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UNIT ONE: INTRODUCTION

1.1 INTRODUCTION
In this unit we will see the definition and scope of agricultural economics. Then after the
characteristics of agriculture in developing countries in general and Ethiopia in particular
will be discussed. The concept of farming system and the different types of farming
systems will also be explained.
1.2 THE SUBJECT MATTER OF AGRICULTURAL ECONOMICS
The subject matter of agricultural economics has both broadened and deepened in recent
years. The field originated early in the twentieth century with a focus on farm
management and commodity markets, but has since moved far into analysis of issues in
food, resources, international trade, and linkages between agriculture and the rest of the
economy. In the process agricultural economists have been pioneering users of
developments in economic theory and econometrics. Moreover, in the process of intense
focus on problems of economic science that are central to agriculture market expectations
behavior under uncertainty, multimarket relationships for both products and factors, the
economics of research and technology adoption, and public goods and property issues
associated with issues like nonpoint pollution and innovations in biotechnology
agricultural economists have developed methods of empirical investigation that have
been taken up in other fields.
Agricultural Economics VS General Economics
Economics is the science which studies human behavior as a relationship between ends
and scarce means which have alternative uses. A common theme in most definitions of
economics is scarcity and choice. Society must choose between competing uses when
resources are wanted for different productive activities, and must choose between
competing ends when products are desired by different individuals. The science of
economics is therefore concerned with the way society organizes the allocation of scarce
resources in order to satisfy alternative wants.
An agricultural activity is one in which mankind attempts to control groups of plants or
animals in order to fulfill certain human wants, mainly by producing food. This process
of control normally takes a form which we know as farming, but farming is often only the
start of a long sequence of productive operations. The agricultural economist retains an
interest in the process which leads ultimately to the satisfaction of a human want as long
as a major part of what is produced is derived from agricultural activity. In the case of
most food products, this means following the process through to the point of final
consumption. On the other hand, the agricultural economist would normally not retain an
interest in many non-food products beyond the point at which these products are
purchased as raw materials by manufacturing industry.
The discipline of agricultural economics adapts the principles of economics to the
problems of agriculture and people engaged in agriculture.
1.3 THE SPECIFIC FEATURE OF AGRICULTURE

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1.3.1 Traditional Agriculture and Comparative Agricultural Systems
Here common characteristics of traditional agriculture will be described. The particular
role of livestock in traditional farming systems will be identified. We will also identify
factors that influence the agricultural system found in a particular country at a point in
time, and explore the differences in farming systems found in various parts of the world.
A) Characteristics of Traditional Agriculture
The world food –income-population problem is serious, and the solution to this problem
depends in part on agricultural development. Before means for fostering agricultural is
discussed, the current condition of agriculture in developing countries must be known.
‘Traditional’ obviously means to do things the way they have usually been done. Because
natural resources, culture, history, and other factors vary from place to place, the way
things have usually been done also differs greatly from one location to another.
Nevertheless, farms in traditional agricultural systems do have several common
characteristics.
1) Intermixing of farm and family decision
Small peasant farms predominate in most developing countries. Business decisions on
these farms are generally intermixed with family or household decisions. The importance
of the family and the close relationship between production and consumption decisions
occur because much of the labor, management and capital come from the same
household. A sizeable proportion of the production is consumed on the same farm or at
least in the same community where it is produced.
This intermixing of production and consumption decisions along with the low levels of
income common among peasant farms adds an element of conservation to family
farming. A farm disaster usually means a family disaster. Consequently traditional farms
often use crop varieties and breeds of livestock that have proven dependable under
adverse conditions, such as low levels of fertility or rough terrain, even if yields or
productivities are modest.
For example ENSET grows on relatively poor land, is drought resistant where is used as
staple food crop in central, south and south east of Ethiopia. Cassava grows slowly, but
on relatively poor soils, and under a variety of weather conditions. It is a root crop,
widely grown in the south of Ethiopia, and in many African countries, that can be pulled
out of the ground at various times of the year to meet calorie needs when other foods may
be short.
