International Journal of Agricultural Marketing IJAM Vol. 7(1), pp. 233-243, February, 2020. © www.premierpublishers.org, ISSN: 0521-9965 Research Article Determinants of Coffee Market Outlet Choices in Gewata District, Kaffa Zone, Southwest Ethiopia Engida Gebre1*, Lemma Zemedu2, Bosena Tegegne3 1Department of Agricultural Economics MizanTepi University, P.O. Box: 260, Ethiopia 2,3School of Agricultural Economics and Agribusiness Haramaya University, Ethiopia; P.O. Box:138. Ethiopia has a broad genetic diversity among its coffee varieties. Coffee is one of the cash crop which is highly marketed through world next to petroleum. It has a great contribution in earning foreign currency and it is an income source for around 20 % Ethiopian population either directly or indirectly. Linking small producers to markets are widely recognized as a valuable development route and market outlets choice is one of the most important farm household decisions to sell their produce and has a great impact on household income. Even if the study area has great potential of coffee production, the farmers faced the marketing problem particularly in choice of appropriate coffee market outlets. This study was therefore carried out to analyze determinants of coffee producers’ market outlet choice decisions in Gewata district. Purposive and two stage random sampling technique was used and data was collected from 121 coffee producers. Multivariate probit model (MVP) was used to analyze factors influencing the choice of coffee market outlets choice by coffee producers. The multivariate probit model results indicated that quantity of coffee sold, education level, frequency of extension contacts, household size, years of farming experience, distance to nearest market, off/non-farm income, land under coffee and transport access significantly influenced coffee producers’ choice of market outlet. Therefore, strengthening farmers coffee cooperative and enhancing the financial capacity of cooperative with functional collection center, improving accessibility of transport services and developing infrastructure, improving farmers’ knowledge through adult education as well as their experience sharing with other coffee producing farmers, improving productivity through strengthening supportive institutions (extension service provider). Keywords: Market Outlet Choice, Multivariate Probit, Coffee, Gewata INTRODUCTION Coffee is the second most exported commodity next to oil, 2016), that is, more than half of its total production. The and employs over 100 million people worldwide (Petit country is the world’s fifth largest producer after Brazil, 2007; Pedegrast 2010; Gray et al., 2013). The production Vietnam, Colombia, and Indonesia, accounting for about is estimated at around 141.9 million bags in crop year 4% of global coffee production. If we consider Arabica 2014/15, while an initial estimate of world coffee alone, Ethiopia is the third largest producer after Brazil and consumption in year 2014 comes to 149.3 million bags, Colombia (ICO, 2015). Despite its high value, it has to be this suggests about the existence of resilient demand for noted that coffee production potential of the country is not coffee worldwide (ICO, 2015). yet exploited. In 2014/15, it held only 3.95 percent of Ethiopia’s cultivation area, corresponding to 561,761.82 Ethiopia is the single largest African producer of coffee with about half of its production going for export. According *Corresponding Author: Engida Gebre, Department of to the Central Statistical Agency of Ethiopia (2015), the Agricultural Economics MizanTepi University, P.O. Box: country produced 420 million kilograms of coffee beans 260, Ethiopia. E-mail: [email protected]; and consumed up to about 220 million kilograms (ICO, [email protected] Determinants of Coffee Market Outlet Choices in Gewata District, Kaffa Zone, Southwest Ethiopia Gebre et al. 234 hectares and 4,199,801.56 quintals of produce was emanates from limited infrastructure. This results them obtained from these crops with average productivity of inability to force local collectors and traders’ price setting 7.48 quintal per hectare in the same agricultural year and exploitation at farm get level. The market and (CSA, 2015). Overall, it is estimated that there is a marketing system of the area is generally dominated by potential of 6 million hectares of cultivable land suitable for conventional system of marketing and producers are coffee production (Mekuria et al., 2004). forced to sale directly for conventional transaction root which they do not get premium price for their coffee Smallholder farmers produces coffee on less than two produce and results low market margins. hectares of land and supply Ninety five percent of Ethiopia’s coffee