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The Future of Smallholder Farming in Eastern Africa - Uganda ...

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Intercrop<br />

differences<br />

Liquidity<br />

constra<strong>in</strong>ts<br />

PRICDIF<br />

TAXLOAN<br />

sooner rather than later.<br />

<strong>The</strong> difference <strong>in</strong> average prices <strong>of</strong> gra<strong>in</strong>s<br />

that prevailed between the third quarter<br />

(July to September, when highest) and the<br />

first quarter (January to March, when<br />

lowest) measured <strong>in</strong> birr per kilogram 24 .<br />

On the one hand, this variable captures the<br />

market risk element; i.e., as the difference<br />

<strong>in</strong>creases farmers postpone their sales<br />

until later, when prices actually get<br />

higher; and conversely, as the price<br />

difference narrows, farmers prefer to sell<br />

their crops sooner, s<strong>in</strong>ce wait<strong>in</strong>g is<br />

associated with a higher risk premium,<br />

especially s<strong>in</strong>ce post-harvest gra<strong>in</strong> loss<br />

could be larger. However, s<strong>in</strong>ce the price<br />

differences are the same for each location<br />

(not household-specific), each<br />

household’s risk perception is not<br />

captured; therefore, this <strong>in</strong>terpretation<br />

might be mislead<strong>in</strong>g. On the other hand,<br />

s<strong>in</strong>ce price differences are largest for teff<br />

and smallest for maize, this variable might<br />

capture the <strong>in</strong>tercrop differences (could be<br />

considered crop dummies). In this case,<br />

the variable takes on a negative<br />

coefficient, suggest<strong>in</strong>g a tendency toward<br />

<strong>in</strong>stant sales for Bako and delayed sales<br />

for Ada (captur<strong>in</strong>g the <strong>in</strong>tercrop<br />

differences <strong>in</strong> susceptibility to postharvest<br />

gra<strong>in</strong> losses).<br />

<strong>The</strong> total monetary value <strong>of</strong> gra<strong>in</strong>s sold to<br />

cover dues such as repayment <strong>of</strong> <strong>in</strong>put<br />

loans and/or land taxes. It is expected that<br />

farmers’ <strong>in</strong>stant crop sales are largely<br />

<strong>in</strong>voluntary but triggered primarily by the<br />

need to pay the government for <strong>in</strong>put<br />

loans, land taxes, or the like.<br />

Positive<br />

Positive<br />

24 S<strong>in</strong>ce we could not generate gra<strong>in</strong> price data at the household level, we used the average <strong>of</strong> gra<strong>in</strong> wholesale<br />

prices for each location. Prices <strong>of</strong> the major crop <strong>in</strong> each location are considered s<strong>in</strong>ce farmers use these crops as<br />

“cash” crops ( teff for Ada, wheat for Hetosa, and maize for Bako.

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