Traditional farms are influenced by market price relationships in their decisions to
allocate family resources, since the surplus they trade or sell connects them to the local
market. Sometimes, traditional farms we called subsistence farms.
2. Labor and land use
Traditional farms generally are very small, usually only 1 to 3 hectares. Labor applied per
hectare planted, however, tends to be high. In many areas, land is a limiting factor and is
becoming more limiting out time as population continues to grow. Labor is often under
employed during certain times of the year, while the capital assets that do exist are fully
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exploited. Much sharing of work and income occurs on traditional farms so there is little
open unemployment during peak times. This sharing means that the individual’s implicit
wage, at times, may be determined, by the average rather than the marginal productivity
of labor.
Traditional farms may hire some labor as well, at least during the busy times of the year.
Low wages caused by high underemployment in peasant agriculture create incentives to
hire laborers. Traditional farmers can hire labor or buy a small amount of leisure and
enhance their social status at relatively low cost.
3. Seasonality
Labor use in traditional agriculture tends to exhibit marked seasonal variation
corresponding to agricultural cycles. During slack seasons, those immediately following
planting or preceding harvest, labor may abundant. However, during peak seasons,
especially during weeding and harvest, labor is in short supply. Wages often exhibit
similar seasonal fluctuations.
The seasonal nature of agricultural production also causes seasonal variation in
consumption and nutritional status. Because storage facilities may be lacking and
mechanisms for saving and borrowing in frequent, consumption patterns tend to follow
agricultural cycles. It is common to find “lean seasons” when consumption is low and
short –run malnutrition high, especially immediately prior to harvest.
Seasonality induces migration as people search for employment opportunities and food.
Other seasonal causes of migration are trade and marketing, cultivation of secondary land
holding, and pasturing cattle.
4. Productivity and efficiency
Traditional farms are characterized by low use of purchased inputs other than labor.
Yields per hectare, production per person, and other measures of productivity tend to be
low. Those reflect that traditional farms are inefficient.
The crop variety, power a source, methods for altering soil fertility and other factors
available to traditional farms constrain productivity growth and hence returns to labor and
traditional types of capital. Efficiency, as measured by equating marginal returns to
resources in alternative uses, is high.
A situation with low use of certain inputs, low productivity, but high economic efficiency
under static conditions has important implications if productivity is to be increased. First,
new technologies can help to change the production possibilities available to farmers.
Second, education may be needed to help farmers learn to adjust resource use to changing
conditions so as to maintain their high levels of efficiency.
5. Rationality and risk
Traditional farmers are economically rational. They are motivated to raise their standard
of living while, of necessity, they are cautions. Traditional farmers are not adverse to
change, but proposed changes must fit in to their current farming systems without altering
too abruptly the methods they have developed overtime to reduce risk and spread out the
demand for labor.
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One mechanism by which traditional farmers in many countries have spread risk is by
exchanging labor and other resources through point and extended families( relative sand
sometimes friends beyond parents and children). In many countries, there is a substantial
degree of sharing, which not only adds to social status but spreads risks. Some of these
sharing arrangements and ties that bind extended families together may deteriorate as
development proceeds, creating a need for new institutional arrangements to spread risk
and in some cases to constrain anti-social behavior.
B. The Role of Livestock
Livestock play many vitally important roles in traditional farming systems. There is little
question that when crops and livestock directly compete for the same resources, it is
usually more efficient for human\s to consume grain than it is to feed the grain to
livestock and consume that. However, in most traditional farming systems, livestock
consume little grain, and meat production is often one of the least important roles of
livestock. The more important roles of livestock are:
1. Buffers and extenders of the food supply
Farm animal provide a special protection to farm families, acting as a buffer between the
family and a precarious food supply. Animals are like savings banks, which can be
consumed or sold during crop failures.
