SALALE UNIVERSITY

COLLEGE OF AGRICULTURE AND NATURA L RESOURSE

DEPARTMENT AGRICULTURAL ECONOMICS

SENIOR PROPOSAL TITLE

ANALTSIS MILK VALUE CHAIN; THE CAUSE OF BILATE ZURIA DISTRICT, SIDAMA
REGION, ETHIOPIA SENIOR RESEARCH PROPOSAL SUBMITTETED TO
DEPARTMENT OF AGRICULTURAL- ECONOMICS IN PARTIAL FULFILLMENT OF
THE REQUIREMENT OF THE COURSE RESEARCH METHOD

PREPARED BY SHAKANA HOBASA…….ID NO 0836

SUBMITTED TO NIGUSU A. (MSc)

JANUARY, 2015 E.C
FITCHE, ETHIOPIA
 APPROVA SHEET
The approval sheet follows the cover page of the seminar and will be used to get formal acceptance of
the seminar by the concerned bodies.

Approval Sheet sample

Submitted by: ____________________ __________________ ___________

Name of the student Signature Date
Approved by: ___________________ _________________ ___________
Name of Advisor Signature Date
____________________ _________________ ___________
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___________________ ________________ ___________
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 Acknowledgements
First of all, I would like to thank to my God Who help me in every aspect to my life.
Secondly, I would like to express deepest gratitude to my advisor NIGUSU.A (MSc)
unlimited support, advise me on my proposal,
Thirdly, I would like to thanks my class mate friend for all of his support.

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 LIST OF ACRONOMY AND ABRIVATION
BARP------------------------Bargaining power of supplier

SRMSA---------------------Sidama Region Methodology Statistics Agency

CSA---------------------------Central statistical agency

ETB-------------------------- Ethiopian birr

FAO---------------------------Food and agricultural organization

GDP---------------------------Gross domestic product

IFNA--------------------------Income from non- farm activity

IFRI- -------------------------International food research institute

ILRI---------------------------International livestock research institution

VMS---------------------------Volume of Milk Supplied

UNICEF-------------------- United Nations children fund

USAID- -----------------------United states agency for international developments

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Table of Contents
APPROVA SHEET...................................................................................................................................ii
Acknowledgements....................................................................................................................................iii
LIST OF ACRONOMY AND ABRIVATION.......................................................................................iv
LIST OF TABLE.....................................................................................................................................viii
ABSTRACT.................................................................................................................................................x
1. INTRODUCTION.................................................................................................................................1
1.1 Background of the Study.................................................................................................................1
1.3 Objectives of the Study....................................................................................................................3
1.3.1 General Objective.....................................................................................................................3
1.3.2 Specific objectives.....................................................................................................................3
1.4 Research Questions..........................................................................................................................3
1.5. Significance of the Study................................................................................................................3
1.6 Scope and Limitation of the study of the study.............................................................................4
2 LITERATURE REVIEW......................................................................................................................5
2.1. Theoretical Literature Review.......................................................................................................5
2.1.1. Concept of Analysis Milk value chain.................................................................................5
The value chain concept is a systems approach that evolved over time drawing from different
disciplines. A Study on Value Chain Analysis in Paddy Sector. However, the concept is used to
describe the flow of physical input and services in the production of a final product and in terms of its
concern with quantitative technical relationships. paid special attention to how local production
systems are linked to processing industry, trade, export and final consumption (YONAD, 2009). A
marketing chain is defining the flow of commodities from producers to consumers that brings into
place economic agents who perform complementary functions with the aim of satisfying both
producers and consumers.........................................................................................................................5
2.1.2 Value Chain...............................................................................................................................5
2.1.3 Terms in Analysis Milk Value Chain......................................................................................5
2.1.4 Major concepts guiding analysis Milk value chain.................................................................6
2.2. Review of Empirical Evidences......................................................................................................7

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 2.3. Conceptual framework...................................................................................................................7
3. METHODOLOGIES OF THE STUDY..............................................................................................9
S.sol.No.....................................................................................................................................................11
Name of milk market intermediary....................................................................................................11
Total number of populations...............................................................................................................11
Sample size...........................................................................................................................................11
1.............................................................................................................................................................11
Collectors..............................................................................................................................................11
6.............................................................................................................................................................11
6.............................................................................................................................................................11
2.............................................................................................................................................................11
Cafes/Hotels.........................................................................................................................................11
40...........................................................................................................................................................11
25...........................................................................................................................................................11
3.............................................................................................................................................................11
Milk retailing kiosks.............................................................................................................................11
3.............................................................................................................................................................11
3.............................................................................................................................................................11
4.............................................................................................................................................................11
Wholesalers..........................................................................................................................................11
4.............................................................................................................................................................11
4.............................................................................................................................................................11
5.............................................................................................................................................................11
Processors............................................................................................................................................11
4.............................................................................................................................................................11
4.............................................................................................................................................................11
Total......................................................................................................................................................11
57...........................................................................................................................................................11
42...........................................................................................................................................................11
3.3 Data sources and methods of data collection...............................................................................11
3.4 Methods of data analysis...............................................................................................................12
3.4.1 Descriptive Statistics...............................................................................................................12

