The supply Responsiveness of peasant Agriculture in Ethiopia

In view of the strategic role that food supply plays in economic development, this paper sets out to estimate the supply responsiveness of peasant agriculture, particularly cereals production, to price levels. A time series data on areas cultivated, yield as well as price and other relevant variables are used. Cultivated area was taken as a response variable while effects of own-price, cross-price, factor (input) availability and costs, and yield expectations are considered s explanatory variables. A log-linear dynamic response equation is specified in which as hoc specifications of supply response including partial adjustment and expectations formation are integrated. Results indicate that cereals, which are the single most important source of food supply in Ethiopia, are found to be inelastic to prices either in their aggregates or considered individually. On the other hand, relatively larger responses (which are also elastic for maize and sorghum) with respect to the movement of real exchange rate were observed perhaps suggesting that food imports have been competing more with cereals that mainly make up the Poors' consumption bundle