View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by CGSpace PRICE AND PERFORMANCE ANALYSIS OF INDIGENOUS SHEEP BREED MARKETING IN MENZ DISTRICTS OF ETHIOPIA M.Sc. Thesis FEVEN TADESSE BIHON December 2009 Haramaya University PRICE AND PERFORMANCE ANALYSIS OF INDIGENOUS SHEEP BREED MARKETING IN MENZ DISTRICTS OF ETHIOPIA 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 Feven Tadesse Bihon December 2009 Haramaya University 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 Feven Tadesse entitled “Price and Performance Analysis of Indigenous Sheep Breed Marketing In Menz Districts of Ethiopia”. We recommend that it be submitted as fulfilling the thesis requirement. Dr Fitsum Hagos ______________ ___________ Major Advisor Signature Date Dr Girma Tesfahun _________________ ___________ Co-Advisor Signature Date Dr Derek Beker _________________ ___________ 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 Feven Tadesse 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). _____________ ______________ ___________ Chair Person Signature Date _____________ _________________ ___________ Internal Examiner Signature Date _____________ _________________ ___________ External Examiner Signature Date ii DEDICATION To my father, who has been a source of inspiration in all my life, and my mother who showed me the way of being a WOMAN! iii 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 M.Sc. 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: Feven Tadesse Bihon Signature: _____________ Place: Haramaya University, Haramaya Date: December 9, 2009. iv BIOGRAPHICAL SKETCH The author was born on January 23, 1981 in Mekelle, Tigray. She attended her elementary school at Lebe-Fana Primary and Junior Secondary School and her secondary school at Bole High School in Addis Ababa. In 1999/2000 she joined the Faculty of Business and Economics at Mekelle University, and graduated with B.Sc. degree in July 2004. After her graduation, she was employed in Nile Private College (Mekelle branch) as Graduate assistant. Then after one year she joined the Relief Society of Tigray (REST) where she served as a gender officer until 2007. Finally, she joined the School of Graduate Studies of the Haramaya University in 2007. v ACKNOWLEDGEMENTS I am very grateful to my major supervisor, Dr. Fitsum Hagos for his guidance and encouragement throughout the course of this paper. I extend my special gratitude to my co- advisor Dr. Girma Tesfahun for his commitment to guide me, and his generous comments and feedback. I would also like to acknowledge my co-advisor Dr. Derek Baker for his insightful comments and suggestions. I am also very grateful to Dr. Aynalem Haile, ILRI supervisor as well as coordinator of ILRI-BOKU sheep breeding program for his excellent supervision and guidance. I am indebted to the International Livestock Research Institute (ILRI), project being implemented by International Centre for Agricultural Research in the Dry Areas (ICARDA)- International Livestock Research Centre (ILRI)-University of Natural Resource and Applied Sciences (BOKU) and Ethiopian research systems, for financial support, provision of office, computer access and excellent working environment during the data analysis and thesis write- up. I would like to thank Debre Berhan Agricultural Research Center (DBARC) for facilitating my research work. Special thanks go to the present manager of the center, Yeshitla Mernie and Livestock department head Dr Solomon Gizaw for their keen cooperation in providing transport facilities. My special thanks also go to Tesfaye Getachew, Asfaw Bisrat, and Tesfaye Zewde, for their kind treatment and assistance during data collection. vi ABBREVIATIONS ACSI Amhara Credit and Saving Institute ANRS Amhara National Regional State BOFED Bureau of Finance and Economic Development CSA Central Statistical Authority EEA Ethiopian Economic Association FAO Food and Agriculture Organization FGLS Feasible Generalized Least Square Estimation GDP Gross Domestic Product Ha Hectare HCSE Heteroscedasticity Consistent Standard Error Estimation IBC Institute of Biodiversity Conservation ICARDA International Center for Agricultural Research in the Dry Areas IFSP Integrated Food Security Program IFPRI International Food Policy Research Institute ILRI