In most of traditional agriculture, livestock do not directly compete with crops because
they eat crop residues, feed off steep slopes and poor solid, and generally consume
materials, which “extend” the food supply. Many types of animals are ruminant (e.g.
cattle, goats, sheep, and buffalo) that eat grass and other forages that humans cannot and
can then convert the forages to products for human consumptions.
Livestock make an important contribution to extending the quality of the diet as well, by
providing meat, milk, and eggs. Small amount of these high protein foods can have a
significant impact on human health.
2. Fertilizer, fuel, hides and hair
Animal manure is vitally important as a source of both fertilizer, and fuel in several
countries. Animal manure adds both fertility and organizes matter to the soil. In countries
where wood is scarce, typical of north Shoa, Wollo, and Tigrai, animal dung is dried and
burned for fuel. In many countries, these two uses of animal manure compete. Dung that
is burned cannot be used to increase soil fertility.
In India and recently in Ethiopia as a result of promotion by rural technology
Establishment of Ministry of Agriculture of Ethiopia (Jimma, Bako, Assela, Agarfa,
Wolita, Nekemte, and several on Northern regions) perhaps since 1876 E.C. methane
digesters have been developed and the gas produced is used for working, and the residual
nitrogen applied to crops.
Few livestock products are wasted in traditional society. Clothing and blankets are made
from animal hides and hair not only cattle and sheep, but buffalo, goats, and other
livestock.
3. Power and transport
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In many countries livestock are the principal source of power. They plow the fields,
transport products to market, and carry out-processing tasks like grinding sugar cane. In
some remote areas, animals help to market crops by eating grain and other plant products
and then walking to market.
On the steep slopes and rough terrain in parts of some developing countries, including
Ethiopia, it will be many years, if ever, before mechanical power replaces animal power.
4 social and cultural
Livestock particularly cattle and goats are highly valued in some societies for social and
cultural reasons. A family’s social status may be measured by the number of animals it
owns, cattle are given as gifts during ceremonial occasions. While livestock serve major
economic functions, they also serve these other social and cultural functions as well. Of
course, it is possible that the social and cultural values placed on livestock have evolved
over the years because of their importance as capital and income earning assets.
C. Traditional Farming and Agricultural Development
One of the striking characteristics of farms in developing countries is their diversity.
Farms in much of sub-Sahara Africa are still very traditional whereas farms in many parts
of Asia and the pacific already have begun to intensify and modernize. The case of
Ethiopia will be illustrated.
1.4 Agriculture in the Ethiopian economy
The Ethiopian Economy is characterized by its great dependence on agriculture.
According to a most recent estimate, agriculture accounts for more than 41% of the GDP,
90% of the annual foreign exchange earnings and 85% of the employment. What is even
more important, it is assumed that this dependency relationship will continue for quite
sometimes. In fact the government’s economic development strategy calls for agriculture
Development and Industrialization for the coming years.
Agricultural operation in Ethiopia can be viewed from three perspectives. By far the most
important of these is the small (peasant) sub sector that accounts for over 95% of the crop
production. The second sub sector includes the pastoral /agro pastoral activities which are
carried out in the drier parts of the country. The third sub sector comprises commercial
farming, which was completely wiped out and replaced by state farms during the last 20
or so years by government proclamation. Things are changing now with the introduction
of new laws and policies that encourage private farming. At their peak in the late 1980’s
the state farms had a maximum land holding of about 220,000 hectares.
Due to man-made and natural factors, growth in the agricultural sector has been very low
or even negative in the last two decades. For instance, agricultural growth during the five
years, between 1987-1991 averaged no more than 0.2% per year. At the same time,
population was growing at the rate of 2.9% per annum, therefore resulting in rapidly
declining per capita food availability.
1.5 Farming systems
A) Determinants of farming systems

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The farming systems in each region of the world show considerable variety. Farming
systems are differentiated by how production is originated, by the nature of technologies
employed and by the types of crops and livestock produced. Each system consists of a
small number of dominant crops (or livestock). We must understand agricultural systems
if we are to improve them.
