Determinants of Wheat Commercialization and Its Income Effects on Smallholder Farmers: A Case Study of Basona Werana District, North Shewa Zone, Ethiopia

Abstract

In Ethiopia, where cereal production and marketing are the means of support for millions of smallholder households in terms of consumption, employment and marketing. Wheat is the core cereal crop in Ethiopia in general and at Basona Werana district in particular which support smallholder households with consumption and marketing. The objective of this study was to identify determinants of smallholder wheat farmer decision to participate in output market and level of marketed output and its income effects on smallholder farmers. Multi-stage sampling process was applied. The study used data on 360 respondents that are collected through structured questioner from Basona Werana districts in North Shewa zone. The descriptive statistics, Double-hurdle model and Propensity score matching inferential methods were employed to analyze the data. Average wheat commercialization index indicated that out of sampled households about 37.78%, 54.44% and 7.78% of households were subsistence, semi-commercial and fully-commercial, respectively. The first hurdle model indicated that, land size allocated to wheat, credit access, access to market price information, family labor, total amount of wheat produced and membership of informal institutions positively influence wheat commercialization participation decision while size of family member, participation of off-farm income, distance from the market and preparation of feasting has negative effect on it. The second hurdle result found that access to market price information, total amount of wheat produced, cash expenditure for input utilization and membership of informal institutions positively affects intensity of wheat commercialization while preparation of feasting have negatively affects. Furthermore, propensity score matching model result indicates that wheat commercialization has a significant and positive effect on income of smallholder households. Therefore, the concerning body should design appropriate policy and strategies that improve the participation of the households in wheat commercialization through investing in transaction cost reduction activities, increasing credit access and empowering informal institutions.