Ethiopian Journal of Environmental Studies & Management 12(5): 509 – 519, 2019. ISSN:1998-0507 doi: https://ejesm.org/doi/v12i5.3 Submitted: April 30, 2019 Accepted: October 24, 2019

ANALYSIS OF SOYBEAN VALUE CHAIN IN BUNO ZONE, SOUTH WESTERN

*ESAYAS NEGASA HAMBISA 1 AND MUSTEFA BATI GEDA 2 1Department of Agribusiness and Value Chain Management, Mettu University, P. O. Box: 318, Mettu, Ethiopia. 2Department of Agricultural Economics, Mettu University, P. O. Box: 318, Mettu, Ethiopia *Corresponding author: [email protected]

Abstract In Bunno Bedelle zone, soybean is a major cash crop which is mainly produced by smallholder farmers. The study was undertaken with the objective of mapping value chain actors, estimating share of actors' margin, identify major constraints and opportunities and identifying market channel of soybean by smallholder farmers. Multi stage random sampling techniques were employed to select a total of 218 farmers from nine Kebeles. Data were collected from both secondary and primary sources. Descriptive, SWOT analysis and value chain mapping methods of data analyses were used to analysis the data. Soybean value chain analysis of the study areas revealed that the main value chain actors were input suppliers, soybean producers, wholesalers, retailers, collectors, processors, exporters and consumers. The major constraints identified are low access to improved inputs, collateral problem to get credit, poor storage facilities, low price of produce, and low negotiation (bargaining) power of producers. Therefore, improving extension services, sharing of experience among soybean farmers, increase land allocation and market information dissemination are require to improve productivity and profitability of soybean farming in the region and Ethiopia at large.

Key Words : Soybean, Value chain, Benefit share, Profit share

Introduction nutrients. It can substitute for meat and to Soybean is one of the world’s most some extent for milk. It is a crop capable important pulse crops. Soybean, a short- of reducing protein malnutrition. Soybean day plant, is a very important oil and is an alternative protein source to the rural protein crop. It can grow on all types of families and can be utilized at home in soil, but deep fertile loam with good various forms and the surplus can be sold drainage is most suitable for growth. It is to other consumers and manufacturers for an annual crop, fairly easy to grow, that income Soybean is among the major produces more protein and oil per unit of industrial and food crops grown in every land than almost any other crop. It is a continent (FAOSTAT, 2011). versatile food plant that, used in its various In the major producing countries and forms, is capable of supplying most particularly in Brazil, Argentina, Paraguay

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Analysis of Soybean Value Chain i n Buno Bedele Zone ...... Esayas & Mustefa and the USA soybean contributes opportunities faced in the soybean value significantly to the total value added by chain, and identify the benefit share of the agricultural sector. In these countries, smallholder producers which are not yet soybeans and its sub-products also occupy well studied. an important position in total export Objective of the Study earnings (Jagwe and Owuor, 2004). In The general objective of the study is Ethiopia, regions with high potential for aimed at analyzing soybean value chain in soybean are Benishangul-Gumuz and the study area. The specific objectives of SNNPR. High potential areas for the study are: upgrading of commercial soybean • To identify soybean marketing production are Bedele, and channel in study area zone (Oil Seeds Business • To map the value chain and estimate Opportunities Ethiopia, 2009). the share of profit of actors along the Even if soybean is benefiting the chain society at both micro and macro level of • To identify major constraints and the economy, its marketing operation is opportunities of soybean value chain challenged by lack of information and/or in study area. absence of business oriented agricultural Study Area production system, limited or no access to Chewaka, and districts market facilities infrastructure which are located in Buno Bedele zone. hinder market arrangement and fair share Chewaka is located 600 kilometres west of profit margin among the stakeholders of Addis Ababa. It has 28 administrative (FAO, 2011). Bezabh (2010) also kebeles (villages). The total land area of identifies that, agriculture continues to the district is about 52,227 hectares, and face a number of problems and challenges. the population is estimated to be 78,783 The major ones are lack and/or absence of (CSA, 2008). Gechi is one of the district business oriented agricultural production in the Buno Bedele Zone, is bordered on system, limited or no access to market the south by Didessa, on the east by facilities resulting in low participation of the , on the north by Bedele, the smallholder farmers in value chain or and on the east by the which value addition of their produces. separates it from the Jimma Zone. The Cultivation and production of soybean is 2007 national census reported a total currently constrained by a lack of population for this district of 70,478, of awareness about the crop by farmers and whom 35,307 were men and 35,171 were private sector and by a lack of knowledge women; 5,442 or 7.72% of its population on its potential uses and processing were urban dwellers. Didessa is one of methods. Moreover, there is a lack of the districts in the linkages between the small produce of Region of Ethiopia. It is named after farmers and soybean demand from the Didessa River, a tributary of the Abay factories (Gurmu, 2010). The Ethiopian River. Part of the Buno Bedele Zone, soybean value chain is essentially full of Didessa is bordered on the south by the challenges yet replete with opportunities. Didessa River which separates it from It is constrained by a number of factors. the Jimma Zone, and on the north Hence, this study was focused on analysis by Gechi. The major town in Didessa the constraints, challenges and

