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Marketing Management Thesis and Dissertations

2018-03

Wheat Value Chain Analysis: The Case

of Koga Irrigation Project, Amhara
Region, Ethiopia

Samson, Fikrie

http://hdl.handle.net/123456789/8705
Downloaded from DSpace Repository, DSpace Institution's institutional repository
 BAHIR DAR UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
MARKETING MANAGEMENT PROGRAMME

WHEAT VALUE CHAIN ANALYSIS:

THE CASE OF KOGA IRRIGATION PROJECT, AMHARA REGION,
ETHIOPIA

MA Thesis
By
Samson Fikrie Gebeyehu

January 2018

Bahir Dar, Ethiopia

 BAHIR DAR UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
MARKETING MANAGEMENT PROGRAMME

WHEAT VALUE CHAIN ANALYSIS:

THE CASE OF KOGA IRRIGATION PROJECT, AMHARA REGION,
ETHIOPIA

MA Thesis
By
Samson Fikrie Gebeyehu

Submitted to the Department of Marketing Management in Partial Fulfillment

of the Requirements for the Degree of Master of Art (MA) in MARKETING
MANAGEMENT

January 2018

Bahir Dar, Ethiopia

 THESIS APPROVAL SHEET

As member of the Board of Examiners of the Master of Art (MA) thesis open defense
examination, we have read and evaluated this thesis prepared by Mr. Samson Fikrie
Gebeyehu entitled Wheat Value Chain Analysis: The Case of Koga Irrigation Project,
Amhara Region, Ethiopia. We hereby certify that, the thesis is accepted for fulfilling the
requirements for the award of the degree of Master of Art (MA) in Marketing
Management

Board of Examiners

________________________ _______________ ______________

Name of External Examiner Signature Date

_________________________ _________________ _______________

Name of Internal Examiner Signature Date

_______________________ _________________ _______________

Name of Chairman Signature Date

I
 DECLARATION

This is to certify that this thesis entitled Wheat Value Chain Analysis: The Case of
Koga Irrigation Project, Amhara Region, Ethiopia submitted in partial fulfillment of
the requirements for the award of the degree of Master of Art in Marketing Management
to the Graduate Program of College of Business and Economics, Bahir Dar University by
Mr. Samson Fikrie Gebeyehu (ID. No. BDU 0803289 PE) is an authentic work carried
out by him under our guidance. The matter embodied in this project work has not been
submitted earlier for award of any degree or diploma to the best of our knowledge and
belief.

Name of the Student

Samson Fikrie Gebeyehu

Signature and date _________________________

Name of the Supervisors

Tadesse Mengistie (Ass. Prof.) (Major Supervisor)

Signature and date___________________________

II
 ACKNOWLEDGEMENTS
I would like to express my deepest thanks to my major advisor Tadesse Mengistie (Ass.
Prof.) for his constructive comments, inspiring guidance and sociable encouragement from
proposal write up until to submission of final thesis document.

I would also like to thank to all my data collectors for their honest relation and interested
work during the field survey. My acknowledgment will not do justice if I fail to mention
the farmers and trader households who took part in the survey work. I would like to thank
them all for sharing their precious time with me.

My thanks also go to Mr. Shiferaw Ayenew, Mr. Tewachew Abebe, and Mr. Ale Bezie
and for their kind cooperation and helping me during the data collection and the entire
study period. In addition, friends and family members have made an enormous
contribution for the success of my work: Chalachew Gebeyehu, Mikru Shiferaw, Moges
Abebe, and Teshager Awoke.

Finally I extend my great thanks to all my beloved family members for their contribution
during my research work and throughout my life.

Above all, I extend my special thanks to the Almighty God for all that he has done for me.

III
 DEDICATION

I dedicate this manuscript to my grandmother Mrs. Asdeber Abera who passed away before
see my successes (may God rest her soul in peace), my mom, Tesfaway Yemanebirhan, and
my friends Moges Abebe, Mikru Shiferaw and Mastewal W/mariam .