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 3.4.2 Econometric model.................................................................................................................13
3.5 Definitions of Variables and Working Hypothesis......................................................................14
3.5 1 Dependent variable.................................................................................................................14
Volume of Milk Supplied (VMS): Volume of milk supplied to the market by the sampled house hold
is a continuous dependent variable measured in liters. It represents the actual volume of milk
supplied to the markett per farm household’s day..............................................................................14
Decision of participation in milk value addition Processing (PDMP): is a dummy dependent
variable that represented the probability of milk producers’ participation in milk value addition and
is regressed using Heckman first stage model. In this study, milk value addition is to mean the act of
processing or adding value(s) changing its form into milk products. Value addition increases the
customer value offered by a product or service. The products obtained from smallholder traditional
level milk value addition are butter (which is further processed into ghee) and butter milk (which is
further processed into cheese and whey). So, if we say milk value addition; in this context, it is to
mean that the process of converting milk into different milk products and supplying these value
added products to market. However, in this study; butter is the key milk product supplied to market
after practice of milk value addition by smaller holder milk producers while other milk products are
consumed at home.............................................................................................................................14
Level of participation in milk value addition (LPMVA): is continuous dependent variable
measured in liters indicating the actual volume of value added milk for market supply. Volume of
value added milk is a proxy variable to represent milk product (butter) for market supply by milk
producer households in the study area and was regressed using Heckman second stage model........14
3.5.2 Independent variable..............................................................................................................14
References..............................................................................................................................................18
APPENDIX...............................................................................................................................................19

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 LIST OF TABLE
Table 1 Sample summary of Milk traders
Table 2 Working plan
Table 3 Budget plan

viii
 LIST OF FIGURE
Figure 1 conceptual framework...................................................................................................................8
Figure 2 Study District AREA......................................................................................................................10

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 ABSTRACT
Ethiopia’s agricultural sector to produce at subsistence level with incomes not adequate to cover the
farmers' consumption and expenditures and allow them to invest back in to their farms. Where
subsistence agriculture prevails and where small-hold

der farming dominates the overall national economy, farmers often face analysis milk value chain
adopt new agricultural technologies. Value chain components are known to be important factors that
determine the extent of commercialization and productivity in the agricultural sector. This study sought
to assess the level of commercialization and variables influencing milk production. This proposal more
focus on study will be to analysis milk value chain the case of Binate azury woreda Sidama
Regional state. The focus of the study is to identify the milk actors and their relationships, profit
share of milk marketing and factor affecting milk market chains in the study area. For the
purpose of this study secondary data were collected from randomly selected 83 producers, 7

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collectors and retailers and 3 consumers in two kibbles of Binate Zaria Woreda. A multistage
sampling technique is used to select the sample households. Sample size is being determined by
using Yamane formula, and structured interview schedule is going to developed, and used for
collecting quantitative data for the study from sampled producers. Data analysis was done using
descriptive statistics tools including mean, percentage, and standard deviation statistics. The
multiple linear regression models are used to identify factors influences of milk markets
participation and market supply. The milk marketing costs are also measured using marketing
margins complemented with assessment of costs and gross profits generates by different
marketing channel actors. The finding indicates that main milk marketing chain channels in the
study area during the survey period were producers, collectors, and retailers and highest market
margin in the milk value chain are retailers who more profitable in the chain. In this regard, a
total of 9 independent variables were included in the model, of which 5 were significant. These
variables include age of household head, education level, current selling price, family size and
income of non-farm activities. The results of this study suggest that development interventions,
polices and supportive services should be designs to suit the felt needs and circumstances of
producers

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 1. INTRODUCTION
1.1 Background of the Study
Agriculture remains the leading sector of the Ethiopian economy accounting for about 52% of
GDP recently. During the period 2004-2008, GDP grew by an annual average of more than 10%
and the registered growth in GDP has been contributed by all sectors (Access Capital, 2009)
(Development), 2005). The smallholder sector is the main source of employment, agricultural
GDP, export earnings, and food and raw materials supplies to urban areas and food industries.
Livestock According to (FAO, 2010; FAO, 2003; BEYENE, 2015) livestock in Ethiopia
contributes about 30-35% of agricultural gross domestic product (GDP) and more than 85% of
farm cash (Berhanu et.al, 2011) income. The livestock sub sector also contributes about 13-16 %
of total GDP. Cattle, camel and goats are the major sources of milk and milk products in
Ethiopia. According to the same source, cattle produce 83% of the total milk and 97% of cow
milk comes from indigenous breeds in addition, the country is endowed with diverse topographic
and climatic conditions favorable for dairy production. These condition support use of improved,
high milk yielding breeds, and offer relatively disease-free environment for dairy production.
Given the high potential for dairy production, the ongoing policy reforms and technological
interventions, success similar to the neighboring Kenya under a very similar production
environment is expected. Production shares the highest contribution to the national GDP next to
crop production. Dairy products in Ethiopia are channeled to consumers through formal and
informal marketing systems (Tefera, T.L. et al., 2010; Tefera, T.L. et al., 2010) .The formal
marketing system appeared to be expanding during the last decade with private farms entering
the dairy processing. The informal market directly delivers dairy products by producers to
consumer (immediate neighborhood or sales to itinerant traders or individuals in nearby towns).
In Ethiopia, the share of milk sold in formal market is less than 2% compared to 15% in Kenya
and 5% in Uganda (Valk, van der O, Tessama .A, 2010; Valk, van der O, Tessama .A, 2010)
Generally, the accessibility of a good value analysis of milk is considered as one of the engines of
economic development and the instruments to break the vicious circle of poverty. Livestock production
is an integral part of Ethiopia’s agricultural sector and plays a vital role in the national

