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M.Sc. Thesis
May, 2013
Haramaya University
By
ABRAHAM TEGEGN WOLDESENBET
May, 2013
Haramaya University
APPROVAL SHEET
SCHOOL OF GRADUATE STUDIES
HARAMAYA UNIVERSITY
As Thesis Research advisors, we hereby certify that we have read and evaluated this thesis
prepared, under our guidance, by Abraham Tegegn entitled Value Chain Analysis of
Vegetables: The Case of Habro and Kombolcha Woredas in Oromia Region,
Ethiopia. We recommend that it be submitted as fulfilling the thesis requirement.
_________________
Major Advisor
Signature
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Co-Advisor
Signature
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Date
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Date
As member of the Board of Examiners of the M.Sc. Thesis Open Defense Examination,
We certify that we have read, evaluated the Thesis prepared by Abraham Tegegn and
examined the candidate. We recommended that the Thesis be accepted as fulfilling the
Thesis requirement for the Degree of Master of Science in Agriculture (Agricultural
Economics).
______________________
Chairperson
______________________
Internal Examiner
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External Examiner
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Signature
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Signature
II
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Date
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Date
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Date
DEDICATION
I dedicate this thesis manuscript to my families for their continuous contribution
throughout my life.
III
STATEMENT OF AUTHOR
First, I declare that this thesis is my own work and that all sources of materials used for
this thesis have been duly acknowledged. This thesis has been submitted in partial
fulfillment of the requirements for M.Sc. degree at Haramaya University and is deposited
at the University Library to be available to borrowers under rules of the library. I solemnly
declare that this thesis is not submitted to any other institution anywhere for the award of
any academic degree, diploma, or certificate.
Brief quotations from this thesis are allowable without special permission provided that
accurate acknowledgement of the source is made. Requests for permission for extended
quotation from or reproduction of this manuscript in whole or part may be granted by the
head School of Agricultural Economics and Agribusiness or the Dean of the School of
Graduate Studies when in his/her judgment the proposed use of the material is in the
interest of scholarship. In all other instances, however, permission must be obtained from
the author.
Signature:
IV
BIOGRAPHICAL SKETCH
The author was born on 3rd March, 1983 in Gojeb town of- Kafa zone, SNNP region. He
attended his elementary and junior education at Gojeb and Diry Goma primary and junior
secondary schools at Gojeb and Diry towns respectively, and Secondary School in Gimbo
Senior Secondary School in Gimbo town. After successful passing ESLCE, he joined
Mekelle University in 2003 and graduated with B.Sc. in Natural Resource Economics and
Management (NREM) in 16th July, 2006. After graduation he served in Chena Woreda
Office of Agriculture and Rural Development for one year and in Kafa Development
Forum Office for about four years. He joined Haramaya University in October 2011 to
pursue his M.Sc. degree in Agricultural Economics program.
ACKNOWLEDGEMENTS
I am indebted to many individuals for their help and encouragement rendered while
conducting this study. First, I would like to appreciate my major advisor Dr. Lemma
Zemedu and my Co-advisor Dr. Mengistu Ketema for their valuable comments, guidance
and encouragement from proposal write up and questionnaire development up to
submission of the final thesis write up.
I would like to thank CASCAPE project at Haramaya University for financial grant for my
research works. It is a great pleasure to extend my appreciation to staff members of
CASCAPE project for their facilitation of the study process and encouragement. I would
like to thank all staff members and development agents of Habro and Kombolcha Woreda
Agriculture and Rural Development offices for their permission and cooperation to use
available data from Woreda offices and all sample respondents for this study.
Above all, I thank the Almighty God for giving me health and strength for the completion
of the study.
VI
BoARD
CASCAPE
CSA
DA
Development Agent
EHDA
GDP
GMM
GTP
IIA
MNL
Multinomial Logit
MoFED
NGO
NMM
OLS
OoARD
OCSI
OoTI
PSNP
RMA
VIF
VII
TABLE OF CONTENTS
DEDICATION
III
STATEMENT OF AUTHOR
IV
BIOGRAPHICAL SKETCH
ACKNOWLEDGEMENTS
VI
VII
LIST OF TABLES
XI
XII
XIII
ABSTRACT
XIV
1. INTRODUCTION
2. LITERATURE REVIEW
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10
2.1.2.2. Production
10
11
12
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14
15
VIII
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3. RESEARCH METHODOLOGY
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IX
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5.2. Recommendations
90
6. REFERENCES
93
7. APPENDICES
101
Appendix A. Tables
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108
LIST OF TABLES
Table
Page
XI
Page
1. Typical agricultural value chain and associated business development services. ............ 8
2. Geographical location of the study areas ..................................................................... 25
3. Value chain map of vegetables .................................................................................... 52
4. Tomato market channel .............................................................................................. 63
5. Potato market channel ................................................................................................. 64
6. Cabbage market channel ............................................................................................. 66
XII
Page
XIII
XIV
1. INTRODUCTION
1.1. Background of the Study
Agriculture is the main stay of Ethiopian economy contributing about 43% of the GDP,
80% of employment and 90% of the export (MoFED, 2011). Having all these importance,
agriculture continues to face a number of problems and challenges. The major ones are
adverse climatic conditions, lack of appropriate land use system resulting in soil and other
natural resources degradation, limited use of improved agricultural technologies, the
predominance of subsistence agriculture and lack and/or absence of business oriented
agricultural production system, limited or no access to market facilities resulting in low
participation of the smallholder farmers in value chain or value addition of their produces
(Bezabih, 2010).
Demand for horticultural products tends to grow very rapidly with urbanization and
increased income. Exports of vegetable products from Ethiopia have increased from
25,300 tons in 2002/03 to 63,140 tons in 2009/10 (EHDA, 2011). Horticultural produce is
a high value item. Diversity of fruits and vegetables are demanded by consumers, such
growth provides major opportunities for farmers to diversify their production and increase
their incomes. Such opportunities may be especially valuable for women, who are the
primary producers and marketers of horticultural produce throughout Ethiopia. Finally,
from the farming through retailing, horticultural production employs about twice as much
labor as cereals per hectare of production; small farmers, rural laborers, and the urban poor
stand to gain extremely from these employment opportunities (Munguzwe and Tschirley,
2006).
In 2011/12 production year 293,609 and 266,264 smallholder farmers were engaged in
vegetable production, and 909,776.5 and 710,988.48 quintals of vegetables were produced
in East Hararghe and West Hararghe Zones, respectively (CSA, 2012). Vegetable
production has significant contribution in supporting household income and used as source
of food in both Zones. In Kombolcha Woreda of Eastern Hararghe Zone and Habro
Woreda of Western Harargehe Zone different vegetables are grown with different
intensities depending on environmental condition and level of marketability. In
Kombolcha Woreda 693,899 quintals of vegetables were produced in 2011/12 production
season on 2,607.5 hectares of land (KWOoARD, 2012). In Habro Woreda 223,080
quintals of vegetables were produced in 2011/12 production season on 1309 hectares of
land (HWOoARD, 2012). The most common grown vegetables are potato, cabbage, carrot
and beetroots in Kombolcha Woreda, and tomato, cabbage, beetroot and onion in Habro
Woreda.
Vegetables produced in the eastern part of Ethiopia are supplied to the local markets and
to the neighboring countries. Potato and onion/shallot are the most commonly marketed
vegetables accounting for about 60% and 20% of the marketed products. The other
products such as cabbage, beetroots, carrot, garlic, green pepper and tomato are marketed
at relatively smaller quantities by few farmers (Bezabih and Hadera, 2007). The marketing
of vegetables in Eastern Ethiopia is characterized by seasonal gluts and shortages which in
turn affect the marketing behavior of producers, traders and consumers (Jema, 2008).
Vegetable marketing is an important source of income and employment in the study areas.
Being the center of production and marketing of vegetables, the study areas have access to
both domestic and terminal markets.
In Africa, per capita supply of fresh produce has fallen since 1970, by an average of 0.3%
per year (USAID, 2005). This decline has been driven by falling real incomes, but also by
increasingly inadequate production and marketing systems that limit yield growth at the
farm level and increase marketing costs throughout the supply chain. Ethiopia probably
has not escaped this trend. Reversing the trend; and realizing the growth potential that
horticulture presents; will require concerted action throughout the supply chain, based on
reliable information and collaboration between the private and public sectors. Value chain
analysis is essential to understand relationships and linkages among buyers and suppliers
and a range of market actors in between (Wenz and Bokelmann, 2011).
A review of literature in agro-industry value chain in Ethiopia indicates that the sector
faces many challenges due to limited market outlets, limited efforts in market linkage
activities and poor market information among actors (Dereje, 2007; Kaleb, 2008; Dendena
et al., 2009). Correspondingly, Mamo (2009) argued that small scale, dispersed and
unorganized producers are unlikely to exploit market opportunities as they cannot attain
the necessary economies of scale and lack bargaining power in negotiating prices.
Development need of vegetables is poorly addressed in Ethiopia. But these days efforts
have been stepped up to improve and support the sector. With this line, the current Growth
and Transformation Plan (GTP) prioritize intensive production and commercialization of
horticulture as a sector for attention. Thus, the development policy initiates the need to
accelerate the transformation of the sub-sector from the subsistence to business oriented
agriculture. But, the existing constraints of production, post-harvest handling and
marketing such as: - input utilization, productivity, packing, warehousing cold storage and
distribution have played their deterring role on production, trade, and consumption of
vegetables in Eastern Ethiopia (Bezabih and Hadera, 2007).
The production of horticultural crops is a major element of the farming system in the
eastern part of Ethiopia such as in East Hararghe Zone and some part of West Hararghe
Zone. In the areas where irrigation water is available and farmers have better agricultural
marketing networks, horticulture production is a major source of cash income for the
households and one of the major sources of livelihood for a large number of transporters,
middlemen and traders in the area (Bezabih and Hadera, 2007). The lack of a shift from
subsistence to commercial farming in spite of such comparative advantage may have
different reasons like high risks, high transaction costs, limited food markets, limited
insurance options and limited access to credit or in general the problem in the value chain.
In spite of the fact that markets are crucial in the process of agricultural
commercialization, transaction costs and other causes of market imperfections could limit
the participation of farm households in different markets (Sadoulet and de Janvry, 1995 as
cited in Moti, 2007). This implies that markets could be physically available but not
accessible to some of the farm households. Value chain analysis is essential to explain the
connection between all the actors in a particular chain of production and distribution and it
shows who adds value and where, along the chain. It helps to identify pressure points and
make improvements in weaker links where returns are low (Schmitz, 2005).
Problems in the vegetables value chain hinder the potential gains that could have been
attained from the existing opportunities. In this regard, vegetable value chain analysis is an
interesting process that has not been investigated much in the study areas. Both buyers and
sellers in the study areas usually do not play collective roles towards one another and there
are no vegetable processing activities. Under such circumstances, a study that focused on
production problems, marketing problems, and roles and responsibilities of actors can play
significant role towards the improvements of the existing system.
The general objective of the study is to analyze the value chains of vegetables in the study
areas. The specific objectives of the study are:
1. To identify vegetable value chain and examine the performance of actors in the
chain;
2. To analyze the determinants of vegetable supply to the market in the study areas;
3. To identify marketing channels vegetables and factors affecting outlet choice
decisions of vegetable producers.
This study was conducted in two Woredas and important information were collected from
sample households and marketing actors involved in the subsector organization in the
study areas. Hence, the study was limited spatially as well as temporally to make the study
more representative in terms of wider range of area, and time horizon. Furthermore, since
Ethiopia has wide range of diverse agro-ecologies, institutional capacities, organizations
and environmental conditions, the result of the study may have limitations to make
generalizations and make them applicable to the country as a whole. However, it may be
useful for areas with similar context with the study areas.
With the above brief introduction, the remaining part of the thesis is organized as follows.
Chapter 2 presents review of literature on value chain analysis from different sources.
Subsequently, description of the study area and methodologies are presented in Chapter 3.
In Chapter 4, both descriptive and econometric results are presented and discussed in
detail. Chapter 5, summarizes the main findings of the study and draws conclusion and
appropriate recommendations.
2. LITERATURE REVIEW
In this part of the study the basic concepts of value chain, concepts guiding agricultural
value chain, benefit of value chain in agricultural sector, markets and marketing, market
channel, market performance, measuring value chain, developing value chain towards the
benefit of the poor, market deriving development in vegetable value chain, status of
vegetable production in Ethiopia and empirical reviews would be discussed.
The following
Supply chain: It is taken to mean the physical flow of goods that are required for raw
materials to be transformed into finished products. Supply chain management is about
making the chain as efficient as possible through better flow scheduling and resource use,
improving quality control throughout the chain, reducing the risk associated with food
safety and contamination, and decreasing the agricultural industrys response to changes in
consumer demand for food attributes (Dunne, 2001).
Value chain: It is taken to mean a group of companies working together to satisfy market
demands. It involves a chain of activities that are associated with adding value to a product
through the production and distribution processes of each activity (Schmitz, 2005). An
organizations competitive advantage is based on their products value chain. The goal of
the company is to deliver maximum value to the end user for the least possible total cost to
the company, thereby maximizing profit (Porter, 1985).
A value chain is the full range of activities required to bring a product from conception,
through the different phases of production and transformation. A value chain is made up of
a series of actors (or stakeholders) from input suppliers, producers and processors, to
exporters and buyers engaged in the activities required to bring agricultural product from
its conception to its end use (Kaplinsky and Morris, 2001). Bammann (2007) has
identified three important levels of value chain.
Value chain actors: The chain of actors who directly deal with the products, i.e.
produce, process, trade and own them.
Value chain supporters: The services provided by various actors who never directly
deal with the product, but whose services add value to the product.
The value chain concept entails the addition of value as the product progresses from input
suppliers to producers and consumers. A value chain, therefore, incorporates productive
transformation and value addition at each stage of the value chain. At each stage in the
value chain, the product changes hands through chain actors, transaction costs are
incurred, and generally, some form of value is added. Value addition results from diverse
activities including bulking, cleaning, grading, and packaging, transporting, storing and
processing (Anandajayasekeram and Berhanu, 2009) as shown in Figure 1 for the case of a
typical agricultural value chain.
Figure 1. Typical agricultural value chain and associated business development services.
Source: Adapted from Anandajayasekeram and Berhanu (2009).
Value chains encompass a set of interdependent organizations, and associated institutions,
resources, actors and activities involved in input supply, production, processing, and
distribution of a commodity. In other words, a value chain can be viewed as a set of actors
and activities, and organizations and the rules governing those activities.
Value chain management is about creating the added value at each link in the chain and a
sustainable competitive advantage for the businesses in the chain. How value is actually
created is a major concern for most businesses. Porter (1985) indicates that value can be
created by differentiation along every step of the value chain, through activities resulting
in products and services that lower buyers costs or raise buyers performance. In much of
the food production and distribution value chain, the value creation process has focused on
commodities with relatively generic characteristics, creating relatively small profit
margins.
The terms production chain, supply chain, market chain and value chain are often used
interchangeably, but in fact there are some important differences (Table 1). In its simplest
definition, the terms production chain, supply chain, market chain are synonymously used
to describe all participants involved in an economic activity which uses inputs and services
to enable a product to be made and delivered to a final consumer. A value chain is
understood as a strategic network between a numbers of independent business
organizations. According to Hobbs et al. (2000), a value chain is differentiated from a
production/supply chain because participants in the value chain have a long-term strategic
vision, disposed to work together, oriented by demand and not by supply, shared
commitment to control product quality and have a high level of confidence in one another
that allows greater security in business and facilitates the development of common goals
and objectives.
Information flow
Little or none
Extensive
Principal focus
Cost / price
Value / quality
Strategy
Differentiated product
Orientation
Led by supply
Led by demand
Organizational structure
Independent actors
Competitiveness of the
enterprise
Independent actors
Competitiveness of the
market chain
Philosophy
Source: Hobbs et al. (2000).
The goal of a value chain is to optimize performance in that industry using the combined
expertise and abilities of the members of the chain. Successful chains depend on
integration, coordination, communication and cooperation between partners with the
traditional measure of success being the return on investment (Dunne, 2001; Bryceson and
Kandampully, 2004).
There are four major key concepts guiding agricultural value chain analysis
(Anandajayasekeram and Berhanu, 2009; Kaplinsky and Morris, 2000). These are
effective demand, production, value chain governance, and upgrading.
Agricultural value chain analysis views effective demand as the force that pulls goods and
services through the vertical system. Hence, value chain analysis need to understand the
dynamics of how demand is changing at both domestic and international markets, and the
implications for value chain organization and performance. Value chain analysis also
needs to examine barriers to the transmission of information in the changing nature of
demand and incentives back to producers at various levels of the value chain (MSPA,
2010).
2.1.2.2. Production
10
Producing the required amount effectively is a necessary condition for responsible and
sustainable relationships among chain actors. Thus, one of the aims of agricultural value
chain analysis is to increase the quantity of agricultural production. Understanding the
mechanisms of the agricultural production greatly help to design appropriate policy that
bring more gain to farmers and the whole society at large. For a long time, sector analyses
have been used to measure the different economic aspects of production. However, sector
analyses have not been without weaknesses. In particular, sector analysis tends to be static
and suffers from the weakness of its own bounded parameters. Such analysis struggles to
deal with dynamic linkages between productive activities that go beyond that particular
sector (Kaplinsky and Morris, 2000). By going beyond the traditional narrow focus on
production, value chain analysis scrutinize interactions and synergies among actors. Thus,
it overcomes several important limitations of traditional sector assessments.
Governance refers to the role of coordination and associated roles of identifying dynamic
profitable opportunities and apportioning roles to key players (Kaplinsky and Morries,
2000). Value chains imply repetitiveness of linkage interactions. Governance ensures that
interactions between actors along a value chain reflect organization, rather than
randomness. The governance of value chains emanate from the requirement to set product,
process, and logistic standards, which then influence upstream or downstream chain actors
and results in activities, roles and functions.