IV
 ABBREVIATIONS AND ACRONYMS

AAFC Agriculture and Agri-Food Canada

ACSI Amhara Credit and Saving Institution
ATA Agricultural Transformation Agency
BoA Bureau of Agriculture
CIAT Centro International de Agricultural Tropical
CSA Central Statistical Agency
EIAR Ethiopian Institution of Agriculture Research
FAO Food and Agriculture Organization
GDP Gross Domestic Product
GMM Gross Market Margin
GMMP Gross Market Margin of Producer
GTZ German Technical Cooperation
HH House Hold
KIP Koga Irrigation Project
MAFAP Monitoring Africa Food and Agriculture Policies
MM Marketing Margin
MoARD Ministry of Agriculture and Rural Development
NMM Net Marketing Margin
Qt Quintal
RSCCo Rural Saving and Credit Cooperatives
TGMM Total Gross Marketing Margin
UNCTAD United Nations Conference on Trade and Development
UNDP United Nation Development Programme
UNIDO United Nation Industrial Development Organization
USAID United States Agency for International Development

V
 ABSTRACT
This study was aimed to analysing value chain of wheat, the case of Koga Irrigation
project in Amhara region Ethiopia. The main objectives of the study were to show the
basic structure of wheat value chain, identify the actors of and their roles with in the value
chains, and identify major opportunities and constraints in the wheat value chain. In this
study, both primary and secondary data were used. The primary data for this study were
collected from 121 producers, 27 retailers, 6 processors, 7 local collectors and 6
wholesalers selected by using appropriate sampling procedures. Producers, local
collectors, wholesalers, retailers, cooperatives, unions, processors and urban retailers
were found to be important actors in the wheat value chain. Value chain supporters were
Amhara bureau of agriculture, Woreda agricultural office, Koga irrigation project office,
office of trade and industry, Amhara credit and saving institution (ACSI), district
cooperative promotion office, Aromia seed enterprise and NGOs (ISSD). Among cost of
producers labour cost takes the highest cost (47.12) followed bay fertilizer and seed costs
which were 17.22% and 16.67% respectively. Out of the total gross marketing margin of
wheat, 31.03%, processors received the highest of all marketing actors which is 22.4%
and local retailers received the lowest margin which is 1.7%. The remaining 2.07%,
7.32%, and 2.6% of marketing margin were received by retailers, wholesalers and
cooperatives respectively along different channels. Price fluctuation, lack of working
capital, wheat product quality problem, lack of market information was constraints. On
the other hand increasing demand of the product, improvements in the infrastructures, and
increasing number of wheat processors were major opportunities reported by
respondents. Therefore, policies aiming at increasing producers’ provision of improved
seed varieties, improving and increasing credit provider institutions, strengthening
cooperatives, improving irrigation channel designing (irrigation water distribution),
improving market information system, and exercising contractual farming are
recommended to accelerate the chain’s development.