1
economy(BEYENE, 2015). Livestock sector in the country serves as source of income, draft
Power and means of employment with an economic contribution share of about 40% of
Agricultural GDP excluding the values of draught power, manure and transport of people and
Products (Dogma et al., 2013), 60- 70% livelihoods of the population (USDA, 2016) and
11% of formal exports earnings of the country (Trade Bulletin, 2011). Besides as a crucial
Means of income, employment, and poverty alleviation, milk subsector also used as food Source
with better nutritive value such as protein and minerals for Ethiopian smallholder milk
Producers. Given considerable potential for increasing smallholder income and employment
Generation from milk and milk products in Ethiopia, development of the milk subsector can
Livestock production is an integral part of Ethiopia’s agricultural sector and plays a vital role in
the national economy.

1.2 Statement of the Problem

Despite Binate zuria woreda dairy cooperative plays a great role in bulk collection,
processing and marketing of processing dairy products, the average raw milk procurement
by dairy cooperative will be declined and similar patterns are observed for most of dairy
cooperative (Tadesse, 2011). As a result of decline in the Ethiopia suffers from weak market
linkages on both the input and output side. Farmers either cannot afford improved inputs or lack
the knowledge to use them. Weak systems connect agricultural outputs to processors and
numerous barriers exist that prevent quality products from reaching end users (Mbiha, 2008),
such as insufficient packaging and storing, inability of Ethiopian products to meet international
market standards, and restrictive trade regulations (USAID, 2011).
A number of factors such as use of traditional technologies, limited supply of inputs (feed,
breeding stock, artificial insemination and water), inadequate extension service, poor marketing
infrastructure, lack of marketing support services and market information, limited credit services,
absence of producers’ organizations, and natural resources degradation have contributed to un-
exploitation of dairy potential. In addition, (Betela et al, 2016) policy decision on assurance of
quality and standards, product marketing, among others is taking to in absence of vital
information on how they affect the entire value chain.

The lack of market access that many farmers face is considered to be a major constraint to
combating poverty Constraints faced by dairy value chain is increasingly seen by agricultural

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research as important component of any strategy for reaching the millennium goals (Zelalem
Yilma and Ledin I, 2000). Therefore, ensuring the resilience of dairy farmers to rapidly changing
markets is a key policy issue. Given the Zonal potential for dairy production, processing,
marketing and consumption, there is scanty information about the Zonal dairy value chain.
Investigating market accesses and value chain for dairy products and availing pertinent
information is being to believe to help policy makers, (Mbiha, 2008) So, this study tries to
identify and map milk value chain actors, their roles, their relationship and volume of marketing
in the study areas so as to reduce the information gap on the subject and to contribute to better
understanding and possible improvement strategies to upgrade.

1.3 Objectives of the Study

1.3.1 General Objective
 The objective of this study is to analysis milk value chain in the study area.
1.3.2 Specific objectives
 To identify milk value chain actors, and their roles in the study area.
 To assess factors affecting of milk market by the farmers in the study area.
 To analysis the profit shares of actors.
1.4 Research Questions
In order to address the above issue, the study will attempt to address at least the following
questions listed below;
 Where are the more actors in Analysis milk value chain?
 What are the major determinants of volume marketed of milk in the study area?
 Who has the highest market margin in the milk value chain actors in the study area?
1.5. Significance of the Study
The study is generated valuable information on value chain analysis of dairy that can assist
policy makers at various levels to make relevant decisions to intervene in the development of
dairy milk production, marketing, processing and designing of appropriate policies and
strategies. The finding of the study can also be useful to input suppliers, producers, traders,
consumers, and marketing agents in the study area to make their respective decisions to produce
output.

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1.6 Scope and Limitation of the study of the study
Scope of the study
The study will be focus on identifying and mapping dairy milk value chain actors and their
relationships, estimating dairy marketing costs, margins and value share of the value chain actors
and identify factors affecting volume of dairy milk marketed by the farmers in the study area.
Limitation of the study
Some of the limitation of the study while collecting of data from the study area is
mentioned as flow:
 Binate zuria district dairy cooperative is very price sensitive due to they have many strong
competitors’ who compete with them in raw milk collecting, processing and marketing of
processed dairy products. Because of this they did not voluntary to give me the cost of
durable items and other fixed costs. As a result of this cost- benefit analysis and profit share
of the Binate zuria cooperative and other actors are not conducted.
 Due to strong competition on procurement of raw milk from small holder farmers, some
of the private milk collector like Holland dairy does not want to give me much information
on the cost they incurring to collect and processing of raw milk. Because of this the profit of
this private milk processing company is not performed.
 The district livestock expert and farmers in the study area are well adapted to collect
money from many international livestock research institutes, PhD students a

4
 2 LITERATURE REVIEW
2.1. Theoretical Literature Review
2.1.1. Concept of Analysis Milk value chain