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Ethiopian Journal of Environmental Studies and Management Vol. 12 no.5 2019 is Dembi. Soybean is an important cash As a result, 218 soybean producer crop of this district. farmers were selected for the purpose of Types and Sources of Data the study. Both primary and secondary sources Methods of Data Collection were used. Primary data sources were Enumerators who have college soybean producer/farmers from six diploma were recruited and trained to purposely selected Kebeles and soybean implement data collection using traders (wholesalers, retailers, and local structured questionnaire. Data was collectors). Secondary data was collected collected under continuous supervision of from different sources, such as: District the researchers. Descriptive, value chain Agricultural Office, District Trade and and SWOT analyses were used for Market Development Office, District analyzing the data collected from farmers Cooperative Promotion Office, ECX, and traders in the study area. reports, bulletins and websites. Sampling Procedure and Sample Size Result and Discussion Multistage sampling technique was Soybean Marketing Channels employed to select soybean producer Soybean passes through various households for the study. In the first stage, channels until it reaches the final three highest soybean producing districts consumers. Around six channels are were purposively selected. Nine highest identified in the soybean value chain. The soybeans producing Kebeles were shortest channel occurs when producers selected randomly from three districts in directly sell the product to consumers. the second stage. In the third stage, simple This occurs when farmers bring small random sampling technique was used to quantity of the product to market and select the households. Probability when the farm is close to urban centres. proportional to size (PPS) was used to This result is similar to Kotler and determine the number of farmers. The Armstrong (2003), identify that the sample size determination was resolved marketing channels refer to the routes by means of Yamane (1967) sampling taken by from producers to consumers. formula with 95 percent confidence level. The channel in Addis Ababa is not N continuation of the channel in the study n = ………………………(1) 1 + N(e) area, because in the study area the raw n = sample size for the research use product is traded but in Addis Ababa the N = total number of households in four processed one is preferable by consumers. soybean producing Kebeles The Marketing channels of soybean in e = margin of errors at 5% Bunno Bedelle were identified below:

Channel 1: Producer Consumer Channel 2: Producer Retailer Consumer Channel 3: Producer Wholesaler Retailer Consumer Channel 4: Producer Local Collector Wholesaler Retailer Consumer Channel 5: Producer Local Collector Wholesaler Exporter Channel 6: Producer Local Collector Wholesaler Processor Retailer Consumer

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Value Chain Analysis Mapping of Soybean Value Chain in Actors and their Functions in Soybean Buno Bedele Zone Value Chain The value chain map depicts the flow Table 1: Source of soybean input for of soybean in the market, activities carried sample respondents out at each stage of the value chain, the Source of Numbers of Percent structure of actors and the support input Households involved in the value adding process. This Local market 90 41.3 result similar to Schmitz (2005) identified Cooperatives 82 37.6 that, value chain mapping enables to NGO 46 21.1 visualize the flow of the product from Total 218 100.0 conception to end consumer through various actors. Consequently, the current Regarding fertilizers, some farmers value chain map of soybean in Bunno used only organic fertilizer (manure and Bedelle zone is depicted in figure1below. compost) while some farmers used both Input suppliers inorganic and organic fertilizers Input Suppliers are the first actors depending on the land size allocated to involved in the soybean value chain. soybean type produced and the soil Farmers in Bunno Bedelle zone generally, fertility status as perceived by the farmers. responsible to supply agricultural inputs Most private vendors supply pesticide. like fertilizers, herbicides, pesticides and Producers farm implements, which are essential Soybean producers are the first link in inputs at the production stage. For all the marketing channel and the second soybeans produced in Bunno Bedelle actors in the soybean value chain. They zone, soybean producers used from local are the major actors who perform most of market, cooperatives and NGO. the value chain functions right from farm inputs preparation on their farms or procurement of the inputs from other sources to post harvest handling and marketing. The major value chain functions that soybean producers perform include land ownership, production, yield and quantity sold.