Key words: Wheat, value chain, value chain actors, margin, market channel

VI
 Table of Contents
THESIS APPROVAL SHEET ....................................................................................... I
DECLARATION ..................................................................................................... II
ACKNOWLEDGEMENTS........................................................................................ III
DEDICATION ....................................................................................................... IV
ABBREVIATIONS AND ACRONYMS ............................................................................ V
ABSTRACT .......................................................................................................... VI
LIST OF FIGURES ................................................................................................ VII
LIST OF TABLES................................................................................................ VIII
1. CHAPTER ONE ............................................................................................. 1
1.1. Introduction ......................................................................................... 1
1.2. Statement of the Problem .......................................................................... 3
1.3. Research Questions ................................................................................. 5
1.4. Research Objectives ................................................................................ 5
1.5. Significance of the Study ........................................................................... 6
1.6. Scope of the Study .................................................................................. 6
1.7. Limitations of the Study ........................................................................... 6
2. LITERATURE REVIEW ................................................................................... 8
2.1. Theoretical Literature Review .................................................................... 8
2.1.1. Definition and Concepts ........................................................................ 8
2.1.2. Value Chain Analysis ......................................................................... 13
2.1.2.1 Dimensions of Value Chain ................................................................... 15
2.1.3. Value Chain Study Approaches .............................................................. 18
2.1.3.1 Value chain Mapping ......................................................................... 19
2.1.3.2 Market System Performance Analysis ...................................................... 19
2.2 Review of Empirical Study ...................................................................... 22
2.3 Conceptual Framework .......................................................................... 24
3 RESEARCH METHODOLOGY ........................................................................ 25
3.1 Research Design .................................................................................. 25
3.2 Description of the Study Area ................................................................... 25
3.3 Data Type, Sources and Collection Method .................................................... 25
3.4 Sampling Technique and Sample Size .......................................................... 26
3.5 Methods of Data Analysis ........................................................................ 28
3.5.1. Descriptive Statistics .......................................................................... 28
3.5.2. Narrative Analysis ............................................................................. 28
4. RESULTS AND DISCUSSION........................................................................... 29
 4.1. Household Characteristics ....................................................................... 29
4.1.1. Demographic Characteristics of Sample Households ...................................... 29
4.1.2. Institutional Factors ........................................................................... 31
4.1.3. Demographic Characteristics of Traders ................................................... 34
4.2. Input Utilization and Trend of Wheat Production ............................................ 35
4.2.1. Input Utilization ............................................................................... 35
4.2.2. Trend of Wheat Production ....................................................................... 39
4.3. Actors, Their Role and Relationship in Wheat Value Chain ................................. 40
4.3.1. Primary Actors ................................................................................ 40
4.3.2. Supporters in the Value Chain and their Roles ............................................ 45
4.4. Value Chain Map and Marketing Channel of Wheat ......................................... 47
4.4.1. Marketing Channels........................................................................... 47
4.4.2. Value Chain Map of Wheat .................................................................. 48
4.4.3. Channel Choice Determinants of Wheat Producers ....................................... 49
4.5. Conduct - performance Analysis of wheat market ........................................... 50
4.5.1. Market Conduct ............................................................................... 50
4.5.2. Analysis of Market Performance ............................................................ 51
4.6. Opportunities and Constraints in wheat Value Chain ........................................ 56
4.6.1. Opportunities and Constraints of Wheat Producers ....................................... 56
4.6.2. Opportunities’ and Constraints of wheat marketing ...................................... 58
4.6.3. Opportunities and Constraints of Processors ............................................... 59
5. SUMMARY, CONCLUSION AND RECOMMENDATIONS ........................................ 61
5.1. Summary and Conclusion ....................................................................... 61
5.2. Recommendations ................................................................................ 64
6. REFERENCES ............................................................................................. 67
7. APPENDICES ............................................................................................. 75
7.1 Questionnaire and Interview Guides Used During the Survey Work ............................ 75
 LIST OF FIGURES

Figure 2 1 Conceptual Framework of wheat value chain ................................................... 24

Figure 4. 1 Basic wheat value chain map in the study area ................................................ 48

VII
 LIST OF TABLES

Table 3 1 Description of population and sample size of each selected blocks ................... 27

table 4 1 Demographic characteristics of sample household .............................................. 29

table 4 2 Demographic characteristics of sample households ............................................. 30
table 4 3 Socio economic characteristics of sample households ......................................... 31
table 4 4 Institutional factors of farmers ............................................................................. 33
table 4 5 Demographic characteristics of sample traders .................................................... 35
table 4 6 Access to variety and required on time by producers .......................................... 36
table 4 7 Sample respondents by their most preferred wheat variety ................................. 37
table 4 8 Source of wheat seed for sample producers ......................................................... 37
table 4 9 Access and payment of fertilizer by respondents ................................................. 38
table 4 10 Wheat production in the study area .................................................................... 39
table 4 11 Factors mentioned for reduction of wheat production ....................................... 39
table 4 12 Factors that determine channel choice of producers .......................................... 49
table 4 13 Cost structure and profitability of sample producers ......................................... 53
table 4 14 Cost and profitability of traders and processors ................................................. 54
table 4 15 Margin of actors in wheat marketing channels .................................................. 55
table 4 16 Constraints of wheat production in the study area ............................................. 56
table 4 17 Opportunities of wheat production in the study area ......................................... 57
table 4 18 Constraints of wheat marketing in the study area .............................................. 58
table 4 19 Opportunities of wheat marketing in the study area........................................... 59
table 4 20 Constraints of wheat processors in the study area .............................................. 60
table 4 21 Opportunities of wheat processors in the study area .......................................... 60

