Risk analysis in cattle fattening in North West Ethiopia: Empirical evidence form two limit Tobit model

Abstract

Resource allocation is a point of concern in small to large farms and is generally argued that small farmers in developing countries are “poor but efficient”, trying to allocate the limited resources to unlimited desires efficiently in the given production system in the light of their life-long experiences. The issue of market orientation in cattle fattening is basically challenged with the risks and uncertainties in the production and the market. Data were collected from 112 purposively selected fattening operator farmers from 3 districts and 6 peasant associations to see the risks. The data were analyzed through both descriptive and econometric statistical tools using STATA. Only about 13% of the respondents have participated in the farm business with own capital and the vast majority borrowed from Amhara Credit and Saving Association (ACSI) through their cooperatives. It is found that production risks are limited while economic and market related risks play vital role in the farm operation. Duration of stay of the cattle, land holding of the household, distance to the development agent’s office and age of the household head increase the risk averse nature of the household and limit their participation in export market. In the other hand, frequency of fattening enhances the risk taking character of the households and their participation in the export of cattle. It is vital to enhance the institutional support from the public to enhance the gain from the fattening activity and market orientation of farming.

Keywords

• Fattening
• Marketing
• Market orientation
• Risk
• Tobit