Impact of Sugarcane outgrower Scheme on Income of Participating Households: empirical evidence around Wonji/Shoa Sugar Factory, Ethiopia

Abstract Abstract Contract farming has been practiced in the sugarcane outgrowers scheme at Wonji/Shoa sugar factory more than two decade. However, their economic impact of participating farmers is remains underexplored. The study, is therefore, analyzed the impact of sugarcane outgrower scheme on participant households by comparing with non contract farm households around Wonji/Shoa sugar factory area. The propensity score matching and probit model was used to estimate scheme impact on income and determine factors influencing participation, respectively. The probit model result show that age, total farm area and distance of the farm area from sugar factory weigh bridge/main road have positively and statistically effects participation where as farming experience and livestock asset holding have negatively and statistically influenced farmers’ participation. The propensity score matching estimates show that compared with their non-participant counterparts, participation in sugarcane outgrower scheme farming is associated with less beneficial effects in proxy measures of the average farm household's farm income per adult equivalent with statistically significant at 1% probability level. In conclusion, finding stress the need for appropriate policy formulation and implementation on improving the farm households’ income of participants which economically benefits contract smallholder farmers. These may include improving the productivity and efficiency of sugarcane production, optimizing cost of production, encouraging the scheme farmers to diversify their livelihoods, improving the price of sugarcane output per tonnage, and additional support by third parties. Keywords : Outgrower scheme, Sugarcane, Wonji/Shoa, farm household income, Oromia, Ethiopia