VIII
 1. CHAPTER ONE
1.1. Introduction

Agriculture has always been an important sector in Ethiopia. According to FAO (2016),
about 82% of the population was employed in agriculture. Agriculture contributed about
36% of the gross domestic product and about 81% of the total export income of the
country during the year 2015/2016 (CSA, 2016). The country’s aspiration for achieving
overall economic growth largely depends on the performance of the agriculture sector. The
sector requires substantial transformation in order to sustain economic growth, reduce
poverty and ensure food security (UNDP, 2016).

In Ethiopia, cereal production and marketing is the means of livelihood for millions of
smallholder households and it constitutes the single largest sub-sector in the economy.
According to CSA (2012/13), cereals farming covered 78% of land under cultivation and
85% of total grain crop production.

Today, wheat is among the most important crops grown in Ethiopia, both as a source of
food for consumers and as a source of income for farmers. Wheat and wheat products
represent 14% of the total caloric intake in Ethiopia. This makes wheat the second-most
important food, behind maize (19%) and ahead of teff, sorghum, and enset (10-12% each)
(FAO, 2014). With regard to the area of cultivation, wheat is the fourth most widely
grown crop after teff, maize, and sorghum. In terms of the gross value of production,
wheat is ranked 4th or 5th, after teff, enset, and maize and approximately tied with
sorghum (CSA, 2012/13).

Unlike other staple grains, wheat is imported in large volumes. The percentage of
domestic wheat consumption coming from imports varies between 25% and 35%,
depending on the size of the harvest and other factors. The government of Ethiopia
currently subsidizes the importation of wheat, providing it to large-scale flour mills on the
condition that the flour be sold to bakeries by at controlled prices with the goal of making
bread affordable to poor consumers. (ATA, 2015)

1
According to MoARD (2005), it is estimated that 1.4 million hectare of land is covered
with wheat and more than 2.18 million tons are produced annually. In terms of area
cultivated and annual production, wheat is the third most important cereal crop in Ethiopia
following maize and teff (CSA, 2012).
Accordingly, nearly 561,000 metric tons of wheat was sold by smallholders and state and
private commercial farms in 2008. However, during the same year 545,325 metric tons
was commercially imported by the government to stabilize the market (MAFAP, 2012). A
country domestic production was 29,163,336.88 quintals, of which 58.04% was for
household consumption, 19.59% was for seed requirement, and 20.13% was sold for
domestic market and others (CSA, 2012).
This indicates that, there was increment in production and marketable volume of wheat but
the current level of wheat marketed is still low and insufficient to meet the domestic
consumption and needs of newly emerging food processing industries. Moreover, in terms
of the marketable volume of wheat, it is estimated that about 21% of the domestic
production is marketed, while the bulk of the produce is retained on-farm for consumption
and seed (CSA, 2009).

Nevertheless, in view of the current rapidly growing rate of urbanization, coupled with the
increased expansion of existing as well as newly emerging food processing industries,
durum wheat products such as macaroni and spaghetti are highly demanded in the local
market and have become an important part of daily diet in the urban and peri-urban areas
of Ethiopia. However, almost all local pasta manufacturers depend on imported durum
wheat (EIAR, 2006). At present, the demand for imported durum wheat is millions of tons
of durum wheat from abroad, costing three hundred million dollars in foreign exchange
(CSA, 2013). The key reasons why local industries do not utilize locally produced durum
wheat are: the perceived sub-standards quality of locally grown durum wheat and the
prohibitive cost of collecting durum wheat from scattered smallholder farmers to meet
large quantity demand (EIAR, 2006).