Technical, institutional and human factors determine the type of agricultural systems.
These set of factors interact at each location and point in time to provide a unique
environment for agricultural production. When these factors remain constant in a
particular geographic area for several years, the farming system that involves represents a
long-term adaptation to that environment. Economic development can introduce rapid
changes in several of the underlying factors, thus placing pressure on the existing system.
i. Technical determinants of farming systems
ii. Institutional and human determinants of farming systems
B) Major Types of Farming systems
While the specific type of farming systems in use depend on a large number of factors,
Duckham and Masefield have grouped farming systems in to three basic types:
1. Shifting cultivation
Shifting cultivation is an old form of agriculture still practiced in many parts of the world.
As the name implies, it involves shifting to a new piece of land when the fertility of the
original patch runs out or when weeds and other pests take over. The movement may be
fast or slow, and sometimes animal manure extends the use of one location. Migration
from one piece of land to another may be random, linear, or cyclic. When cyclic, the
rotation frequency can last as long as 30 to 45 years.
Shifting cultivation also has been called slash and burn because usually the land is
slashed with a machete and burned to clear the brush. Capital investment in the farm is
low; a machete, digging sticks, and hoes being the primary tools. Typical crops include
corn, millet and sorghum, rice, and roots. Usually the crops are mixed. Occasionally the
cleared area is used for perennial crops. Shifting cultivation is practiced on about 20
percent of the world’s exploitable soils, particularly in Africa and Latin America. It is
popular where population pressures are not too severe.
Shifting cultivation is frequently associated with the insecure control over the land, either
because of absentee (or government) ownership or unclear tenure status. It has been
linked to soil erosion and other environmental problems in several developing countries,
partly because there are few incentives to invest in practices that maintain soil fertility. In
the Domain Republic, for example, shifting cultivation on government-owned land led to
a loss of forest cover and extensive erosion.
2. Pastoral Nomadism
Pastoral nomadism involves people who travel, more or less continuously, with herds of
livestock. Pastoral nomads have no established farms, but often follow well-established
traditional routes. Although there probably only about 15 million pastoral nomads in the
whole world, they occupy an area larger than the entire cultivated area in the world. They
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are especially prevalent in the arid and semi-arid tropics. Some examples include the
Masai of Kenya and Tanzania, the Hima of Uganda, the Fulani of West Africa, the
Bedouin of the Eastern Mediterranean, and the nomads of Mongolia.
Pastoral nomadism can be total or partial. In the latter case, the nomads have homes and
some cultivation for part of the year. Typically five or six families will travel together
with 25 to 60 goats and sheep or 10 to 25 camels. Sometimes they own cattle as well. The
livestock eat natural pasture and their productivity is quite low.
Pastoral nomadism can lead to a variety of problems. Because the grazing takes place on
common land, there is a tendency for overgrazing because every individual farmer wishes
to maximize his or her number of animals. As the number of animals increase, the
grazing areas deteriorate and incomes shrink. There is little scope for technical
improvement, and serious problems arise in years of drought. As the human population
grows, additional pressures are placed on the resource base supporting the nomadic
system.
3. Settled Agriculture
Settled agriculture represents a variety of agricultural systems including mixed farming
systems, intensive annual crops, intensive and extensive livestock systems, and perennial
crops. These farming systems are the survivors of an enormous amount of human
experimentation. Systems have evolved that produce a relatively high and certain return
in storable products per unit of effort. As discussed above, the environments as well as
distance to market are major factors influencing the choice of the system as well as the
individual commodities for particular locations.
Mixed farming usually involves a mixture of crops and livestock. Few farming systems
consist of just one commodity. However, what is meant by mixed farming is the
integration of crops and livestock production such that multiple commodities are grown
at the same time on the same land. Mixed farming is common in traditional agriculture
because it produces relatively high returns while minimizing risk, makes efficient use of
labor and land, and helps maintain fertility. Good management is required to coordinate
the various farming activities.
