ANALYSIS OF DETERMINANTS OF ADOPTION OF ORGANIC FERTILIZER AND ITS EFFECT ON SMALLHOLDER FARMERS INCOME IN SHASHEMENE DISTRICT, ETHIOPIA

ABSTRACT 
Ethiopia’s agricultural sector accounts to 40 percent of national Gross Domestic Product. This shows that the sector is important in improving the livelihoods of the bulk of the population. Despite its importance, the agricultural sector in Ethiopia is characterized by low productivity. To improve this and overall economic growth, the Ethiopian government has focused on promotion of organic fertilizer use. However, adoption of organic fertilizer remains low in most parts of Ethiopia including Shashemene district. This study therefore aimed at identifying the major constraints of organic fertilizer adoption and its income effect with specific objectives being determining transaction costs associated with adoption of organic fertilizer, factors influencing adoption and use intensity and impact of organic fertilizer use on households’ farm income. The study used primary data which was collected from 368 smallholder farmers. The analytical framework incorporated descriptive statistics, double hurdle model and propensity score matching. The results showed that the average transaction costs through bargaining, searching for information and transportation were 68.23 ETB, 53.33 ETB and 124.53 ETB respectively. Policing and enforcement costs were non-existent among the farmers. The household size, livestock number, extension contacts, access to information media and membership to farmer groups significantly influenced the decision to adopt organic fertilizer. The farm income, size of the cultivated plot, membership to farmer groups and application frequency of organic fertilizer significantly influenced the intensity of organic fertilizer use. Propensity score matching revealed that the adoption of organic fertilizer increased farmers per hectare farm income by between 2661 ETB and 2959 ETB. Thus, farmers should be encouraged to adopt organic fertilizer. This could be possible if the government and other stakeholders gave more attention to provision of better extension services and better access to information related to organic fertilizer adoption as well as making availability of this fertilizer to farmers easier.

CHAPTER ONE 
INTRODUCTION 
Background to the Study 
Ethiopia is one of the fastest growing economies in Africa. In the last decade, the Ethiopian economy registered a growth of 11 percent per annum on average in Gross Domestic Product (GDP) (Ministry of Finance and Economic Development (MoFED), 2014) compared to 3.8 percent for previous decade (World Bank, 2012). As such, it is rated as one of the fastest growing non-oil exporting economies in the world. This growth has been largely supported by relatively high growth in agriculture (MoFED, 2012). Therefore, the role of agriculture in the Ethiopian economy cannot be underscored. 

In Ethiopia, about 86 percent of total export earnings is obtained from agriculture (MoFED, 2010). The sector makes a significant contribution to the national GDP and provides a basis for development of other sectors such as industry. More than 40 percent of the country’s GDP is generated from agriculture. It is also the main source of income for 85 percent of people living in rural areas of the country consisting of more than 90 percent of the Ethiopian poor (IFPRI, 2010). Therefore, the sector is important in improving the livelihoods of the bulk of the population. 

Despite its importance, the agricultural sector in Ethiopia is characterized by low productivity. This has resulted in increased poverty amongst most smallholder farmers. One of the major causes of low productivity is change in environmental conditions resulting from high population growth rate (International Food Policy Research Institute (IFPRI), 2010). The rapid population growth in rural and urban areas of Ethiopia has led to increased demand for energy and food. Many households use animal by-products such as manure for fuel while crop by-products are used both for fuel and animal fodder. The substitution of animal by-products and manure for fuel and animal fodder has led to low adoption of organic fertilizer by smallholder farmers. Rapid population growth has also resulted to increased demand for cultivable land leading to clearing of forests. This creates a serious problem on sustainability of the environment which has been associated with fluctuation of rainfall, exposing farm land to erosion and making agricultural production vulnerable to weather fluctuations as well as deterioration in soil fertility which cannot be restored easily. The deterioration in soil fertility is associated with inadequate recycling of soil nutrients leading to gradual depletion of soil organic matter (Scotti et al., 2015). This leads to a reduction in agricultural productivity and hence increasing poverty levels. 

Reducing poverty levels as well as improving food security necessitates creation of a better performing agricultural sector. This is thus the goal of the government and several development partners. In its first phase of five year (2010/11-2014/15) growth and transformation plan, the Ethiopian government had placed emphasis on agriculture and rural development specifically to reduce rural poverty and in general to improve overall economic growth (International Fertilizer Development Centre (IFDC), 2012). Based on the achievements, agriculture continued to be targeted in the second growth and transformation plan (2015/16 – 2019/20) giving priority to smallholder agriculture (National Planning Commission (NPC), 2015). These plans have been targeted ending poverty and making the country free from foreign aid by ensuring farmers reap maximum benefits from the agricultural sector (MoFED, 2015). To achieve this, the government has promoted different agricultural technologies in addition to scaling up the best practices of better performing farmers in overall sustainable improvement of agricultural productivity. 

The major focus of the intervention was increasing land-labour ratio and adoption of new agricultural technologies by smallholder farmers. Such technologies include use of fertilizer as the main yield-augmenting technology. Due to this, the government and other development partners put more emphasis on fertilizer adoption to improve smallholder farmers’ income in Ethiopia. It was also estimated that Ethiopia must essentially double use of fertilizer by 1.2 metric tons of fertilizer products to meet the Growth and Transformation Plan (GTP) target (IFDC, 2012). However, fertilizer adoption was initially limited to chemical fertilizer (Kassie et al., 2009) while less attention was given to organic fertilizer. Following the increased use of chemical fertilizer by smallholders, the soil had gradually deteriorated through loss of organic matter. It became compact, lifeless and less able to hold nutrients and water, resulting to low productivity. 