produces, while the remaining five Coffee growers in the study area produces coffee for percent grown on modern commercial farms (Taye, 2013 market purpose as well as home consumption. Even if and USAID, 2010). With approximately 95% of coffee coffee is one of the crucial crop both economically and production in Ethiopia has been considered as organic, socially in the study area, the market outlet choice study coffee production in the country is categorized into four have not yet been under taken. In order to maximize the major systems of production namely forest coffee, semi- benefits that they may earn, farmers have to make forest coffee, garden coffee and plantation coffee (Ministry appropriate decisions as to where they should sell their of Trade, 2012). product. However, there are various factors that affect households’ decision to select appropriate market outlet Agricultural markets in Ethiopia before 2008 had been for delivering their products to the market. Identifying these characterized by high costs and risks of transacting and factors is very important in terms of investigating possible little access to market information due to a long-chain areas of interventions that may help farmers to maximize supply of coffee with several market intermediaries (ECX, benefits out of their coffee production and marketing 2011). It was fragmented and not well integrated into a activities. wider market system, which increases transaction costs and reduces farmers’ incentives to produce for the market. Linking small producers to markets are widely recognized METHODOLOGY as a valuable development route (Alemu and Meijernik, 2010). The government and other stakeholders have Description of the Study Area focused efforts at linking smallholder farmers with these channels by assisting farmers form groups and organizing Gewata district is located in Southwest of Ethiopia, Kaffa forums where farmers and the buyers can link. zone. It is located 86km away from Bonga town, 813km from Hawasa and 546km from Addis Ababa. The area lies Marketing outlet choice is one of the most important farm within 07°25- 7°50N Latitude and 35°56-35°89E household decisions to sell their produce in different Longitude. It is bordered in the South by Gimbo and Chena marketing outlets and has a great impact on household district, in the West by Bitta and Gesha district, in the North income (Shewaye, 2016). Market outlet choices are a by sayilem and Oromia region and in the East bordered by household-specific decision, and several drivers have to Oromia region (GDAO, 2016). The district has a total of 30 be considered as a basis for such decision. Various kebeles of which 27 are rural based kebele administration empirical studies pointed out that smallholder farmers’ areas and 3 are urban kebeles. decision to choose different market outlets can be affected by household characteristics, resource According to GDHO (2016), the total population of the endowments, and access to different market outlets, district was 91,645 of which male accounts for 44906 prices, and transportation cost (Berhanu et al, 2013; Moti (49%) and female accounts 46739 (51%) of the total. Of and Berihanu, 2012 and Shewaye, 2016), and they the total households 97.32% are rural agricultural confirm that lack of market knowledge or difficulties in households. The estimated total area coverage of the accessing markets that are more rewarding makes districtis 91,500 hectares. Gewata district is well known by smallholder farmers to transact their produce through an high vegetation cover and most of the surrounding area is outlet offering low price. However, even if such studies covered by tropical rain forest comprising a rich mixture of were taken by different author in different part of the woody species arranged in many stories. country in relation to market outlet choice of the of different agricultural commodity in Ethiopia, but no study was not The area is characterized by a long rainy season that taken in the study area on the market outlet choice of extends from March /April to October. The mean annual coffee as well as other agricultural commodity except a rainfall ranges from 1800 mm to 2200mm. Over 85% of the research conducted by (Kassa et al., 2017) on honey total annual rainfall occurs in 8 months rain season, with market outlet choice of honey despite to important of mean monthly values in the range of 125- 250mm occurs market outlet choice decision on household income. in 8 months long rain season. The mean temperature of the district ranges from 16c (lowest) and 22c highest. Coffee producers in Gewata district are widely The district is dominated by midland agro ecology which is characterized by limited marketing linkage which favorable for coffee production. The dominant