Agricultural Commercialization of Smallholder Farmers in Ethiopia: A Review

Yohannes Girma

doi:10.7176/jesd/12-13-04

Abstract

Smallholder farmers have high contribution for Ethiopian GDP. However, majority of these smallholder farmers have limited participation in market. Market participation of smallholder farmers is the main path way to shift from subsistent oriented agriculture to market oriented agriculture in Ethiopia. Therefore, this paper reviewed recent literatures to identify the major determinants of smallholders’ Commercialization and to know the welfare impact of agricultural Commercialization in Ethiopia. According to this review, the major determinants of smallholders’ Commercialization are divided into nine parts. Namely, population increase, institutional factors, transaction cost, asset holding, technology, market access, risk, policy issue and food habit. Furthermore, progress in welfare which was seen in terms of increase in, agricultural production and productivity, income, food security and poverty reduction are the main contributions of Commercialization for smallholders. In general, this review paper concluded that strengthening market participation of farmers is essential to facilitate smallholder farmers’ welfare.Furthermore, policy recommendations to facilitate agricultural Commercialization in Ethiopia are forwarded in this review paper. Keywords: Commercialization; Determinants; Smallholders; Welfare. DOI: 10.7176/JESD/12-13-04 Publication date: July 31 st 2021

Highlights

Agriculture in Ethiopia accounts over 40% of the national GDP, in which smallholder farmers contributes about 90% of the agricultural production (ATA, 2016).Th agricultural sector in Ethiopia is characterized by very large number of smallholders having less than 2Ha of land and very small number of commercial farmers that make up 1% of the land area
Smallholder Farmer The current definition of smallholder is seen according to the following eight indicators that are inclusive for all countries: market orientation, landholding size, Labour input, farm management strategies, income, farming system, capacity and legal aspect (EPFL, 2013)
Chamberlin (2008, and Newsham et al, 2018) smallholder farmer is the one with small land holding size, scare resource, produce for own consumption and vulnerable to different agricultural risks

Summary

Introduction

Agriculture in Ethiopia accounts over 40% of the national GDP, in which smallholder farmers contributes about 90% of the agricultural production (ATA, 2016).Th agricultural sector in Ethiopia is characterized by very large number of smallholders having less than 2Ha of land and very small number of commercial farmers that make up 1% of the land area. The transformation of Ethiopian agriculture from subsistent to market orientated (commercialized) production system forms the basis of the agricultural development strategy of the Government of Ethiopia (Diao, 2010). 3. Smallholder Farmer The current definition of smallholder is seen according to the following eight indicators that are inclusive for all countries: market orientation (subsistent or commercial), landholding size, Labour input (hired or family labour), farm management strategies, income, farming system (level of technology used, rain fed or irrigation agriculture), capacity (administration of the farm; storage, processing and marketing; certification) and legal aspect (is the land registered?) (EPFL, 2013). Agricultural commercialization is the transformation of production from subsistent oriented to market oriented (Sokoni, 2007) Such transformation must be based on market demand and profit maximization principle (Leavy and Poulton, 2007). As farmers market participation increases, more of the households’ income is derived from non agricultural activities

Degree of Integration to cash economy

Findings

Conclusions