VEGETABLE MARKET CHAIN ANALYSIS IN AMHARA NATIONAL REGIONAL STATE: THE CASE OF FOGERA WOREDA, SOUTH GONDAR ZONE M.Sc. Thesis ABAY AKALU WELDESLASSIE October 2007 Haramaya University VEGETABLE MARKET CHAIN ANALYSIS IN AMHARA NATIONAL REGIONAL STATE: THE CASE OF FOGERA WOREDA, SOUTH GONDAR A Thesis Submitted to the Department of Agricultural Economics, School of Graduate Studies HARAMAYA UNIVERSITY In Partial Fulfillment of the Requirements for the Degree of MASTER OF SCIENCE IN AGRICULTURE (AGRICULTURAL ECONOMICS) BY Abay Akalu Weldeslassie October 2007 Haramaya University ii APPROVAL SHEET SCHOOL OF GRADUATE STUDIES HARAMAYA UNIVERSITY As Thesis research advisors, we here by certify that we have read and evaluated this Thesis prepared, under our guidance, by Abay Akalu Weldeslassie entitled “Vegetable Market Chain Analysis in Amhara National Regional State: the Case of Fogera Woreda, South Gondar Zone”. We recommend that it be submitted as fulfilling the thesis requirement. Professor Belay Kassa ______________ ___________ Major Advisor Signature Date Dirk Hoekstra _________________ ___________ Co-Advisor Signature Date As member of the Board of Examiners of the M.Sc Thesis Open Defense Examination, we certify that we have read, evaluated the Thesis prepared by Abay Akalu Weldeslassie and examined the candidate. We recommended that the Thesis be accepted as fulfilling the Thesis requirement for the Degree of Master of Science in Agriculture (Agricultural Economics). Dr. Belayneh Legesse _______________ October 06, 2007 Chair person Signature Date Dr. Bekabil Fufa _________________ October 06, 2007 Internal Examiner Signature Date Dr. Dawit Alemu _________________ October 06, 2007 External Examiner Signature Date iii DEDICATION I dedicate this piece of work to my father, Memhir Akalu Weldeslassie, and my wife, Yeshiwork Yalew, together with our kids, for all their contribution. iv STATEMENT OF THE AUTHOR First, I declare that this thesis is my solely work and that all sources of materials used for this thesis have been duly acknowledged. This thesis has been submitted in partial fulfillment of the requirements for an advanced MSc degree at the Haramaya University and is deposited at the University Library to be available to borrowers under rules of the library. I solemnly declare that this thesis is not submitted to any other institution anywhere for the award of any academic degree, diploma, or certificate. Brief quotations from this thesis are allowable without special permission provided that accurate acknowledgement of source is made. Requests for permission for extended quotation from or reproduction of this manuscript in whole or in part may be granted by the head of the major department or the Dean of the School of Graduate Studies when in his or her judgment the proposed use of the material is in the interests of scholarship. In all other instances, however, permission must be obtained from the author. Name: Abaya Akalu Weldeslassie Signature: _____________ Place: Haramaya University, Haramaya Date: October 15, 2007. v BIOGRAPHICAL SKETCH The author was born on July 18, 1973 in Gondar. He attended his elementary school at Amba Giorigis Primary and Junior Secondary School and Secondary school at Fasiledes Comprehensive High School at Gondar. Joined the then Alemaya University of Agriculture in 1988/89, he graduated with B.Sc. degree in Agricultural Economics on 5th of September 1992. Working latest five years for Amhara National Regional State Cooperatives Promotion Bureau until he joined Haramaya University for postgraduate studies in October 2005, the author was working at different levels for Bureau of Agriculture and Rural Development from 1993-98. vi ACKNOWLEDGEMENTS I thank professor Belay Kassa for all his support in the course of my work. His motive to share knowledge (a reflection of modern knowledge management principles) by providing me those interesting books, which would only be able to get unless, went to Europe or America, in fact an illusion for me are unforgettable. My equal appreciation, without repeating similar words, also goes to my co-advisor Dirk Hoekstra and equally grateful to Dr Berhanu Gebremedhin for their advice, guidance, constructive, critical comments since the inception of the proposal until the final date of submission. Both individuals were with me in all the assignment. Dirk has strictly followed me the whole period through reviewing the manuscript and giving me fruitful comments on both the substance as well as the English. Dr Berhanu on the other hand supported me much on research methodology and econometric analysis. His critical comments and suggestions on the econometric analysis was very much above the required that helped me develop to some extent standard Thesis. I want to remind readers of this Thesis on the quality of the write up that the gap that might be observed would be fully attributable to my failure to write what I have been guided not to anyone of the advisors or Dr Berhanu. Other members of the IPMS-ILRI are also acknowledged namely Muluhiwot (IPMS Administrator), Birkie (IPMS-Secretary), Teshome and