Value Chain Analysis of Butter and Cheese: The Case of Loma Woreda, Dawuro Zone, Southern Ethiopia

Abstract

This study was conducted with the main objective of identifying butter and cheese value chain actors and their respective functions,  estimate benefit distribution among the actors, identify determinants of farmers’ market participation and level of participation; and  identify the constraints and potential opportunities of butter and cheese production and marketing in the study area. About 138 smallholder butter and cheese producers were selected randomly from six Kebele administrations proportionally. Both qualitative and quantitative types of data were used. Primary data was collected by using both close ended and open ended (semi- structured) questionnaire and personal interview, focus group discussion and key informant interview was used to collect the data. Descriptive statistics and Heckman two stage models were used to analyze the data. Marketing margin analysis method was used to analyze the benefit distribution among the butter and cheese value chain actors. According to the result obtained; input supplier, producers, local collectors, wholesalers, retailers and consumers are the direct butter and cheese value chain actors whereas extension service providers, credit and saving service providers, trade and industry office and non-governmental organizations are the indirect actors thereby play the crucial role as service providers. The result revealed that the total share of gross marketing margin and share of profit margin of producer is 62.5% and 54.2% respectively. The share of profit margin of local collectors, wholesalers and retailers were 18.8%, 12.1%, and 14.75% respectively from the sales of 1 KG butter.  Out of 138 respondents, 85% revealed that the main reason for most farmers not participating in credit were limited supply of credit, bureaucracy, unavailability of credit agents and high interest payment especially to take credit from Omo micro finance institution.   On average 2,070.5KG of butter are supplied by sample respondents. In addition to butter production, on average 30,420 KG of cottage cheese were supplied to the same market center in study area in 2016/2017. In general, policy initiatives aiming at increasing farmers’ improving market information, road, access extension service, access to credit and cooperative development are recommended to step up the development of dairy sector particularly butter and cheese value chain in the study area.

Keywords: Marketing Margin, Benefit Distribution, Value Chain Actors