High-value farm product transformation in contract marketing: evidence from smallholder farmers in central Ethiopia

Smallholder farmers are the leading agricultural food producers in the developing world, yet they face significant challenges in securing market access. This study is significant to understand how transforming high-value products enhances marketing decisions and sales volume. It investigates the factors influencing participation in informal contracts and estimates the volume of high-value farm products sold in the central Oromia region of Ethiopia. We collected data from 422 randomly selected farm households using a semi-structured questionnaire and analyzed it using descriptive statistics and a double-hurdle model. The descriptive statistics revealed that approximately 264 farmers (62.56%) had access to informal contracts, 20 farmers (4.74%) engaged in formal contracts, and 138 farmers (32.7%) utilized open markets. The histogram results showed that 34.04%, 38.4%, and 47.87% of high-value crops, milk, and eggs, respectively, were sold in the fourth quartile of the full transformation status category. The age of farmers and buyer volume limits negatively impacted participation in informal contracts. Conversely, farm size, the number of adopted agricultural technology packages, and market trust positively influenced farmers' decisions to engage in the informal contract market. The truncation regression analysis indicated that the number of cropping systems, participation in irrigation, dummy districts, transformation status, adoption of cross-breed cows, distance to market, poultry feed availability, and access to extension services all positively affected the volume of crops, milk, and eggs sold. The findings suggested that transforming highvalue products improves sales volume. Therefore, the government should strengthen agricultural institutional services by aligning stakeholder transformational goals with national development.