According to Raikes et al. (2000), trust-based coordination is central for goods and
services, whose characteristics change frequently, making a standardized quality
11
determination for the purposes of industrial coordination difficult. This applies to the
manufacturing industry as well as agri-food chains. It is possible to identify in one
industry several coordination forms used by different firms where the choices rely on the
trust existent between the firms.
Value chains can be classified into two based on the governance structures: buyer-driven
value chains, and producer-driven value chains (Kaplinisky and Morris, 2000). Buyerdriven chains are usually labor intensive industries, and so more important in international
development and agriculture. In such industries, buyers undertake the lead coordination
activities and influence product specifications. In producer-driven value chains which are
more capital intensive, key producers in the chain, usually controlling key technologies,
influence product specifications and play the lead role in coordinating the various links.
Some chains may involve both producer and buyer driven governance. Yet in further work
(Humphrey and Schmitz, 2002; Gibbon and Ponte, 2005) it is argued that governance, in
the sense of a clear dominance structure, is not necessary a constitutive element of value
chains. Some value chains may exhibit no governance at all, or very thin governance. In
most value chains, there may be multiple points of governance, involved in setting rules,
monitoring performance and/or assisting producers.
Chain governance should also be viewed in terms of richness and reach, i.e., in terms
of its depth and pervasiveness (Evans and Wurster, 2000). Richness or depth of value
chain governance refers to the extent to which governance affects the core activities of
individual actors in the chain. Reach or pervasiveness refers to how widely the governance
is applied and whether or not competing bases of power exists. In the real world, value
chains may be subject to multiplicity of governance structure, often laying down
conflicting rules to the poor producers (MSPA, 2010).
Upgrading refers to the acquisition of technological capabilities and market linkages that
enable firms to improve their competitiveness and move into higher-value activities
(Kaplinsky and Morris, 2000). Upgrading in firms can take place in the form of process
upgrading, product upgrading, functional upgrading and chain upgrading. Upgrading
entails not only improvements in products, but also investments in people, knowhow,
12
Market can be defined as an area in which one or more sellers of given products/services
and their close substitutes exchange with and compete for the patronage of a group of
buyers. Originally, the term market stood for the place where buyers and sellers are
gathered to exchange their goods, such as village square. A market is a point, or a place or
sphere within which price making force operates and in which exchanges of title tend to be
accompanied by the actual movement of the goods affected (Backman and Davidson,
1962). The concept of exchange and relationships lead to the concept of market. It is the
set of the actual and potential buyers of a product (Kotler and Armstong, 2003).
Conceptually, a market can be visualized as a process in which ownership of goods is
transferred from sellers to buyers who may be final consumers or intermediaries.
13
Market performance can be evaluated by analyzing costs and margins of marketing agents
in different channels. A commonly used measure of system performance is the marketing
margin or price spread. Margin or spread can be useful descriptive statistics if it used to
show how the consumers price is divided among participants at different levels of
marketing system (Mendoza, 1995).
Marketing costs: Marketing costs are the embodiment of barriers to access to market
participation by resource poor smallholders. It refers to those costs, which are incurred to
perform various marketing activities in the transportation of goods from producer to
consumers. Marketing costs includes handling cost (labour, loading and unloading, costs
of damage, transportation and etc) to reach an agreement, transferring the product,
monitoring the agreement to see that its conditions are fulfilled, and enforcing the
exchange agreement (Holloway et al., 2002).
Under competitive market conditions, the size of market margins would be the outcome of
the supply and demand for marketing services, and they would be equal to the minimum
costs of service provision plus normal profit. Therefore, analyzing market margins is an
important means of assessing the efficiency of price formation in and transmission through
the system. There are three methods generally used in estimating marketing margin: (1)
detailed analyses of the accounts of trading firms at each stage of the marketing channel
(time lag method); (2) computations of share of the consumers price obtained by
14
producers and traders at each stage of the marketing chain; and (3) concurrent method:
comparison of prices at different levels of marketing over the same period of time
(Mendoza, 1995; Scarborough and Kydd, 1992).
Value chain is useful as a poverty-reduction tool if it leads to increase on and off farm
rural employment and income. Increased agricultural productivity alone is not a sufficient
route out of poverty within a context of globalization and increasing natural resource
degradation. A focus on post-harvest activities, differentiated value added products and
15
increasing links with access to markets for goods produced by low-income producers
would appear to be the strategy open to smallholders (Lundy et al., 2002).
Traditionally, little attention has been paid to the value chains by which agricultural
products reach final consumers and to the intrinsic potential of such chains to generate
value added and employment opportunities. While high-income countries add nearly
US$185 of value by processing one tone of agricultural products, developing countries add
approximately US$40. Furthermore, while 98 percent of agricultural production in highincome countries undergoes industrial processing, barely 38 percent is processed in
developing countries. These indicate that well developed agro-value chains can utilize the
full potential of the agricultural sector (UNIDO, 2009).
2.3. Developing Value Chain Systems towards the Benefits of the Poor
In recent years, the pro-poor growth approach has become one of the key concerns of
developmental organizations. The focus of the approach lies in the promotion of economic
potentials of the poor and disadvantaged groups of people (OECD, 2006). The main aim is
to enable them to react and take advantage of new opportunities arising as a result of
economic growth, and thereby overcome poverty (Berg et al., 2006). The promotion of
value chains in agribusiness aims to improve the competitiveness of agriculture in national
and international markets and to generate greater value added within the country or region.
The key criterion in this context is broad impact, i.e. growth that benefits the rural poor to
16
the greatest possible extent or, at least, does not worsen their position relative to other
demographic groups. Pro-poor growth is one of the most commonly quoted objectives of
value chain promotion. In recent years, the need to connect producers to markets has led to
an understanding that it is necessary to verify and analyze markets before engaging in
upgrading activities with value chain operators. Thus, the value chain approach starts from
an understanding of the consumer demand and works its way back through distribution
channels to the different stages of production, processing and marketing (GTZ, 2006).
The value chain approach seeks to identify long-term solutions to reduce the vulnerability
of developing countries to fluctuating world market prices or trade shocks. It does not just
focus on adding value to existing traditional commodity exports (in other words,
diversifying the same product), but also on promoting alternative products. Another
characteristic of the approach is that it does not solely concentrate on functional
dimensions such as supplying appropriate inputs, or applying good agricultural processing,
handling and distribution practices. It emphasizes the importance of institutional
arrangements, or rather governance issues, along the value chains that link and coordinate
producers, processors and distributors of a certain product. Moreover, this aspect covers
authority and power relationships that determine how financial, material and human
resources are allocated and flow within the chain (Gereffi et al., 1994). Dynamic value
chain systems respond to market shifts by developing and transferring knowledge to
intermediaries and producers, so that they can adapt and maintain a competitive market
position over time. Vibrant value chain systems grow and continuously incorporate new
businesses, generating ever-increasing jobs, income, and assets. In this manner, value
chain systems can have the potential to significantly reduce poverty for large numbers of
poor people (Alexandra and Mary, 2006).
The value chain approach considers both the added value of a product and an insight into
the actors roles and relations. The value chain approach analyses a products development
process from input supply through production and processing level, transport, trade and
marketing, to consumption. Despite the fact that, earlier work on agriculture concentrated
mainly on improving the supply side of the respective value chains e.g. production
17
conditions and output, recent studies have also paid attention to the demand side (Diao,
2007). Here the value chain analysis concentrates on both ends of the chain corresponding
with the two sides of a market.
Agricultural potential and market access alone cannot make farmers profitable.
Availability of market infrastructure (storage, transport, etc) is important for farmers to
avoid flooding of markets and enables them to increase their profit by selling in times of
low supply. Due to seasonality, market prices fluctuate depending on the quantity and the
quality of the products on the markets. Especially on the wholesale and retail markets
prices also fluctuate even during one day. Often the limited availability of storage is the
reason that traders and retailers try to sell all their produce by the end of one day, even if
they achieve only a low price. In times of high supply, traders benefit more; in times of
low supply farmers can sell everything they harvest for good prices (Koenig et al., 2008).
18
Ethiopia has a variety of vegetable crops grown in different agro ecological zones by small
farmers, mainly as a source of income as well as food. The production of vegetables varies
from cultivating a few plants in the backyards, for home consumption, to large-scale
production for the domestic and home markets. According to CSA (2012) the area under
these crops (vegetables and root crops) was estimated to be 359,950.13 hectares with a
total production of 24,267,581.58 tons in the year 2011/12. Root and tuber crops are by
far the dominant product group. Potatoes (32%) stand out as the important products,
followed by taro/Godere (19%), garlic (12%), and onions (nearly 12%). Potatoes are
mostly found in the Amhara Regional State (51%) and Oromia (33%). Among small-scale
producers of vegetables, Ethiopian cabbage (Kale) takes the higher almost 50%, followed
by red pepper with a share of 31%, and green pepper 10%.
Smallholder vegetable farms are based on low input low output production systems. The
use of improved seeds and planting material of high yielding varieties and other inputs
such as fertilizer and plant protection materials is not common in the smallholder sector.
Technical training and extension services on improved crop husbandry techniques are not
available. As a result average productivity levels are low in the small scale farming sector
(EHDA, 2011).
There are a number of studies that have employed the value chain approach to agricultural
commodities. Fitter and Kaplinsky (2001) used a value chain analysis to examine intercountry distributional outcomes of the global coffee sector by mapping input-output
relations and identifying power asymmetries along the coffee value chain. Their study
showed that returns to product differentiation taking place in the face of globalization do
not accrue to the coffee producers. They also found that power in the coffee value chain
was asymmetrical. At the importing end of the chain, importers, roasters and retailers
compete with each other for a share of value chain rents but combine to ensure that few of
the rents return to the farmer or the producer country.
19
Ponte (2002) also used a value chain analysis to examine the impact of deregulation, new
consumption patterns and evolving corporate strategies in the global coffee chain on the
coffee exporting countries in the developing world. The study concluded that the coffee
chain was increasingly becoming buyer-driven and the coffee farmers and the producing
countries were facing a crisis relating to changes in the governance structure and the
institutional framework of the coffee value chain.
Horticulture value chain study conducted in Eastern parts of Ethiopia identified different
problems on the chain (Bezabih, 2008). The major constraints of marketing identified by
the same study include lack of markets to absorb the production, low price for the
products, large number of middlemen in the marketing system, lack of marketing
institutions safeguarding farmers' interest and rights over their marketable produces (e.g.
cooperatives), lack of coordination among producers to increase their bargaining power,
poor product handling and packaging, imperfect pricing system and lack of transparency
in market information communications.
Dereje (2007) used value chain approach to study the competitiveness of Ethiopian coffee
in the international market. The study indicates that Ethiopian farmers have low level of
education, large family size with small farmland and get only 3% of the retail price in the
German market. Thus, policy intervention was suggested to improve farmers
performance.
Value chain study conducted on mango by Dendena et al. (2009) indicated that the
subsector faces some challenges. Among others: highly disorganized and fragmented
20
industry with weak value chain linkages, long and inefficient supply chains, inadequate
information flows and lack of appropriate production are explained as the major problems.
The study recommended institutional innovation to reduce the above challenges.
The study of marketable surplus turned out to be very vital for agricultural based countries
because the transition of smallholder farmers towards commercial production is
determined by it. Getachew (2009) has noted that the transition of the small-scale sector
towards commercial production will ultimately be determined by the ability and
willingness of producers to provide a commodity. Similarly, Mamo (2009) argued that the
development of markets, trade and the subsequent market supply that characterize
commercialization are fundamental to economic growth.
There are a number of empirical studies on factors affecting the marketable surplus of
agricultural commodities. Ayelech (2011) identified factors affecting the marketable
surplus of fruits by using OLS regressions. She found that fruit marketable supply was
affected by; education level of household head, quantity of fruit produced, fruit production
experience, extension contact, lagged price and distance to market.
Abay (2007) applied Heckman two-stage model to analyze the determinants of vegetable
market supply. Accordingly, the study found out that marketable supply of vegetables
were significantly affected by family size, distance from main road, number of oxen
owned, extension service and lagged price.
21
Regarding factors affecting channel choices of the households, different researchers used
multinomial logit and probit for categorical marketing system for different agricultural
commodities.
A study by Ferto and Szabo (2002) identified variables influencing producers decision for
channel choices. The analysis was based on a survey among three supply channels of fruit
and vegetable producers in Csongrad, Hungary in respect the choice of marketing channels
which are wholesalers, marketing cooperative and producers organization channel. A
multinomial logit model was applied to reveal on the determinants influencing these
choices among various supply channels. Farmers decisions with respects to supply
channels were influenced differently by transaction costs, and producers sell to wholesale
market were strongly and negatively affected by the farmers age, information costs, and
negatively by the bargaining power and monitoring costs. The probability that farmers sell
their product to marketing cooperative is influenced by the age and information costs
positively, whereas by the asset specificity and bargaining power negatively.
Rao et al. (2010) confirmed that educational level of the operator, off-farm employment,
own means of transportation and age of operator had positive effect where as household
size was negatively associated with supper marketing channel choices. In second stage
second stage of treatment model, off-farm employment and own means of transportation
affected income of vegetables growers positively. Furthermore, dummy variable for
channel choices were positive and significant. This indicated that supplying vegetable to
supermarket channels rendered better income gain over spot marketing channel. On the
other hand, ownership of livestock negatively influenced income of vegetables growers
supplying traditional or spot marketing channel.
Jari and Fraser (2009) identified that market information, expertise on grades and
standards, contractual agreements, social capital, market infrastructure, group participation
and tradition significantly influence household marketing behavior. The study uses
multinomial regression model to investigate the factors that influence marketing choices
among smallholder and emerging farmers.
22
Bongiwe and Masuku (2012) identified that age of the farmer, quantity of baby corn
produced and level of education were significant predictors of the choice to sell vegetables
to NAMBoard market channel instead of selling to other-wholesale market channel. The
age of the farmer, distance from production area to market, membership in farmer
organization and marketing agreement were significant determinants of the choice to use
non-wholesale market channel over other-wholesale market channel. The study uses
descriptive and multinomial logistic regression analyses to investigate factors that
influence market channel choices.
Mamo and Degnet (2012) identified that gender and educational status of the household
head together with household access to free aid, agricultural extension services, market
information, non-farm income, adoption of modern livestock inputs, volume of sales, and
time spent to reach the market have statistically significant effect on whether or not a
farmer participates in the livestock market and his/her choice of a market channel. The
study uses binary logit and multinomial logit to explore the patterns and determinants of
smallholder livestock farmers market participation and market channel choice using a
micro-lever survey data from Ethiopia.
23
3. RESEARCH METHODOLOGY
This chapter discusses the research methodology used in the study including location and
description of the study areas, data types and data sources, methods of sampling, methods
of data collection and analysis.
Kombolcha Woreda: Kombolcha is one of the nineteen Woredas found in East Hararghe
Zone of Oromia Regional State, Ethiopia. The Woreda is composed of 19 rural kebeles
and 1 urban kebele. Komblocha Woreda is located about 542 kms southeast of Addis
Ababa and 16 kms northwest of Harar town, the capital of East Hararghe Zone of Oromia
Region. The Woreda is strategically located between the two main cities Harar and Dire
Dewa. In addition, due to its proximity to Djibouti and Somalia, the Woreda has access to
potential markets in the area.
The Woreda had total population of about 157,444, of which 77,659 were females in
2011(CSA, 2010). About 45.1%, 53.0% and 1.9% of the total population were young,
economically active and old age, respectively. Average family sizes for the Woreda was
4.9 persons per household. The crude population density of the Woreda is estimated as
517 persons per km2.
Lowland and midland agro-ecological zones characterize the Woredas climate. The
Woreda receives mean annual rainfall of 600-900 mm, which is bimodal and erratic in
distribution. The main rainy season in the Woreda is from February to mid-May and from
July to end of August. The economy of the Woreda is dominated by traditional cash crop
farming mixed with livestock husbandry. The major crops produced in the Woreda include
sorghum, maize, vegetables (potato, cabbage, beetroot, and carrot), chat, groundnut, coffee
and sweet potato (KWOoARD, 2012).
24
Habro Woreda: Habro is one of the twelve Woredas found in West Hararghe Zone of
Oromia Regional State, Ethiopia. The Woreda is composed of 32 rural kebeles and 5
urban kebeles. Habro Woreda is located about 410 kms southeast of Addis Ababa and 78
kms from Chiro town, the capital of West Hararghe Zone of Oromia Region in the western
central part of West Hararghe Zone. Gelamso town is the administrative seat of the
Woreda.
The Woreda had the population of about 214,591, of which 103,472 were females in
2011(CSA, 2010). Young, economically active and old age populations accounted for
45.3%, 52.4% and 2.3%, respectively. An average family size for rural area was 4.76
persons. The crude population density of the Woreda is estimated as 288.8 persons per
km2.
25
The altitude of the Woreda stretches between 1500 and 2000 m.a.s.l. Habro classified into
dega (18%), woinadega (57%) and kola (25%) agro climatic zones. Sorghum, maize, teff,
haricot bean, barley, wheat and vegetables (potato, tomato, cabbage, onion, shallot, and
carrot) are the dominant crops in the Woreda (HWOoARD, 2012).
The study used information on different variables such as data on vegetable production,
vegetables marketed, prices of vegetable supplied, distance to Woreda market, distance to
all weather roads, age of the household head, extension service, educational status of the
household head, family size, access to market information, credit facility, and type of
sellers and buyers. Survey was made to obtain these information.
The secondary data were collected from Central Statistical Authority (CSA), Bureau of
Agriculture and Rural Development (BoARD), Capacity Building for Scaling Up of
Evidence Based Best Practices in Agricultural Production in Ethiopia (CASCAPE) project
and other sources. Primary data were collected using informal and formal surveys, and
from key informants. The informal survey used Rapid Market Appraisal (RMA) technique
using checklists. The formal survey was undertaken through formal interviews with
randomly selected farmers, traders and consumers using a pre-tested semi-structured
questionnaire for each group.