The value chain concept is a systems approach that evolved over time drawing from different
disciplines. A Study on Value Chain Analysis in Paddy Sector. However, the concept is used to
describe the flow of physical input and services in the production of a final product and in terms
of its concern with quantitative technical relationships. paid special attention to how local
production systems are linked to processing industry, trade, export and final consumption
(YONAD, 2009). A marketing chain is defining the flow of commodities from producers to
consumers that brings into place economic agents who perform complementary functions with
the aim of satisfying both producers and consumers
2.1.2 Value Chain
The concept of a commodity chain is the base for the further developed global commodity chain
by and others. It seeks to explain the dynamics of the distribution of value chain activities in a
world economy. The main driver is the international division of labor between different regions
due to varying labor-intensities of production and manufacturing activities within a chain
(Sivapalan and Rajendran, 2012) .The origin of value chain analysis is discussed from two
distinct traditions: the French ‘filigree concept’ and Wallenstein’s concept of a commodity chain
(The analysis of the value chain activities can be done to understand the competitive advantage
sources. The firm infrastructure denotes a range of activities, such as- quality management, legal matters
handling, accounting, financing, planning and strategic management.
2.1.3 Terms in Analysis Milk Value Chain
Marketable and marketed surplus: Marketable surplus is the quantity of produce left out after
meeting farmer’s consumption and utilization requirements for kind payments and other
obligations (gifts, donation, charity, etc.). Marketed surplus shows quantity actually sold after
accounting for losses and retention by farmers, if any and adding previous stock left out for sales.
Thus, marketed surplus may be equal to marketable surplus, it may be less if the entire
marketable surplus is not sold out and farmers retain some stock and if losses are incurred at the
farm or during transit (Gizachew, et.al.,2005). The importance of marketed and marketable
surplus has greatly increased owing to recent changes in agricultural technology as well as social
pattern.

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In order to maintain balance between demand for and supply of agricultural commodities with
rapid increase in demand, accurate knowledge on marketed/marketable surplus is essential in the
process of proper planning for procurement, distribution, export and import of agricultural
products (c).
2.1.4 Major concepts guiding analysis Milk value chain
Agricultural value chain analysis views effective demand as the force that pulls goods and
services through the vertical system. Hence, value chain analysis needs 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 (FAO, 2003)
Production: In agricultural value chain analysis, a stage of production can be referred to as any
operating stage capable of producing a saleable product serving as an input to the next stage in
the chain or for final consumption or use. Typical value chain linkages include input supply,
production, assembly, transport, storage, processing, whole (LDMPS, 2007)sealing, retailing,
and utilization, with exportation included as a major stage for products destined for international
markets. A stage of production in a value chain performs a function that makes significant
contribution to the effective operation of the value chain and in the process adds value.
Value chains can be classified into two based on the governance structures: buyer-driven value
chains, and producer-driven value chains. Buyer-driven 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.
upgrading in firms can take place in the form of: -Process upgrading: increasing the
efficiency of internal processes such that these are significantly better than those of rivals, both
within individual links in the chain, and between the links in the chain.

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 Product upgrading: introducing new products or improving old products faster than rivals.
This involves changing new product development processes both within individual links in
the value chain and in the relationship between different chain links.
 Functional upgrading: -increasing value added by changing the mix of activities conducted
within the firm or moving the locus of activities to different links in the value chain.
 Chain upgrading: moving to a new value chain.
2.2. Review of Empirical Evidences
Different scholars conducted research on agricultural commodities marketing using market
concentration ratios, marketing costs and margins and profit analysis. According to Randolph et
al., (2007) Dairying is one of the investment areas farmers can venture into to improve their standards
of living (ILRI, 2007). It is a developmental tool as it widens and sustains three major mechanisms out of
poverty; securing the assets, improving smallholder and pastoral productivity, and increasing market
participation by the poor. It is estimated that almost 150 million farm households (more than 750
million people), are engaged in milk production worldwide, the majority of who are in developing
countries (FAO, 2010). The dairy sector provides income and employment to many, often poor, people.
It is estimated that 12 to 14 percent of the world population, or 750-900 million people, live on dairy
farms or within dairy farming households and the production of one million liters of milk per year on
smallholder dairy farms creates approximately 200 on-farm The result indicates that margin and
profit received by marketing actors and level of market efficiency varied with respect to location
and size of marketing channel. using marketing cost and margin analyzed performance of cattle
marketing system In Borena and found that butchers at Addis. on dairy marketing also captured
some variables that influence dairy supply. There are a number of empirical studies on factors
affecting the marketable supply of agricultural commodities. For instance, identified factors
affecting the marketable surplus of sesame by using.
2.3. Conceptual framework
On the basis of above theoretical and empirical framework, the study conceptualizes the
independent variable (factors affecting volume of milk supplied) as demographic, economic, and
institutional factors. Therefore, impact of all these independent variables were directed to
dependent variable (volume of milk supplied) through one way arrow from
differentdireTherefore, researchers analyzed the influence of independent variable on

7
 Economic Factors
Local and cross breed
Institutional Factors
cow owned
 Access to market information
Income from livestock
 Extension service
Landholding size

Analysis Milk value

chain

Institutional
Primary actors
Education level
Membership to co-op Producers, collectors,

Distance to market Whole Sellers, processors

Retailers

Demographic factors
Family size

 Children within family

Figure 1 conceptual framework

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 3. METHODOLOGIES OF THE STUDY

This section justifies all methods, materials and procedures used in the study which includes the
general description of the study area, the types and sources of data, sampling procedures and
method of data analysis.