Correspondingly, Mamo (2009) argued that small scale, dispersed and unorganized
producers are unlikely to exploit market opportunities as they cannot attain the necessary
economies of scale and lack bargaining power in negotiating prices. Therefore, it is
becoming increasingly crucial for policy makers to focus immediate attention on agro-
industries. Such industries, established along efficient value chains, can increase

2
significantly the rate and scope of industrial growth (UNIDO, 2009). There is an immense
potential for increasing domestic production of wheat to meet the current rapid demand for
wheat, but there are a number of constraints that hinder the intensification production and
quality of wheat. These include weak seed production and distribution, high seed cost,
high fertilizer cost, inadequate coordination between research, seed multiplication and
extension, lack of market information, high transport costs, lack of access to appropriate
storage and marketing facilities and poor infrastructure and shortage of access to bank
credit. Furthermore, poor farming management and post harvesting handling is also among
the major problems.

Particularly, in Ethiopia and similar developing countries, government policies have been
more focused on aspects of production and less on what happens in between production
and consumption (FAO, 2015). Hence, the concern over market performances and food
losses across the supply and marketing chains needs to be the center of the countries’
policy formulation and implementation. This leads the conclusion that research is critically
important to support policy formulation.

1.2.Statement of the Problem

Agricultural marketing is a very important factor in economic development and lack of a

well-functioning agricultural market and marketing system severely hinders the increase
of social welfare, income distribution, and food security of developing countries.
Moreover markets and marketing system do not develop simultaneously with economic
growth. Markets and marketing system should be organized deliberately to enable
economic development (Wolday, 1994).

The efforts of increasing agricultural production and productivity have to be accompanied

by a well-performing marketing system which satisfies consumer demands with the
minimum margin between producers and consumer prices. Higher prices for producer can
encourage farmers to adopt new technologies, increase production, (Wolday, 1994).
However, there are external and internal problems that influence the marketing efficiency
in Ethiopia. This has to do with lack of pertinent market information, development of
marketing institutions and marketing infrastructure such as storage, transportation etc.

3
The possible increment in output resulting from the introduction of improved technology
could not be exploited in the absence of well-functioning marketing system. An efficient,
integrated, and responsive market mechanism is of critical importance for optimal
allocation of resources in agriculture and in stimulating farmers to increase their output
(James, 1972, as cited in Andargachew, 1990). A well-functioning marketing system is not
limited to stimulation but it also increases production by seeking additional output.

In spite of the potential for production and growing demand for grain, grain marketing in
Ethiopia is characterized by weak institutional support and inadequate infrastructure. With
no effective systems in place for identifying grades and standards, existing market
information systems are of limited value to famers and other actors along the value chain.
Indeed, producers and traders have difficulty making sound decisions based on price
information that does not specify grades and standards. Since mixing different grades of
grain compromises quality, the lack of common standards and grades has also hindered the
introduction of warehouse receipt systems. Furthermore, trade associations are weak and
have limited capacity to regulate themselves, establish and enforce standards, and
modernize wheat marketing (MAFAP, 2012).

Wheat crop is a very promising value chain commodity, and seem suitable for promotion.
There is a promising potential to involve in value adding of the stored grains particularly
wheat, to meet the ever growing national market demand for industrial processors and
consumers (Mulegata et al., 2005). Furthermore, owning to the suitability of the country’s
agro-ecologies for the production of superior quality durum wheat and, increasing demand
of wheat by local factories, small holder farmers in Ethiopia have comparative and
competitive advantage to produce the crop targeting the international market (EIAR,
2006).

However, Ethiopia suffers from weak market linkages on both the input and output sides.
Farmers either cannot afford improved inputs or lack the knowledge to use them. Weak
systems connect agricultural outputs to processors and numerous barriers exist that prevent
quality products from reaching end users, such as insufficient packaging and storing,
inability of Ethiopian products to meet international market standards, and restrictive trade
regulations (USAID, 2011).