For this study, in order to select a representative sample a multi-stage random sampling
technique were implemented to select vegetables producer kebeles and sample farm
households. In the first stage, with the consultation of Woreda agricultural experts and
development agents, out of 19 and 32 kebeles of Kombolcha and Habro Woredas 7 and 5
vegetables producer kebeles were purposively selected based on the level of production. In
the second stage, from the identified or selected rural kebeles, 4 sample kebeles namely
Bilusuma and Eegu from Kombolcha Woreda, and Harochercher and Bareda from Habro
Woreda were selected randomly. In the third stage, using the household list of the sampled
kebeles 162 sample farmers were selected randomly based on proportional to the
population size of the selected kebeles (Table 2).
26
Name of selected
kebeles
Total number of
vegetable producers
Number of sample
households
Bilusuma
214
53
Eegu
178
44
Harochercher
150
37
Bareda
113
28
Kombolcha
Habro
Total
655
Source: Own computation from OoARD and kebele adminstaraion data
162
For this study, data from traders and consumers were also collected. The sites for the
trader surveys were market towns in which a good sample of vegetable traders existed.
The lists of wholesalers were obtained from the respective Woreda Office of Trade and
Industry (OoTI) and for other traders there is no recorded list. From 55 wholesalers, 12
wholesalers were selected randomly. In addition, 18 retailers and 7 collectors were
randomly selected constituting a total of 37 traders from Melkarafu, Harar, Gelemso,
Karakurikura and Wachu markets. Furthermore, 18 and 12 consumers were interviewed
from Kombolcha and Habro Woredas, respectively by selecting randomly.
Descriptive statistics, inferential statistics and econometric analysis were used to analyze
the data collected from vegetable producers, traders and consumers.
These methods of data analysis refer to the use of percentages, means, standard deviations,
t-test, 2-test, F-test and maps in the process of examining and describing marketing
functions, facilities, services, and household characteristics.
As products move successively through the various stages, transactions take place between
multiple chain actors, money and information are exchanged and value was progressively
27
added. The analysis of vegetable value chains highlights the need for enterprise
development, enhancement of product quality, and quantitative measurement of value
addition along the chain, promotion of coordinated linkages among producers and
improvement of the competitive position of individual enterprises in the marketplace.
Moreover, individual enterprises may feed into numerous chains; hence, which chain (or
chains) was/were targeted depends largely on the point of entry for the research inquiries
(Kaplinsky and Morris, 2001). The following four steps of value chain analysis were
1. Mapping the value chain to understand the characteristics of the chain actors and the
relationships among them, including the study of all actors in the chain, of the flow of
vegetables through the chain, of employment features, and of the destination and
volumes of domestic and foreign sales. This information can be obtained by
conducting surveys and interviews as well as by collecting secondary data from
various sources.
2. Identifying the distribution of actors benefits in the chain. This involves analyzing the
margins and profits within the chain and therefore determined who benefits from
participating in the chain and who would need support to improve performance and
gains. In the prevailed context of market liberalization, this step is particularly
important, since the poor involved in value chain promotion were the most vulnerable.
3. Defining upgrading needed within the chain. By assessing profitability within the
chain and identifying chain constraints, upgrading solutions could be defined. These
may include interventions to: (i) improve product design and quality and move into
more sophisticated product lines to gain higher value and/or diversify production; (ii)
reorganize the production system or invest in new technology to upgrade the process
and enhance chain efficiencies; (iii) introduce new functions where in the chain to
increase the overall skill content of activities; and (iv) adapt the knowledge gained in
particular chain functions in order to redeploy it.
4. Emphasizing the governance role. Within the concept of value chain, governance
defines the structure of relationships and coordination mechanisms that exist among
chain actors. By focusing on governance, the analysis identified actors that may
28
require support to improve capabilities in the value chain, increase value added in the
sector and correct distributional distortions. Thus, governance constituted a key factor
in defining how the upgrading objectives could be achieved.
Following the above procedure, the main aspects of vegetable value chain analysis was
done by applying some quantitative and qualitative analysis. First, an initial map was
drawn which depicts the structure and flow of the chain in logical clusters. This exercise
was carried out in qualitative and quantitative terms through graphs presenting the various
actors of the chain, their linkages and all operations of the chain from pre-production
(supply of inputs) to consumption. After having developed the general conceptual map of
the value chain, the next step is analyzing the chains economic performance and benefit
share of actors.
Estimates of the marketing margins are the best tools to analyse performance of market.
Marketing margin was calculated by taking the difference between producers and retail
prices. The producers share is the commonly employed ratio calculated mathematically
as, the ratio of producers price to consumers price. Mathematically, producers share can
be expressed as:
(1)
The above equation tells us that a higher marketing margin, diminishes producers share
and vice versa. It also provides an indication of welfare distribution among production and
marketing agents.
29
Calculating the total marketing margin was done by using the following formula.
Computing the Total Gross Marketing Margin (TGMM) is always related to the final price
paid by the end buyer and is expressed as a percentage (Mendoza, 1995)
(2)
Net Marketing Margin (NMM) is the percentage over the final price earned by the
intermediary as his net income once his marketing costs are deducted. The equation tells
us that a higher marketing margin diminishes the producers share and vice-versa. It also
provides an indication of welfare distribution among production and marketing agents.
(3)
From this measure, it is possible to see the allocative efficiency of markets. Higher NMM
or profit of the marketing intermediaries reflects reduced downward and unfair income
distribution, which depresses market participation of smallholders. An efficient marketing
system is where the net margin is near to reasonable profit.
To find the benefit share of each actor the same concept was applied with some
adjustments. In analyzing margins, first the Total Gross Marketing Margin (TGMM) was
calculated. This is the difference between producers (farmers) price and consumers
price (price paid by final consumer) i.e.
TGMM = Consumers price Farmers price
(4)
(5)
where, SPi is selling price at ith link and PPi is purchase price at ith link.
30
TGPM=TGMM-TOE
(6)
where, TGPM is total gross profit margin, TGMM is total gross marketing margin and
TOE is total operating expense.
Similar concept of profit margin that deducts operating expense from marketing margin
was done by Dawit (2010) and Marshal (2011).
Then profit margin at stage i is given as:
(7)
In order to expand the leading role agriculture plays in economic growth and poverty
reduction, smallholder farmers need to improve their marketable surplus. A higher
marketable surplus can help farmers to participate in a high value markets by increasing
their level of income. Therefore, investigating the nature of marketable surplus is a major
component of agro-value chains.
In this study, multiple linear regression model was used to analyze factors affecting farm
level vegetables supply to the market in the study areas because of all vegetable producers
participate in the market. This model is also selected for its simplicity and practical
31
(8)
A multinomial logit (MNL) model was applied to explain inter household variation in the
choice of a specific marketing outlet. This study assumes that farmers decision is
generated based on its utility maximization. This implies that each alternative marketing
outlet choice entails different private costs and benefits, and hence different utility, to a
household decision maker. The analytical model is constructed as follows. Suppose that
the utility to a household of alternative j is Uij, where j = 0, 1, 2. From the decision
makers perspective, the best alternative is simply the one that maximizes net private
benefit at the margin. In other words, household i will choose marketing oulet j if and
only if Uij > Uik,
observed in practice. What a researcher observe are the factors influencing the households
utility such as household and personal characteristics and attributes of the choice set
experienced by the household. Based on McFadden (1978), a households utility function
from using alternative j can then be expressed as follows:
U (Choice of j for household i) = Uij = Vij + ij
where,
Uij is the overall utility,
Vij is an indirect utility function and
ij is a random error term.
The probability that household i select alternative j can be specified as:
32
(9)
(10)
Assuming that the error terms are identically and independently distributed with type i
extreme value distribution, the probability that a household chooses alternative j can be
explained by a multinomial logit model (Greene, 2000) as follow:
Pij
exp( j X ij )
J
exp(
j 0
(11)
X ij )
where,
Xij is a vector of household of the ith respondent facing alternative j
j is a vector of regression parameter estimates associated with alternative j.
Following equation (11) above, we can adapt the MNL model fitting to this study as
follow:
(12)
where,
i represents ith farm household, and i=1,2,3,,162.
j represents different marketing outlets, j=0 for sale to wholesalers, j=1 for sale to
collectors and j=2 for sale to retailers.
P represents the probability of vegetables marketing outlet j to be chosen by farm
household i;
CHOICEij = j means that vegetables marketing outlet j is chosen by farm household i;
Xi is independent variables
33
Pij
exp( j X ij )
(13)
J 1
exp(
j 1
X ij )
The coefficients of explanatory variables on the omitted or base category are assumed to
be zero. The probability that a base category will be chosen can be calculated as follows:
Pij
(14)
J 1
1 exp( j X ij )
j 1
, for j= 1, 2.J
(15)
where,
Pj is the probability that farmers choose market outlet j
j is a vector of regression parameter estimates associated with alternative j .
In the case of this study, farmers have three market outlets to sell most of their vegetable
produce, J = 3, and the alternatives j = 1, 2, 3, represent sale outlets to wholesalers, to
collectors and to retailers, respectively. The dependent variables (the marketing outlet
(CHOICE) chosen) in the analysis are measured by the probability of selling vegetables to
either of these markets. According to the survey result, three main different marketing
outlets were identified. These include sales to wholesalers (0=Wholesaler); sales to
collectors (1=Collectors) and sales to retailer (2=Retailers).
The model predicts the relative probability that a producer would choose one of the three
categories based on the nature of the explanatory variables. For this analysis, the market
outlet Wholesaler was used as comparison base because this outlet was chosen by the
majority of vegetable selling farmers in trading their vegetables. Econometric analysis of
the data was done with Sata 11 software.
34
(16)
If there is heteroscedasticity problem in the data set, the parameter estimates of the
coefficients of the independent variables cannot be BLUE. Therefore, Breusch-Pagan test
of heteroscedasticity was employed for detecting heteroscedasticity in this study.
The problem of endogeneity occurs when an explanatory variable is correlated to the error
term in the population data generating process, which causes, the ordinary least squares
estimators of the relevant model parameters to be biased and inconsistent. The source of
endogeneity could be omitted variables, measurement error and simultaneity (Maddala,
2001). Both Hausman test and Durbin-Wu-Hausman (DWH) test was applied to check the
presence of endogeneity. In the case of Huasman test if there is little difference between
OLS and IV estimators, then there is no need to instrument, and we conclude that the
regressor was exogenous. If instead there is considerable difference, then we need to
instrument and the regressor is endogenous (Cameron and Trivedi, 2009). In the case of
just one potentially endogenous regressor with the coefficient denoted by , the Huasman
test statistics is:
(17)
is 2(1) distributed under the null hypothesis that the regressor is exogenous.
35
In the case Durbin-Wu-Huasman (DWH) test the error term from the first stage added on
the structural equations. i.e
Both test results of endogeneity show that quantity of potato produced is endogenous
variable for potato supply to the market. This problem can be overcome by using two
stages least square (2SLS) method. The method involves two successive applications. The
first stage is made by regressing the suspected endogenous variables over the predetermined or pure exogenous variables to get their predicted values. Then the predicted
values of the endogenous variables in the first stage are used to estimate the supply
equation. Here quantity of fertilizer used (Fert) was used as instrument to quantity of
potato produced. This instrumental variable was selected from the available variables by
checking the correlation between endogenous variable and the instruments and the model
was specified as:
Y (VPS) =f( Age, Sex, DMkt, Land, AExte, MInfo, NOFI, (QPron=QFert), Credit, HEduc,
Family, TLU, VFExp)
(18)
where, VPS is volume of potato supplied to the market, QPron is amount of potato
produced and QFert is amount of fertilizer applied in quintal.
(19)
where, s indicates estimators based on the restricted (constrained) subsets, f indicates
estimators based on the full set of choices (Unconstrained). Therefore,
respective coefficients, and
and
and
are the
36
In the course of identifying factors influencing vegetable supply to the market and
market channel choice decisions, the main task is exploring which factors potentially
influence and how (the direction of the relationship) these factors are related with the
dependent variables.
3.5.1. Dependent variables
Age of Household Head (Age): It is a continuous variable and measured in years. Aged
households are believed to be wise in resource use, on the other hand young household
heads have long investment horizon and it is expected to have either positive or negative
effect on volume of vegetable sales. Adugna (2009) who found that age of the household
head have negative effect on the elasticity of onion supply to the market. This variable is
also expected to have relationship with outlet choice decision of vegetable producers.
Bongiwe and Masuku (2012) found that age of the farmers was significant determinant of
the choice to use non-wholesale market channel over other-wholesale market channel.
37
this study distance to nearest market is hypothesized to affect volume of vegetables sales
negatively. Similar issue was studied by Ayelech (2011) on fruit market in Goma woreda
identified that poor market access has significant and negative effect on quantity of
avocado and mango supplied. Also those households who are close to market were
assumed to have more probability to choose better market outlet. In this study, distance
from market is hypothesized to influence the decision of farmers to choose the wholesalers
market outlet.
Sex of the Household Head (Sex): A dummy variable taking zero if female and one if
male for variable to be considered. Sign could not be attached with the variable. Tshiunza
et al. (2001) determined that male farmers tended to produce cooking banana for market
and therefore participated in banana market more than female farmers participate. Further,
study conducted by Awol (2010) indicated negative relation between sale volume of
poultry and male-headed household. It is also expected to have relationship with outlet
choice decision of vegetable producers. Mamo and Deginet (2012) found that sex of the
household head has statistically significant effect on whether or not a farmer participates
in the livestock market and his/her choice of a market channel.
Woreda Dummy (Woreda): This variable is a dummy taking the value zero if the
Woreda is Kombololch and one if the Woreda is Habro, which consists of a number of
characteristics of the Woredas. This is related to the difference between Woredas in access
to information, access to market, production potential and etc. This variable influences
38
Credit Access (Credit): This is a dummy variable taking the value one if the household
takes loan and zero otherwise, which indicates credit taken for vegetables production.
Access to credit would enhance the financial capacity of the farmer to purchase the inputs,
thereby increasing vegetable production and market share size. Therefore, it is
hypothesized that access to credit would have positive influence on level of production
and sales. Alemnewu (2010) and Muhammed (2011) who found that if pepper and teff
producer gets credit, the amount of pepper and teff supplied to the market increased. It is
also hypothesized that access to credit would have influence on wholesale market outlet
choice decisions. Urquieta (2009) found that access to loan was significant determinant of
market channel choice.
39
Vegetable Farming Experience (VFExp)): It is the total number of years a farmer stays
in production of vegetables. A household with better experience in vegetable farming is
expected to produce more amounts of vegetables and, as a result, he is expected to supply
more amounts of vegetables to market. Farmers with longer farming experience are
expected to be more knowledgeable and skillful (Ayelech, 2011).Therefore, this variable
is hypothesized to positively influence vegetable marketable surplus.
Land Size (Land): This refers to the total area of land that a farm household owned in
hectares. In agriculture, land is one of the major factors of production. The availability of
land enables the owner to earn more agricultural output which in turn increases the
marketable supply (Desta, 2004). Therefore, land holding and marketable supply are
expected to have direct relationship.
40
2007). But for this study TLU is hypothesized to influences volume of vegetable sales
negatively.
Membership to any Cooperative (MCoop): It is binary variable and takes the value of
one if the household is membership of any cooperatives engaged in any business,
otherwise zero. Thus cooperatives improve understanding of members about market and
41
42
Farming was the main occupation and source of livelihood for all sample farmers (100%)
in both Woredas. Majority of respondents from Habro Woreda have been practicing mixed
crop livestock production relative to Kombolcha Woreda. However, in addition to the
43
farming activities, some respondents (8.6%) have also engaged in non-farm activities like
in small trading activities and 5.7% in off- farm activities.
Items
N
Female
8.25
6.15
12
7.4
Male
89
91.75
61
93.85
150
92.6
Illiterate
51
52.58
31
47.69
82
50.62
Literate
46
47.42
34
52.31
80
49.38
Married
90
92.8
63
96.7
153
94.44
Unmarried
2.1
1.5
1.85
Divorced
3.1
1.85
Widowed
2.1
1.5
1.85
Cooperative
s
Yes
14
14.4
14
21.5
28
17.2
No
83
85.6
51
78.5
134
82.8
Non/off
farm income
Yes
12
12.37
11
16.92
23
14.20
No
85
87.63
54
83.08
139
85.80
Sex
Education
Marital
Status
2-test
0.25
0.37
2.2
1.37
0.66
N is number of respondents
Source: Own computation from survey result, 2012
Table 4. Demographic and socioeconomic characteristics of samples (continuous
variables)
Kombolcha (N=97)
Variables
Habro (N=65)
Total (N=162)
t-test
Mean
SD
Mean
SD
Mean
SD
Age
34.6
8.9
38.5
8.2
36.1
8.8
-2.8***
Family size
5.4
2.4
6.7
2.6
5.9
2.5
-3.2***
Experience
11.3
7.2
4.3
2.1
8.5
6.7
7.6***
44
The average years of farming experience related to vegetable production was 11.3 and 4.3
years in Kombolcha and Habro Woredas, respectively. There was significant difference in
vegetables production experience in the two Woredas at 1% significant level. Most (85.6
and 78.5 percent) of the respondents have not been a member of any cooperatives from
Kombolcha and Habro Woredas, respectively.
Landholding of the sample respondents ranges from 0.13ha to 2ha with an average of
0.91ha per household in Habro Woreda and from 0.06ha to 3ha with an average of 0.39 ha
per household in Kombolcha Woreda. In terms of allocation, 0.13ha (33%) and 0.17ha
(18.6%) were allocated to vegetables production in Kombolcha and Habro Woredas,
respectively (Appendix Table 5). There was a significant difference in land allocation to
agricultural production at 1% significant level due to high population density, land size is
small in Kombolcha Woreda compared to the land holding in Habro Woreda and hence
the area allocated to crop production is small compared to Habro Woreda.
Variables
Kombolcha(N=97)
Habro(N=65)
Total(N=162)
2-test
Tomato
65
100
65
40.12
Onion
1.03
12
18.46
13
8.02
16.06***
Potato
71
73.2
71
43.83
Cabbage
38
39.18
28
43.08
66
40.74
0.24
Carrot
37
38.14
37
22.84
Shallot
2.06
1.23
Beet root
14
14.43
14
21.54
28
17.28
1.37
45
There was a significant difference in vegetable production in the two Woredas. This is
may be due to difference in agro ecology and natural resources between the Woredas.