3.1. Description of the study area

This study will be conducted in Binate zuria woreda particularly at two kebeles, namely
Gangesso and mukaneka. Binate zuria woreda is found in Sidama Regional states.it is 31 KM
Away from Hawassa and 43 km away from wolata sodo.it is found between Hawassa and wolata
soda. Binate zuria has total population of 123321 of whom 52% are female. According to the
current master plan the total area of the woreda is 167 km square. The woreda is divided in to 19
kebeles which are responsible to the woreda council and administrative office. The woreda
topography is that elevation with in the woreda bounder ranges from the lowest 1720 ASL to the
highest 2010 asl. The woreda is found in tropical rainy climate which receive moderately heavy
rainfall throughout the year. The economic activities of this woreda are mostly mixed agriculture
and there are also other off-farm activities. Sampling Technique a multi-stage sampling
technique is used to identify the district, kebeles, sample respondents, and other participants of
dairy products. At the first stage is passively selected because of production potential of milk
produces. Sample size in each kebeles is determined based on proportion to size of the
households. Crop-livestock mixed production system is the most important components of
subsistence farming system in the study area and are assumed to be more valuable to assure food
security of the community. However, the erratic rainfall, severe deforestation, deterioration and
descending of the coverage of the grazing land proportion as well as worst cultivation including
the high steep areas with traditional system of farming and livestock keeping practices are the
main hindrance of developmental progress in the district (Binate Zuria District office of
Agriculture)

9
 Figure 2 Study District AREA

Source; Boricha district map, Sidama region, southern Ethiopia, 2017

3.2 Sampling Techniques and Sample Size Determination

A two-stage sampling procedure will be applied to select sample milk producer households in
the study area. In the first stage, nineteen administrative kebeles of the study area and high milk
producer kebeles based on their current milk production level and market access using the list
provided by the study District Offices of Agriculture and then, two sample administrative
kebeles of the district are selected randomly out of twelve high milk producer kebeles. In the
second stage, a total of 42 sample smallholder milk producer households will be selected
randomly from these 5 randomly selected from two kebeles. The total population size where
samples were drawn is 123321.To determine the total sample size of the respondents going to
interview both in urban and rural area, discussion is made with head of Bilate zurya district of
livestock development and health office.

10
The simplified formula provided by Yamane (1967) was used to determine the required sample
N
size as follow: n= = Where: n=the sample size for the research,
1+ N ¿ ¿
N= the population size (Total number of households who kept livestock in the selected woreda
and produce milk and it’s by product and e=the level of error (e=0.1)

Name of milk market Total number of Sample size

S.sol.No. intermediary populations

1 Collectors 6 6

2 Cafes/Hotels 40 25

3 Milk retailing kiosks 3 3

4 Wholesalers 4 4

5 Processors 4 4

Total 57 42
Table 1 Sample summary of Milk traders

3.3 Data sources and methods of data collection

Both quantitative and qualitative types of data will be collected by well-trained enumerators
from both secondary and primary sources of data as: the secondary data from the District and
Zonal Agricultural Office, internet, CSA, and other supporting sectors whereas the primary data
from randomly selected milk producers and traders employing surveying method through
conducting of interviews using pre-tested structured and semi-structured questionnaires. Data
will be selected from primary and secondary sources. primary data can be selected face to face
contact with produces and consumers in the transaction places. Primary data are collected
through encompassed data includes detained with input suppler, farmer, traders, consumers ,
agricultural expertise and survey, an interview to the dairy cow milk producer households to
identify factors affecting milk market supply and dairy household milk market
participation .while the secondary source will include different types of reference books,
materials like strategic plan document of Bilate zurya woreda agricultural administrative office
and office reports sample done by other professionals which deals about this issue and other

11
written materials through opening internet service. The study is employed both qualitative and
quantitative data. Who compete with the dairy cooperative was purposively selected to conduct
an interview with them. The structure of milk value chain of the study area and problems related
to milk marketing of smallholder dairy farmers and milk purchasing potential of dairy
cooperative from dairy farmers are collected.

3.4 Methods of data analysis

Both descriptive statistics and econometric analysis was employed to know the actors and factors
influences of milk markets participation and market supply in the market chain. The
methodology used in this study will be adopted more of quantitative. The data collected from
sampled respondent (household) is analyzed and interpreted by using statistical tools based on
frequency, and percentage using tabulation. The data from key informants also were incorporated
in the data presentation and discussion part accordingly.
3.4.1 Descriptive Statistics
The study will employed descriptive statistics such as mean, percentages, standard deviation,
table of frequency, minimum and maximum to describe the demographic and socio-economic
situation of the respondents.
Data analysis employed descriptive statistics such as percentage, and comparison. Because
precise costs are frequently difficult to determine in many agricultural marketing chains for the
reasons that costs are often cash and imputed, the Total Gross Marketing Margin (TGMM) was
calculated (Scott, 1995). It is expressed as a percentage of the difference between end buyer and
first seller prices,
End Buyer price - Farmer' s Price
 100
TGMM= End Buyer Price ………… (1
It is useful to introduce the idea of farmer’s participation”, farmers portion, or farmer’s Gross
Marketing Margin (GMMP) which is the portion of the price paid by the consumer that goes to
the farmer. The farmer’s margin is calculated as
Price paid by End Buyer - Gross Marketing Margin
× 100
GMM =
Price Paid by End Buyer .. (2)
P

The consumer price share of market intermediaries is calculated as:-

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 SP  BP
MM  X 100
EBP

Where: MM = Marketing margin (%)

