Determinants and economic impact of agricultural machinery custom hiring services on smallholder farm mechanization in Ethiopia

The purpose of this study was to assess the factors that influence agricultural machinery custom-hiring services (CHS) in Dugda District, East Shoa Zone, Oromia Region, Ethiopia, as well as their operational performance and economic effects. Its main objectives were to determine the factors that affect adoption, evaluate the economic viability of mechanized versus traditional farming, and highlight potential policy measures to support smallholder mechanization. Using semi-structured interviews with 32 key informants from cooperatives, service centers, and local institutions, as well as structured questionnaires given to 363 farm households, a mixed-methods, cross-sectional approach was used. ANOVA and binary logistic regression were used to analyze the quantitative data, and thematic analysis was used to triangulate the results of the qualitative data. CHS utilization was found to be significantly impacted by factors such as educational status, farm size, crop type, topography, availability of machinery, hiring cost, distance to providers, and timeliness. When compared to traditional methods, mechanized CHS significantly decreased labor hours (for example, from 225 to 12 hours/ha for wheat) and increased net returns for maize (58,187.5 vs. 51,850 ETB/ha), teff (85,800 vs. 38,650 ETB/ha), and wheat (62,600 vs. 44,700 ETB/ha). Operational inefficiencies were observed, though, as only 84 of the 120 tractors that were registered were operational, and many more were in poor condition. CHS increases farm profitability and productivity, making it a successful strategy for encouraging smallholders to become mechanized. However, obstacles like a lack of spare parts, high hiring costs, a lack of machinery supply, and dispersed landholdings still prevent service expansion. The study suggests enhancing cooperative-based services, guaranteeing spare-part availability, offering operator training, providing credit and transportation support, encouraging land clustering for effective machinery use, and more in order to strengthen CHS sustainability.