Value Chain Analysis of Dairy Products: The Case of Lemo District of Hadiya Zone, Southern Ethiopia

Abstract

This study was aimed at identifying the actors, activities, the distribution of costs and benefits among them and identifies factors affecting farmers’ participation in milk marketing and marketed volume in Lemo district of Hadiya zone, Southern Ethiopia. In this study, both primary and secondary data were used and a total of 180 sample farm households were taken. The Heckman two-stage econometric estimation procedure was employed to identify factors that determine milk market participation decision and milk sale volume of the farm households. The first step of the Heckman two stages procedures results showed that dairy households’ participation decision in milk market was strongly and significantly affected by age of household head, number of household members under 5 years old, volume of milk output produced and distance to principal market. And the second stage estimation result revealed that marketed milk volume was found to be strongly and significantly affected by income from non dairy sources, volume of milk produced, amount of butter produced, experience in dairy production and inverse Mill’s ratio (LAMBDA). Milk producers, local collectors, cooperative traders, cafes and restaurants and retailers were found to be important milk market intermediaries. Whereas, butter producers, local collectors and retailers were the only butter market intermediaries found in the study areas. As a recommendation, improving access to services to address problems like lack of access to credit, market accesses are the actions to be taken to strengthen the sector’s development.

Keywords: Value chain analysis, Dairy products, Heckman two-stages, Lemo District of Hadiya Zone, Southern Ethiopia