SP = Selling price at each level

BP = Buying price

EBP = End buyer price

In marketing chain with only one trader between producer and consumer, the 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 percentage of net income that can be
classified as pure profit (i.e., return on capital) depends on the extent to which factors such as the
middleman`s own, often imputed, salary are included in the calculation of marketing costs

3.4.2 Econometric model

Determinants of milk market participation: The Heckman’s procedure results for both outcome
and selection variables are presented and. Moreover, it is important to check multicollinearity
problem before running the model for continuous variables. Econometric analysis is used to
estimate the fundamental relationship between the dependent variable and the explanatory
variables. It is crucial to understand the effects of different factors on milk marketable surplus
and channel choices of producers. Hence, this subsection provides model specification for both
analyses one after the other. Such as Age of household head: Distance to the nearest market:
Crop income: Tropical livestock holding: and so on.
Multiple linear regressions for market supply of milk:-For identifying the household level
marketable surplus and factors affecting quantity of milk supplied to the market, multiple linear
regression models will be used as:
y i=b o +bi x i+ ui
Where y i= volume of milk supplied to the market in liters in 2018,
b o = Intercept
b i = Coefficient of it explanatory variables

13
x i= A vector of explanatory variables
ui = Disturbance term

3.5 Definitions of Variables and Working Hypothesis

3.5 1 Dependent variable
Volume of Milk Supplied (VMS): Volume of milk supplied to the market by the sampled house
hold is a continuous dependent variable measured in liters. It represents the actual volume of
milk supplied to the markett per farm household’s day.

Decision of participation in milk value addition Processing (PDMP): is a dummy dependent

variable that represented the probability of milk producers’ participation in milk value addition
and is regressed using Heckman first stage model. In this study, milk value addition is to mean
the act of processing or adding value(s) changing its form into milk products. Value addition
increases the customer value offered by a product or service. The products obtained from
smallholder traditional level milk value addition are butter (which is further processed into ghee)
and butter milk (which is further processed into cheese and whey). So, if we say milk value
addition; in this context, it is to mean that the process of converting milk into different milk
products and supplying these value added products to market. However, in this study; butter is
the key milk product supplied to market after practice of milk value addition by smaller holder
milk producers while other milk products are consumed at home.
Level of participation in milk value addition (LPMVA): is continuous dependent variable
measured in liters indicating the actual volume of value added milk for market supply. Volume
of value added milk is a proxy variable to represent milk product (butter) for market supply by
milk producer households in the study area and was regressed using Heckman second stage
model.
3.5.2 Independent variable
Age of Household Head (AHH): It is a continuous variable and measured in years. Age is a
proxy measure of farming experience of household head. 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 sign effect on market participation and volume
of milk supply.
Sex of the Household Head (SHH): This is dummy variable (takes a value of 1 if the household
head is male and 0 female). (Byron et al, 2012) revealed that male-headed households were more

14
like milk marketing female households have the main role and being male households will
expected to have negative effect on market supply.
Family Size (FS): This variable is continuous variable and refers to the total number of family
members and measured in adult equivalents in the households. Economically active family
members within a given farming household affect dairy production activities positively (Million
and Belay, 2004). Thus, in these respect family size will be expected to have positive impact on
sales volume. Based on (Muriuku and Thorpe; 2007) large family size requires large amount of
consumption. Therefore, family size can affect the sale volume of milk marketed negatively.
Education Level of the Household Head (ELHH): It is categorical variable measured classifying the
educational level of the households by classes. Education is hypothesized to have positive
influence on volume marketed. (Holloway etal.1999) observed that education and visits by an
extension agent having significant and positive effect on quantity of milk marketed in Ethiopia
highlands.
Distance the Nearest Market (DNM): It is continuous variable that express the location of the
milk producing household from the nearest milk market and is measured in kilometer. The closer
the market, the lesser would be the transportation charges, reduce walking time and other
marketing cost, minimize loss due to handling, better access to market information and facilities.
In this study, distance from nearest milk market is hypothesized to be positively.
Credit Access (CA): This is a dummy variable, which indicates credit taken for milk production.
Access to credit has a capacity to enhance the financial capacity of the farmer to purchase the
input. (Ayelech, 2011) found that credit is important to facilitate the introduction of innovative
technologies and for input and output marketing arrangements. Therefore, it is hypothesized that
access to credit will be positive influence on level of production and sales.
Extension Contact (EC): this is a dummy variable representing extension service as a source of
information on technology and measured in number of contacts. Extension agents assist farmers
in dissemination of new technologies, thus speeding up the adoption or use of new technologies
and practices (Taye, Z., et al (2016 Agricultural Value Producers who have had longer extension
contact are expected to have more production and hence more market supply.

ely to participate and supply to the market as sellers with significantly. However in case of

15
Current milk market price (CMMP): This is a continuous variable measured in terms of price
in ETB per litter. It represents the average price of milk that producers receive during the
production year at different months to different channels. Therefore, the market price is expected
to have a positive relationship with milk market supply.

4 Work Plan and Budget

No Activities Duration

July 2023 Aug Sept 2023 Oct Apr 2023 May June
2023 2023 2023 2023

1 Questionnaire √
preparation

2 Selection of √
respondents

3 Data collection √ √

4 Data coding and √

editing

5 Data analysis √

6 Literature review √

7 Research writing √

8 Submission of √
draft paper and
accepting
comments

9 Preparation of the √
final Research

16
Table 2 Working plan

No

No table of figures entries found.

