Analysis of structure, conduct and performance of cow milk market in Sululta Woreda, Ethiopia

Abstract

Ethiopia’s economy is based on subsistence agriculture accounting for 40% of the gross domestic product (GDP). Livestock production contributes 30-35% of the gross domestic product and more than 85% of farm cash income. In this respect, milk production plays a major role in the livelihoods of Ethiopians and it accounts for 19% of the export earnings in the country. In relation to this, Oromia region contributes 40% of the country’s milk production. Despite this importance, milk is not adequately market-oriented and competitiveness of smallholder farmers is limited by low market participation. The objectives of this study were to; characterize milk producers and traders, determine the structure conduct and performance of milk market and identify the determinants of participation decision of milk producers and volume of milk marketed in the study area. A total of 150 milk producers and 40 traders from four Kebeles of the Woreda were interviewed to obtain data using multistage and proportionate sampling respectively. The data was analyzed using descriptive statistics, structure conduct performance approach and Heckman two-step econometric method. The results of the market concentration ratio of the top four milk traders was 87.16% of the total milk purchased per year. This revealed the existence of a strong oligopoly milk market in Sululta Woreda. Findings revealed that the marketing channel that had the highest (54.55%) marketing margin was channel III (producer-dairy cooperative union- processor- retailer – consumer). The results of Heckman two step econometric estimation showed that years of education, experience, number of cross-bred milking cows, non-dairy income, extension services, number of children under age of five years and membership to dairy cooperatives had a significant effect on participation of households. Furthermore, volume of milk market supply was also affected by education, gender, cross bred milking cows, non-dairy income and family size. Based on the findings, it was recommended that there is need for policies that promote collective organizations which could play a major role in reducing the level of oligopolistic market structure and market inefficiency in Sululta Woreda. Moreover, policies that promote inclusion of smallholder farmers in dairy value chain should be enacted. This include investment in adult education, improving access to extension and promoting new technology which replaces human labor should be applied to increase milk market participation and for better functioning of marketing systems.