Participation of Smallholders in Production and Marketing of Commercial Crops: The

Case of Sesame in Diga

Geremew Kefyalew, Kindie Getnet, Wassie Berhanu, Katherine Snyder and Simon Langan

MSc thesis (International Economics) Addis Ababa University

December 2012

Outline

1. Introduction

2. Sesame production and marketing in Diga

3. The study Setting

4. Results and discussion

5. Conclusions and recommendations

1. Introduction

• Agriculture the underpinning of Ethiopian economy

. employment (>85%) . export (>90%) . GDP(>42%)

• Dominated by smallholder sub-sector . covers > 95 % of agricultural output .Major source of agricultural growth . characterized by: . rainfed (only 13 % irrigated) . subsistence . low productivity

• Government priority (PASDEP, ADLI, GTP)

. Productivity growth

. Smallholder commercialization (market –

oriented crop productions)

• Advantage of market-oriented crops

. livelihood diversification

. export-revenue

. poverty reduction

2. Sesame production and marketing in Diga

• Diga– One of the N4 sites– high potential for agriculture (land, water, market

access)– Mixed crop-livestock farming system– Livelihood improvement could be assisted through

better participation of smallholders in sesame production and marketing

• The scene in sesame production and marketing- Smallholders differently respond to the available potential and opportunities- Currently only about 29% of the potential arable land cultivated under sesame

3. The study setting

A. The research questions. What factors, in addition to water, determine livelihood improvement from cash crop production?

. Is production potential supported with market potential, market access, and market participation?

B. Hypothesis - Water translate to livelihood development through production and

market participation - Other internal and external factors influence the possibility to

change the production potentials into livelihood advantages

C. The research objectives

(a) To identify determinants of smallholder farmers

participation in production of sesame

(b) To examine factors affecting the level of sesame

production participation

(c) To analyze factors affecting and explaining

marketing of sesame

D. Data and Methodology• Data

Primary sources (formal questionnaires and key interviews)

120 households 4 PAs Purposive (to select PAs) and random sampling

techniques (to select respondents)

• Methodology Descriptive and Econometrics

Descriptive- to analyze the common factors Econometrics

Probit model determinants of household decision to produce

sesameOLS method

level of participation in sesame production income earned from sesame

Variables considered.external factors

access to institutional services access to input and output markets

.internal (household specific) factors asset endowmentshh characteristics

E. Specification tests

Multicollinearity problem

. Variance inflating factors (VIF) for continuous variables

. Contingency Coefficient (CC) for discrete variables

. Results - no serious correlation among explanatory

variables (in all cases and models)

Sample selection bias Heteroskedasticity – robust standard error

(corrected S.E.) Endogeneity problems

F. Data summary .Out of 120 sampled hhs 91 sesame producer in 2011/2012 29 non-producers 104 male headed, 16 female headed 40% illiterate 68% members of cooperatives 66% have access to credit services

92.5 % own land3.24 ha- average landholding0.75 ha-average cultivated land under

sesame96 % use oxen for cultivation1.63 average sesame produced (in quintal)2.53 average crop-yield (quintal per

hectare)

4. Results and discussion

• Descriptive results Crop production –main source of agrl.

income Sesame - major cash crop in the area

Major sesame production constraints:

. No improved seed varieties . Pest and disease problems . Low technology applications (fert.)

• Sesame marketing constraints

. High transaction costs

. Lack of trust on traders (scale cheating)

. Traders set the price (predetermined)

•Econometric results1. Determinants of sesame Production participation – probit regression

VARIABLES MARGINAL ROBUST P>|z|

EFFECTS (dF/dx) STAND.ERR.

Age of hh head -.000 .000 0.981

Educational level of hh -.000 .000 0.862

Active family labour .002** .003 0.050

Landholding size .017*** .024 0.000

Number of donkey owned .003** .006 0.024

Number of oxen owned .004*** .006 0.006

Member to cooperatives .010 .019 0.189

Access to credit .011** .018 0.040

Access to non-farm activity .002 .004 0.240

Family food availability .032** .055 0.019

Distance from extension -.0001** .000 0.036

Distance from nearest market -.000 .000 0 261

*** Significance level at 1 percent probability ** Significance level at 5 percent probabilityPseudo R-square = 0.8254 Prob > chi-square = 0.0000

Source:, survey result,, 2012,

• 12 potential variables included (8 cont., 4 disc)• 7 variables significant

Number of active family labour Household landholding size Number of oxen owned Number of donkey owned Availability of family food for the whole year Access to credit Distance from hh home to extension centers

2. Level of sesame production participation - OLS regression

VARIABLES COEFFICIENTS R.Std.Err. P>t

Landholding size .010 .043 0.805

Active family labour .262*** .068 0.000

Access to credit .533*** .178 0.004

Educational level of hh .014 .035 0.687

Household gender -.313 .298 0.296

Crop yield .181*** .053 0.001

Sesame farming experiences .379** .163 0.023

Production problems -.135 .242 0.579

Number of oxen owned .27** .121 0.029

Constant .80 .544 0.143

*** significance of the coefficient at less than 1 percent probability level

** Significance of the coefficient at less than 5 percent probability level

Prob > F = 0.0000

R-squared = 0.4756

Source: survey result, 2012

• 10 variables included ( 6 contin., 4 discrete)• 5 variables- statistically significant

Access to credit Number of active family labour Number of oxen owned Sesame crop yield - quintal produced per hectare Farmers experience on sesame production

3. Level of income generated from sesame sale - OLS regressionDependent Variable: Earned income from sesame sale (gross)

VARIABLES COEFFICIENTS Robust S.E. P>|t|

Amount of sesame marketed 1435.10*** 43.10 0.000

Access to market information 302.27*** 90.34 0.001

Time of Sell: IMMIDIATE-reference

One month later -after harvest -147.28 123.20 0.236

Two months later-after harvest -231.35* 116.35 0.051

Three months later- after harvest -442.81** 171.03 0.012

Selling Channels: DIRECT-reference

Selling through Brokers 97.92 93.90 0.301

Sesame market price p 87.93*** 25.46 0.001

Traveling time to nearest market -1.70 *** 0.64 0.010

Major buyers: Local traders-reference

Selling to cooperatives 145.20** 71.17 0.045

Selling to traders 21.62 82.26 0.793

CONSTANT 1318.57*** 464.03 0.006

*; **, **** indicates the statistical significance of the coefficients at 10%, 5% and 1% probability levels, respectively.

Prob > F = 0.0000

R-squared = 0.9718

Source: Survey result, 2012

• 12 potential variables entered regression• 7 variables- have significant estimated

coefficients Amount of sesame marketed) Access to market information Selling sesame after 2 months Selling sesame after 3 moths Sesame selling price at market Selling to cooperatives Traveling time to nearest market

5. Conclusions and recommendations

• Prod. potential necessary but not sufficient condition for livelihood development through sesame production

• Household specific factors significantly influences sesame production and marketing participation

• Institutional factors (credit, cooperatives) found to be important in all stages of sesame production processes

• Recommendations: Provision of improved sesame seed varieties that

properly fits the Wereda’s agro-ecology Development and broadening the basis of institutional

services (credit, cooperatives, contract farming) Developing sustainable sesame diseases and pest

infestation control mechanisms Provision of reliable information (on production and

marketing) in regular basis

Thank you