Tomato, potato and cabbage are the dominant vegetables produced by sample households
in the study areas. Therefore, most of the analysis focused on these vegetables.
The average vegetables productivity in Kombolcha Woreda is higher than Habro Woreda.
In Kombolcha Woreda the mean productivity of potato and cabbage was 84.9 and 88.2
qt/ha, respectively and in Habro Woreda the mean productivity of potato and cabbage was
57 and 74.3qt/ha (Table 6). In both Woredas the average yield is lower than the national
average which is 104.2 and 91 for tomato and cabbage, respectively, and higher than the
national average which is 82.8qt/ha for potato (CSA, 2012). There are significant
differences in productivity between the Woredas and there are also huge differences in
productivity among the households.
Habro
Total
t-test
Mean
SD
Mean
SD
Mean
SD
Tomato (N=65)
56.97
20.82
56.97
20.82
Potato (N=71)
84.87
32.10
84.87
32.1
Cabbage (N=66)
88.22
26.36
74.34
20.74
82.12
24,87
2.32**
The respondents depend on different means of income generation strategies where khat
and grain production were major sources of income for the majority of the producers in
Kombolcha and Habro Woredas, respectively. For this reason, about 42.3% and 76.9% of
the respondents earned their living from khat and grain production as a primary source in
Kombolcha and Habro Woredas, respectively. Vegetables production is also considered as
the second major means of livelihood in both Woredas (Appendix Table 6). Similarly,
potato and tomato were the principal vegetable crops that support the livelihood of
46
farming households in Kombolcha and Habro Woredas followed by cabbage, carrot and
beetroot.
47
Above Mean
(N=30)
Mean
SD
Mean
SD
Age
37.7
8.5
39.4
7.7
Family
6.4
VFExp
3.7
1.5
DMkt
0.97
Land
TLU
Variables
Potato (N=71)
t-test
Below mean
(N=40)
Above mean
(N=31)
Mean
SD
mean
SD
-0.63
33.4
9.7
35
3.1
-0.99
5.28
2.1
6.1
4.8
2.3
-2.3**
7.3
5.66
0.9
0.81
0.8
0.76
0.86
6.7
2.8
7.9
4.5
-1.3
3.2
2.2
3.9
1.9
-1.4
Cabbage (N=66)
t-test
Below mean
(N=48)
Above mean
(N=18)
t-test
Mean
SD
Mean
SD
-0.74
36.23
8.05
34.39
8.25
0.82
2.8
-1.4
6.4
2.57
5.28
2.42
1.6
10.65
6.6
-2.29**
6.90
5.45
4.2
-1.48
0.35
0.88
0.36
-0.32
0.67
0.51
0.47
0.18
1.62
3.55
5.86
3.85
2.13
-0.27
6.91
6.05
3.78
3.55
2.06**
2.72
1.67
3.25
1.39
-1.4
3.12
-10.96
QPron
14.3
5.5
25.5
6.7 7.3*** 11.88
4.47 29.23 9.15
13.94
***
Note: ***, ** and * are statistically significant at 1%, 5% and 10% probability level, respectively.
2.02
3.72
0.97
5.73
43.33
44.11
-1.2
4.57***
48
Items
Male
Sex
HEduc
Woreda
MInfo
Credit
Below
mean
(N=35)
N
%
31
88.57
Above Mean
(N=30)
N
30
100
Female
11.43
Literate
19
54.29
15
50
Illiterate
16
45.71
15
50
Kombolcha
Habro
35
100
30
100
Yes
12
34.29
23.33
No
23
65.71
23
76.67
Yes
16
45.71
11
36.67
No
19
54.29
19
63.33
Yes
35
100
30
100
AExte
Potato (71)
2
-test
3.65*
0.12
11.7***
0.54
Below
mean
(N=40)
N
%
Above
mean
(N=31)
N
%
37
29
92.5
-test
93.55
7.5
6.45
19
52.5
17
54.84
21
47.5
14
45.16
40
100
31
100
10
25
29
93.55
30
75
6.45
10
3.23
36
90
30
96.77
39
97.5
26
83.87
No
Cabbage (N=66)
0.03
0.38
33.15***
1.22
Below
mean
(N=48)
N
%
Above mean
(N=18)
N
43
89.58
18
100
10.42
25
52.08
14
77.8
23
47.92
22.2
24
50
14
77.8
24
50
22.2
33
68.75
16
88.9
15
31.25
11.1
11
22.92
16.67
37
77.08
15
83.33
43
89.58
18
100
10.42
4.19**
1
2.5
16.13
Note: *** and * are statistically significant at 1% and 10% probability level, respectively.
Source: Own computation from survey result, 2012
49
2-test
2.03
3.58*
4.14**
2.78*
0.31
2.03
In this study, three major vegetable market outlets were identified as alternatives to
farmers to sell majority of their vegetable products. These were wholesalers which
accounts for 38.89% of total sells followed by, retailers (30.86%) and collectors (30.2%).
Although the role of agricultural cooperatives in smallholder farmers marketing is
recognized as vital, no single household reported cooperatives as alternative market outlet
in their vegetable marketing. This should be seen as serious policy concern for the
government and other relevant stakeholders in this sector.
Variables
Wholesaler
(N=63)
Collectors
(N=49)
Retailers
(N=50)
Total
(N=162)
F-test
Mean
SD
Mean
SD
Mean
SD
Mean
SD
Age
34.52
9.2
35.71
9.2
38.54
7.3
36.12
8.8
3.05*
Family
5.19
4.87
2.5
5.74
2.4
5.26
2.3
1.86
DMkt
0.77
0.62
0.95
0.61
0.75
0.59
0.82
0.61
1.62
Note: *** and * are statistically significant at 1% and 10% probability level, respectively.
Source: Own computation from survey result, 2012
50
Variables
Sex
HEduc
Marital
Status
Woreda
OTran
MCoop
Items
Wholesaler
(N=63)
Collector
(N=49)
Retailer
(N=50)
Total
(N=162)
Male
Female
59
39.33
44
29.33
47
31.33
33.33
41.67
25
12
7.41
Illiterate
29
35.37
25
30.49
28
34.15
82
50.62
Literate
34
42.5
24
30.0
22
27.5
80
49.38
Married
62
98.41
42
85.71
49
98.00
153 94.44
Unmarried
100
1.85
Divorced
100
1.85
Widowed
33.33
33.33
33.33
1.85
Kombolcha
51
52.58
43
44.38
3.09
97
59.88
Habro
12
18.46
9.23
47
72.31
65
40.12
Yes
32
19.75
33
20.37
25
15.43
90
55.56
No
31
19.14
16
9.88
25
15.43
72
44.44
Yes
14
8.64
2.47
10
6.17
28
17.28
F-test
150 92.59
0.40
0.55
2.59*
94.33***
1.99
2.11
No
49 30.25 45 27.78 40 24.69 134 82.72
Note: *** and * are statistically significant at 1% and 10% probability level, respectively.
Source: Own computation from survey result, 2012
According to McCormick and Schmitz (2002), value chain mapping enables to visualize
the flow of the product from conception to end consumer through various actors. It also
helps to identify the different actors involved in the vegetable value chain, and to
understand their roles and linkages. Consequently, the current value chain map of
vegetables in Habro and Kombolcha Woredas is depicted in Figure 3.
51
Cons
umpt
ion
Consumers
Exporters
Marketing
Banks
Wholesalers
Retailers
OoTI
Collectors
Haramaya
University
Produ
ction
Woreda
Farmers
Administration
Input
suppl
y
Informal Credit
BoARD
Cooperatives
Private
NGOs
Suppliers
Vendors
OCSI
Actors
Functions
52
Enablers
The value chain map highlighted the involvement of diverse actors who are participated
directly or indirectly in the value chain. According to KIT et al. (2006), the direct actors
are those involved in commercial activities in the chain (input suppliers, producers,
traders, consumers) and indirect actors are those that provide financial or non-financial
support services, such as credit agencies, business service providers, government, NGOs,
cooperatives, researchers and extension agents.
The primary actors in vegetable value chain in Habro Woreda were seed and other input
suppliers, farmers, traders and consumers but in Kombolcha Woreda it includes exporters.
Each of these actors adds value in the process of changing product title. Some functions or
roles are performed by more than one actor, and some actors perform more than one role.
Input Suppliers
At this stage of the value chain, there are many actors who are involved directly or
indirectly in agricultural input supply in the study area. Currently OoARD, primary
cooperatives/ union and private input suppliers are the main source of input supply.
Vegetables growing farmers also participated in this stage especially for potato seed
supply in Kombolcha Woreda, and World Vision Ethiopia is also participated in such
activity in Habro Woreda. All such actors are responsible to supply agricultural inputs like
improved seed varieties, fertilizers, herbicides, pesticides and farm implements which are
essential inputs at the production stage. For major vegetables produced in Habro and
Kombolcha Woredas, the majority of the sample producers used their own seed (Table
11). Regarding fertilizers, some farmers used only organic fertilizer (manure and compost)
while some farmers used both inorganic and organic fertilizers depending on the land size
allocated to vegetable, vegetable type produced and the soil fertility status as perceived by
the farmers. Pesticides are supplied mostly by private vendors.
53
Source of
seed
Habro
Tomato (N=65)
Kombolcha
Cabbage (N=28)
Potato (N=71)
Cabbage (N=38)
Own seed
13
20.00
21.43
71
100
14
36.84
Local market
40
61.50
10
35.71
21.05
OoARD
12
18.50
14.29
Cooperatives
7.14
16
42.11
NGOs
21.43
Habro
Total
Fertilizers
use
Tomato
(N=65
Yes
49
75.38
49
75.38
No
16
24.62
16
24.62
Potato
(N=71)
Yes
71
100
71
100
No
Cabbage
(N=66)
Yes
33
86.84
21
75
54
81.82
No
13.16
25
12
18.18
Crop type
2-test
1.52
54
Producers
Vegetable growers are the major actors who perform most of the value chain functions
right from farm inputs preparation on their farms or procurement of the inputs from other
sources to post harvest handling and marketing. The major value chain functions that
vegetable growers perform include ploughing, planting, fertilization, irrigating, weeding,
pest/disease controlling, harvesting and post harvest handling.
The diverse agro-climatic conditions can make growing vegetable crops highly costeffective and competitive, and provide vast opportunities in study areas. Unfortunately,
these opportunities have not been exploited by the farmers due to the lower price they
receive for their produce in the markets, as well as bearing the cost of post-harvest losses.
Vegetables production in these two Woredas was based on rainfed and irrigation system.
In Kombolcha and Habro Woredas 76.29% and 87.69% of the respondents, respectively
use irrigation for vegetable production. Sole cropping is the most popularly practiced
production system in Habro and Kombolcha Woredas, respectively. In Kombolcha
Woreda 33% of producers intercrop vegetables with other crops and almost all producers
reported that they practice sole cropping in Habro Woreda (Table 13).
Variables
Cropping
system
Value
adding
Irrigation
Items
Kombolcha
(N=97)
Habro (N=65)
Total (N=162)
Sole
65
67.01
64
98.46
129
79.63
Inter
32
32.99
1.54
33
20.37
Yes
36
37.11
35
53.83
71
43.83
No
61
62.89
30
46.15
91
56.17
Yes
74
76.29
57
87.69
131
80.86
No
23
23.71
12.31
31
19.14
2-test
23.82***
4.4**
3.27*
55
Post harvest handling, which includes different activities like sorting, grading, packing,
storing, transportation, loading and unloading, is done by the farmers themselves or traders
or brokers. If vegetables are sold at the farm gate which is the case in Kombolcha Woreda,
all aforementioned activities are performed by the buyer (traders or broker). Most of the
farmers use sacks, underground storage and ground floor of their residential house as a
store in Kombolcha and sacks and boxes as store in Habro Woreda. There are high
postharvest losses due to improper harvesting, handling, packaging and poor facilities to
market. The result of the sample farmers survey shows that 34%, 25.4% and 20.2% of
tomato, potato and cabbage damaged before it reach to market (Table 14). Survey result
also shows that 43.8% of sample producers conduct sorting and grading of vegetables by
separating damaged and undamaged vegetables, cleaning and cutting when needed before
they take it to the market (Table 13). Means of transportation varies among Woredas but
predominately producers use pack animals and vehicles (Appendix Table 7).
Habro
Total
Variables
t-test
Mean
SD
Mean
SD
Mean
SD
Tomato (N=65)
34
15.5
34
15.5
Potato (N=71)
25.4
14.5
25.4
14.5
23
18.3
16.6
10.2
20.2
15.5
1.7*
Cabbage (N=66)
In Habro Woreda, most of producers transport their vegetables to the nearby markets.
However, in Kombolcha Woreda, traders also go to the farmers field and negotiate about
price, purchase it and eventually transport mostly potato product to urban markets. There
is significant difference between the two Woredas in market place use at 1% significant
level due to the difference in market access and vegetable types produced between the
Woredas (Appendix Table 8).
56
Collectors/Assemblers
These are traders in assembly markets who collect vegetables from farmers in village
markets and from farms for the purpose of reselling it to wholesalers and retailers. They
use their financial resources and their local knowledge to bulk vegetables from the
surrounding area. They play important role and they do know areas of surplus well.
Collectors are the key actors in the vegetable value chain, responsible for the trading of
33.5, 33 and 25.8 percents of tomato, potato and cabbage, respectively from production
areas to wholesale and retail markets in the study areas. The trading activities of collectors
include buying and assembling, repacking, sorting, transporting and selling to wholesale
markets.
Brokers/Middle Men
Brokers play an important role in linking farmers to market and other stakeholders of the
commodity chain while the ability of market accession of farmers is limited and market
demand requires an improvement in quantity amount as well as diversity of products type.
The brokers sometimes go beyond facilitation of transaction and tend to control and fix
prices, create price symmetry and make extra benefits from the process in addition to
convincing the producers to sale their vegetables at the prices set by wholesalers. More
over brokers are divided in to village level brokers, urban brokers and commission agents.
Village level brokers facilitate transaction by convincing farmers to sale his vegetables
and facilitating the process of searching good quality and quantity vegetables to traders
and urban brokers. Commission agents are brokers working for specific traders.
Wholesalers
Wholesalers are mainly involved in buying vegetables from collectors and producers in
larger volume than any other actors and supplying them to exporters, retailers and
consumers. They also store product, usually for a maximum of three days. Survey result
indicates that wholesale markets are the main assembly centers for vegetables in their
respective surrounding areas. They have better storage, transport and communication
access than other traders. Almost all wholesalers have a warehouse in a market either self
57
owned or rental basis. They are located in Melkarafu, Harar, Karakurikura and Gelmiso
market towns but the number of wholesalers in Melkarafu market are higher than all other
market towns.
Retailers
Retailer involvement in the chain includes buying of vegetables, transport to retail shops,
grading, displaying and selling to consumers. Retailers are key actors in vegetables value
chain in both Woredas. They are the last link between producers and consumers. They
mostly buy from wholesalers and sell to urban consumers. Sometimes they could also
directly buy from the producers. Consumers usually buy the product from retailers as they
offer according to requirement and purchasing power of the buyers. Retailers can be
divided in to urban and rural in the case of tomato in Habro Woreda because of the reason
that tomato is not traded in large scale. Rural retailers are based in village market and
mainly purchase tomato from farmers, and sell to consumers and urban retailers. Urban
retailers purchase from framers and rural retailers in village market and sale to urban
consumers.
Exporters
Exporters are identified in Melkarafu vegetables market and they are exporting their
vegetables to Somalia. Almost all vegetable types were exported to Somalia from
Melkarafu market. Vegetables are mostly exported by Somalian exporters who come to
Melkarafu market to buy vegetables.
Vegetable consumers
Consumers are those purchasing the products for consumption. About three types of
vegetable consumers were identified: households, restaurants and institutions which give
services such as higher education institutions, hospitals, etc. The private consumers are
employees, and urban and rural dwellers who purchase and consume vegetables with an
average income of Birr 18,905 and 17750 per annum and purchase vegetables by 24.4%
and 16.14% of their incomes in Kombolcha and Habro Woredas, respectively (Appendix
58
Table 9). Private consumers purchase vegetables directly from producers, retailers and
wholesalers though most of the consumers purchase from retailers. Farmers also make
important segment of the rural consumers since they consume part of their produces. The
survey result also showed that, on average, 8% of tomato, 13.88% of potato and 9.4% of
cabbage produced in 2011/12 were consumed by the producers. Institutions purchase their
product from wholesaler who has the capacity to supply sustainably based on contractual
agreements.
Consumers prefer medium, sphere shape, red color and strong tomato; medium size potato
with smooth skin and free from damage; and medium size and green cabbage. In general
consumers have their own quality criteria to purchase vegetables.
Such actors are those who provide supportive services including training and extension,
information, financial and research services. According to Martin et al. (2007), access to
information or knowledge, technology and finance determines the state of success of value
chain actors. OoARD, primary cooperatives, micro finance, NGOS and Haramaya
University are main supporting actors who play a central role in the provision of such
services.
DAs and OoARD were the main sources of vegetables training in both Woredas. The
survey result revealed that 67% and 84% of sample respondents participated in vegetable
training that were organized in the last three years in Kombolcha and Habro Woredas,
respectively (Table 15). The result shows that most of the trainings were given on fertilizer
application and the other trainings such as crop management, harvesting and post harvest
handling are given in composition. Trainings were not given on vegetables marketing and
seed preparation.
Regarding extension service, among the total sample farmers 81.44% have been taken
extension services on the vegetables value chain in Kombolcha Woreda and all of sample
59
respondents in Habro Woreda (Table 15). OoARD through its DA backed by the Woreda
subject matter specialists is the major actor who provides information and advisory service
on vegetable production and management practices (Appendix Table 10). Furthermore,
sample farmers indicated that they are getting information particularly of input availability
and price from primary cooperatives and kebele administration.