Tilahun (Fogera IPMS-ILRI pilot learning site staff) for their at ease facilitation of all logistical matters. Improving Productivity and Market Success (IPMS) for Ethiopian Farmers Project- International Livestock Research Institute (ILRI) is also impassable without giving thanks for granting fund. Other friends like Demelash Seifu were also with me. Hence, I would like to convey my heartfelt thanks to every body who has a hand on my achievements. Finally, more than every body, equally to my advisors, I am obliged to extend my gratitude to my family /my wife Yeshiwork Yalew, son Natnael and daughter Hilina/ for their invaluable sacrifice in every perspective until I returned. Without their support, completion would have not been real. All honors associated with this degree (if appear) belong to them, more than me. vii ABBREVIATIONS ANRS Amhara National Regional State BOFED Bureau of Finance and Economic Development CSA Central Statistical Authority EARO Ethiopian Agricultural Research Organization FAO Food and Agriculture Organization GDP Gross Domestic Product ha Hectare IFPRI International Food Policy Research Institute ILRI International Livestock Research Institute IPMS Improving Productivity for Market Success Ethiopian Farmers’ Project kms Kilometres m.a.s.l meters above sea level MEDAC Ministry of Economic Development and Cooperation MOI Ministry of Information MoARD Ministry of Agriculture and Rural Development MSU Michigan State University OLS Ordinary Least Squares SCP Structure Conduct performance SPSS Statistical Package for Social Sciences TGMM Total Gross Marketing Margin VIF Variance Inflation Factor WHO World Health Organization viii TABLE OF CONTENTS STATEMENT OF THE AUTHOR v BIOGRAPHICAL SKETCH vi ACKNOWLEDGEMENTS vii ABBREVIATIONS viii LIST OF FIGURES xiii LIST OF APPENDIX TABLES xiv ABSTRACT xv 1. INTRODUCTION 1 1.1. Background 1 1.2. Statement of the Problem 2 1.3. Objectives of the Study 3 1.4. Scope of the Study 3 1.5. Significance of the Study 3 1.6. Limitations of the Study 3 1.7. Organization of the Study 3 2. LITERATURE REVIEW 5 2.1. Definitions 5 2.2. Markets and Development 6 2.3. Peculiarities of Agricultural Production and Marketing 8 2.4. History of Agricultural Marketing Research 9 2.5. Market Chain Analysis 11 2.6. Marketing Functions 13 ix TABLE OF CONTENTS (Cont'd) 2.7. Transaction Costs 13 2.8. Market Supply and Demand 14 2.8.1. Supply 14 2.8.2. Demand 17 2.9. Status of Vegetable Production in Ethiopia 19 2.10. Review of Empirical Studies in Ethiopia 21 3. METHODOLOGY 24 3.1. The Study Setting 24 3.2. Methods of Data Collection 25 3.3. Sampling Procedures 25 3.3.1. Farmers’ sampling 25 3.3.2. Rural assemblers, wholesalers, and brokers sampling 25 3.3.3. Retailers’ sampling 25 3.3.4. Consumers’ sampling 26 3.4. Methods of Data Analysis 26 3.4.1. Analysis of market structure 26 3.4.2. Analysis of market conduct 28 3.4.3. Analysis of market performance 28 3.4.4. Econometric analysis 31 3.4.4.1 Factors affecting production participation 31 3.4.4.2. Land allocation and market supply analysis 33 3.4.4.3. Demand analysis 37 4. RESULT AND DISCUSSION 41 4.1. Production 41 4.1.1. Household characteristics 41 4.1.2. Farm size and allocation 43 4.1.3. Access 45 4.1.4. Farm practice and crop calendar 49 4.1.5. Seed type, preference and use 51 4.1.6. Cost of production 51 4.1.7. Production and marketing problems and opportunities 53 4.2. Marketing 56 4.2.1. Market structure 56 4.2.1.1. Market participants 56 4.2.1.2. Barrier to entry 63 4.2.2. Standard and grades 64 x TABLE OF CONTENTS (Cont'd) 4.2.3. Packaging 65 4.2.4. Transportation 65 4.2.5. Storage 65 4.2.6. Market information 65 4.2.7 Risk bearing 66 4.2.8 Market conduct 66 4.2.9 Market performance 69 4.3. Results of econometric analysis 76 4.3.1. Production participation 76 4.3.2 Land allocation 78 4.3.3 Market supply 80 4.3.4. Consumption 81 4.3.4.1 Properties of consumers 81 4.3.4.2. Econometric model result 82 5. CONSCLUSIONS AND RECOMMENDATIONS 84 5.1 Conclusions 84 5.2 Recommendations 87 6. REFERENCES 91 7. APPENDICES 97 xi LIST OF TABLES Table Page Table 1 Sampled growers by farming system ..................................................................... 41 Table 2 Respondents’ demographic characteristics............................................................. 42 Table 3 Major crops’ land share.......................................................................................... 44 Table 4 Access to market and road...................................................................................... 46 Table 5 Extension contact frequency and type.................................................................... 47 Table 6 Farmers experience for onion and tomato.............................................................. 49 Table 7 Tillage and weeding practice by farming system................................................... 50 Table 8 Per hectare cost of production ................................................................................ 52 Table 9 Retailers’ demographic characteristics..................................................................