Crop market participation among smallholder farmers in Tanzania

Abstract

This paper assesses determinants of crop market participation among smallholder farmers in Tanzania, with a focus on transaction cost, asset endowment and cooperatives. The study is based on household survey data from Southern Tanzania where cooperatives play a significant role in the cash crop market. We analyse market participation using Cragg’s double-hurdle model and account for potential endogeneity of cooperative membership using control function approach. We find that distance to market negatively influences cash crop sales while better access to information and communication encourages both food and cash crop marketing. Among asset endowments, only agriculture-specific resources have significant impact. The study shows that marketing cooperatives enhance crop market participation of their members as the cooperatives improve the productive capacity of farmers. However, we also found that marketing cooperatives appear to stunt local food market activities. Having a marketing cooperative branch in the village reduces both the likelihood of selling food crops and the amount sold by residents of the village. It does not affect cash crop marketing decision.