Variables
Training
Extension
Market
Information
Credit
Input access
problems
Items
Kombolcha
(N=97)
Habro (N=65)
Total (162)
Yes
65
67
55
84.62
120
74.03
No
32
33
10
15.38
42
25.97
Yes
79
81.44
65
100
144
88.89
No
18
18.56
18
11.11
Yes
52
53.61
35
53.85
87
53.70
No
45
46.39
30
46.15
75
46.30
Yes
6.19
27
41.54
33
20.37
No
91
93.81
38
58.46
129
79.63
Yes
82
84.54
65
100
147
90.74
No
15
15.46
15
9.26
2-test
6.28**
13.57***
0.001
29.98***
11.08***
Note: *** and ** are statistically significant at 1% and 5% probability level, respectively.
Source: Own computation from survey result, 2012
Financial services
In the study area, cooperatives, Oromia Credit and Saving Institution (OCSI) and
individual lenders have been identified as a potential source for credit both in kind or on a
cash basis. The survey result showed that only 6.2 and 41.5 percent of sample respondents
from Kombolcha and Habro Woredas, respectively took credit (Table 15). Most of the
respondents reasons for not participating in credit market were religious which is related
to taking or giving interest. Sources of credit for traders are also the same as producers
except some big traders get credit from banks.
60
With regard to credit source out of 33 sampled farmers who took credit, 22 farmers took
credit from OCSI, 5 farmers from service cooperatives, 3 from traders and relatives and
the remaining took credit from more than one sources (Appendix Table 11).
The dominant value chain actors play facilitation role. They determine the flow of
commodities and level of prices. In effect they govern the value chain and most other
chain actors subscribe to the rules set in the marketing process. The study result indicates
that the exporters and wholesalers assisted by the brokers are the key value chain
governors. Melkarafu market is heavily dependent on Somalia for vegetables export, and
therefore the vegetables value chains are highly influenced by the export to Somalia. In
most cases, the business relations between the various operational actors are of free market
exchange and uncoordinated. Due to the lack of a proper market information system and
minimal bargaining power, farmers are forced to sell their product at the price offered by
traders. Traders in Kombolcha Woreda usually refer to Somalia markets for price fixation
and in Habro Woreda price is fixed by wholesalers. There is no vertical linkage between
value chain actors but there is horizontal linkage between traders. In some cases, there are
conflicts among the traders regarding payment and failure to keep their commitment.
Overall, the governance of the vegetables value chain is buyer driven with minimum trust
between various actors. Traders are always complaining that the farmers are not providing
quality product while farmers are blaming the traders for offering low prices. The
smallholder farmers are not organized and are not governing the value chain. Hence, they
are price takers and hardly negotiate the price due to fear of post harvest loss, in case the
product is not sold. The value chain governance is similar both in the Kombolcha and
Habro Woredas.
61
their final consumption destination (Kotler and Armstrong, 2003). The analysis of
marketing channels is intended to provide a systematic knowledge of the flow of the goods
and services from their origin (producer) to the final destination (consumer). Since the
channels to different vegetables were different the analysis was done on tomato, potato
and cabbage, majorly produced vegetables in the study area.
Nine main alternative channels were identified for tomato marketing. It was estimated that
3062.8 qts of tomato were marketed in Gelemiso, Wachu, Harar, Karakurikura and
Melkarafu markets in 2011/12. From the total quantity marketed 911.6 qts of tomato are
supplied by sample respondents. The main marketing channels identified from the point of
production until the product reaches the final consumer through different intermediaries
were depicted in Figure 4.
As can be understood from Figure 4 the main receivers from producers were collectors,
rural retailers and consumers with an estimated percentage share of 33.48%, 29.03% and
17.24%, respectively. On top of this, channel comparison was made based on volume that
passed through each channel. Accordingly, the channel of producer collector
wholesalerurban retailer consumer carry on the largest followed by producer
consumer; and producer rural retailers urban retailer consumer that carry a volume
of 235.73Qt, 157.16Qt and 155.34Qt in that order.
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
62
Producers (911.6Qts)
29.03%
17.24%
12.19%
8.06%
Collectors
Rural
Retailers
41.3%
33.48%
91.08%
Wholesalers
58.7%
84.8%
Urban
15.2%
8.92%
Retailers
100%
Consumers
Figure 3: Tomato market channel
Figure 4. Tomato market channel
Source: Own sketch from survey result, 2012
Seven main alternative channels were identified for potato marketing. It was estimated that
149,219.2qts of potato were marketed in Melkarafu, Harar, Karakurikura, Wachu and
Gelemso markets in 2011/12. From the total quantity marketed 1207qts of potato are
supplied by sample respondents. From the quantity supplied by sample farmers around
15.4 qts traded outside the Woreda market and the remaining quantities flow through the
identified channel to consumers and exporters. The main marketing channels identified
from the point of production until the product reaches the final consumer through different
intermediaries were depicted in Figure 5.
As can be understood from figure 5 the main receivers from producers were collectors and
wholesalers with an estimated percentage share of 32.95% and 52.2%, respectively.
According to volume of potato passed to different channels, the channel of producer
wholesaler exporter carry the largest volume followed by producer collector
63
wholesaler exporter; and producer retailer consumer that carry a volume of 614.3qts,
315.6qts and 112.3qts in that order.
I.
II.
III.
IV.
ProducersWholesalersRetailersConsumers (6.3Qts)
V.
VI.
VII.
ProducersCollectorsRetailersConsumers (74Qts)
ProducersCollectorsWholesalersExporters (315.6Qts)
ProducersCollectorsWholesalersRetailersConsumers (3.2Qts)
Producers (1207Qts)
5.55%
9.3%
52.2%
32.95%
Collectors
1.5%
Wholesalers
18.6%
1%
Retailers
100%
Consumers
97.5%
Exporters
Figure 5. Potato market channel
Source: Own sketch from survey result, 2012
64
81.4%
Nine main alternative channels were identified for cabbage marketing. It was estimated
that 73,455.2qts of cabbage were marketed in Melkarafu, Harar, Karakurikura, Wachu and
Gelemso market in 2011/12. From the total quantity marketed 1330.5qts of cabbage was
supplied by sample farmers. From the total quantity around 27.87qts traded outside the
Woreda market and the remaining quantities flow through the identified channels to
consumers and exporters. The main marketing channels identified from the point of
production until the product reaches the final consumers through different intermediaries
were depicted in Figure 6.
As can be understood from Figure 6 the main receivers from producers were collectors,
wholesalers and retailers with an estimated percentage share of 25.8%, 31.6% and 29.4%,
respectively. According to volume of cabbage passed to different channels, the channel of
producer retailer consumer carry the largest volume followed by producer wholesaler
exporter; and producer consumer that carry a volume of 390.6qts, 265.2qts and
176.16qts in that order.
I.
II.
III.
ProducersWholesalersConsumers (37.89Qts)
IV.
V.
VI.
VII.
ProducersWholesalersRetailersConsumers (101.87Qts)
ProducersCollectorsRetailersConsumers (84.31Qts)
ProducersCollectorsWholesalersConsumers (23.26Qts)
ProducersCollectorsWholesalersRetailersConsumers (62.54Qts)
65
Producers (1330.5Qt)
13.24%
29.36%
31.64%
25.76%
75.4%
3.8%
Wholesalers
24.2%
Retailer
100%
9%
63%
Consumers
24.6%
Collectors
Exporters
Figure 6. Cabbage market channel
Source: Own sketch from survey result, 2012
The distribution of costs and gross income at different levels is important in the business
of vegetables. Being highly bio-degradable, fresh vegetables require greater attention
during harvesting, packaging and transporting from the point of production to the final
66
market. The marketing cost of the vegetables mainly involves the cost of post-harvest
activities incurred before reaching the consumer. This includes cost of harvesting and
packaging (material and labor costs), handling (sorting, cleaning, grading, loading, and
unloading), and transportation and tax costs. Generally, these components constitute a
large share in the total margin between the final retailer price and the cost of production.
The margin calculation is done to show the distribution throughout the various actors as
vegetables move from production to collectors, wholesalers, retail markets, and finally to
consumers.
Marketing margin can be used to measure the share of the final selling price that is
captured by a particular agent in the value chain. The relative size of various market
participants gross margins can indicate where in the marketing chain value is added
and/or profits are made. In order to calculate the marketing margin of an agent, the
average price of vegetables for that particular agent was taken. For instance, the buying
price of consumers was obtained by taking the average purchasing price of consumers. In
order to measure the market share of each agent, the marketing channel where all agents
have participated was selected. Marketing margins, associated costs and benefit share of
value chain actors and marketing margins through different main channels was presented
bellow.
Table 16 indicates different types of marketing cost related to the transaction of tomato by
collectors, wholesalers, rural retailers and urban retailers; and the benefit share of each
marketing actors. The arrangement of marketing cost revealed that perishability loss is the
highest cost for each marketing agents. This is due to the perishable nature of tomato.
Thus, the cost of loss is the highest amount followed by packing material cost and
transportation cost.
67
Produc
ers
Collec
tors
Whole
salers
Rural
Retailers
Urban
Retailers
Horizontal
Sum
Purchase Prices
450
540
550
650
2190
Production cost
261.20
261.20
6.50
6.50
38
14.20
21
10
18
12.50
75.70
Loss
35
25
21.50
27
32.50
141
Overhead cost
4.45
4.55
11.30
21.50
43.80
Packing material
25
25
25
25
25
125
1.67
1.67
7.34
85.20
85.45
71.05
89.47
99.67
430.84
Total cost
346.40
85.45
71.05
89.47
99.67
692.04
Sale Prices
476.7
662.50
750
775
900
3564.2
Market margin
215.5
212.5
210
225
250
1113
% share of margin
19.4
19.1
18.9
20.2
22.5
100
Profit margin
130.3
127.05
138.95
135.53
150.33
682.16
19.9
22
100
Marketing cost
Labor
Transport
Tax
% share of profit
19.1
18.6
20.4
Source: Own computation from survey result, 2012
Each of the tomato value chain actors adds value to the product as the product passes from
one actor to another. In a way, the actors change the form of the product through
improving the grade by sorting, cleaning or washing or create space and time utility.
Compared to farmers, traders (collectors, wholesalers and retailers) operating expense is
half (50%) but their profit margin is more than three fourth of that of farmers. That means
by simply buying from the farmers and selling to consumers, traders took above 80% of
the total profit margin. While farmers, doing all the work of producing tomato and bearing
the associated risks, took only 19.4% of the profit margin. This disproportionate share of
benefits is the reflection of power relationship among actors. Tomato producers added
19.4% of the total value of tomato in the woreda. Collectors, wholesalers, rural retailers
68
and urban retailers are responsible for 18.6%, 20.4%, 19.9% and 22%, respectively. The
price change from producers price to consumer price is 88.8%.
Marketing margins of tomato in the nine channels for each group of market players are
given below in Table 17. GMMp, GMMc, GMMrr, GMMur and GMMw are gross
marketing margins of producers, collectors, rural retailers, urban retailers and wholesalers,
respectively. NMMc, NMMrr, NMMur and NMMw are net marketing margins of
collectors, rural retailers, urban retailers and wholesalers, respectively.
II
III
IV
VI
VII
VIII
IX
TGMM
47.1
46.7
50
50
40
46.7
43.7
50
GMMp
100
52.9
53.3
50
50
60
53.3
56.3
50
GMMc
27.8
18.7
16.7
GMMrr
47
27.8
GMMur
46.7
22.2
22.2
22.2
22.2
GMMw
40
24.4
25
11.1
NMMc
18.3
8.1
7.2
NMMrr
36.5
17.8
NMMur
35.6
11.1
12.9
14.3
14.2
NMMw
31
16.4
19.7
6.4
The total gross marketing margin (TGMM) is the highest in channel IV, V and IX which is
about 50 %. Rural retailers, urban retailers and wholesalers have got the highest gross
marketing margin in channel II, III and VI, respectively whereas wholesalers have got the
lowest marketing margin in channel IX.
Without considering channel I (producers sell directly to consumer) producers share
(GMMp) is highest (60%) from the total consumers price in channel VI and lowest in
69
channel IV, V and IX (50%) because of the involvement of collectors and rural retailers in
this channel that purchase relatively at a lower price from producers in their locality.
NMM are somewhat high in channel II, III and VI as the rural retailers, urban retailers and
wholesalers directly purchase from producer and sell it to the end buyers who are
consumers.
Collectors
Wholesalers
Retailers
Horizontal
Sum
Purchase Prices
362.50
458.33
522.33
1343.16
Production cost
277.46
Item (Birr/Qt)
277.46
Marketing cost
Labor
11.80
10.50
12.33
7.47
42.1
Transport
14.60
19
14.25
12.50
60.35
Loss
22.70
16.50
9.75
19.50
68.44
2.63
5.80
19.60
31.03
8.50
8.50
8.50
8.50
34
1.67
5.67
60.6
59.13
52.63
69.24
241.6
Total cost
338.06
59.13
52.63
69.24
519.06
Sale Prices
380
533.50
633.33
800
2346.83
102.54
171
175
277.67
726.21
% share of margin
14.2
23.5
24.1
38.2
100
Profit margin
41.94
111.87
105.76
208.43
468
22.6
44.5
100
Overhead cost
Packing material
Tax
Total marketing cost
Market margin
% share of profit
9
23.9
Source: Own computation from survey result, 2012
70
Table 18 indicates different types of marketing cost and margin related to the transaction
of potato by producers, collectors, wholesalers and retailers with the same cost
arrangement as tomato value chain. Potato value chain in Kombolcha Woreda has the
same value adding behavior as tomato value chain in Habro Woreda. Farmers in potato
value chain gets lower profit margin relative to tomato value chain. Compared to farmers,
traders (collectors, wholesalers and retailers) operating expense is almost one third
(34.9%) but their profit margin is more than nine tenth of that of farmers. That means by
simply buying from the farmers and selling to consumers, traders took 91% of the total
profit margin. While farmers, doing all the work of producing potato and bearing the
associated risks, took only 9% of the profit margin. Collectors, wholesalers, and retailers
are responsible for 23.9%, 22.6% and 44.5%, respectively. The price change from
producers price to consumer price is 110.5%.
Marketing margins of potato in the seven channels for each group of market players are
given in Table 19. GMMp, GMMc, GMMr and GMMw are gross marketing margins of
producers, collectors, retailers and wholesalers, respectively. NMMc, NMMr and NMMw
are net marketing margins of collectors, retailers and wholesalers, respectively.
II
III
IV
VI
VII
TGMM
62.5
46.4
53.1
62.5
57.1
62.5
GMMp
100
37.5
53.6
46.9
37.5
42.9
37.5
GMMc
33.4
28.6
25
GMMr
62.5
25
29.1
GMMw
46.4
28.1
28.6
12.5
NMMc
29.9
24.6
19.9
NMMr
55
19.8
21.2
NMMw
45.1
26.9
27.2
11.3
71
The total gross marketing margin (TGMM) is the highest in channel II, V and VII which is
about 62.5 %. Collectors, retailers and wholesalers have got the highest gross marketing
margin in channel V, II and III, respectively whereas wholesalers have got the lowest
marketing margin in channel VII.
Without considering channel I (producers sell directly to consumer) producers share
(GMMp) is highest (53.6%) from the total consumers price in channel III and lowest in
channel II, V and VII (37.5%) because of the involvement of middlemen in these channels
that purchase relatively at a lower price from producers in their locality. NMM are
somewhat high in channel II and III as the wholesalers and retailers directly purchase from
producers and sell it to the end market i.e. consumer or exporter .
Table 20 indicates different types of marketing cost and margins related to the transaction
of cabbage by cabbage producers, collectors, wholesalers and retailers where the
arrangement of costs are the same with tomato and potato value chain. Cabbage value
chain has the same value adding behavior as the other vegetables. Farmers in cabbage
value chain gets higher profit margin relative to tomato and potato value chain. Compared
to farmers, traders (collectors, wholesalers and retailers) operating expense is less than
half (45.5%) but their profit margin is more than half of that of farmers. That means by
simply buying from the farmers and selling to consumers, traders took 57.4% of the total
profit margin. While farmers, doing all the work of producing cabbage and bearing the
associated risks, took 42.6% of the profit margin. Collectors, wholesalers and retailers are
responsible for 16.7%, 15.7% and 25%, respectively. The price change from producers
price to consumer price is 71.4% which is lower relative to other vegetables.
72
Producers
Collectors
Wholesalers
Retailers
sum
Purchase Prices
337.50
425
450
1212.5
Production cost
142
142
10.60
10.50
12.33
7.67
41.1
Transport
17
14
11
7.25
49.25
Loss
31
22
14.75
27.50
95.25
Overhead cost
1.55
0.8
16.6
21.95
8.50
8.50
8.50
8.50
34
1.67
5.67
70.10
58.55
49.38
69.19
247.22
Total cost
212.10
58.55
49.38
69.19
389.22
Sale Prices
350
450
525
600
1925
Market margin
208
112.50
100
150
570.5
% share of margin
36.5
19.7
17.5
26.3
100
137.90
53.95
50.63
80.81
323.29
15.7
25
100
Marketing cost
Labor
Packing material
Tax
Profit margin
% share of profit
42.6
16.7
Source: Own computation from survey result, 2012
Marketing margins of cabbage in the nine channels for each group of market player are
shown below Table 21. GMMp, GMMc, GMMr and GMMw are gross marketing margins
of producers, collectors, retailers and wholesalers, respectively. NMMc, NMMr and
NMMw are net marketing margins of collectors, retailers and wholesalers, respectively.
73
II
III
IV
VI
VII
VIII
IX
TGMM
37.5
36.4
36.4
41.7
45.8
40.9
45.8
45.8
GMMp
100
62.5
63.6
63.6
58.3
54.2
59.1
54.2
54.2
GMMc
25
18.2
16.7
16.7
GMMr
37.5
16.7
20.8
16.7
GMMw
45.4
36.4
25
22.7
29.2
12.5
NMMc
16
8.3
7.6
7.6
NMMr
25.5
4.6
8.8
4.6
12.8
20.1
3.4
26.5
NMMw
35.6
15.9
Source: Own computation from survey result, 2012
The total gross marketing margin (TGMM) is the highest in channel VI, VIII and IX
which is about 45.8%. Retailers and wholesalers have got the highest gross marketing
margin in channel II and III, respectively whereas wholesalers have got the lowest
marketing margin in channel IX.