Items

Unit

Unit price

Amount of required

Total price

Personal cost

Food

200

17
600

Telephone

Card

100

200

Internet

Mb

20

25

500

Data collection

100

500

Stationary cost

18
Paper

Packet

120

360

Pens

Number

10

10

100

Markers

Number

10

19
40

Printing

Page

25

50

Transport

Km

200

1000

Total

3350

Table 3 Budget plan

20
References
Ayele Solomon, Asseged Workalemahu, Jabbar MA, Ahmed MM and Belachew Hurissa, 2003. Livestock
marketing in Ethiopia: A review of structure, performance and development initiatives Socio-economic
and Policy Research Working Paper 52.. ILRI (International Livestock Research , p. 52.

Berhanu et.al, 2011. : Determinants of participation decisions and level of participation in farm level milk
value addition:. Original article. Ethiop .J. Appl. Sci. Technol, pp. 19-30.

Berihu Assefa,Abebaw Zerfu, and Biruk Tekle, 2014. dentifying Key Success Factors and Constraints of
Ethiopia’s MSE Development: An Exploratory Research, Addis Ababa: Ethiopian Development Research
Institute..

Betela et al, 2016. Value Chain Analysis of Dairy Products in Esssera District Dawro Zone, Southern
Ethiopia. IISTU Department of Agribusiness and Value Chain Management, p. 43.

BEYENE, B., 2015. Review on Value Chain Analysis of Dairy Products in Ethiopia College of Agriculture
and Veterinary Medicine. Journal of Economics and Sustainable Development, Volume 6, pp. 1-12.

BEYENE, B., 2015. Review on Value Chain Analysis of Dairy Products in Ethiopia College of Agriculture
and Veterinary Medicine. IISTE Journal of Economics and Sustainable Development , pp. 1-12.

CSA, 2008. Report on livestock and livestock characteristics (private peasant holdings). Statistical bulletin
446,Federal Democratic Republic of Ethiopia Central Statistical Agency, Addis Ababa, Ethiopia.. In: Addis
Ababa, Ethiopia.: s.n.

Development), M. o. A. a. R., 2005. Agricultural Input and products marketing strategy State ministry.
Addis Ababa: s.n.

FAO, 2003. : FAO action program for the prevention of food loses. Milk and dairy products, post harvest
losesand food safety in sub-Saharan Africa and the near east. Regional approaches to national
challenges.Synthesis report. ILRI, Nairobi, Kenya. Kenya: s.n.

FAO, 2., 2010. Greenhouse Gas Emissions from the Dairy Sector. s.l.:s.n.

Gizachew, G., 2005. Dairy Marketing patterns and Efficiency: The case of Ada’a District Eastern Oromia.
M.Sc. Thesis Presented to Alemaya University. In: Ethiopia: s.n.

LDMPS, 2007. Phase Report – Data Collection and Analysis Volume I – Dairy. GRM International BV..

Mbiha, G., 2008. Analysis of the Dairy Value Chain in the Dar es Salaam Milk shed, Tanzania Dissertation
for Award of MSc.. In: Degree at Sokoine University of Agriculture. Morogoro, Tanzania. 147pp: s.n.

21
Sivapalan and Rajendran, 2012. Study on Value Chain Analysis in Dairy Sector Kilinochchi District, Sri
Lanka Global Journal of Management and Business Research Volume 12 Issue. s.l.:s.n.

Tadesse, A., 2011. Market chain analysis of fruits for Gomma woreda, Jimma zone, Oromia National
Regional State M.Sc thesis presented to School of Graduate Studies. Haramaya University: s.n.

Tefera, T.L. et al., 2010. “Commercializing dairy and forage systems in Ethiopia:An Innovation Systems
PerspectiveILRI – IPMS. Working Paper No. 17. 2010. In: s.l.:s.n.

Valk, van der O, Tessama .A, 2010. The formal dairy chain of Addis Ababa, an analysis of the integration
ofsmall -scale dairy farmers in Ethiopian, Addis Ababa. In: , Addis Ababa: s.n.

YONAD, 2009. Value chain Analysis of Milk and Milk products in Borana pastoralist area, unpublished .
In: s.l.:s.n.

Zelalem Yilma and Ledin I, 2000. Milk production, processing, marketing and the role of milk and milk
products on small farm’s income in the central highlands of Ethiopia. In: ESAP (Ethiopian Society
ofAnimal Production), Pastoralism and agropastoralism: Which way forward? Proceedings of. Addis
Ababa, : s.n.

References
Ayele Solomon, Asseged Workalemahu, Jabbar MA, Ahmed MM and Belachew Hurissa, 2003. Livestock
marketing in Ethiopia: A review of structure, performance and development initiatives Socio-economic
and Policy Research Working Paper 52.. ILRI (International Livestock Research , p. 52.

Berhanu et.al, 2011. : Determinants of participation decisions and level of participation in farm level milk
value addition:. Original article. Ethiop .J. Appl. Sci. Technol, pp. 19-30.

Berihu Assefa,Abebaw Zerfu, and Biruk Tekle, 2014. dentifying Key Success Factors and Constraints of
Ethiopia’s MSE Development: An Exploratory Research, Addis Ababa: Ethiopian Development Research
Institute..

