This document assesses the profitability and risk of smallholder irrigated crop production in Ethiopia, highlighting that irrigated high-value crops yield greater profits than rainfed crops. Key findings indicate that profitability varies significantly between different crops and regions, while perceived business risks range from moderate to high. The study suggests improvements across the entire irrigation value chain to enhance sustainability and profitability for smallholder farmers.

1. Assessment on the profitability and risk of smallholder-based
irrigated crop production in Ethiopia
Overview
Profit can be considered as an important economic incentive driving the investment decisions of smallholder farmers in irrigated
agriculture. However, as a new business, production of high value irrigated crops can be risky for smallholder farmers. This makes it
important to understand profitability and risk associated with irrigated agriculture. This paper reports assessment results of farm profit for
selected commodities in selected sites of Ethiopia. Data used in the analysis refers to the 2013/14 production year.
Findings and key message
• Irrigated agriculture of high value crops generates more profit per unit of irrigated area compared to the rainfed crop production.
• Irrigated fodder seed production from Rhodes grass, recently introduced in the Koga irrigation scheme, generates more profit compared
to traditional irrigated commodities such as tomato.
• Difference in profit levels observed for commodities in and between sites suggests differences either in one or all of the exogenous
variables that affect profit . These include crop yield, production cost and output price.
• The level of perceived business risk by most irrigators ranges from moderate (mainly at Mirab Abaya and Mesano) to high (at Koga and
Dugda), with both input supply, production and post harvest stages of the value chains mentioned as sources of risk.
• The findings suggest the need to improve the entire value chain of irrigated agriculture by targeting interventions at all value chain
stages.
Objectives
• Assessing profit generated from respective
crops and
• Assessing the perceived level and sources of
business risk in irrigated agriculture
Methods
• The study was conducted in four sites
located in four regions of Ethiopia. The
specific sites are Koga (Amhara), Dugda
(Oromia), Mirab Abaya (SNNPR) and
Mesano (Tigray).
• Commodities considered for analysis
include Rhodes grass seed (irrigated
fodder), irrigated wheat, irrigated barley,
rainfed wheat and rainfed barley as
additional crops.
• Profit analysis was made using descriptive
and stochastic simulation techniques.
Kindie Getnet
a
, Amare Haileslassie
a
, and Yigzaw Desalegne
b
a
International Water Management Institute, P.O Box 5689, C/o ILRI Campus, Addis Ababa
b
International Livestock Research Institute, Box 5689, Addis Ababa
Profit by commodity type (Koga) Profit by commodity type (Dugda)
Profit by commodity type (Mirab Abaya) Profit by commodity type (Mesano)
Farmers’ risk perception and its sources (Figures a and b)
Kinde Getnet
k.getnet@cgiar.org P.o.box 5689, Addis Ababa,
Ethiopia , www.iwmi. cgiar. org
This document is licensed for use under a Creative Commons Attribution –Non commercial-Share Alike 3.0 Unported Licence April 2015
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