Recently, the Ethiopian government and development partners have started promoting the use of organic fertilizer. The rate of adoption of organic fertilizer over the past was not known in Shashemene district. This is due to lack of well documented data over the past. The recent report (2013/14) however showed that about 42 percent of the farmers have adopted organic fertilizer in the district (SWADO, 2015). Nevertheless, the culture of recycling some potential sources of organic fertilizer such as animal manure and crop residuals has been poor in Shashemene district. 

As such, this necessitated evaluation of factors contributing to low adoption of organic fertilizer and its effect on income in Shashemene district of Ethiopia. 

Statement of the Problem 
Farmers in rural areas of Ethiopia have been facing the challenge of declining agricultural productivity. One of the reasons for this is decrease in soil fertility. Since 1970s, the Ethiopian government has intervened in agricultural sector to overcome this problem through promotion of various agricultural technologies such as organic fertilizer. However, soil degradation has continued leading to decline in agricultural productivity. Further, despite the efforts made by the government and other development partners to enhance adoption of organic fertilizer in Shashemene district, the rate of adoption of this fertilizer remains low with only 42 percent of the households adopting organic fertilizer (SWADO, 2015). However, there is a dearth of information on the determinants of low adoption of this specific technology, the transaction costs involved as well as effect on household incomes. Thus, to fill this gap, this study was intended to evaluate the determinants of low adoption of organic fertilizer in Shashemene district. The impact of organic fertilizer use on households’ farm income as well as the transaction costs involved in organic fertilizer adoption were evaluated. 

Objectives of the Study 
General Objective 
To contribute to improved agricultural productivity through adoption of organic fertilizer in Shashemene district, West Arsi Zone, Oromia Regional State of Ethiopia. 

Specific Objectives 
i. To estimate transaction costs associated with organic fertilizer usage amongst smallholder farmers. 
ii. To determine the socio-economic and institutional factors that influence adoption and use intensity of organic fertilizer. 
iii. To determine the effect of organic fertilizer usage on smallholder farmers’ farm income. 

Research Questions 
i. What is the level of transaction costs associated with organic fertilizer usage among smallholder farmers? 
ii. What are the socioeconomic and institutional factors that influence adoption and use intensity of organic fertilizer? 
iii. What is the effect of organic fertilizer usage on smallholder farmer’s farm income? 

Justification of the Study 
Organic fertilizer is more affordable and sustainable compared to chemical fertilizer. Farmers can get this fertilizer at a lower cost and they can also prepare it locally on their farms as it requires less skill. It is more compatible with capabilities of smallholders with less skill and who lack capital to buy chemical fertilizer. Therefore, this study was focused on evaluating determinants of adoption of organic fertilizer in Shashemene district of Ethiopia. Evaluation of constraints related to adoption of organic fertilizer and income effect is relevant as it helps to provide empirical evidence to either confirm or deny the existing arguments in relation to the factors influencing adoption of organic fertilizer and its income effect. The study has also estimated transaction costs associated to adoption of organic fertilizer as adoption of any technology consists of its own cost implications for the adopters which needs to be addressed. The results of the study will help policy makers to come up with better ways of organic fertilizer adoption. Moreover, the study contributes toward improving agricultural productivity therefore improving farmers’ farm income at household level and increasing income from agricultural sector at national level. The results of the study also provide insight toward further study on related areas. 

Scope and Limitation of the Study 
Agricultural productivity can be improved through employing different agricultural techniques such as conservation agriculture, adoption of improved variety of crops, fertilizer adoption and others. Although this study reviewed theoretical analysis related to some of these technologies, the main focus of analysis was adoption of organic fertilizer. This can be seen as the foremost limitation of this study. Absence of relevant data in the district agricultural office presented limitation to this study. To overcome this, primary data was collected from targeted stakeholders. Less availability of commercialized organic fertilizer in the study area also put limitation on the study. To counteract this, the study focused on the organic fertilizers which farmers can buy if available in the nearest market or prepare around their farms. Sever political instability that has taken place in early February, 2016 in most parts of Ethiopia including Shashemene district has also put limitation on this study. Several documents which could help the researcher were burnt during the time in some peasant associations. 

The study has focused on smallholder farmers in Shashemene district while largescale commercial farmers were beyond the scope of this study. It is important to evaluate the farmers’ willingness to accept this technology, it was however, beyond the scope of this study. The study, as its core objective was aimed at covering the determinants of adoption of organic fertilizer and its effect on income. 

Definition of Terms 
Adoption – is the choice of acquiring and using something. In this study “adoption of organic fertilizer” shows the stage or choice of using organic fertilizer. 

Collective action – is an action taken by a group of people whose objective is to enhance resource use and achieve common goal. 

Kebele – is the smallest unit of local government in Ethiopia. It comes after National, Regional, Zonal and woreda administration. It is also known as Peasant Association. 

Organic fertilizer – is a plant food rich in carbonic content (Lavison, 2013) which is mainly prepared from animal matter, plant matter or minerals occurring in nature. 

Opportunity cost – is the best value forgone because an alternative course of action has been chosen. 

Productivity – is a measure of efficiency with which inputs are utilized in production. It is the ratio of agricultural outputs to agricultural inputs. 

Smallholder – is farmers owning less than 5 hectares of land. 

Technology – is a new or improved means of producing goods and services aimed at improving a given situation or changing status quo to a more desirable level. 

Woreda – is the fourth administration level from the higher to the lower administration division in Ethiopia. It comes after National, Regional and Zonal administration. It is also known as district. 

Teff – is a cereal crop grown in Ethiopia and used for preparing enjera (staple food in Ethiopia). 

Transaction cost – is a cost resulted from the transfer of property right.

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Item Type: Kenyan Postgraduate Material  |  Attribute: 76 pages  |  Chapters: 1-5
Format: MS Word  |  Price: KSh900  |  Delivery: Within 30Mins.
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