Intensive annual crops are extremely important in the world. About 70 percent of the
cultivated area of the world is planted to the major grain crops, which include wheat, rice
and corn. Other important annual crops are barely, millet, sorghum, roots, tubers,
vegetables, and pulses. Pulses include such crops as beans, soybeans, peas, and peanuts.
Perennial crops are grown harvested over several years and include crops such as cocoa,
coffee, bananas, and sugarcane. Some of these crops are grown in large plantations but
often in very small farms as well, even in the same country. They tend to produce high-
value products that are often exported.
Intensive livestock systems include both ruminants (for example, cattle, buffalo, sheep,
and goats) that produce milk, meat, fiber, dung, and other products, and non-ruminants
(for example, pigs and poultry) that are particularly important for their meat and eggs.
These animals are often fed grains in addition to pasture and forage. In a few countries,
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intensive livestock systems can involve carefully managed grasslands or pasture.
Extensive livestock systems include a wide variety of grazing systems on semi-arid
range, high and cool mountain pastures, wet lowlands, and more. Livestock may graze on
leaves as well as grass.
In summary, there are a large number of crops and livestock systems, many of which
have been relatively productive or at least well suited to their environment. As
population expands and other conditions change, a particular system may no longer be
adequate and is forced to change. Few systems are static for very long today, and several
offer potential for improved productivity.
1.6 The Farming Systems in Ethiopia
The farming systems in use and the types of crops grown vary according to the characters
tics of each agro-ecological zone. The two major farming systems prevailing in the
country are pastoral/agro pastoral and mixed farming. The arid and semi arid zones are
almost wholly used for pastoral or agro pastoral activities, except in a few places where
the existence of a perennial river enables irrigated crop production. Mixed farming
dominated by crop production is the norm in all other agro ecological zones. Livestock
mainly cattle, is an important component of mixed farming as livestock provides draught
power, milk, meat and manures. In fact, two-thirds of the country’s livestock populations
found outside the arid and semiarid zones where crop dominated mixed farming is
practiced.
The major cereal crops grown in Ethiopia are Teff, (Eragrastis teff) wheat, barely, maize,
sorghum, and millets; the latter three being typically grown in the lower altitude areas of
the various zones. Faba beans, field peas, chick peas and lentils are high to mid altitude
crops while haricot beans is grown in lower altitudes areas mainly as cash crop. There is
a wide array of oil seeds grown, the most important of which includes niger seed (Giotia
abysinica) and flax in the highlands and sesame and ground nuts in lower altitude areas.
The annually cultivated land ranged (1989/90-1991/92) from 5.1 to 5.4 million hectares,
which is 31-33% of the potentially cultivable land. Crop productivity is quite low,
ranging from 1.2-1.3 mt/ha for cereals 0.9-1.4 mt/ha for food legumes and about 3.6mt/ha
for root and tuber crops.
In terms of land use efficiency, it would be noted that cereal crops, occupy 72-74% of
the annually cultivated land, account for 59-62% of the annual production while the root
and tubes crops contribute 24-28% of the annual production from a land area of around
11%. Although the Ethiopian agriculture (in the context of regions) varies with regions, it
is affected by climate, population, cultural setup, and diseases.
1.7 The Role of Woman in Farming Systems
Women have key roles to play in farming systems throughout the world. Women are
involved not only in household chores and child rearing in rural areas but are a major
source of labor for food production and account for a large proportion of economic
activity.
i) Dual Roles of women
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With the notable exception of strongly Islamic societies, women play two major roles in
the rural areas of the vast majority of developing countries.
-they have household responsibilities for child rearing, food preparation, and other
chores.