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Fig. 1: Value chain map of soybean in Bunno Bedelle Zone Represents physical flow of inputs and products

As indicated in table 2, the average farmers who produce in Bunno Bedelle land holding size of farmers who have zone frequently doesn’t access extension participated in the production of soybean services and support in training and in 2017/2018 production season is found advisory from Bunno Bedelle Cooperative to be 1.17 hectare per household. promotion and Agriculture Office. They The average soybean yield is are also beneficiaries from the NGO in estimated to be 27.97 qt/ha in the study accessing bio fertilizer and improved area (Table 2). The yield show much soybean seed variety. variation among the zones because those

Table 2: Land holding and average yield of soybean Variables N Mean Std. Deviation Land size in hectare 218 3.1 2.3 Land size used for soybean 218 1.17 1.60 quantity of soybean produced 218 27.97 33.84 quantity supply to the market 218 23.025 28.005 Quantity of soybean sold 218 22.76 28.34 Quantity of soybean consumed 218 1.16 0.95

As it stated in table 7 above the soybean supplied to the market in average marketed supply of soybean by 2017/2018 production season was found producers was 22.76 quintals in 2017/18 to be 142 and 0.25 qt respectively. production season with maximum of 142 Local Collectors and 0.25 quintals. As indicated in table 2, It is the first link between producers the maximum and minimum quantity of and other traders. According to Bezabih

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(2010), these are small trading individuals clean the soybean and look for export sale who collect the product in small quantity outlets. The unions prefer to participate in directly from producers and resell to the ECX marketing framework as buyers brokers/wholesalers, oil millers and rather than as sellers. This is because they exporters in a more marketable quantity. have developed the necessary financial They act as intermediaries who do not add and organizational capacity to export. The value but merely snatch the benefit that government and/or concerned could have accrue to the producers. They governmental organizations are doing use their financial resources and their local their best to encourage unions to knowledge to bulk soybean from the undertake high-value addition activities, surrounding area. They play important including export and import of role and they do know areas of surplus commodities and inputs. well. Collectors are the key actors in the Exporters soybean value chain, responsible for the The major operator in the soybean trading of soybean from production areas market is the exporter. These are the to wholesale and retail markets in the largest buyers of soybean from the Bunno Bedelle zone. wholesalers. These large-scale exporters, Wholesalers mostly located in Addis Ababa, have their They are larger suppliers who have own buying branches. These buyers buy better capacities in terms of finance and most of the exported soybean using other facilities. They provide both price different instruments. They buy on the information and advance payments for spot market, on cash from anyone willing selected reliable clients. They have better to sell, competing merely on prices. storage, transport and communication According to the study result, all of access than other traders do. producers of soybean do not directly Retailers export their produce themselves. They Retailers are also important primary instead sell their produce to different types actors in the soybean value chain in the of traders, which constitute the different study area. Their duty is to buy the product sale outlets for the farmer. from farmers, collectors and wholesaler Supporting Actors one and store it to their temporary storage. Such actors are those who provide Then by sorting and packing they sell raw supportive services including training and soybean to nearby consumers by extension, information, financial and negotiation. research services. Access to information Union and Cooperatives or knowledge, technology and finance One sales outlet of the small-scale determines the state of success of value farmer is the cooperatives and unions. chain actors. Primary cooperatives, micro Unions collect soybean from each farm finance, NGOS and Trade and Market household through their member Development Office are main supporting cooperatives. The cooperatives in turn actors who play a central role in the collect the soybean mainly from their provision of such services. member farmers. The unions store and

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Table 3: Proportion of households accessing services Variable Categories Percent Access to market information yes 57.3 Membership to cooperative yes 45.0 Access to extension services yes 46.7 Participate in agricultural extension yes 54.1 package program Non/off farm activities yes 43.6 Credit access yes 16.5

