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Abstract
Most studies on smallholder market participation decisions analyze crop or livestock
market participation separately. However, in mixed crop-livestock farming systems,
smallholders’ participation decisions in crop and livestock markets may not be separate as a
household’s position in one market may be influenced by its position in the other. Where
there is limited income from off-farm and/or non-farm activities, household cash
requirements for crop production or household consumption are usually met by selling
livestock. Similarly, livestock purchase is usually financed by income from crop sales.
However, to what extent the position in one market influences the other is still not well
explored in the literature. The aim of this paper is to investigate the interactions of crop and
livestock output market participation of smallholders, by analyzing the determinants of
household market participation positions in both commodities simultaneously. Household
level data collected in 2009 from 1075 sample households in ten districts of the four major
regions of Ethiopia is used for the analyses. Using simultaneous equation models, we test
whether the position of being a net seller in crop market is affected by the position of being
a net buyer in the livestock market, and vice versa. Results show that the decision to be a
net buyer in crop market is associated positively with the decision to be a net seller in
livestock market. Similarly, the decision to be a net seller in crop market is associated
positively with the decision to be a net buyer in livestock market. This implies that crop
purchase is financed by livestock sale and excess income from crop sale is saved in the
form of livestock asset. Thus, policies/strategies enhancing smallholders’ participation in
crop and livestock markets in mixed crop-livestock system should pay attention to the
production and marketing of both commodities simultaneously.