Without considering channel I (producers sell directly to consumer) producers share
(GMMp) is highest (63.6%) from the total consumers price in channel II, III and IV, and
lowest in channel VI, VIII and IX (54.2%) because of the involvement of middlemen in
these channels that purchase relatively at a lower price from producers in their locality.
NMM are somewhat high in channel II and III as the retailers and wholesalers directly
purchase from producer and sell it to the end market i.e. consumer or exporter.
Vegetables are produced for market and consumption and are important cash crops in
Habro and Kombolcha Woredas. According to the result of this study, all sample
households are good suppliers of the vegetables to the market. Analysis of factors
affecting farm level marketable supply of vegetables was found to be important to identify
74
factors constraining vegetables supply to market. The analysis was done separately. The
numbers of tomato, potato and cabbage producing farmers were 65, 71 and 66,
respectively. Multiple linear regression models were employed to identify the factors. For
the parameter estimates to be efficient, unbiased and consistent assumptions of Classical
Linear Regression (CLR) model should hold true. Hence, multicolliniarity, endogeniety
and heteroscedasticity detection test were performed using appropriate test statistics.
The command robust (in Stata) was used to correct for heteroscedasticity. There is no
multicollinearity problem since VIF results are less than 10 (Appendix Table 1).
Endogeniety test results show that quantity of potato produced is endogenous variable for
potato supply to the market (F=10.1(p=0.002)) and there is no endogeneity problem for
cabbage (F=0.46(p=0.50)) and tomato (F=0.66(p=0.42)) supply to the market. The reason
for the existent of endogeneity problem in the case of potato is may be the usage of potato
for household consumption more than any other vegetables. This problem can be
overcome by using two stages least square (2SLS) method for potato market supply.
75
Coef.
Robust Std.Err.
P>|t|
1.190***
0.337
3.53
0.001
Land
.306
0.260
1.18
0.243
HEduc
.276
2.026
0.14
0.892
TLU
-.016
0.674
-0.02
0.981
AExte
-16.765***
5.010
-3.35
0.001
Family
.110
0.563
0.19
0.846
Credit
2.983
4.224
0.71
0.483
NOFI
3.213
2.889
1.11
0.271
MInfo
5.540**
2.543
2.18
0.034
DMkt
-.176
2.718
-0.06
0.949
Sex
4.070*
2.267
1.8
0.078
Age
.164*
0.097
1.69
0.097
QFertIV
.225**
0.110
2.05
0.045
_cons
10.487*
5.730
1.83
0.072
VFExp
R2
60.27
8.5***
71
Note: Dependent variable is amount of potato produced in quintal. ***, ** and * are
statistically significant at 1%, 5% and 10%, respectively. QFert is an instrument for
quantity of potato produced.
Source: Own computation from survey result, 2012
Vegetable Farming Experience (VFExp): It affects potato market supply positively and
significantly at less than 10% significance level. The result suggests that as farmers have
high potato production experience the amount of potato supplied to the market increased
through its effect on potato production in the first stage (Table 22). Thus, the result
implied that, as farmers experience increased by a year, potato supplied to market
increased by 0.57qt. This is in line with Abay (2007) who illustrated as farmers
experience increased the volume of tomato supplied to the market increased.
76
Vari
able
Potato
Cabbage
Tomato
Coef.
Std.
Err.
Coef.
Std.
Err.
Coef.
Std.
Err.
QPron
.470***
0.208
2.25
.973***
0.005
201.64
.756***
0.055
13.72
VFExp
.569*
0.319
1.79
.015
0.043
0.35
.094
0.178
0.53
Land
.203
0.125
.004
0.050
0.12
.096
0.163
0.59
HEduc
-.184
0.888
.255
0.384
0.66
-.560
0.782
-0.72
Woreda
1.62
0.21
-
-3.001***
0.811
-3.7
.137
0.342
-.051
0.105
-0.49
-.115
0.206
-0.56
AExte
-7.889**
3.883
.366
0.533
0.69
Family
.215
0.254
0.4
2.03
0.85
.100
0.081
1.24
.075
0.166
0.45
Credit
3.109
1.969
1.58
-.010
0.456
-0.02
.424
0.680
0.62
NOFI
.140
2.039
0.07
.822**
0.349
2.35
-.615
1.057
-0.58
MInfo
3.075**
1.570
-.354
0.510
-0.69
2.360***
0.704
3.35
DMkt
-1.234
1.255
-.243**
0.363
-2.67
.493
0.520
0.95
Sex
1.425
1.582
1.96
0.98
0.9
-.238
0.358
-0.66
1.597
1.410
1.13
Age
.051
0.039
1.3
-.012
0.026
-0.47
.027
0.045
0.61
_cons
4.284
3.954
1.08
.027
0.862
0.03
-5.838***
1.938
-3.01
TLU
R2
F/Chi2
N
88.04
99.81
88.81
360.41***
5304.4***
35.96***
71
66
65
Note: Dependent variables are amount of tomato, potato and cabbage sold in quintal. ***,
** and * are statistically significant at 1%, 5% and 10%, respectively. Std.Err is robust.
Access to extension and Woreda dummy was excluded from tomato and potato supply
model result due to multicollinearity.
Source: Own computation from survey result, 2012
77
market information reduces farmers risk aversion behavior of getting a market and
decreases marketing costs of farmers that affects the marketable surplus. The implication
is that obtaining and verifying information helps to supply more quantity of vegetables.
This is in line with Mohammed (2011) who illustrated access to market information by
farming households increase marketable supply of teff significantly in Halaba especial
Woreda.
Distance from the Nearest Market (DMkt): It affects cabbage marketable surplus
negatively and significantly at less than 5% significance level as expected. The result
shows that as the distance from the nearest market increased by one feet hour the quantity
of cabbage supplied to the market decreased by 0.24qts. This is may be due to the reason
that as the distance to the market center increases transportation cost increases; since
cabbage is highly perishable and bulky product its loss and other marketing costs
increased. This is in line with Ayelech (2011) who indicated that distance to market
caused market surplus of avocado to decline in Gomma Woreda.
Access to Extension Service (AExte): It was negatively and significantly associated with
potato sale volume at less than 5% significant level. The result shows that on average, if
potato producer gets extension service the amount of potato supplied to the market
decreased by 7.9qts. The possible reason for the negative sign may be is due to the
negative effect of extension on potato production in the first stage (Table 22). Therefore,
extension service given to the farmers reduces potato quantity produced and this in turn
reduces potato supplied to the market.
78
Non/Off Farm Income (NOFI): It influences volume of cabbage supply significantly and
positively at less than 5% significance level. This is because most of non/off farm
activities that are farmers participating in are pity cash trading and productive safety net
programs (PSNP). Farmers participating in pity cash trading were business oriented
farmers and they produce vegetables completely for market and farmers participated in
PSNP obtained agricultural inputs as gifts and have better cabbage productivity than
others. The result showed that if cabbage producers have non/off farm income, cabbage
supply increased by 0.82qt compared to farmers who do not have non/off farm income.
Quantity Produced (QPron): As hypothesized, the regression result shows that quantity
produced significantly affected potato, cabbage and tomato quantity supplied to the market
at 1% significance level. The result also implied that, a quintal increase in the quantity of
potato, cabbage and tomato production has caused an increase of 0.47, 0.97 and 0.77qt of
marketable potato, cabbage and tomato. This is in line with Abay (2007); Adugna (2009)
and Ayelech (2011) who illustrated an increase of tomato, mango, avocado and papaya
production by farming households has augmented marketable supply of the commodities
significantly.
4.4.2. Determinants of vegetable market outlet choices
The MNL model as specified in section 3.4.2.2 with three choices, was tested for the
independence of irrelevant alternatives (IIA) assumption based on Hausman test
(Appendix Table 2). The hypothesis that all the coefficients except the constant are zero is
rejected at 1 percent level based on the Wald test. The model explained 41.4% of the
variation in market choice among vegetables producing farmers. The possible
heteroscedasticity and multicolleaniarity problems are also corrected. The command
robust (in Stata) was used to correct for heteroscedasticity. There is no multicolleaniarity
problem because the result of VIF is less than 10 for all variables (Appendix Table 1).
Table 24 below presents the coefficients from multinomial logit regression on the existing
alternative marketing outlets in the sample and the marginal effects. According to Green
(2012), the coefficient values measures the expected change in the logit for a unit change
in the corresponding independent variable, other independent variables being equal. The
79
sign of the coefficient shows the direction of influence of the variable on the logit. It
follows that a positive value indicates an increase in the likelihood that a household will
change to the alternative option from the baseline group. The result showed that some of
the variables were significant at both market outlets while some others were significant in
one marketing outlet but not in the other outlet. Compared to the base category
(wholesalers) access to extension service, post harvest handling, owning transport facility
and membership to any cooperative determined the selection of collector as market
options while the variables access to extension service, educational level of household
head, owning transport facility and woreda dummy affected the choice of retail outlet.
The results of the estimated marginal effects are discussed in terms of the significance and
signs on the parameters. The positive estimated coefficients of a variable indicates that the
probability of the producers being in either supplying to collector market outlet or retailer
market outlet relative to supplying to wholesaler market outlet increases as these
explanatory variables increase. The implication is that the probability of the producers to
be on these outcomes is greater than the probability of being wholesaler outlet (the base
category). The negative and significant parameter indicates the probability of using
wholesale outlet is higher than the probability of being in the two alternatives. Estimates
not significantly different from zero indicate that the explanatory variable concerned does
not affect the probability of the producers decision to use wholesaler outlet category than
in the other two categories. The result of the MNL and marginal effects and their possible
explanations are presented below.
The alternative wholesaler was used as a base category (bench mark alternative). This
implies that the discussion of the results focuses on the impact of the explanatory variables
on a use of collectors and retailers category relative to use of wholesalers (the base
category).
80
Table 24. Coefficients and marginal effects of Multinomial Logit Model for the choice of marketing outlets
Collectors
Variables
Retailers
Robust
Std.Err.
-.212
.724
-0.29
VAdd
-1.485***
.537
HEduc
.473
AExte
Collectors
Retailers
Robust
Std.Err.
dy/dx
Robust
Std.Err.
dy/dx
Robust
Std.Err.
6.483***
1.073
6.04
-.331
.074
-4.45
.860
.048
18.06
-2.77
.061
.658
0.09
-.305
.094
-3.24
.058
.065
0.89
.480
0.99
-1.162*
.668
-1.74
.144
.101
1.43
-.139
.083
-1.67
-1.585**
.746
-2.12
-3.780**
1.511
-2.50
.043
.166
0.26
-.558
.253
-2.21
NOFI
-.683
.663
-1.03
-.337
.885
-0.38
-.124
.117
-1.06
-.013
.085
-0.15
MInfo
.728
.503
1.45
-.844
.638
-1.32
.185
.098
1.89
-.117
.090
-1.30
Credit
-.189
.772
-0.24
-.777
.714
-1.09
-.017
.160
-0.11
-.062
.059
-1.06
OTran
-.834*
.478
-1.75
1.023*
.607
1.68
-.140
.099
-1.41
.072
.069
1.05
AEqu
-.131
.132
-0.99
-.183
.140
-1.31
-.021
.027
-0.80
-.014
.012
-1.15
-1.402**
.650
-2.16
-.492
.692
-0.71
-.234
.095
-2.47
-.011
.065
-0.17
DMkt
.547
.435
1.26
-.711
.553
-1.29
.144
.087
1.66
-.093
.066
-1.41
Sex
-.134
.867
-0.15
1.489
1.356
1.10
-.065
.196
-0.33
.098
.062
1.56
Age
.031
.032
0.97
.047
.037
1.27
.005
.006
0.80
.004
.003
1.16
_cons
.096
1.409
0.07
-1.629
1.936
-0.84
Woreda
MCoop
Coef.
Coef.
Wholesale outlet is base outcome. dy/dx is marginal effect. N=162, LR 2 (30) = 92.5***, Pseudo R2=0. 41. Log likelihood = -103.75. ***,
**and * are statistically significant at 1%, 5% and 10%, respectively.
Source: Own computation from survey result, 2012
81
Access to Extension Service (AExte): The variable was negatively and significantly
associated with use of collector and retailer outlets at less than 5% significance level.
Other things being equal, the likelihood of using collector and retailer outlet would be
lower by 4.3% and 55.8%, respectively for households having extension access relative to
using wholesale outlet. Farmers access to extension service increased the ability of
farmers to acquire important market information as well as other related agricultural
information which in turn increases farmers ability to choose the best market outlets for
its product. This result is in line with Mamo and Degnet (2012) who found agricultural
extension services in the form of visit of farmers by extension officers tended to increase
the probability of selling directly to consumers in livestock market channel choice of
farmers in Ethiopia.
Owning Transport Facility (OTran): This variable influenced the choice of collector
outlet negatively and significantly; and choice of retailer outlet positively and significantly
at 10 % significance level. Ownership of transport facilities by farmers decreased the
probability of choosing collectors outlet by 14% and increase the probability of choosing
retailer outlet by 7.2% compared to base category. This might be due to the reason that,
farmers who have transport facility could supply their product to local market center and
sell to wholesalers or retailers directly by getting better price which might go to the
collectors. This shows that the availability of transportation facilities helps reduce long
market distance constraint, offering greater depth in marketing choices.
Woreda Dummy (Woreda): Woreda dummy was positively and significantly related
with retailer outlet at 1% significance level. As the Woreda becomes Habro, the
probability of choosing retail outlet increased by 86% compared to the base category.
These shows the interference of intermediate traders was low in Habro Woreda compared
to Kombolcha Woreda. The reason may be is the most dominantly produced vegetable in
Habro Woreda is tomato and traders are not participated in tomato market compared to
other vegetables. This forced tomato producers to sell to retailers in the market.
Post Harvest Value Addition (VAdd): It was negatively and significant related with
collector market outlet at less than 1% significance level. Farmers who have practiced
better postharvest handling chooses wholesaler market outlet relative to collector outlet.
82
The result shows that as farmers practice value adding activities the probability of
choosing collector outlet decreased by 30.5% compared to base category. The most
probable reason might be is related to the quality of the product i.e. wholesalers seek
better quality vegetables to sell to exporters or to get better market and they have better
relationship with those farmers supplying better quality product.
83
There are factors that hinder the production of vegetables products in the study area. The
majority of the sample producers indicated seed shortage, pesticide shortage, diseases,
insects, drought and frost as major constraints of vegetables production. The major
constraints of vegetables production are discussed below in Table 25.
Potato (N=71)
Lack of pesticides
11.54
20
28.17
10
17.86
Lack of seed
11
21.15
18
25.35
12
21.43
Diseases
17
32.69
19
26.76
16
28.57
Insects
10
19.23
7.04
13
23.21
Drought
5.77
8.45
5.36
Frost
9.79
4.23
3.57
Major constraints
Cabbage (N=56)
The most important physical inputs for vegetable production are improved seeds,
fertilizers, pesticide/herbicides and irrigation water. Research and extension services,
information and appropriate technological support are non-physical inputs that are equally
important for higher yields. Among the total sample of respondents, 90.7% replied limited
access and supply of inputs as their production problem (Table 15). This is caused mainly
due to absence of vegetable seed multiplying and distributing agency, shortage of supply,
high input price, inappropriate delivery mechanisms and delayed supply. Delay in input
supply happened because of prolonged chain of input supply especially for improved
seeds and chemical fertilizers.
84
This was directly related to agricultural input access problem. Unavailability of pesticide
and herbicides mainly create these problems in addition to the problem of accessing to
improved and diseases resistance seeds. This shows most farmers are using poor quality
seeds, as high quality seeds are often not available at planting time and are expensive. The
other reason for this problem is the problem of management skill. Inadequate farmer skills
and knowledge on production and farm management creates such problems. This is mainly
related with poor extension service in the areas.
Natural factors
Natural factors such as drought, frosts, rainfall, water supply and flood are often beyond
the control of farmers and institutions. Despite the availability of irrigation water for some
respondents, the utilization is traditional leading to inefficient water use.
Availability of irrigation water, its effect in generating income in short period, its better
productivity in small land, its use as cash income source or livelihood consumption,
increasing price and its continuous demand in the market were some of the opportunities
of vegetables by most of the producers. The survey result shows that 92.6% of the
producers intend to expand vegetables production due to the above opportunities
(Appendix Table 12).
The Woredas are also naturally endowed though they have some production and
marketing constraints. Some of the potentials to mention are the following. The Woredas
are very suitable to produce not only vegetable products but also other market oriented
commodities of cereal, pulses and/or animal production. Of the potential crops, tropical
fruits like papaya, mango, banana, orange and avocado; and cereals like sesame, teff,
sorghum, maize, rice and improved local animals for milk and meat production are some
of the available potentials. On top of this, relatively fertile arable land and abundant
underground water potential are some to mention.
85
Almost all vegetable producer farmers responded that there were market problems in their
area (Table 26). The major vegetable marketing constraints are related with nonavailability of market/limited access to market, low price of product, lack of storage, lack
of transport, low quality product that cannot meet consumers demand and perishability.
Again all traders engage in vegetables value chain confirmed that there is marketing
problems in vegetable value chain. The major vegetable marketing constraints mentioned
by traders are related with the limited power of price setting, the problem of supply
shortage, lack of storage facility, problem in information flow, low product quality and
lack of support from concerned bodies (Appendix Table 13). Traders also mention that the
main cause of these problems are high monopolistic power of wholesalers, high travel
distance of export to Somalia, lack of processing and long chain condition of the market.
In addition, data from key informant interview showed that the absence of policy
instrument that governs Ethio-Somalia market route is serious vegetable marketing
problem. Exporters buy the products at farm gate prices and directly sell to end consumers
and consumers in the end market pays very high price to the products, for instance,
exporters bought potato at 6 birr/kg from Melkarafu market and sell at minimum of 30
birr/kg in Somalia market. Exporters also do not secure all these high margins because of
illegal actors through transportation of long journey to Somalia and high perishability
86
losses. This shows that there are high losses in between due to lack of appropriate policy
instruments.