Access to Extension Services farmers, and rarely radio served as the The survey result revealed that 46.7% sources of market information. Despite the of the sampled have been taken advice availability of these formal sources, none service on the soybean value chain in of the studied individuals neither Bunno Bedelle zone. OoA through its DA producers nor traders responded using this backed by the zone subject matter channel of information (radio and specialists is the major actor who provides newspapers) as a source. The main information and advisory service on reasons are suggested as; the information soybean production and management is not timely and reliable. Some producers practices. In addition, the contact of tried to get scanty and outdated price development agents with producer information from their respective farmers was not frequent and regular. cooperatives. Even there are times to Furthermore, sample farmers indicated change the price within a day. Soybean that they are getting information exporters had better access to all particularly of input availability and price information through electronic media, the from primary cooperatives and Kebele internet and played significant role in administration. price decision. In the existing marketing Access to Market Information system, cooperatives and small traders More than 57.3% of the sampled followed the price trends of big households have accessed market institutional buyers and exporters in their information with significant difference in price setting. Marketing costs and benefit access among farmers in the different shares of actors in soybean value chain. PKAs. This study testified that almost all Table 4 indicates different types of soybean-marketing actors (producers to marketing cost related to the transaction of exporters) had market information access soybean by collectors, wholesalers and though timeliness and quality of exporter; and the benefit share of each information is questionable. marketing actors. At local level friends, client traders, personal visit of the market and nearby

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Table 4: Price of soybean at different market level, 2017/18 Item(birr/qt) Producer Collector Wholesaler Exporter Hori.sum Purchasing cost - 691.60 746.10 879.50 2317.20 Production cost 550 - - - 350 Marketing cost Material cost 10 10 10 10 40 Transporting cost 10 15 25 25 75 Communication cost - 10 25 25 65 Loading/unloading - - 10 10 20 Tax - - 2 2 4 Cleaning - - 20 - 20 Total marketing cost 20 35 72 67 194 Total cost 570 726.6 818.10 946.5 3061.20 Average selling price 691.60 746.10 879.50 1100 3417.20 Gross margin (value added) 141.60 54.5 133.4 220.5 550 Market share margin (%) 25.8 9.9 24.3 40 100 Profit margin(net margin) 121.60 19.5 61.4 153.5 356 Share profit % 34.2 5.5 17.2 43.1 100 Note: 1$(USD) =27.5 Ethiopia birr

Each of the soybean value chain actors Major Constraints and Opportunities of adds value to the product as the product Soybean Value Chain passes from one actor to another. In a way, Major Constraints of Soybean Value the actors change the form of the product Chain through improving the grade by sorting, Almost all soybean producer farmers cleaning or create space and time utility. responded that there were market Compared to farmers, traders’ operating problems in the study area. The major expense is much less but their profit soybean marketing constraints are related margin is more than that of farmers. That with non-availability of market/limited means by simply buying from the farmers access to market, low price of product, and and selling to consumers, traders took lack of storage, lack of transport, low above 76% of the total profit margin. quality product demand and lack of While farmers, doing all the work of packaging material. The major soybean producing soybean and bearing the marketing constraints mentioned by associated risks, took only 34 % of the traders are related with the limited power profit margin. This disproportionate share of price setting, the problem of supply of benefits is the reflection of power shortage, lack of storage facility, problem relationship among actors. in information flow, low product quality and lack of support from concerned bodies.

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Table 5: Major constraints of soybean value chain (producers) Major problem Total household (218) Number Percent Collateral problem to get credit 182 83.5 Low price of product 167 76.6 Lack of packaging material 155 71.1 Lack of storage 191 87.6 Lack of transport 120 55 Price fluctuation 169 77.5 Low access to improved inputs 176 80.7 Low negotiation (bargaining) power of producers. 127 58.7 Poor linkage with value chain actors 198 90.8

Low Selling Price of Soybean Problems Related to Transport Soybean production is associated with Out of the major soybean producing high cost of production. However, sells areas, Bunno Bedelle zone is relatively price of seed soybean is reported as low. good in terms of road condition, The survey result indicated that 76.6% of availability and transport rates. About the producers mentioned low sells price of 55% of the assemblers reported that they soybean as one of the major problems in lack transport for marketing soybean. The soybean marketing. rate of transportation was so high for Packaging Material localities away from the main road. This The availability, cost and quality of high transportation cost had implications packaging materials were serious issues on the price paid to producers. Beside, at considered by farmers during the survey. local level there existed seasonal shortage About 71.1% of the farmers mentioned of transport vehicles consequently created unavailability of packaging material (sisal high transportation costs. sack), from this, 34.4% of them reported Major Opportunities of Soybean Value high cost of packaging material (sisal Chain sack) and 36.7% of them mentioned poor Production potential: The soybean is one quality of packaging materials as their of the most important food plants of the major problems on packaging materials world, and seems to be growing in issue. importance. Bunno Bedelle has the Storage advantage of having good local varieties, About 87.6% of the farmers favourable growing conditions, and vast considered unavailability of storage suitable area for soybean growing. facility as a problem. Among the Soybean is a short-day plant. It can grow respondents about 45% indicated it is on all types of soil, but deep fertile loam costly for them to rent storage and 42.6% with good drainage is most suitable for of them reported loss of products at growth. It is an annual crop, fairly easy to storage as problems. Absence of modern grow, that produces more protein and oil warehouses in the nearby areas has per unit of land than almost any other resulted in mishandling of output. crop. Producers are unable to build their own Source of feed: It is a versatile food plant storage devices due to tenure insecurity. that, used in its various forms, is capable of supplying most nutrients. It can

