SMALLHOLDER AGRICULTURE COMMERCIALIZATION DYNAMICS UNDER CHANGING CLIMATE: EVIDENCE FROM RURAL ETHIOPIA
Date
2026
Authors
Takesure Tozooneyi
Clifton Makate
Journal Title
Journal ISSN
Volume Title
Publisher
AERC
Abstract
Smallholder crop commercialization, which implies the engagement of farmers with output markets, has been for long a popular development policy for alleviating rural poverty in many countries in Sub-Sahara Africa. The success of smallholder crop commercialization initiatives lies in developing robust value chains that link farmers to inputs and outputs markets, by so doing improving their welfare from the consequent market-based exchanges. However, the development of these value chains must overcome systemic investment risks. One such risk is climate risk, particularly rainfall, temperature variability, and shocks (e.g., drought and heat stress). Commercialization dynamics under changing climate remain largely under-explored in extant literature. This study explores how smallholder commercialization decisions and outcomes are evolving under elevated climate risk exposure and other socioeconomic challenges affecting smallholders in Ethiopia. Precisely, we evaluate the dynamics of the influence of long-term climate variability and recurrent climate shocks in driving crop output market participation in Ethiopia. The study uses longitudinal household panel data for Ethiopia spanning seven years (2012-2019), complemented with historical climate data for over 30 years (1980-2018). We rely on measures of the degree of participation in output markets as indicators of agricultural commercialization. We apply appropriate latent variables models in a Correlated Random Effects framework, which helps us address the potential endogeneity problem associated with output market participation decisions emanating from unobservable household heterogeneity. Results reveal recurrent climate variability and specific shocks (drought, flood, and heat stress) to strongly influence crop output commercialization. Also, investments in commercial input purchases offer resilience to farmers and help sustain output market participation under climate variability and stress. Efforts to upgrade smallholder agricultural value chains should be in tandem with steps toward protecting production from climate risks.