Determinants of Productivity and Sustainability in Small‐Scale Dairy Industries: Evidence From the Salale Zone of Oromia, Ethiopia

The small-scale dairy industry plays a crucial role in improving rural livelihoods, nutrition and income generation in Ethiopia. However, its productivity and sustainability are constrained by socio-economic, institutional and climatic factors. This study identifies the key determinants influencing productivity and sustainability in the small-scale dairy sector of the Salale Zone, Oromia, Ethiopia. Primary data were collected from 250 smallholder dairy farmers using structured questionnaires. Ordered Logit regression model with marginal effects estimation was employed to assess factors affecting the likelihood of achieving higher dairy productivity under varying household, institutional and environmental conditions. The results indicate that age of household head (β = 0.012), education level (β = 0.040), land ownership (β = 0.490), access to social networks (β = 0.188), infrastructure (β = 0.150) and veterinary services (β = 0.160) significantly enhanced productivity. Conversely, larger household size (β = -0.038), low economic status (β = -0.275), market inefficiencies (β = -0.230), high feed prices (β = -0.290), milk adulteration (β = -0.270), price fluctuations (β = -0.340), seasonal feed shortages (β = -0.175) and climatic variability (β = -0.250) reduced performance. Marginal effects analysis showed that market inefficiencies, adulteration and price fluctuations decreased dairy success by 35%, 29% and 22%, respectively, while improved feed access, infrastructure, finance and training increased it by 31%, 27%, 24% and 18%. The findings highlight the combined influence of socio-economic, institutional and climatic factors on dairy productivity and provide empirical insights for enhancing efficiency, profitability and sustainability in Ethiopia's small-scale dairy industry.