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Research Article
DETERMINANTS of SMALLHOLDER POTATO FARMERS’
COMMERCIALIZATION in CENTRAL HIGHLANDS of
ETHIOPIA
Daniel Hailu
Department of Agricultural Economics, Ethiopian Institute of Agricultural Research (EIAR), P.O. Box 2003, Addis Ababa,
Ethiopia.
Email address: danielhailu19@yahoo.com/dahagm19@gmail.com
Key Words: Commercialization, commercialization index, Smallholders, Potato, Determinants, Market participation,
Ethiopia.
INTRODUCTION
The world’s population currently (2020) reached 7.8 billion agriculture dominated with traditional technologies
and about 81 million people will be added to the world’s accounted for about 95 per cent of the output (Pender et
population every year (Worldometer, 2020). The report al. 2004). A small-scale farmer produces more for their
shows that 56.2% of these populations live in urban areas. own consumption and participates in the market as both
Meeting the food needs of a growing and urbanizing buyers and sellers.
population will be difficult for the world’s agricultural
production and trading systems in coming decades. In Market-oriented agricultural production by these farmers to
Ethiopia, small-scale subsistence-oriented farmers improve productivity, economic development, social
dependent on low input, rain-fed and mixed farming welfare, income distribution and food security of
DETERMINANTS of SMALLHOLDER POTATO FARMERS’ COMMERCIALIZATION in CENTRAL HIGHLANDS of ETHIOPIA
Daniel H. 843
700,000,000
600,000,000
500,000,000 Production (kg)
400,000,000 Population
300,000,000
200,000,000 per capita consumption
100,000,000
-
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Production Year
Potato can play an important role in improving food Despite its importance as a staple food and in combating
security and cash income of smallholder potato growers in hunger and poverty, potato has been neglected in
Ethiopia. Potato produces more dry matter per hectare agricultural development policies for food crops. Potatoes
than the major cereal crops in the world, more protein per are commonly regarded as a bulky, perishable commodity
unit area than any other crop except soybeans and more with high transport costs and limited export potential,
food per unit of water than any other major crop. It’s confined mostly to cross-border transactions. The
relatively short crop cycle (3-4 months) and water efficient increased demand in the food processing industry acts as
qualities further magnify potato’s use value in a major driving force behind the growth of the potato
intensification and mitigation of prevailing climate change market. Therefore, study on agricultural sales play an
challenging long cycled cereals.
important role in improving food security and cash income Method of Data Analysis
of smallholder potato growers in Ethiopia.
Descriptive statistics, Household Commercialization Index
Objectives of the Study (HCI) and Tobit model were used to analyze the primary
data collected from smallholder household heads using
The general objective of this study was to describe the structured questionnaire. Descriptive statistics was used to
characteristics of farm household’s market participation in describe and analyze the socioeconomic characteristics of
potato and explore strategies to promote smallholder small holder farmers. The HCI was used to determine
farmers’ participation in market oriented potato in the study household level of commercialization. Finally, Tobit model
area. The specific objectives were: was used to analyze factors determining level of potato
To describe the characteristics of farm commercialization.
household’s market participation in potato
To determine the level of the smallholder farmers’ Descriptive Statistics
market participation (HCI).
To identify factors that determines the level of The collected data from 196 smallholder farmers are
commercialization. analyzed to describe the relevant demographic, social,
economic and farm specific features of the farmers.
Multistage sampling procedure combining both purposive The index measures the extent to which household crop
and simple random sampling was used to identify farmers production is oriented toward the market. A value of zero
to include in the sample. District and peasant associations would signify a totally subsistence oriented household
were selected purposively based on potential potato where a value closer to 1 implies the higher degree of
production, cultivated land and number of potato farmers. commercialization.
Finally, respondents were selected proportionally from
each peasant associations using systematic random A two-limit Tobit regression model
sampling techniques.