4
Yet, producers are still facing different problems such as, limited improved seed supply,
high cost of seed and fertilizer, poor wheat farming management, high renting cost of
combiner harvester, lack of credit, post-harvest handling (particularly lack of suitable
storage), lack of market information, poor linkage with local wheat processors, and fail to
meet quantity and quality requirements and infrastructure problem. Therefore, this entails
a need for more comprehensive study which thoroughly analyses wheat value chain in the
study area.

As much as the knowledge of the researchers the whole wheat value chain analysis have
not yet been studied and analysed in the district, particularly in Koga Irrigation Project,
where there is high production of wheat. This is the first study of its kind which analyses
the entire wheat value chain from input supplier to the ultimate consumer.

Therefore, this study is designed to address the prevailing information gap on the subject
and contribute to better understand the wheat value chain and assess possible improvement
strategies to upgrade wheat value chain for the benefit of smallholder farmers, processors,
traders, and other wheat value chain actors.

1.3.Research Questions

 How does wheat value chain map looks like in the study area?
 Who are the main actors involved in the wheat value chain in the study area and
their roles?
 What are the major opportunities and constraints on wheat production, marketing
and processing in the study area?

1.4.Research Objectives

General Objective

The overall objective of this study is to undertake wheat value chain analysis in koga
irrigation project.

Specific Objectives

 To map wheat value chain structure in the study area.

5
  To identify the major actors in the study area and their role with in the value chain.
 To identify major opportunities and constraints in the wheat value chain.

1.5.Significance of the Study

The study analysed the entire wheat value chain from input supplier to the end consumer.
Moreover, this study would have provided information for researchers and development
planners on the value chain actors and their roles, determinants of wheat supply to the
market, structure, factors of channel choice to wheat market and identifying opportunities
and constraints relative to wheat value chain in the study area.

The study may generate valuable information on value chain analysis of wheat that might
assist policy makers at various levels to make relevant decisions to intervene in the
development of wheat production, marketing, processing and designing of appropriate
policies and strategies. The findings of the study might also be useful to government and
non-governmental organizations input suppliers, producers, traders, consumers, and
marketing agents to make their respective decisions. Furthermore, it may also serve as a
reference material for further research on similar topics and other related subjects.

1.6.Scope of the Study

The study emphasizes different market levels, role of value chain actors in the marketing
channel, producers bargaining characteristics, traders buying and selling strategies,
storage, transportation, market information, and financial institution involved in the
market and factors determine channel choice of producers in the study area were also seen.
The study were also focused on wheat producers in koga irrigation project, Mecha woreda,
Amhara region.

1.7.Limitations of the Study

This study was limited to the value chain analysis of wheat in the study areas. It was
limited to only wheat crop out of different cereal crops produced in the study area. The
study were carried out by one year cross-sectional data and it focused on Koga irrigation
project area where wheat is particularly produced. Hence, the study was limited spatially
as well as temporally to make the study more representative in terms of wider range of
area and range of time. Resources being have the limitation effect during the study. In

6
addition, lack of empirical studies related to this area of interest in the study area
particularly in wheat value chain analysis was also another limitation.

7
 CHAPTER TWO

2. LITERATURE REVIEW
2.1.Theoretical Literature Review
2.1.1. Definition and Concepts

Definitions of Terms

Value: It is referred to as the perception of consumers’ or the price that the customer is
willing to pay for a certain offering in return. Value also refers to the value added to the
product by activities at each step in the chain as well as the value created by the product
and activities and then captured by each of the actors involved (Hawkes, 2011).

Value added: Ideally represents the value created during the production and marketing
process conducted by each actor who involved in the value chain. It is measured as the
difference between the value of all goods and services produced and the value of those
purchased non-labour inputs which have been used in the production and marketing
process. Value addition is currently becoming an important topic in agricultural sector,
especially for perishable agricultural commodities (Tadele et al., 2014).

