A s has been discussed in the previous chapters, difficult climatic condi-tions and lack of soil nutrients pose important challenges for farm households in Ethiopia (Dercon 2004). During the last fifty years, a large number of severe droughts occurred and crop production in most areas “never topped subsistence levels” (REST 1995, 137). Dercon (2005) reports that 78% of rural households are seriously affected by harvest failure due to weather variability over time and space. Land degradation exacerbates these risks, and Ethiopia has one of the highest rates of soil nutrient depletion in sub-Saharan Africa (Grepperud 1996; FAO 2001).1