Tobit regression model, originally formulated by Tobin in
Sample Size Determination 1958, with a hybrid of the discrete and continuous
dependent variables was used to analyze determinants in
The sample size was computed by Statistics Canada the potato producers’ level of commercialization. The use
(2010): that is a step-by-step approach where, first an of the Tobit model is intuitive because the parameter
initial sample size is calculated and then it is adjusted for estimates will be biased and inconsistent if OLS is used
the population, design effect and the response rate. Based (Gujarati, 2004). This is because OLS underestimates the
on the formulation, sample sizes of 196 respondents were true effect of the parameters by reducing the slope. The
selected through random sampling. degree of bias will also increase as the number of
observations that take on the value of zero increases. This
Data Type and Sources suggests that OLS regression was not appropriate and
estimation with OLS would have led to biased parameters
Data was obtained from both primary and secondary estimates. Probit and Logit models could not be used in
sources using appropriate data collection instruments. this case because they are only used when the dependent
Primary data was collected from 2015/16 cropping season variable takes two values (Gujarati, 2006). Tobit model
using personally administered structured questionnaires. was used because the dependent variable
Secondary data was gathered from country's statistical commercialization index is censored and treated as
report, crop variety register, annual reports, research continuous values that range between 0 (subsistence
papers, website, books and unpublished reports. producers) and 100 (fully commercialized farmers),
thereby avoiding crude distinction between Where Yi* is latent variable representing the HCI scores,
commercialized and non-commercialized household. 0, 1,..., n are parameters to be estimated, and HCI
Therefore, Tobit regression model offered the most is, Household Commercialization Index of the ith farmer. Zi
preferred option. - factors that affect commercialization level. And ui - an
error term with mean zero and variance (ui ~ IN (0,
2 2
The study followed Makhura (2001) and Bellemare and
Barrett (2006) who used Tobit model to specify a market )) and HCI scores for the smallholder potato producers
participation decision function. The Tobit model is range between zero and one.
specified in Maddala (2001) and Hobbs (1997) as follows: 1, if Yi* ≥ 1
Y* = βx + µ -------------------------- (1) Yi = Yi*, if 0< Yi* < 1
Where, y* is the latent variable, and x is a vector of
independent factors, β is the corresponding vector of 0, if Yi* ≤ 0 ---------------------- (3)
parameters and µ is the error term. Two-limit Tobit model allows for censoring in both tails of
Following Amemiya (1981) and Endrias et al., (2013), the the distribution (Greene, 2003). The log likelihood that is
two-limit Tobit model was defined as; based on the doubly censored data and built up from sets
n of the two - limit Tobit model is given by;
Yi*HCI 0 j zij ui -------------------------- (2)
j 1
Tobit model parameters cannot be directly interpreted as 3) The probability of being between the limits: The
changes in the dependent variable brought about by influence of explanatory variables on the probability of
changes in independent variables. A Tobit model provides dependent variable to fall in the uncensored part of the
a single coefficient for each independent variable despite distribution.
two distinct types of dependent variables censored and Pr( y 0 | )
uncensored. The marginal effects also account for the ( ) (7)
probability of being commercialized.
postharvest period (November to February) and also 91% Aggreg 108,52 45,32 437,2 1,344, 1,935, 69
of the marketing performed on the farm. ate 0 5 76 825 946
Percent 6 2 23 69 100
Table 1: Preferred period of selling by farmer age
Time of selling Freq. Percentage
March 14 7
April 7 4 Household Level Of Commercialization
October 7 4
November 40 20 The degree of household commercialization in the study
December 36 18 area ranged from 0 to 1 across the sampled households.
January 56 29 As shown in Table 3, about 72% of households found to
February 36 18 be at higher level of commercialization selling on average
Total 196 100 70% of the total quantity of the produce, whereas 7% of
Source: own computation the households are at low commercialization level, with
average sell of 20% of the produce, respectively. In
Why Farmers Grow Potato? The statistical summary general the average level of household commercialization
provided in Figure 2 shows that the larger proportion (86%) in the study area was found to be 61%, which is
of the farmers produces potato for selling purpose, which significantly above the national commercialization
indicates producers in the area were business-minded. average.
