# **4. Resource use and productive performance across the farm size distribution**

To assess relative productive performance, we pool data on commercial farm with those from smallholders. Overall yields by commercial farms’ are double those by smallholders most often achieved by farms in the 10-20 ha category. More intensive use of inputs by large farms may account for part of this advantage, but lack of data on these, especially on labor, makes it difficult to assess productivity. The inverse relationship between farm size and productivity tends to disappear for commercial farms.

# **4.1 Descriptive evidence**

While there has been a large literature on the relationship between farm size and productivity (Ali and Deininger 2015), most analyses use data from smallholders or commercial farms separately, a separation that can yield biased estimates (Muyanga and Jayne 2014). To overcome this, we pool smallholder and commercial farms to explore the farm size-productivity relationship using data for the entire farm size distribution. Table 5 reports summary statistics of cultivated area and yield for selected major crops, as well as incidence and intensity of chemical fertilizer and improved seeds use by crop.<sup>12</sup> The top panel highlights the marked differences in area cultivated between smallholders who all use less than one hectare on average for each specific crop and commercial farms, the largest group of which use 1,650 ha for wheat and about 1,200 and 1,000 ha for cotton and sesame. Comparing yields between smallholders and commercial farms suggest that, except for teff and coffee,<sup>13</sup> the latter obtain about double the yield of the former, though better information on specific inputs, especially labor, and their cost would be required to translate this into productivity. Among commercial farms, those between 10 and 20 ha obtain the highest yields for most crops (maize with 4.2 t/ha, sorghum with 3.1 t/ha, teff with 0.9 t/ha, wheat with 4.2 t/ha, sesame with 1.4 t/ha, and soya beans with 2.4 t/ha). Exceptions are beans and coffee where yields are highest in the 20-50 ha category, and cotton, where they peak in the 50-100 ha bracket.

Beyond yield differences, incidence of fertilizer use varies across farm size groups. In maize, only 35% of smallholders but 53% of commercial farms below 20 ha and 84% of those in the 100-500 ha group use fertilizer although, with 160 to 190 kg/ha, amounts applied by users are very similar. Differences are similarly pronounced for sesame, where 10% of smallholders vs. 65% of the largest farms use fertilizer, coffee (5% vs. 60%), and sorghum (17% vs. 45%) but less strong for wheat (65% vs. 75%) and teff, a typical smallholder crop where fertilizer use is highest for commercial farmers below 20 ha. The gap in improved input use between large and small farms is even more pronounced for improved seeds which was used by 20%, 1%, 4%, 12%, 1% of smallholders in maize, sorghum, teff, wheat, and sesame, respectively,

> 12 The number of observations in each of the cells is reported in the bottom panel of table 5.

> 13 Estimating coffee output could be tricky as it can be reported in different conditions and states (e.g., cherry coffee harvest vs. washed and dried coffee beans). Apparently, without the conditions and states reported in the two surveys, we need to be cautious while comparing coffee yield between smallholder and commercial farms.

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