Smallholder farmers’ participation in oilseed and pulse contract farming using a probit model in Wenberma District, Ethiopia

Abstract

Contract farming is increasingly promoted as a mechanism for improving smallholder farmers’ access to markets, inputs, and income opportunities. However, in Ethiopia, participation in oilseed and pulse contract farming remains limited, and empirical evidence on both farmers’ perceptions and the determinants of participation is still insufficient. This study aimed to assess farmers’ perceptions of contract farming and identify the key factors influencing their participation in Wenberma District, Amhara Region. The study is based on cross-sectional data collected from 329 households, comprising 128 contract participants and 201 non-participants. Descriptive statistics were used to examine differences between the two groups, while a binary probit model was employed to estimate the determinants of participation. The results from the perception analysis show a clear contrast between groups. Among participants, 33.6% strongly agreed and 62.5% agreed that contract farming is beneficial, reflecting largely positive experiences linked to improved input access, price stability, and market assurance. In contrast, 75.1% of non-participants remained neutral, indicating limited exposure and uncertainty rather than active rejection of the system. The econometric results reveal that participation is significantly influenced by several socioeconomic and institutional factors. Education increases the likelihood of participation, with primary and secondary education raising the probability by 58.6% and 63.9%, respectively. Farm size (marginal effect = 5.6%) and livestock ownership (2.9%) also positively influence participation. Similarly, extension contact increases participation probability by 1.2% per additional visit, while awareness of contract farming shows a strong positive effect of 49.3%. In contrast, higher dependency ratios reduce participation by 11.5%, and greater distance to collection centers lowers the likelihood by 0.4% per additional minute of travel. Overall, the findings indicate that participation in contract farming is shaped by differences in human capital, resource endowment, institutional access, and spatial constraints. The results underscore the importance of strengthening agricultural extension services, improving farmer awareness, and reducing market access barriers to enhance participation among smallholder farmers.