Though agriculture plays a dominant role in the economy, it is characterized by small-scale, rain-fed, minimal input utilization and vulnerability to extreme weather conditions. Since long time, in order to improve and advance the sector's productivity, the government has been dedicating its energy and resources. As such considerable progress has been achieved. The sector serves as employment base for 80 per cent of the population. It as well serves 45 per cent for the Growth Domestic Production and 90 per cent for export earnings. Hence, prioritizing the sector means supporting other sectors and the whole economy. Under the Ethiopian context, where small-scale farming is practised on the 90 per cent of arable land, extended mono type farming with vast lands is impractical as it puts a question mark on the tenure security of small-scale farmers and compromises the very existence of the country's biodiversity. Hence, the government has underlined the need on enhancing productivity in small-scale farming with proper utilization of agricultural inputs. Side by side with this, the expansion of large-scale farming in arid and semi arid lands with sparsely populated places is recommended and based on the country's law, the involvement of both local and foreign investors in the sector has been increasing from time to time.

During the course of the last two decades the government has asserted its commitment to promote and support agricultural investment. According to some sources, in 2011, foreign direct investment in the agricultural sector has accounted for 32 per cent of the FDI coming to Ethiopia. To attract investors the government offers incentives such as duty-free importation of goods, tax holidays, access to affordable lease holds and access to finance from Development Bank. Regarding institutional support, it has established the Ethiopian Investment Agency which is a focal point for investment facilitation and promotion. In addition to this, there are several institutions which support the modernization of both small-scale and large-scale farming. Research institutions in the public and private sectors have been playing crucial role in providing hybrid seeds, irrigation techniques, farming methods and crop shifting system to the farmers.

Small-scale farming, on which the majority of farmers relied on, had played significant role in poverty reduction, realizing food security and supporting export. Currently though productivity has increased due to population growth, the demand of food in the domestic market necessitate more production and supply. Hence, registering high productivity with in small plot is essential. On the other hand, in better agro-ecology zones where surplus product is produced, integrating the sector to the market is vital. Currently the role of Farmers Cooperative in market integration is appreciable which enhances the producers income so that more money is obtained for farming investment. In this regard, market linkage with agribusiness has a paramount effect in transforming the sector. When demand increases due to the expansion of agribusiness, farmers could be inspired for more engagement in their production and when their income rises, rural poverty reduction can be achieved. According to the recent report from Ethiopian Agricultural Research Institute, there are high nutritive value crops that can be supplied both to domestic and foreign markets and could support value chain and put farmers in to advantageous positions. Crops such as wheat, maize, coffee, sesame and chick peas have high market demand and if productivity is enhanced they could have high return.

However, though the rate of productivity by African standard is satisfactory, in the world context it is very small and meet only half of the domestic demand. Availability and accessibility of improved seeds and technical services remain the major constraints in raising productivity. Maize and wheat primarily produced by small-scale farming support large segment of rural population. But the harvest does not satisfy the domestic demand. The gap is filled by imports and aids received. However, there is still sufficient room to increase the yield with the adoption and proper use of higher quality inputs and better agronomy practices. The other thing that must be considered is that, there is an estimated 25 per cent of post-harvest losses because farmland and community storage means and facilities are substandard which expose the crop to spoilage. There are also other factors which put farmers and their way of life static.

As farming is a seasonal business, farmers harvest their crops in fixed period and at that moment to settle their debt which is incurred due to input purchase, they sell their products at average price. Such practice further marginalize farmers from the market and limit their bargaining power as a result. Only brokers and illegal traders benefit from the circumstance. To establish a functioning market and to enhance farmers bargaining power, the role of institutions such as the Ethiopian Commodity Exchange is crucial. However, according to some studies still the institution lacks vibrancy in handling bulky rural products. Hence, looking addition means is essential. Similarly, farmers cooperative unions should scale up their responsibilities in facilitating value chaining so that farmers do not suffer from dysfunction market. Cash crops, such as coffee, also need similar attention.

Traditionally coffee is the major export earner commodity and almost 90 per cent of the coffee crop is produced by small-scale farmers. Cooperative associations, however, been there as some studies indicated. But some are under managed. This in turn has greatly hampered the improvement of the sector and the livelihood of the farmers. Therefore, looking for remedial action is essential. As opposed to this, there are well managed and well performing coffee producers cooperatives association which provide sufficient service to their members. Thus, learning and exchanging experience from each other can bring improvement on the sector. In general there has been tangible progress in the sector both in small-scale and extensive farming. The utilization of inputs such as finance, knowledge, technology and research has played significant role for the achievement. Thus to meet the goal, which transforms agriculture-led economy to industry-led one the ongoing efforts must be strengthened.