Potato(N=71)
Cabbage(N=56)
Lack of Market
15.69
13
18.31
15
26.79
20
39.22
32
45.07
24
42.86
Lack of storage
13
25.49
13
18.31
7.14
Lack of transport
5.88
12.68
12.5
7.84
1.41
3.57
Perishability
5.88
4.22
7.14
On the other hand, availability of market demand throughout the year, growing number of
buyers, high experience in vegetables trade and growing price were some of the
opportunities of vegetables by most of the producers. The survey result shows that 85.2%
of the producers intended to expand vegetables sale due to the above opportunities
(Appendix Table 12).The natural proximity to market and being found on export center to
Somalia and the main road to Harar and bordering to Somali National Regional State are
the opportunities that enhance level of commercialization to Kombolcha woreda. Habro
woreda also have better market access to Addis Ababa and Chiro town which is the capital
city of West Hararghe zone.
87
This study was aimed at analyzing value chain of vegetables in Habro and Kombolcha
Woredas of Oromia region. The specific objectives of the study include identifying
vegetable value chain and examining the performance of actors in the chain; analyzing the
determinants of vegetable supply to the market in the study area; and identifying
marketing channels and factors affecting outlet choice decisions of farm households. The
data were generated from both primary and secondary sources. The primary data were
collected from individual interview using pre-tested semi-structured questionnaire and
checklist. The primary data for this study were collected from 162 randomly selected
households from Habro and Kombolcha Woredas, 37 traders from Melkarafu, Harar,
Gelemiso, Karakurikura and Wachu markets; and from 30 consumers. The analysis was
made using descriptive statistics and econometric model using SPSS and STATA
software. All the sampled households were vegetable producers. Market outlet choice
decision and marketable surplus of vegetables are found to be important elements in the
study of vegetable value chain. Therefore, in identifying determinants that affect the
marketable surplus of vegetables, a multiple regression model was used in the study and
multinomial logit model (MNL) was applied to analyze factors affecting market outlet
choice of farmers for selling vegetables in the study areas. The findings of this study are
summarized as follows.
Of the 162-interviewed vegetable producing households, 93.9% were male headed and the
rest 6.1% were female headed households in Habro Woreda and 91.8% were male headed
and the rest 8.2% were female headed households in Kombolcha Woreda. The average
ages of the sampled respondents were 38.5 and 34.6 years in Habro and Kombolcha
Woredas, respectively. The average family size was 6.7 and 5.4 in Habro and Kombolcha
Woredas, respectively.
Vegetable value chain analysis of the study areas revealed that the main value chain actors
are input suppliers, vegetable producing farmers, wholesalers, retailers, collectors,
exporters and consumers. Vegetable producers, OoARD, primary cooperatives, private
88
pesticides/ herbicide suppliers, Harmaya University and World Vision Ethiopia were the
main actors involved in the production and input supply activities. Collectors were
engaged in purchasing vegetables from remote areas and sell at town markets to
wholesalers. Wholesalers purchase vegetables from farmers and collectors and sell to
retailers, exporters and consumers. Retailers purchase vegetables from producers,
collectors and wholesalers and sell to consumers. There are also governmental and
nongovernmental supportive actors who support vegetable value chain directly or
indirectly. Value chain supporters or enablers provide facilitation tasks like creating
awareness, facilitating joint strategy building and action and, the coordination of support.
The main supporters of the vegetable value chain in the study areas are office of
agricultural and rural development (OoARD), Office of trade and industry (OoTI),
Woreda administrations, Oromia saving and credit institution, Haramaya university,
informal credit suppliers and banks.
Constraints hindering the development of vegetable value chain are found in all the stages
of the chain. At the farm-level, vegetable producers are faced with lack of modern input
supply and high postharvest losses. On marketing side, limited access to market, low price
of product, lack of storage, lack of transport, low quality of product and lack of policy
framework to control the illegal Ethio-Somalia trade route are the major problems.
Vegetables produced in this area passes through several intermediaries, i.e. collectors,
wholesalers and retailers, with little value being added before reaching the end-users. The
intermediate buyers obtain the vegetables from the farmers at a lower price and they sell to
the consumers at a higher price. The average price that sample respondents received for a
quintal of tomato, potato and cabbage was reported to be 476.7, 380 and 350 Br/qts
whereas the price that consumers paid was 900, 800 and 600 Br/qts, respectively. The
research result also indicated the absence of organized institution and system group
marketing, and lack of processing activities have made traders in a better position to
dominate the roost in pricing. Vegetable is highly perishable product and has to reach the
consumer as fast as possible. This hands the power to buyers and due to this its
governance is buyer driven. The study indicates that traders operating expense for tomato,
potato and cabbage were 50%, 34.9% and 45.5% of total value chain expense but their
profit margin is almost 80%, 91% and 57.4% of the total profit margin.
89
The results of the study show a slight difference between total production and marketable
surplus; making vegetables a market oriented product. The result of the multiple
regression model indicates that marketable supply of tomato is significantly affected by
access to market information and quantity of tomato produced; marketable supply of
potato was significantly affected by access to extension service, access to market
information, vegetable farming experience and quantity of potato produced; and
marketable supply of cabbage was significantly affected by non/off farm income, Woreda
dummy, distance to the nearest market and quantity of cabbage produced. The result of
endogenous regression result shows that quantity of potato production significantly
affected by access to extension service, access to market information, vegetable farming
experience, sex of the household head, age of the household head and quantity of fertilizer
application. Therefore, these variables require special attention if marketable supply is to
be increased.
Vegetable producers in the study areas supply their produce through different market
outlets. Farmers were classified into three categories according to their outlet choice
decision: those who have supplied most of their produce to wholesalers (38.89%); those
who have supplied most of their produce to collectors (30.25%); and those farmers who
have supplied most of their produce to retailers (30.86%). The multinomial logit model
was run to identify factors determining farmers market outlet choice decision. The model
results indicated that the probability to choose the collector outlet was significantly
affected by access to extension service, owning transport facility, membership to any
cooperatives and post harvest value addition compared to wholesale outlet. Similarly, the
probability of choosing retailer marketing outlet was affected by Woreda dummy,
educational status of household head, access to extension services and owning transport
facility compared to wholesale outlet. Therefore, these variables require special attention if
farmers margin from vegetable production is to be increased.
5.2. Recommendations
The recommendations or policy implications to be drawn from this study are based on the
significant variables from the analysis of present study. To start with, dissemination of
modern input technologies is essential in increasing the productivity of vegetables. Given
90
that farmers are small-scale and unorganized in the study area, this state of affairs clearly
needs strong government intervention. Not only does it require providing input facilities,
but also their dissemination to ensure optimal access. Effort should also be made to
strengthen farmers cooperative and encourage collective action of farmers to lower
transaction costs to access inputs.
Secondly, the results of econometric analysis indicate that vegetables supply to the market
is positively and significantly affected by access to market information, non/off farm
income, vegetable farming experience and quantity of vegetable produced. Therefore,
these factors must be promoted in order to increase the amount of vegetable marketable
supply. Increasing the production and productivity of vegetables per unit area of land is
better alternative to increase marketable supply of vegetables. Introduction of improved
varieties, application of chemical fertilizers, using of modern technologies, controlling
disease and pest practices should be promoted to increase production. Quantity production
of potato is also positively and significantly affected by vegetable farming experience,
access to market information and quantity of fertilizer application. Strengthening the
supportive activities such as information centers and input supply systems would also
boost vegetable supply. In addition to that, building the asset base of the farmers and
developing the skills what farmers have through experience increases vegetable supply to
the market.
91
92
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North Gondar Zone, Amhara National Regional State. M.Sc thesis presented to the School
of Graduate Studies, Harmaya University. 102p.
KIT, Faida Mali and IIRR, 2006. Chain empowerment: Supporting African farmers to
develop market. Royal Tropical Institute, Amsterdam; Faida Market Link, Arusha; and
International Institute of Rural Reconstruction, Nairobi.
Koenig, T., J. Blatt, K. Brake, K. Kloss, T. Nilges, F. Woellert, 2008. Market-driven
development and poverty reduction: a value chain analysis of fresh vegetables in Kenya
and Tanzania, Berlin.
Kohls, R., and N. Uhl, 1985. Marketing of agricultural products. 5th Edition. McMillian
Publishing Company, NewYork, USA.
Kotler, P. and G. Armstrong, 2003. Principle of marketing, 10th Edition. Hall of India Pvt.
Ltd. New Delhi. pp 5-12.
97
McCormick, D. and H. Schmitz, 2002. Manual for value chain research on home workers
in the Garment Industry, IDS, Brighton.
McFadden, D., 1978. Quantal choice analysis: a survey. Annals of Economic and Social
Measurement, 5(1976):363-390.
Mendoza, G., 1995. A premier on marketing channel and margins. Lyme Rimer Publishers
Inc., USA.
MoFED (Ministry of Finance and Economic Development),2006. Ethiopia: Building on
progress. A Plan for Accelerated and Sustained Development to End Poverty (PASDEP)
2005-2010. Volume I: Main Text, Addis Ababa.
MoFED (Ministry of Finance and Economic Development), 2010. Federal Democratic
Republic of Ethiopia: Global agricultural and Food Security Program. Addis Ababa.
MoFED (Minstry of Finance and Economic Development), 2011. Macro economic
development in Ethiopia. Annual report. Addis Ababa.
Moti Jaleta, 2007. Econometric analysis of horticultural production and marketing in
central and eastern Ethiopia. PhD Dissertation, Wageningen University. The Netherlands.
101p.
98
99
100
7. APPENDICES
101
Appendix A. Tables
Variable
VIF
1/VIF
Variable
VIF
1/VIF
Woreda
3.13
0.320
AEqu
1.56
0.643
VFExp
2.54
0.394
Woreda
1.51
0.661
Land
2.37
0.422
Age
1.44
0.695
Family
2.13
0.469
Credit
1.39
0.718
AExte
1.95
0.513
VAdd
1.34
0.745
Age
1.88
0.533
MInfo
1.23
0.813
Credit
1.71
0.585
AExte
1.22
0.821
TLU
1.71
0.586
HEduc
1.22
0.823
Minfo
1.59
0.627
MCoop
1.2
0.835
HEduc
1.55
0.644
OTran
1.15
0.873
DMkt
1.33
0.754
Sex
1.15
0.873
Qpron
1.31
0.763
DMkt
1.13
0.883
Sex
1.28
0.782
NOFI
1.07
0.937
NOFI
1.12
0.893
Mean VIF
Mean VIF
1.83
chi2
df
P>chi2
evidence
2.389
14
1.000
for Ho
0.000
18
1.000
for Ho
0.368
18
1.000
for Ho
102
1.28
Appendix table 3. Conversion factors used to compute tropical livestock units (TLU)
Livestock Category
Conversion factor
Calf
0.25
Weaned calf
0.34
Heifer
0.75
Cow or ox
1.00
Horse/mule
1.10
Donkey (adult)
0.70
Donkey (young)
0.35
Camel
1.25
0.13
0.06
Chicken
0.013
Bull
0.75
Male
Female
<10
0.6
0.6
10-13
0.9
0.8
14-16
0.75
17-50
0.75
>50
0.75
103
Appendix table 5. Mean land allocation of sample households for different crops in
hectare
Kombolcha(N=97)
Habro (N=65)
Total(N=162)
Variables
t-test
Mean
SD
Mean
SD
Mean
SD
Vegetables
0.13
0.08
0.168
0.08
0.14
0.08
-2.12**
Cereals
0.17
0.1
0.62
0.37
0.36
0.34
-10.56***
Khat
0.14
0.1
0.22
0.11
0.16
0.13
-2.65***
Habro
Khat production
Vegetables production
Grain production
Livestock production
Others
Variables
Transportations
Items
Kombolcha
(N=97)
Habro
(N=65)
Total (N=
162)
Vehicle
37
38.14
35
53.85
72
44.44
Back of Animals
22
22.68
9.23
28
17.28
Man Power
7.22
10
15.38
17
10.49
14
21.54
45
27.78
Vehicle and
31 31.96
Animals
Note: *** is statistically significant at 1%.
Source: Own computation from survey result, 2012
104
2-test
19.67***
Kombolcha
Habro
Total
Items
N
Potato
(N=71)
Farm gate
25
35.21
25
35.21
Market
46
64.79
46
64.79
Tomato
(N=65)
Farm gate
3.08
3.08
Market
63
96.92
63
96.92
Cabbage
(N=66)
Farm gate
10.53
3.57
7.58
Market
34
89.47
27
96.43
61
92.42
2-test
26.69***
Habro (N=12)
Total (N=30)
Variables
Income
Income proportion
Mean
SD
18,905
6502.78
24.48
5.54
Mean
SD
Mean
SD
4817.85
16.14
6.89
19.62
7.45
0.52
4.11
4.12
3.58
3.12
Onion
1.69
0.7
4.61
2.71
3.23
2.48
Potato
2.82
1.08
3.75
2.05
3.39
1.75
Cabbage
2.42
1.56
3.125
2.23
2.82
1.94
1.14
0.63
1.14
0.63
0.5
2.3
2.17
1.2
2.07
Carrot
Beetroot
105
Habro (65)
Total (144)
DA and OoARD
31
39.24
46
70.77
77
53.47
3.8
3.08
3.47
Haramaya university
1.54
0.69
16
24.62
61
42.36
45
56.96
DA, and Neighbor and friend
Source: Own computation from survey result, 2012
Source
Habro (N=27)
Total (N=33
Micro finance
16.67
21
77.78
22
66.67
Cooperatives
50
7.41
15.15
Traders
3.70
3.03
Relatives
33.33
6.06
11.11
9.09
Appendix table 12. Need of respondents to expand vegetables production and marketing
Variables
Production
Items
Kombolcha
(N=97)
Habr(N=65)
Total (N=162)
Yes
85
87.63
65
100
150
92.59
No
12
12.37
12
7.41
Yes
74
76.29
64
98.46
138
85.19
No
23
23.71
1.54
24
14.81
Sell
106
2-test
8.78***
15.16***
Items
Yes
11
100
No
Supply shortage
(N=14)
Yes
13
92.86
No
7.14
Lack of storage
(N=18)
Yes
18
100
No
Yes
100
No
Product quality
(N=15)
Yes
14
93.33
No
6.67
Yes
100
No
Source: Own computation from survey result, 2012
107
I.
General Information
Woreda:
2. [ ] Female
2. [ ] 6 thgrade or
6. [ ] Degree
3. [ ] Divorce 4. [ ] Widowed
7. Distance of your residence from the nearest market center: [____] hrs walk
8. Distance of your residence to the nearest development center: [____] hrs walk.
9. Distance to all weather road: [
] OR [
] hrs walk
10. What is your major means of income generation? (Rank in order of importance)
1. [ ] Khat
2. [ ] Coffee production
Fruit production
3. [ ] vegetables production
5. [ ] Grain production
108
4. [ ]
6. Pulses production 7.
9. [ ] Fruits trading
10. [ ] Pulses
trading
production
13. [ ] Livestock
1. [ ] Yes
years
2. [ ]No
If your answer for Q.12 is Yes, what is the name of the cooperative ______________
II.
1. Family size:
] Male [
] Female [
] Male [
] Male [
] Total
] Female [
] Female [
] Male [
1. [ ] Yes
] Total
] Total
] Female [
] Total
2. [ ] No
6. Total crop land: ______timad _____ ha. (Note: 1 ha = 8 timad or 1 timad = 0.125 ha)
7. Total grazing land:
timad
ha.
timad _______ ha.
1. [ ] Yes
ha.
2. [ ] No
], Donkeys [
], Calves [
], Goats [
], Sheep[
], Camels [
], Mules [
1. [ ] Yes
] Vehicle
animals
III.
], Cows/heifers
1. [
],
Horses
2. [ ] No
2. [
] Transport
3. [ ] Cart
Crop Production
109
3. What type of vegetable crops do you produce? Area and production during last season?
Vegetable
type
Produ
ction
(Qt)
%
%
sold consumed
Income generated
from sales (both
seasons), Birr
Tomato
Onion
Potato
Cabbage
Shallot
Beetroot
Carrot
Others
4. Inputs of vegetable crop production during last season? (*Labor requirement includes
for plowing, sawing, weeding, harvesting, transporting, irrigation water application etc).
Crop
type
Seed (kg)
*Labor
(manday) Local Improved
Dap
(qt)
Urea
(qt)
Compost
(in local
unit)
Manure
(in local
unit)
Pesticide
(li or kg)
(specify)
Tomato
Onion
Potato
Cabbage
Carrot
Shallot
Beetroot
Others
(Specify)
5. What is the source of labor used for vegetables production? () (Multiple response is
possible) 1. [ ] Family labor 2. [ ] Labor exchange 3. [ ] Hired labor
6. The source of oxen power (): 1. [ ] Own
2. [ ] Rent
4.[]Cooperation
3. [ ] Other (specify):
Hours
110
2. [ ] Unknown
10. What type of vegetables production system do you adopt? 1. [ ] Sole cropping 2. [ ]
Mixing different vegetable crops 3. [ ] Mixing with other crops [ ] 4. Others___
11. If you use irrigation for vegetables production, what is source, method, frequency of
use, and costs of irrigation? (* Multiple response is possible).
Crop type
*Sources
Pond
Borehole or
Hand dung
hall
River/spring
Lake
*Methods
Furrow/Over
flooding
Sprinkler
Basin
Bordering
Hours
used per
day for
irrigation
water
application
Total number
of days used
for irrigation
water
application
till harvest
Cost of using
motor pump/
hour ( in Birr)
Own
pump
Rented
pump
Tomato
Onion
Potato
Cabbage
Carrot
Shallot
Beetroot
Others
(specify)
12. What type of farm implements do you use for vegetables production? Give years of
purchase and the price?
