This study examines the interdependence between Ethiopian smallholders' net market positions in crop and livestock markets. Using survey data from over 1,000 households, the study finds evidence that a household's likelihood of being a net seller in one market increases if it is a net seller in the other market, and vice versa. Specifically, the probability of being a net seller in crops increases by 6.4% for net sellers in livestock. Likewise, the probability of being a net buyer in livestock increases by 2.79% for a 10% rise in the probability of being a net seller in crops. The results suggest cash from crop sales may finance livestock purchases and crop deficits may be covered by livestock sales.

1. Interdependence of Smallholders’ Net Market Positions in Crop and Livestock Markets: Evidence from Ethiopia Moti Jaleta and Berhanu Gebremedhin Improving Productivity and Markets Success (IPMS) of Ethiopian Farmers Project, International Livestock Research Institute (ILRI), Addis Ababa, Ethiopia.. Presented at the ILRI Scientific Seminar, Addis Ababa, 15 December 2010

9. Sample distribution Region District No. PAs No. of sample households Male headed Female headed Total Tigray Atsbi Wenberta 12 86 34 120 Alamata 8 91 37 128 Amhara Metema 7 65 10 75 Fogera 11 89 23 112 Bure 9 83 32 115 Oromia Ada’a 9 103 23 126 Mieso 8 77 14 91 Gomma 8 62 19 81 SNNP Alaba 10 78 33 111 Dale 10 88 28 116 Total 92 822 253 1075

11. Empirical models Structural equations Reduced form equations

13. Results

17. Hausman’s endogeneity test results of the simultaneous equations (N=1075) Explanatory variables Position in crop market Position in live animal market Net buyer Net seller Net buyer Net seller Coef. Std. Err. Coef. Std. Err. Coef. Std. Err. Coef. Std. Err. Age of household head (years) 0.008* 0.005 -0.018*** 0.007 -0.016*** 0.006 0.001 0.004 Sex of household head (1=male; 0=female) -0.177 0.118 0.219* 0.119 -0.143 0.146 0.105 0.113 Education of household head (1=literate; 0=illiterate) 0.037 0.108 -0.146 0.121 -0.156 0.124 0.012 0.097 Family size (persons) 0.054** 0.026 -0.034 0.028 0.078** 0.030 -0.042* 0.024 Family labor available for agriculture (persons) -0.107*** 0.035 0.123*** 0.035 -0.037 0.041 0.051 0.032 Land owned (ha) -0.045 0.042 0.041 0.041 -0.010 0.048 -0.045 0.036 Animals owned (TLU) -0.009 0.016 0.006 0.013 -0.043*** 0.015 0.070*** 0.012 Value of crop production (1000Birr) -0.054*** 0.004 0.056*** 0.004 -0.003 0.004 -0.006** 0.002 Income from honey and its products (1000Birr) -0.033 0.061 0.060 0.060 0.029 0.046 -0.002 0.042 Off and non-farm income (1000Birr) 0.021** 0.009 -0.029*** 0.010 -0.017 0.015 0.010 0.006 Income from dairy products sale (1000Birr) 0.036** 0.017 -0.032* 0.016 0.016 0.015 -0.007 0.013 Dummy_ land rented or shared in (1=Yes; 0=No) -0.306*** 0.102 0.281*** 0.102 Animals lost due to death (TLU) 0.147*** 0.054 -0.031 0.049 Net seller in live animal (1=Yes; 0=No) 0.216** 0.102 Net seller in live animals (predicted value) -0.695 0.604 Net buyer in live animals (1=Yes; 0=No) 0.296* 0.161 Net buyer in live animal (predicted value) -3.816** 1.720 Net seller in crop (1=Yes; 0=No) 0.091 0.158 Net seller in crop (predicted value) 1.476*** 0.537 Net buyer in crop (1=Yes; 0=No) 0.133 0.114 Net buyer in crop (predicted value) 0.528 0.375 Constant 0.265 0.429 0.719* 0.399 -1.626*** 0.386 -0.034 0.242

18. Interdependence in the net market positions

19. Marginal effects of the explanatory variables on the household net positions in crop markets Explanatory variables Net position in crop markets Net buyer Net seller dy/dx Std. Err. dy/dx Std. Err. Age of household head (years) 0.002 * 0.001 -0.002 * 0.001 Sex of household head (1=male; 0=female) -0.048 0.034 0.050 0.034 Education of household head (1=literate; 0=illiterate) 0.010 0.028 -0.008 0.028 Family size (persons) 0.014 ** 0.007 -0.016 ** 0.007 Family labor available for agriculture (persons) -0.028 *** 0.009 0.029 *** 0.009 Land owned (ha) -0.011 0.011 0.009 0.011 Animals owned (TLU) -0.002 0.004 0.005 0.003 Value of crop production (1000Birr) -0.015 *** 0.001 0.014 *** 0.001 Income from honey and its products (1000Birr) -0.009 0.016 0.007 0.016 Off and non-farm income (1000Birr) 0.005 ** 0.002 -0.005 ** 0.002 Income from dairy products sale (1000Birr) 0.009 ** 0.005 -0.009 ** 0.005 Dummy_ land rented or shared in (1=Yes; 0=No) -0.079 *** 0.027 0.077 *** 0.027 Animals lost due to death (TLU) Net seller in live animals (predicted value) -0.124 0.157 Net buyer in live animals (1=Yes; 0=No) 0.064 * 0.034

20. Marginal effects of the explanatory variables on the household net positions in live animals markets Explanatory variables Net position in live animals market Net buyer Net seller dy/dx Std. Err. dy/dx Std. Err. Age of household head (years) -0.003 *** 0.001 0.001 0.001 Sex of household head (1=male; 0=female) -0.027 0.028 0.018 0.038 Education of household head (1=literate; 0=illiterate) -0.028 0.023 0.003 0.035 Family size (persons) 0.013 *** 0.005 -0.012 0.008 Family labor available for agriculture (persons) -0.007 0.007 0.012 0.011 Land owned (ha) -0.002 0.008 -0.019 0.013 Animals owned (TLU) -0.007 *** 0.003 0.024 *** 0.004 Value of crop production (1000Birr) 0.000 0.001 -0.003 *** 0.001 Income from honey and its products (1000Birr) 0.005 0.008 -0.003 0.015 Off and non-farm income (1000Birr) -0.003 0.002 0.004 * 0.002 Income from dairy products sale (1000Birr) 0.003 0.003 -0.001 0.005 Dummy_ land rented or shared in (1=Yes; 0=No) Animals lost due to death (TLU) 0.025 *** 0.009 -0.011 0.017 Net seller in crop (predicted value) 0.279 *** 0.078 Net buyer in crop (1=Yes; 0=No) 0.077 ** 0.033