A study was conducted in Suba area, central highlands of Ethiopia, to assess the net return, land and
labour productivity, and the return to scale of cereal farming practice. Seventy-five farmers belonging to
three local wealth classes (poor, medium and rich) were randomly selected and interviewed about inputs
and outputs related to cereal farming for the production year 2007/2008. Farm soil properties were
investigated to check the variability in soil quality among the wealth classes. Benefit:cost ratio (BCR), net
returns and annual profit were used to indicate the worthiness of the cereal farming activity. The return to
scale was estimated by using the Cobb–Douglas production function. The results show that cereal farming
is a rewarding practice, with the rich households gaining more profit than the poor. Farm size was the most
important variable that affects the net return. There is an increasing return to scale. However, it is unlikely
that farmers will have more land than they own at present because of the land shortage problem in the
country caused by the increasing human population. Thus, attention should be given to minimizing the
costs of production through proper regulation of domestic fertilizer costs and increasing labour productivity
especially for the poor and medium households. The use of manure and compost as an additional fertilizer
should also be promoted.