Betela et al, 2016. Value Chain Analysis of Dairy Products in Esssera District Dawro Zone, Southern
Ethiopia. IISTU Department of Agribusiness and Value Chain Management, p. 43.

BEYENE, B., 2015. Review on Value Chain Analysis of Dairy Products in Ethiopia College of Agriculture
and Veterinary Medicine. Journal of Economics and Sustainable Development, Volume 6, pp. 1-12.

BEYENE, B., 2015. Review on Value Chain Analysis of Dairy Products in Ethiopia College of Agriculture
and Veterinary Medicine. IISTE Journal of Economics and Sustainable Development , pp. 1-12.

22
CSA, 2008. Report on livestock and livestock characteristics (private peasant holdings). Statistical bulletin
446,Federal Democratic Republic of Ethiopia Central Statistical Agency, Addis Ababa, Ethiopia.. In: Addis
Ababa, Ethiopia.: s.n.

Development), M. o. A. a. R., 2005. Agricultural Input and products marketing strategy State ministry.
Addis Ababa: s.n.

FAO, 2003. : FAO action program for the prevention of food loses. Milk and dairy products, post harvest
losesand food safety in sub-Saharan Africa and the near east. Regional approaches to national
challenges.Synthesis report. ILRI, Nairobi, Kenya. Kenya: s.n.

FAO, 2., 2010. Greenhouse Gas Emissions from the Dairy Sector. s.l.:s.n.

Gizachew, G., 2005. Dairy Marketing patterns and Efficiency: The case of Ada’a District Eastern Oromia.
M.Sc. Thesis Presented to Alemaya University. In: Ethiopia: s.n.

LDMPS, 2007. Phase Report – Data Collection and Analysis Volume I – Dairy. GRM International BV.

Mbiha, G., 2008. Analysis of the Dairy Value Chain in the Dar es Salaam Milk shed, Tanzania Dissertation
for Award of MSc.. In: Degree at Sokoine University of Agriculture. Morogoro, Tanzania. 147pp: s.n.

Sivapalan and Rajendran, 2012. Study on Value Chain Analysis in Dairy Sector Kilinochchi District, Sri
Lanka Global Journal of Management and Business Research Volume 12 Issue. s.l.:s.n.

Tadesse, A., 2011. Market chain analysis of fruits for Gomma woreda, Jimma zone, Oromia National
Regional State M.Sc thesis presented to School of Graduate Studies. Haramaya University: s.n.

Tefera, T.L. et al., 2010. “Commercializing dairy and forage systems in Ethiopia:An Innovation Systems
PerspectiveILRI – IPMS. Working Paper No. 17. 2010. In: s.l.:s.n.

Valk, van der O, Tessama .A, 2010. The formal dairy chain of Addis Ababa, an analysis of the integration
ofsmall -scale dairy farmers in Ethiopian, Addis Ababa. In: , Addis Ababa: s.n.

YONAD, 2009. Value chain Analysis of Milk and Milk products in Borana pastoralist area, unpublished .
In: s.l.:s.n.

Zelalem Yilma and Ledin I, 2000. Milk production, processing, marketing and the role of milk and milk
products on small farm’s income in the central highlands of Ethiopia. In: ESAP (Ethiopian Society
ofAnimal Production), Pastoralism and agropastoralism: Which way forward? Proceedings of. Addis
Ababa, : s.n.

23
APPENDIX
Appendix
QUSTIONERY
Dear Respondent: survey questionnaire conducted on Bilate Zuria woreda kebeles 46, kebeles
48 and kebeles 49 who participated in milk production. Mainly the production of milk, the
processing of milks and it’s by products like, cheese, Butter and yoghurt and also the consumer
of this milk channel and routs.
1. Ages
2. Sex 1= Male 0= Female
3. Educational status 0 = illiterate
1.Grade 1-4 2. Grade 5-8 3. Grade 9-10 4. Grade 12 and above
4. Who supplies raw milk to you? 1. Producer 2. Rural collector 3. Traders 4. Others
5. Marital status 1 = Married 0 = Single
6. What is the size of your family ___________ Male _________ Female _____? Total =_________
7. Age of Family 1. 0-15 year .2.16-49 year .3 .49-65 year.
8. Do you use value addition activity? 1. yes 0. No

24
9. If yes, what kind of activity?
10. In the milk processing, which one of the following is your most product?
1. cheese 2. Butter 3. Yoghurt
11. How much profit do you get from your value addition activity?
12. Is there any competitor to your milk product? 1. Yes 0. No
13. Who are your major marketing channels today?
1) collector 2) retailer 3) Consumers
14. How is the cost of one litter raw milk?
15. How much litter milk consume in the month?
1. Average amount of milk consumption in a month (in liter)
2. average purchase price per Liter (in birr)
16. Did you get credit service during production years? 1. Yes 0. No
17. In Q16 if your answer is yes, which organization provide you?
1. Development Bank 2. Commercial Bank
3. Agricultural Bureau 4. NGO
5. Local money lender 6. Service cooperatives
18. If you have not used credit so far for livestock, what were the main reasons?
1. Due to high interest rate 2. Shortage of down payment
3. Inaccessibility to credit 4. Unavailability
19. Have you received extension advice on dairy technologies and crossbred cattle Practices during the
last years? 1. Yes 0. No

25