Determinants and welfare impact of market participation and marketing channel choice among smallholder rice farmers in Oyo State, Nigeria.

Abstract

This study investigates the determinants of market participation, marketing channel choice, and their implications for the welfare of smallholder rice farmers in Oyo State, Nigeria. Drawing on primary data from 200 rice-producing households, the analysis employs a Double Hurdle model to assess participation and intensity of commercialization, a Multinomial Logit (MNL) model to evaluate marketing channel selection, and a Multinomial Endogenous Switching Regression (MESR) model to estimate the welfare effects of different marketing channels. Results reveal that 83% of respondents participated in rice markets, with millers being the dominant channel (64%), followed by wholesalers (26%) and brokers (10%). Market participation was significantly influenced by demographic factors and institutional and transaction cost variables, including age, gender, education, household size, access to credit, ownership of storage facilities, and satisfaction with market prices. The intensity of commercialization was further shaped by farm size, farming experience, access to extension, non-farm income, and transaction cost-related factors such as market distance and transport. Marketing channel choice was determined by a combination of household demographics, farm characteristics, institutional access, and transaction costs. Notably, male farmers and those with larger farms were more likely to sell to wholesalers, while farmers with higher education levels were more inclined to engage brokers. The MESR model confirmed that market participation significantly improved net farm income and food security, with the greatest benefits accruing to farmers who sold directly to millers. These findings underscore the critical role of structured marketing channels and institutional support in enhancing smallholder welfare. The study recommends targeted policy interventions to strengthen market linkages, reduce transaction costs, expand rural infrastructure, and improve farmer access to extension services and marketing literacy. Gender-sensitive approaches and the adoption of digital marketing tools are also highlighted as key strategies to promote equitable and efficient market participation.