| Summary: | Ethiopian agriculture is a vulnerable sector from effects of climate variability. This study identified how strong is the effect of climate variability on smallholders’ crop income in Central highlands and Arssi grain plough farming systems of the country. The unbalanced panel data (1994-2014) of the study collected for eight rounds analysed through fixed effect regression. The model result shows that successive increment of crop season rainfall keeping the temperature constant has negative and significant effect on households’ crop income in the study area. The crop income responds similarly for temperature increment if the rainfall remains constant. Given this, simultaneous increment of the two climate related inputs has positive and significant effect on crop income. Other variables like flood, frost, storm, and rainfall inconsistency in the onset and cessation time affected households’ crop income negatively and significantly. Similarly, draught power and human labour, which are critical inputs in the crop production of Ethiopian smallholders, have positive and significant effect on crop income as to the model result. Thus, this study recommended that there should be supplementing the rainfall through irrigation, check dam and other activities to have consistent water supply for the crop production that enable smallholders to collect better income. Additionally, negative effect of temperature increment should be curved through adopting long lasting strategies like afforestation.
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