Table 5. The marginal effects of change in Possession of Livestock: Number of livestock owned in
explanatory variables (HCI) TLU was found to positively and significantly affect
Variables dy/dx commercialization at 1% significant level. A unit change in
the number of oxen owned by households would increase
∂ E (y|x) ∂ E (y*|x)
the probability of a farmer to participate in the market by
Age of HHH -0.2937 -0.2760
4.2 percent the mean level of commercialization by 4
Production of Potato 0.0556 0.0523
percent. Results revealed that livestock holding size,
Tropical Livestock Unit 0.0423 0.0398 which is a proxy for measuring wealth status of household
(TLU)
head, enables farmers to overcome liquidity constraints to
Family Size in the HH -0.0405 -0.0380 purchase and apply inputs and implement correct farm
Distance to the nearest -0.0396 -0.0372 management practices on time and increases the ability to
market produce more as compared to non-holders. This result has
Education level of HHH 0.0093 0.0087 been supported by the finding of Tadele et al. (2017) and
Membership to 0.0375 0.0353 Aman et al. (2014) who found livestock can positively
cooperatives contribute to crop production by providing natural fertilizer,
Land tenure status -0.0240 -0.0226 oxen used for traction power and source of cash to finance
Market price of potato 0.0084 0.0079 purchased inputs such as seed and fertilizer.
Credit service 0.0038 0.0036
Off-farm income 0.0005 0.0005 Family Size: Household size measured in Adult-
Equivalent (AE) affects level of participation in marketing
Potato Production: Value of total farm outputs (potato) negatively and significantly at 10% significant level. A unit
produced had a positive and significant effect on change in the number of family size would decrease the
commercialization at 5% significant level. A unit change in probability of a farmer to participate in the market by 4
the production of potato would increase the probability of percent and the mean level of market participation by 3.8
a farmer to participate in the market by 5.6 percent and the percent. Results revealed that households with more
mean level of commercialization by 5.2 percent. Results members and higher dependency will consume more of
revealed that as the level of potato production increased, the product. The negative impact of household size
the amount of marketable surplus supplied to market is indicated that the higher the family size, the lower will be
also increased. This is because when a farmer produces the amount of grain marketed. The result is consistent with
surplus of grain over food consumption, to reduce the that of Aman et al. (2014) and Benjamin et al. (2014) who
postharvest losses or perishability they are obligated to
DETERMINANTS of SMALLHOLDER POTATO FARMERS’ COMMERCIALIZATION in CENTRAL HIGHLANDS of ETHIOPIA
J. Agric. Econs. Rural. Dev. 848
found households with large family sizes need to feed their commercialization average. Among the farmer-specific
family first and take the remaining small amount to the characteristics, higher levels of potato production,
market. educated household heads and household heads that
possess large number of livestock (TLU) were a positive
Age of the household heads: Age of household heads and significant effect on commercialization. However,
which was measured in years was negatively and household heads with highest family size, old aged
significantly affects level of household’s potato household heads and distant market from farm were a
commercialization at 1% significance level. A unit change negative and significance effect on commercialization. The
in the age of HHHs in an increase order would decrease study concludes that smallholder farmers have a great
the probability of a farmer to participate in the market by potential for commercialization that can be developed in
29.4 percent the mean level of commercialization by 27.6 the study area.
percent. Younger farm household heads participated more
in output markets than the older farmers. This is because The farming population is growing older because young
younger peoples are comparatively more educated than people increasingly chose city life. Therefore, the study
the older farmers, had more contacts with extension agent suggested the need for policies to encourage the
and avoid pre and post-harvest losses and are more participation younger generation to engage in agriculture
business-minded to participate in selling than their older sector and the development of market facilities in the area.
counterparts. The finding was consistent with Abafita et al. Nowadays the consumer demand is shifting from fresh
(2016) and Mabiratu Dangia et al. (2019). tubers to processed products; the study also recommends
the policy to encourage farmers to sell processed products
Distance of the market: The time taken in minutes of than fresh tubers.
walking time to the nearest market had negatively and
significantly affected the amount of potato sold in the
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Citation: Daniel Hailu (2020). Determinants of Smallholder Potato Farmers’ Commercialization in Central Highlands of
Ethiopia, Journal of Agricultural Economics and Rural Development, 6(2): 842-850.
Copyright: © 2020: Daniel H. This is an open-access article distributed under the terms of the Creative Commons
Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original
author and source are cited.