Dairy farmers’ access to market in Uganda: Observing the unobservable

Enhancing access to output markets for smallholder farmers is recognized as an effective tool for poverty reduction: the more smallholders produce and sell to the market, the higher their income and overall livelihoods. The underlying assumption, which is rarely spelled-out, is that market access represents a major incentive for smallholders to shift their production objective from subsistence to commercial, i.e. to set up sustainable businesses, be they either small or large, around their agricultural assets. This paper relies on the Uganda 2011/12 National Panel Survey (NPS) to investigate the linkages between access to market and dairy farmers’ self-reported subsistence and commercial production objectives. Market access, including both market participation and intensity of participation, is found to depend on a variety of observable farmers’ characteristics. Market participation, however, does also depend on whether the farmer considers himself or herself as commercially-oriented. There are thus some unobservable characteristics, such as smallholder’s risk attitude and willingness to invest in dairy, that influence farmer’s decision to participate in markets, and that are difficult to capture using traditional household and farm level data. This makes it challenging for decision-makers to design and implement policies that utilize markets as a tool out of poverty.