International Livestock Research Institute Kms Kilometres LMA Livestock Marketing Authority m.a.s.l Meters above sea level MEDAC Ministry of Economic Development and Cooperation MOA Ministry of Agriculture NGO Non Governmental Organization OLS Ordinary Least Squares SCP Structure Conduct Performance TGMM Total Gross Marketing Margin VIF Variance Inflation Factor vii TABLE OF CONTENTS STATEMENT OF THE AUTHOR iv BIOGRAPHICAL SKETCH v ACKNOWLEDGEMENTS vi ABBREVIATIONS vii LIST OF TABLES x LIST OF FIGURES xi LIST OF TABLES IN THE APPENDIX xii ABSTRACT xiii 1. INTRODUCTION 1 1.1. Background 1 1.1.1. Sheep production in Ethiopian highlands 3 1.1.2. Socio-economic importance of sheep 4 1.2. Statement of the Problem 5 1.3. Objectives of the Study 7 1.4. Research Questions 7 1.5. Scope and Limitations of the Study 8 1.6. Significance of the Study 8 1.7. Organization of the Study 9 2. LITERATURE REVIEW 10 2.1. Basic Concepts 10 2.2. Methods of Evaluating Efficiency of Marketing System 11 2.3. Structure, Conduct and Performance (SCP) Model 12 2.4. Marketing Costs and Margins 14 2.5. Structure and Performance of Livestock Markets in Ethiopia 15 2.6. Price Analysis 18 3. METHODOLOGY 21 3.1. Description of the Study Area 21 3.2. Data Requirements 29 3.3. Sampling and Method of Data Collection 29 3.4. Methods of Data Analysis 30 3.4.1. Analysis of market structure 31 3.4.2. Analysis of market conduct 36 viii 3.4.3. Analysis of market performance 36 3.4.4. Determinants of gross margin 37 3.4.5. Price analysis 42 4. RESULTS AND DISCUSSION 46 4.1. Organization of Sheep Marketing System 46 4.1.1. Types of markets 46 4.1.2. Market yard facilities 46 4.1.3. Mode of transportation 47 4.1.4. Participants and channels of sheep marketing 48 4.2. Market Structure 50 4.2.1. The degree of market concentration 51 4.2.2. Market barriers 51 4.2.3. Degree of market transparency 56 4.3. Market Conduct 57 4.4. Marketing Cost and Margins 57 4.4.1. Marketing cost and profit 57 4.4.2. Marketing margins 60 4.4.3. Determinants of gross margin 60 4.4.4. Marketing channel efficiency 65 4.5. Price Analysis 68 4.5.1. General results of the model 68 4.5.2. Determinants of prices 70 5. CONCLUSIONS AND RECOMMENDATIONS 75 5.1. Conclusions 75 5.2. Recommendations 77 6. REFERENCES 79 7. APPENDIX 85 ix LIST OF TABLES Table Page 1. Topography of the study area 21 2. Area coverage, population size and density by districts 23 3. Average cultivated and grazing land holding 24 4. Livestock Population as of 2007 25 5. Sheep market characteristics 47 6. Buyers/sellers concentration ratio for sample markets 51 7. Type of explanatory variables and reference level. 52 8. Variance Inflation Factors (IVF) of the continuous explanatory variables 53 9. Econometric results of the Logit model estimation 54 10. Average price and marketing costs of sheep supplied to Addis Ababa (Sholla) terminal market 59 11. Marketing margins for sheep supplied to Addis Ababa Sholla terminal market 60 12. Variables included in analysis and reference level. 61 13. Regression result of OLS and FGLS Estimations 62 14. Efficiency of different marketing channels of sheep sample markets 67 15. Variables included in analysis and reference level 69 16. Regression result of OLS and heteroscedasticity consistent standard error estimation 72 17. Regression result of OLS and Feasible Generalized Least Square Estimation 73 x LIST OF FIGURES Figure Page 1. Typical structure of Ethiopian livestock market 17 2. The study area (Menz Mama Meder, Menz Gera Meder) 22 xi LIST OF TABLES IN THE APPENDIX Appendix Table Page 1. Total number of sheep offered and sold at Mehal meda market 86 2. Total number of sheep offered and sold at Mollale market 86 3. Traders market share by average number of sheep purchased on sample marketing days 86 4. Price Spread in marketing channels of sheep from Mehal meda market 87 5. Price Spread in marketing channels of sheep from Mollale market 90 6. Sheep traders questionnaire 93 7. Market survey questionnaire 100 xii PRICE AND PERFORMANCE ANALYSIS OF INDIGENOUS SHEEP BREED MARKETING IN MENZ DISTRICTS OF ETHIOPIA ABSTRACT Sheep have multiple roles in the livelihood of resource poor farmers as source of income, meat, skin, manure, strong wool or long hairy fleece, and as buffer resources during crop failures.