The argument for promoting cash crops in developing countries has generally been based on their contribution to small farmer incomes and their impact on other household activities such as household crop production through interlinked markets.
While these arguments are supported by some empirical results, there is little information on the impacts cash cropping can have on these household activities in the absence of interlinked markets. In addition, the impacts of cash cropping may depend on the types of cash crops studied, time and place. Perennial cash crops (PCC) can relax household liquidity constraints for purchasing productive inputs, maintain soil fertility and moisture and save inputs such as seeds and draft power, which can be used for food crop production even in the absence of arrangements for interlinked markets. In this study we build on previous studies by developing key hypotheses by which PCC (Chat, coffee and sugarcane) affect food crop production and the implication for household food security. In addition, we look at the link between perennial food crop, enset (Ensette venttricosum), and other annual food crops. We empirically measure these effects using survey data on 150 rural households collected in 1999 in Ethiopia. Our results indicate that-after controlling for conventional inputs, household wealth variables, education and other variables, higher chat (Catta edulis) production is associated with reduced value of food crop yields and total value of food crop production. On the other hand, higher sugarcane production is correlated with higher value of total food crop production and productivity. Moreover, more intensive coffee production is associated with more intensive enset production. However, production of coffee and enset do not have significant effects on food crop production and productivity. These results suggest that while farmers can gain from sugarcane production through cash income and its impact on food crops, coffee and enset can be produced to bring additional income to the household at no significant cost to food crops. The real impact of chat on the welfare of households should be viewed in terms of its opportunity costs and its contribution to household income.