-they are paid or unpaid workers in agriculture or off the farm. They produce, food,
they process food, they preserve food, and they prepare food. They work in the fields,
they tend livestock, they thresh grain, and they carry produce to the market. In many
areas, women manage the affairs of the household and the farm. They sell their labor to
other farms and sometimes migrate to plantations. They work in small industries and in
the informal sector, producing goods and services for sales locally or beyond, In many
cases, the true extent of involvement of women in agriculturally related activities is
underestimated because, when surveys are taken, women often describe their principal
occupation as housewife. They are then counted as economically inactive. This
invisibility of female employment has led to policies and programs that ignore women
and sometimes adversely affect them.
Involvement in farm production may be seasonal, particularly in Asia where, in many
countries, women assume major responsibilities for harvesting, both on their own farms
and as paid labor on other farms. The role of women varies by region and with size of
farm as discussed below.
ii) Regional differences
Women play the largest role in farming in Africa. In many African countries nearly all
the tasks connected with food production are left to women. Men may tend livestock or
produce cash crops. In Malawi, for example, overt two thirds of those working full time
in farming are women. In areas of Africa where men migrate to work elsewhere, the
entire administration of the household is often left to women. Women are important to
agriculture ij many areas of the world. Households headed by women make up 20 to 25
percent of rural households in developing countries, excluding China and Islamic
societies. In Latin America, women typically care for animals, particularly chicken and
pigs, while tending garden vegetables and other food crops. In sugar and fruit producing
areas, especially in the Caribbean, women work as cash laborers on plantations, and, thus,
provide a substantial proportion of household income. In Asia, many examples of female
farming systems are known.
iii) Determinants of the roles of women in agriculture
Social, cultural, and religious factors; population pressures; farming techniques; off-farm
job activities; colonial history; and many other factors determine the role of women in
farming systems. Sometimes in areas with apparently similar physical conditions, women
assume very different roles. As off- farm job opportunities, population pressures, and
farming techniques change, so too does the role of women.
The importance of women in agriculture has implications for credit and input policies.
i) Women often have inadequate access to credit because
a. In many societies they lack legal status necessary to enter in to contracts,
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b. Only very frequently do women hold title to land, often necessary as collateral for
loans,
c. There seems to be a bias against women in the administration of credit programs
ii) Gender is important as one of the several socioeconomic characteristics that influence
the adoption of new technologies. If women are important in agriculture, their opinion
must be sought when designing new technologies. The impact of these technologies on
the relationship between men and women should be considered.
iii) The impacts of credit, technology and other agricultural policies on women have been
exacerbated by discriminatory land reform and settlement policies. Inadequate access to
land, worsened by government policies, when combined with problems of access to credit
can hinder women’s ability to participate in agricultural development. Given the large
role that woman play in developing country farming systems, efforts that ignore or
discriminate against women have distorting effects and diminish chance of success.
SUMMARY
The discipline of agricultural economics adapts the principles of economics to the
problems of agriculture and people engaged in agriculture.
The common characteristics of traditional agriculture are:
Intermixing of farm and family decision, Labor and land use, Seasonality, Productivity
and efficiency, Rationality and risk
The more important roles of livestock are: Buffers and extenders of the food supply,
Fertilizer, fuel, hides and hair, Power and transport, social and cultural.
Farming systems in the world exhibit considerable variability. Both technical and human
factors determine the types of farming systems. Technical factors include both physical
and biological factors. Institutional and human factors are characterized by both
externally and internally controlled forces. The major farming systems of the world can
be grouped in to three classes: shifting cultivation, pastoral nomadism, and settled
agriculture. Settled agriculture represents a variety of agricultural systems including
mixed farming systems, intensive annual crops, intensive and extensive livestock systems,
and perennial crops. Women and children play important roles in agriculture,
Particularly in Africa. Social, cultural, religious, and technological, off-farm
employment, historical, and other factors determine the role of woman in farming
systems. The importance of women in agriculture has implications for credit and input
policies, for the generation and extension of new technologies, and for land reform
policies.

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