Implements/equipments Number
Plough
Hoe
Harrow
Motor pump
Others (Specify)
Years of purchase
13. How is the trend of volume of crops production during the past 5 years? ()
Crop type
Vegetables
Cereals
Others (specify)
Increasing
Decreasing
111
Same
2. [ ] No
Crop type
Oxen
Shortag
e
Dis
Inse
Drou
ease
cts
ght
s
We
eds
Fl
o
o
d
Fr
os
t
Seed
short
age
Tomato
Onion
Potato
Cabbage
Carrot
Shallot
Beetroot
Others
(specify)
IV.
Production Services
1. [ ] Yes
2. [ ] No
2. If your answer for Q.1 is No, what was the main reason behind? _____________
3. If your answer for Q.1 is Yes, which type and from which source did you get such
agricultural inputs in the vegetables production process? (*Multiple responses is expected)
Crop type
Tomato
Onion
Potato
Cabbage
Carrot
Shallot
Beetroot
*Types
of
inputs
used
*Source
s
1.
2.
3.
4.
5.
Improved seed
Fertilizers
Pesticides/herbicides
Farm implements
Others (specify)
112
1. OoARD
2. Local market
(known sources)
3. Illegal markets
4. Cooperatives
5. NGOs (specify)
6. Research centers
(specify)
7. Haramaya
university
8. Fellow farmers
4. Why did you prefer the chosen sources to get the needed inputs? _________________
5. How did you get the input from the mentioned sources? (*Multiple response is possible)
No.
1
2
3
4
1. [ ] Yes
1.
2.
3.
4.
5.
Through purchase
On credit bases
As gift
Through exchange
Others (specify)
2. [ ]No
1. [ ] Unavailability
2. [ ]
3. [ ] Others (specify)
8. Do you always get inputs in the quantities that you need? () 1. [ ] Yes
2. [ ] No
9. If your answer for Q.8 is No, why? () (Multiple response is possible) 1. [ ] Not
vailable
available on time
5. [ ] Cash shortage
*Problems
(write codes)
Improved seed
Fertilizer
Pesticides/herbicides
Farm implements
Others (specify)
1.
2.
3.
4.
Unavailability
Shortage of supply
Costly
Remoteness of input selling
site
5. Others (specify)
2. [ ] No
2. If your answer for Q.1 is Yes, from where and for what purpose did you collect the
credit? (*Multiple response is possible)
No. Source
1
*Purpose
(write codes)
Micro finance
113
2
3
4
5
6
7
8
Cooperatives/unions
NGOs (specify)
Bank (specify)
Trader
Relatives
Iqub/Iddir
Others (specify)
3. If your answer for Q.1 is Yes, have you paid the loan? () 1. [ ] Yes
2. [ ] No
2. [ ] No
6. If your answer for Q.5 is Yes, what was the problem? () (Multiple response is
possible)
3. [ ] Huge bureaucracy
4.3.1. Training
1. Have you ever participated in vegetables production system training in the last three
years? ()
1. [ ] Yes
2. [ ] No
114
2. [ ]No
4. [ ] Training
1.3.3. Research
1. Source of vegetables production, marketing and consumption research/innovation in
your area? () (Multiple response is possible)
1. [ ] Agricultural Research Center (specify)
2. [ ] NGOs (specify)
3. [ ] Haramaya University
4. [ ] OoARD
2. [ ] No
3. If your answer for Q.2 is Yes, specify the organization and year
Number of times
V.
Marketing
1. [ ] Yes
115
2. [ ] No
2. If your answer for Q.1 is No, why you did not sell? _______________
3. If your answer for Q.1 is Yes, how much and to whom did you sell your production?
(*Write the codes and multiple result is possible)
Amount
1. Collectors
Amount
*To
sold
2. Consumers
produced(qt)
whom
(qt)
3. Retailers
4. Wholesalers
Tomato
5. Institutions (hotels,
Onion
Universities, etc )
Potato
6.
Cooperatives
Cabbage
7. Exporters
Carrot
8. Processers
Shallot
9. Brokers
Beetroot
10. Others (specify
Others
Crop
type
Whe
re * 1. Farm
gate
2. Market
center
3. Retailing
yourself
4. Others
(specify)
2. [ ]Wacho
3. [ ] Gelmiso
4. [ ]Chiro
Kombolcha
6.[ ] Harar
7. [ ] Diredawa
8. [ ] Other (specify)-
3. [ ] Back of animals
5. [ ]
1. [ ] Vehicles
2. [ ] No
Increasing
Decreasing
The same
1. [ ] Yes
2. [ ] No
116
2. [ ] No
19. If your answer for Q.18 is Yes, what quality requirement do you consider for;
Tomato
, Onion
, Shallot
, Potato
, Cabbage
,Beetroot
,Carrot
, Others (specify)
20. What was your source of information about quality requirement of your customers?
21. Do you have any value addition on your vegetable products? () 1. [ ] Yes
2. [ ] No
22. If your answer for Q.21 is Yes, what are those value adding activities? (*Multiple
response is possible)
Crop type
Tomato
Onion
Potato
Cabbage
Carrot
Shallot
Beetroot
Others
How much it
costs?(Birr/qt)
1.
2.
3.
4.
Cleaning
Cutting
Storage
Others
(specify)
23. Linkage with commercial value chain actors: () (Multiple response is possible)
1. [ ] Retailers
Brokers
2. [ ] Whole sellers
5. [ ] Collectors
4. [ ]
3. [ ] Consumers
6. [ ] Others(specify)________
2.[ ] No
25. If your answer for Q.24 is Yes, from whom did you get the market information ? ()
1. [ ] DAs
4.[ ] Radio
2. [ ] Market
2. [ ] Weekly
4. [ ] Other (specify)
2. [ ] No
29. Did you know the market prices before you sold your vegetables? () 1. [ ]Yes 2. [ ]No
117
30. Did you know the nearby market price before you sold?() 1.[ ] Yes 2.[ ]No
31. Did you face difficulty in finding buyers when you wanted to sell vegetables? ()
1. [ ] Yes
2. [ ] No
32. If your answer for Q.31 is Yes, due to: () 1. [ ] Inaccessibility of market
Lack
of market information
2. [ ]
4. [ ] Others
Crop type
Lac
k of
mar
ket
Low
price
of
prod
uct
Lac
k of
stor
age
Lac
k of
tran
spor
t
Lack
of
market
inform
ation
Poor
linkag
e with
value
chain
actors
Low
quali
ty of
prod
uct
Low
cons
umer
dem
and
High
mark
et
dista
nce
Pe
ris
ha
bil
ty
Ot
her
s
(sp
eci
fy)
Tomato
Onions
Potato
Cabbage
Carrot
Shallot
Beetroot
Others
(specify)
34. What do you do if you did not get the expected price for your vegetables supply? ()
1. [ ] Took back home
anothermarket on the same day
3. [ ] Took to
35. Do you have any contract market for your vegetable product? () 1. [ ] Yes 2. [ ] No
36. If your answer for Q.35 is Yes, with whom?
37. Is storage of vegetables production a problem for you? () 1. [ ] Yes
2. [ ] No
38. If your answer for Q.37 is Yes, indicate the total volume of the product damaged in
quintal and then the percentage loss at field and after harvest?
Crop type
Tomato
Onion
Potato
Cabbage
Carrot
Shallot
Beetroot
Others (specify)
118
% of loss after
harvest
Crop type
Selling
Packing Loading
price
materia /unloadi
(birr/qt)
l
ng
Stor
Rev Ta
e
enue x
rent
Tomato
Onion
Potato
Cabbage
Carrot
Shallot
Beetroot
40. Who sets your selling price for vegetables in last season? () 1. [ ]Yourself
2. [ ]
VI.
2. [ ] No
2. [ ] No
3. How much do you earn from such trading per market day?
birr
2. [ ] No
6. If your answer for Q.5 is Yes, what are these sources of income?
7. Did you participate on Productive Safety Net programs (PSNP) as livelihood source?
()
1. [ ] Yes
2. [ ] No
8. If your answer for Q.7 is Yes, who was involved on this program? (Multiple response is
possible) () 1. [ ] Yourself
4.[ ]Your sons
2. [ ] Wife/husband
3. [ ] Your daughters
9. What were the specific PSNPs you/and any of your family member involved in? ()
(Multiple responses is possible); 1. [ ] Food for work 2 . [ ] Cash for work
4. [ ] Others (specify)
10. What percent of your household expenditure was covered by these income generating
activities cover? _____________
119
I.
General Information
1. Name of trader:
Age
2. Address: Region
Zone
Woreda
Town
2. [ ] Wholeseler 4. [ ] Collecters
1. [ ] Single 2. [ ] Married
Sex______
3. [ ] Divorced
Female
5. [ ] Others
4. [ ] widowed
Total
3. [ ] Employed manager
2. [ ]
2. [ ] Partnership
persons.
Female
Total
Family member
Non family member
total
12. What is your main business? /Put in order of importance and business proportions/
Activity
Wholesaling
Retailing
Assembling
Brokerage
Processer
Exporter
Others (specify)
Business rank
120
2. [ ] No
14. If your answer to Q.13 is No, at what period of the year do you participate? ()
When purchase price becomes low
1. [ ]
3.[ ] Other(specify)
1.[ ] Yes
2. [ ] No
birr.
19. What is the amount of your current working capital? __________________ birr.
20. What is your source of working capital? (); 1. [ ] Own 2. [ ] Loan
4.[ ] Share
3. [ ] Gift
5. [ ] Others (specify)
21.If it was loan, from whom did you borrow? (); 1. [ ] Relative/family
Private money lenders.
Other traders
3. [ ] NGO (specify)
4. [ ] Friend
2. [ ]
5. [ ]
22. How much was the rate of interest? _____ birr for formal,
23. What was the reason behind the loan? ()
1. [ ] Monthly
3. [ ] Others
2. [ ] Quarterly
3. [ ]
5. [ ]Others (specify)
25. Is there change in accessing finance for vegetables trade these days? ()
1. [ ] Improved
2. [ ] Deteriorated
3. [ ] No change
2. [ ] No
No.
Separate house
Residence
121
Mobile telephone
Weighting scale
Shop
Bicycle
motorcycle
Vehicle
Other (specify)
30. Are there entry barriers in vegetable trading? ()
1. [ ] Yes
1. [ ] Capital
3. [ ] Administrative problems
2. [ ] No
2. [ ]
4. [ ] Stiff competition
2. [ ] Retailers
5. [ ] Local collectors
II.
3. [ ] Whole sellers
6. [ ] Brokers
4. [ ] Consumers
7. Others(specify)_______
Purchase practice
1. From which market and supplier did you buy vegetables? (*Multiple market area is
possible, ** Multiple answers are possible and write the codes in correspondence to the
market area and other answers should be written in accordance)
Marke
t*
(locati
on
name)
Crop
types
Tomato
Fr
om
**
1.
2.
3.
4.
5.
Producers
Retailers
Wholesaler
Collectors
Cooperative
s
Brokers
Unknowns
Others
(specify)
Quantit
y
purchas
ed (qt)
Aver
age
price
/kg
%age
of
purchas
ed
vegetab
les
Payment
1. Cash
2. Credit
3. Advance
payment
Onion
6.
Potato
7.
Cabbage
8.
Carrot
Shallot
Beetroot
2. From which market do you prefer to buy most of the time?
3. Why do you prefer this market? () 1. [ ] Better quality
3. [ ] Shortest distance
.
2. [ ] High supply
4. [ ] Others (specify)
122
1. [ ] Yes
2. [ ] No.
1. [ ] By sack
% .
2. [ ] By basket
3. [ ]
4. [ ] By feresula
3. [ ] Sellers
4. [ ] Other (specify)
4. [ ] Family members
2. [ ] Broker
5. [ ] Friends
6. [ ] Others
2. [ ] By visiting them
4. [ ] Extending credit
3. [ ]
5. [ ] Using brokers
7. [ ] Other (specify)
2. [ ] No
11. If your answer to Q.10 is Yes, what quality requirement do you consider for;
Tomato
, Onion
, Potato
Carrot
, Others (specify)
, Cabbage
12. What was your source of information about quality requirement of your customers?
13. Which are the months of the year when prices are lowest?
Onion
, Potato
, Cabbage
Tomato
, Carrot
Tomato
Others (specify)
14. Which are the months of the year when prices are highest?
Onion
, Potato
, Cabbage
, Carrot
, Others
1. [ ] Yes
2. [ ]No
16. If your answer to Q.15 is Yes, what was the reason? () (Multiple answer is possible);
1. [ ] To attract suppliers
competitors
3. [ ] To kick
5. [ ] Others (specify)
Producers ________, Collectors _______
1. [ ] Yes
2. [ ] No
1. [ ] Yes
2. [ ] No
1. [ ] Yes
123
2. [ ] No
III.
Selling Practices
1. To which market and to whom did you sell vegetables. (*Multiple market area is
possible, ** Multiple answers are possible and write the codes in correspondence to the
market area and other answers should be written accordingly)
Crop type
Tomato
Onion
Potato
Cabbage
Shallot
Carrot
Beetroot
Others
%age
Quantity Average share
sold (qt) price/kg of
buyers
1.
To 2.
Market
** 3.
4.
5.
6.
7.
Processer
Retailers
Wholesalers
Exporters
Cooperative
Consumers
Hotels and
organization
8. Brokers
9. Unknowns
10. Others
(specify)
2. [ ] Through
3. [ ] Other (specify)
3. When did you get the money after sale? () 1. [ ] As soon as you sold
some hours
Payment
1. Cash
2. Credit
3. Advance
payment
2. [ ] After
4. [ ] Other _________
4. What do you do, if the product is not sold on time? () 1. [ ] Took back home
Took to another market
2. [ ]
Tomato
Others
(specify)
4. [ ] By fair scaling
5. [ ]
6. [ ] Others (specify)
Wholesalers_____, Consumers_______,
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, others
1. [ ] Sisal sack
2. [ ] Plastic sack
3.
9. Do you know the market prices in different markets (on farm, village market and other
areas) before you sold your vegetables? () 1. [ ] Yes
2. [ ] No
, Cabbage
, %, Carrot
%, others
12. What percent of the produce is sold to domestic market (Chiro, Harar, Diredawa etc)?
Tomato _____ %, Onion ______ %, Potato
%, others (specify)
, Cabbage
, %, Carrot
%, Potato
%, others (specify)
, Cabbage
, %, Carrot
14. Do you have other branch shops/ shades to sell your vegetables? () 1. [ ] Yes 2. [ ]No
15. Who sets selling price? ()
3.
[ ] Buyers
1. [ ] Myself
4. [ ] Other (specify)
16. Are there charges (taxes) imposed by government or community officials at the
market? ()
1. [ ] Yes
2. [ ] No
17. If your answer to Q.16 is yes, what are they and what is the basis of payment?
Types of taxes
Amount
Bases of payment
(birr)
Per quintal
Simply on daily bases
Per track bases
Based on purchased value of
products
Based on sales value of products
Others (specify)
1. [ ] Yes
Rate of payment
(birr)
2.[ ] No
Tomato Onion
Potato
Purchase price
Labor for packing
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Loading/unloading
Transportation fee
Sorting
Storage cost
Loss in transport
and storage
Processing cost
Telephone cost
Watching and
warding
Other personal
expenses
License and taxes
Other cost
(specify)
Total cost
Selling price
Revenue
22. Are there problems on vegetables marketing? () 1. [ ] Yes
2. [ ] No
Problems
Credit
Price setting
Supply shortage
Storage problem
Lack of demand
Information flow
Quality problem
Government policy
Telephone cost
Lack of government support to
improve vegetables marketing
Others (specify)
Toma
to
1.Yes
On Pot Cab
ion ato bage
2. No
Carro
Beet
Shallot
t
root
V. Marketing Services
1. Is vegetables trading in your locality needs a trading license? () 1. [ ] Yes
126
2. [ ] No
2. If your answer to Q.1 is Yes, how do you see the procedure to get the license? ()
1. [ ] Complicated
2. [ ] Easy
1. [ ] Yes
2. [ ] No
4. If you do not have specific vegetable trading license what is your joint trading
license? () 1. [ ] Grain
2. [ ] General
5. How much did you pay for vegetables trade license for the beginning? _____birr
6. How much is the yearly renewal payment? ________birr
7. Are you restricted by Woreda or administrative boundary to operate? ()
1. [ ] Yes
2. [ ] No
1. [ ] Yes
2. [ ] No
10. If your answer to Q.9 is Yes, for how long did you store vegetables in the store?
Tomato Onion Potato Cabbage Carrot Shallot
Beetroot
Others
(specify
Maximum
hrs/days
11. Are you organized in any of the following organization? (*Multiple response is
possible)
Organization
1. Yes
2. No
Benefits
If yes, what is the name
of the organization?
Social
association
(iqub, idir
etc)
Market
cooperative
(write
codes)*
Trade
association
127
I.
General Information
Woreda:
[_______] years
1. [ ] Male 2. [ ] Female
4. [ ] Certificate
2. [ ] Unmarried
Crop
type
Quantity
purchased
(per
market
day)
No. of
market
day per
weak
Low
price
paid
(birr/kg)
No. of
months
you may
buy at
lower
price
Tomato
Onion
Potato
Cabbage
Carrot
Shallot
Beetroot
Others
128
High
price
paid
(birr/kg)
No. of
months
you may
buy at
higher
price
*From
whom
do you
buy
, Cabbage
, Carrot
, Others (specify)
4. What are the constraints hindering consumption of vegetables? Rank horizontally (1=
most severe, 2= second severe and etc)
Crop
type
Supply Income
Shorta shortag
ge
e
Lack of High
storage price of
at home product
Poor
produc
t
handli
ng
Lack of
market
informati
on
Perisha
bilty
Others
(specif
y)
Tomato
Onion
Potato
Cabbage
Carrot
Shallot
Beetroot
Others
(specify)
5. Do you know the benefits of consuming vegetables product?
1. [ ] Yes 2. [ ] No
6. Do you think there is problem with consumption of vegetables product?
1. [ ] Yes
2.[ ] No
7. Do you prefer packed or fresh vegetables product? 1. [ ] Packed
2. [ ] Fresh
8. What should be done to increase vegetables product consumption?
IV. Checklist for Key Informants Interview
129