Determinants of commercial orientation of smallholder farm households in risk-prone areas of Ethiopia: analysis of the central rift valley.

Ethiopia's economy primarily depends on agriculturae.the sectory is dominantly run by smallholder farmers and contributes to about 50 percent of GDP and provides employment for about 83 percent of the total population.The sector is also expercted to contribute towards speeding up of the performance of the other sectors in the Millennium Development Goal. Commericial agriculture is considered important for stimulating growth, economic development, food security and poverty reduction. In spite of the supportive policy provided by the government, there is little empirical evidence on the position and characteristics of the risk-prone smallholder farmers and on what factors are influencing their commercial orientation as expressed by their participation in market-oriented activities.priority is given to these farmers since their livelihood is much more threatened by environment-related risk factors beyond economic reasons.This study seeks to address these farmers by assessing survey data collected in 2007from smallholder farm househols making their livelihood in drought-risk-prone areas least squares and simultaneous equation model were employed to assess the three objectives that include analyses of houeholds typology, determinants of commericial orientation and the tradeoff between commmercial orientation and productivity.Results show that farm households commercialization typology divides between maize and their management strategies indicating the intesity of the problem and absence of best strategy to combat risk.The type and magnitude of determinant factors also varied across decision-making hurdles and across the type of commerical activities, i.e. crop sales, input purchases and resource allocation.Unregulated diversification was found to influence the intensity of commercial orientation.The socio-economic factors resposible for characterizing the smallholder farmers are not specific and each factor contributes to the variability among the houehold.Most (around 80 percent) of the farmers are considered as subsistence-oriented with respect to their low level of participation in commerce.Those few farm househlds that may be grouped as commercial-oriented are positively associated with improved factor productibity, given other socio-economic factors.Most of the farmers did not have access to credit and extension services.Even the few commercial ones did not benefit much from the services.Improved commmercialization demands improvement of the asset holding position of the farm househods and/or redeployment of suplus labor elsewhere.Therefore, smallholder agricultural development stragegies should consider addressing diversity in performance and capacity limitations for meaningful and sustained impact.