MARKET CHAIN ANALYSIS OF SMALLHOLDER COFFEE PRODUCERS IN DEBUB ARI DISTRICT OF SOUTH OMO ZONE

Abstract

The inefficient marketing has made the farmers to get low income and unproportional benefit from their coffee. This study mainly aimed at analyzing coffee market chain and the determinants of coffee market outlet choice decision of smallholder coffee producers in the De bub Ari District. The descriptive statistics, S-C-P model and econometric models were used to analyze the data. Multivariate probit model was used to identify factors affecting market outlet choices of the smallholder coffee producers. Both primary and secondary data were collected from the study area. The multi-stage sampling technique was has been employed for this study. A total of 194 coffee producer household heads have been randomly selected and interviewed with the help of pre-tested structured questionnaire. The focus group discussion and key informants interviews were conducted to supplement the formal data. The results of S-C-P model indicated that the four firms concentration ratio (CR4) result in the study area was found to be tight oligopolistic nature for both red and dry coffee which accounts 89.2 and 80%, respectively. About 72% of price setting was done by buyers,27% negotiation and 1% by the producers. There are seven market channels which have been identified in the study area. The computed marketing margin among different actors and channels indicated that the total gross marketing margin (TGMM) of coffee is high in channel I, II, III whereas the producers marketing margin(GMMp) was highest in channel VII. The probability of choosing collector, wholesalers, retailer, Processor, consumers outlets is 67.1%, 66.4%, 36.9%, 71.6% and 15.3% respectively. The joint probabilities of households to jointly choose the four market outlets was 0.031% which is greater than the likely of not choosing all market outlets which is 0.003%. Access to credit negatively influenced retailer, processor and consumer market outlet choice, distance to the nearest market negatively influenced processor market outlet choices, market information, offarm participation positively influenced retailer and consumer market outlets choices. Therefore, the intervention is needed to improve coffee marketing chain through promoting cooperatives, infrastructural development and timely market information for efficient marketing system in the study area.