The new normal? Cluster farming and smallholder commercialization in Ethiopia

Abstract

Cluster farming is increasingly recognized as a viable means of improving smallholder economic integration and commercialization in many developing countries. However, little is known about its impact on smallholder welfare and livelihoods. We examine the relationship between cluster farming and smallholder commercialization using a large‐scale survey of 3969 farm households in Ethiopia cultivating high‐acreage crops such as teff, wheat, maize, barley, and sesame. Using switching regressions and instrumental variable estimators, we show that cluster farming is associated with commercialization measured as commercialization index, market surplus value, and market price. To further deal with endogeneity concerns, we also employ some pseudo‐panel models where we observe similar insights. Beyond this, we account for heterogeneities by disaggregating households based on farm scales and crops cultivated. Our findings show that cluster farming is positively associated with commercialization for all farms and crop types despite this disaggregation. However, the related gains are higher among medium and large farms and vary per crop type. These findings imply that cluster farming is crucial in improving smallholder commercialization and may be a critical entry and leveraging point for policy. We thus lend support to initiatives and plans that seek to upscale cluster farming as they can potentially improve smallholder commercialization with ensuing impacts on rural livelihoods and welfare.

Land as a binding constraint to cluster-based development in Ethiopia: To cluster or not to cluster?

“…As one of the agglomeration models targeting cluster-based rural development, cluster farming is usually geared at increasing farm production and productivity with far-reaching implications on smallholder livelihoods and welfare [ 8 , 12 – 15 ]. Cluster farming has also been shown to associated with technology adoption [ 8 , 15 ] and smallholder commercialization [ 11 ] with ensuing income increases and poverty reduction [ 10 , 14 ]…”

“…Ethiopia is an ideal setting to understanding this relationship for two key reasons. In the first place, the country is following the cluster-based development approach and rolling out farm clusters in many regions in the country [ 10 , 11 , 16 , 17 ]. Second, the cluster farming approach is centered on the land access given that farm households are required to contribute at least 0.25 ha of land to participate in cluster farming [ 10 , 16 , 17 ].…”

“…Previous studies on cluster farming have primarily focused on the role of cluster farming in improving marketing conditions and welfare, with little attention paid to various constraints faced by farm households to participate in cluster initiatives [ 11 – 14 , 28 ]. Zhang and Hu [ 12 ] show that potato agro-clusters improve potato production and foster rural development in China.…”

“…Cluster farming, which refers to the concentration of agricultural activities creating income and employment opportunities in and around a particular region, represents a new development initiative used by governments and development agencies as a way of increasing collective action among smallholder farmers [1,10,11]. As one of the agglomeration models targeting cluster-based rural development, cluster farming is usually geared at increasing farm production and productivity with far-reaching implications on smallholder livelihoods and welfare [8,[12][13][14][15].…”

“…As one of the agglomeration models targeting cluster-based rural development, cluster farming is usually geared at increasing farm production and productivity with far-reaching implications on smallholder livelihoods and welfare [8,[12][13][14][15]. Cluster farming has also been shown to associated with technology adoption [8,15] and smallholder commercialization [11] with ensuing income increases and poverty reduction [10,14] In the context of Ethiopia, cluster farming approach has been introduced during the Growth and Transformation Plan (GTP I) as Agricultural and Commercialization clusters (ACC), an overarching approach targeting specific geographical locations and different highvalue and high-acreage crops throughout the country [16,17]. Within the ACC, the Farmer Production Clusters (FPCs) was also introduced as a more nuanced intervention aimed at achieving economies of scale by grouping between 30 to 200 smallholder farmers who own adjacent lands [17].…”