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Analysis of Soybean Value Chain in Buno Bedele Zone...... Esayas & Mustefa substitute for meat and to some extent for Conclusion milk. It is a crop capable of reducing Soybean value chain analysis of the protein malnutrition. Soybean is an study areas revealed that the main value alternative protein source to the rural chain actors were input suppliers, soybean families and can be utilized at home in producers, wholesalers, retailers, various forms and the surplus can be sold collectors, processors, exporters and to other consumers and manufacturers for consumers. Compared to farmers, traders’ income Soybean is among the major operating expense is much less but their industrial and food crops grown in every profit margin is more than that of farmers. continent. Regardless of what they are That means by simply buying from the called, soybeans are a promising and farmers and selling to consumers, traders proven source of plant protein and edible took above 76% of the total profit margin. oil. Soybean is a source of edible oil While farmers, doing all the work of (second most consumed oil in the world producing soybean and bearing the after palm oil) and is used to produce associated risks, took only 34% of the livestock feed. Many other products with profit margin. a soybean basis are also directly used for The local market, cooperative and human consumption (soymilk, soy yogurt, agriculture office were the main sources of snacks, soya sauce, protein extract and input supply for the soybean producers. concentrates, etc.) (FAOSTAT, 2011). The main supporters of the soybean value Availability of labour: Bunno Bedelle chain in the study areas are district has the advantage of having cheap labour agricultural office, District that is important manual harvest of administrations, research centre, District soybean is few of the advantages we have trade and market development, ECX and at hand. Soybean production is labour- banks. Constraints hindering the intensive and there is available labour development of soybean value chain are force in the country. From this labour found in all the stages of the chain in the force, some are migrating to Bunno study area. Bedelle in search of job opportunity. Therefore, it is possible to use this labour Recommendations as major input in the production of Farmers do not have access to soybean. It is possible to make labour an information on improved production affordable input by increasing the practices, market intelligence, value productivity of soybean. addition, better post-harvest handling and Access to foreign markets: As FAO demands on quality and standards in STAT (2011), noted soybean is one of the different markets. Such information may world’s most important pulse crops. be included in state extension programs Soybean is the leading oil seed crop and for dissemination to all stakeholders in the contributed about 35% of the world’s soybean seed value chain. vegetable oil production. It is also the world’s primary livestock feed References supplement. We can also take the Bezabih Emana, (2010). Market advantage of the Israel market, which for assessment and value chain analysis political reasons cannot import from Arab in Benishangul Gum Regional State, countries such as Sudan. Ethiopia. SID-Consult-Support

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Integrated Development, Addis Kotler, P. and Armstrong, G. (2003). Ababa, Ethiopia. Principle of marketing, 10th Edition. CSA (2008). Area and production of crops Hall of India Pvt. Ltd. New Delhi. pp (private peasant holdings, meher 5-12. season) Agricultural Sample Survey Oil Seeds Business Opportunities 2007 / 2008 (2000 E.C.) (September Ethiopia, (2009). Agriculture – December 2007) Vol. I Research; 2(1): 123. (J.H.M. FAO (2011). FAOSTAT Accessed on Wijnands, J. Biersteker, E.N. van http://faostat.fao.org/default.aspx. Loo) Shiferaw Gurmu & Grant C. Gurmu, F. (2010). Overview of Soybean Black & Paula E. Research in Ethiopia. Hawassa: Schmitz, H. (2005). Value chain analysis SARI. ICARDA 2010. Ethiopia and for policy makers and practitioners. ICARDA. Ties that Bind. No.29. International Labour Office and Aleppo, Syria: ICARDA. ICRISAT Rockefeller Foundation, Geneva, 2011. Switzerland. Jagwe, J., Ouma, E. and Machethe, C. Yamane, T. (1967). Statistics: An (2007). Transaction costs and Introductory Analysis, 2nd Ed. New smallholder farmers’ participation in York: Harper and Row. Banana Markets in the Great Lakes Region, Pretoria, South Africa

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