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Concern about the sustainability of food production has been leading to a revival in the use of organic fertilizer in modern agriculture as this is seen as an appropriate way to maintain soil health. The purpose of this study is to shed light on the role of the demand, supply, and market of farmyard manure (FYM) in maintaining and improving cereal yields by analyzing a data set of farm households from 1993 to 2003 in Tamil Nadu, India. We find the dairy sector development and associated increase in FYM supply contribute to the productivity improvement of upland cereals. However, due to high transportation costs of FYM, the impact is spatially constrained within the small area where dairy sector development has taken place.