -2nd cycle) – 35%, 39 and 55 yrs (old) – 39%, older 55 yrs (seniors) – 9%.

These four groups assumes to represent farm households found at their different demographic cycle.

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How young households perform How young households perform (in terms of average income)(in terms of average income)

Badperformers Goodperformers

Source: Computed based on survey data

Proportion of good and bad performing householdsat different demographic stages

head aged 25 years or less

Badperformers Goodperformers

Source: Computed based on survey data

Proportion of good and bad performing householdsat different demographic stages

head aged 25 - 39 years

Badperformers Goodperformers

Source: Computed based on survey data

Proportion of good and bad performing householdsat different demographic stages

head aged 39 - 55 years

Badperformers Goodperformers

Source: Computed based on survey data

Proportion of good and bad performing householdsat different demographic stages

head aged 55 years or older

Income/prosperity improves as households’ move to their next stage in their demographic cycle? Why? Better access to productive resources like farmland.

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What explains difference in What explains difference in performanceperformance

• Young households are resource poor.• Does this affect their engagement in commercialisation?

- Yes and No, depending on how we measure commercialisation.

Age of household head

< 25 years 25 – 39 39 - 55 > 55

F-test

Productive resources

- Age (yrs) 22 33 47 62 95.0***

- Cultivated land (ha) 0.96 2.3 4.4 4.1 9.23***

- Value of livestock owned (Br) 2657 2674 3342 4111 2.53*

- Highest grade completed (Yrs) 6 5 3 2 2.45*

- Family size (No.) 2 4.8 8.7 9.5 3.45***

- Credit market (% participated) 50% 75% 83% 100% --

Land productivity (gross margin)

- Non-irrigated (Br./ha)

- Irrigated farm (Br.ha)

5,794

24,658

7,014

22,399

12,991

20,558

6,215

25,455

2.64*

1.81

N 8 (17%) 16 (34%) 18 (39%) 4 (9%)

***, ** and * denotes statistical significance at 1%, 5% and 10% respectively.

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Irrigation & production for market among Irrigation & production for market among different hhsdifferent hhs

Age of household head

< 25 25 – 39 39 - 55 > 55

F-test

Irrigated vegetable land (ha) 0.20 0.37 0.70 0.21 2.5*

Share of irrigated land 22% 16% 16% 5% 2.6*

Commercialisation index (% of output sold)

78 75 71 62 2.48*

Value of output sold (Birr/farm) 3864 5187 8690 3682 4.23***

Young, land poor farmers • allocated the greater portion of their land to cash crops • sold a greater proportion of their output.

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Additional Dimensions to Agricultural Additional Dimensions to Agricultural CommercialisationCommercialisation

Young, small farmers, however, operate badly Young, small farmers, however, operate badly in terms of in terms of crop sales (volume, income) crop sales (volume, income) use of non-family labor (hire only 15 man-days, use of non-family labor (hire only 15 man-days,

about one third of the average), about one third of the average), use of rented land (but 87% of their cultivated use of rented land (but 87% of their cultivated

farmland is rented land).farmland is rented land).

Age of household head

< 25 25 – 39 39 - 55 > 55

F-test

Cash income from farming

(Birr/hh)

3864

5187

8690

3682

4.23***

Participation in factor market - Labor market (labor hired – persons/yr) - Land market (rented-in land – ha)

15

0.88

35

1.7

45

1.5

42

0.98

2.52*

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Summary/conclusionSummary/conclusion The intervention The intervention enables small farmers to

diversify their outputs and helps for enhanced helps for enhanced participation in output markets but with slightly participation in output markets but with slightly different outcomedifferent outcome It contributes for reducing poverty and improving It contributes for reducing poverty and improving

livelihood among the poor (generated more cash livelihood among the poor (generated more cash income per unit farmland)income per unit farmland)

it is more of a commercialization tool among relatively it is more of a commercialization tool among relatively land-rich households.land-rich households.

Market-based livelihood improving programs Market-based livelihood improving programs should not limited to technical interventions. should not limited to technical interventions. Institutional factors (markets – factor markets) Institutional factors (markets – factor markets) are also important in optimising the impact of are also important in optimising the impact of interventions. interventions.

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Though measuring commercialisation in Though measuring commercialisation in terms of terms of ‘the percentage of crop ‘the percentage of crop production marketed by a farm or production marketed by a farm or household’household’ has a big advantage as it has a big advantage as it treats commercialisation as a continuum, treats commercialisation as a continuum, thereby avoiding crude distinctions thereby avoiding crude distinctions between "commercialised" and "non-between "commercialised" and "non-commercialised" farms, this simple index commercialised" farms, this simple index might mislead and should be used might mislead and should be used carefully.carefully.

Summary/conclusionSummary/conclusion