Value for the actors: It is the economic value that is created and captured by the actors in
the chain. Actors upgrade their activities to capture more value (Hawkes and Ruel, 2011).

Customer value: The difference between the values the customer gains from owning and
using a product and the costs of obtaining the product. Oftentimes consumers perceive
value differently than the product’s actual monetary value (Umberger, 2014).

Supply Chain: Dunne (2001) defined supply chain as the physical flow of goods that are
required for resource to be transformed into finished products. The supply chain is a
longer channel stretching from raw materials to components to finished products carried to
final buyers. The supply chain is a system of organizations, people, activities, information,
and resources involved in moving the product from supplier to the end customer (Engman,
2007).

Market: A market is traditionally defined as a physical place where buyers and sellers
gathered to buy and sell goods and services. A market is as a collection of buyers and

8
sellers who transact over a particular product or product class (such as the housing market
or the grain market). A market is the set of actual and potential buyers of a product or
service. These buyers share a particular need or want that can be satisfied through
exchange relationships. But a market is more than a physical place. It is a mechanism or
an institution through which buyers and sellers exchange information and transact (Kotler
and Keller, 2012).

Marketing: It is an institution or mechanism which brings together buyers (“demanders”)

and sellers (“suppliers”) of particular goods and services. As a basic definition, marketing
is the process of satisfying human needs by bringing products to people in the proper form
and at the proper time and place. Marketing has an economic value because it gives form,
time, and place utility to products and services. As products definition it is the
performance of all the transactions and services associated with the flow of good from the
point of initial production to the final consumer. As business firm marketing is as a
complete management concept through which the company sells itself as well as its line of
product. From the view point of society, it is defined as all the process necessary to
determine consumers’ physical and societal needs and to conceptualize and affect their
fulfilment. (Branson and Norvell, 1983).

Marketable Surplus: It is a theoretical ex ante concept which represents the surplus

which the farmer/producer has available with himself for disposal once the genuine
requirements of the farmers family consumption, payment of wages in kind, feed, seed and
wastage have been met. The concept of marketable surplus is subjective because the
feature of retention of the farmer is a matter of subjective guess (Alagh, 2014).

Marketed surplus: It is a practical concept and refers to that quantity of produce which is
actually marketed by the producer. In other words, marketed surplus is that quantity of the
produce which the producer farmer actually sells in the market irrespective of his
requirements for family consumption, farm needs, feeds, payment in kind and others.
Marketed surplus of agriculture produce plays a vital role in the economic development of
country. Increasing marketed surplus in an economy is one of the significant indices of
economic development (Shah and Makwana, 2013).

9
Concepts of Value Chain

During the last decades, the underlying concept of value chain was subject to different
influences and objectives. The origin of value chain analysis is discussed from two distinct
traditions: the French ‘filière concept’ and Wallerstein’s concept of a commodity chain
(Raikes et al. 2000; Bair 2005). From both, a couple of derivatives have emerged. Well
known is Porter’s concept of the value chain, Gereffi’s global commodity chain, and
Humphrey’s world economic triangle, whereas the last two were joined to the concept of
the global value chain.

The ‘filière concept’ was developed in the 1960s at the Institute National de la Recherche
Agronomique (INRA) and the Centre Internationale en Recherche Agronomique pour le
Développement (CIRAD) as an analytical tool for empirical agricultural research. The
concept was used to gain a more structured understanding of economic processes within
production and distribution systems for agricultural commodities (Raikes et al. 2000). The
general filière concept has been applied to the domestic value chains stopping at national
boundaries (Kaplinsky, Morris 2002).

In the 1970s, Wallerstein (1974) developed the concept of commodity chains, embedded
in the world systems theory, which is an elaboration of the dependency theory. The
concept of a commodity chain is the base for the further developed global commodity
chain by Gereffi and others (Raikes et al. 2000). It seeks to explain the dynamics of the
distribution of value chain activities in a capitalist world economy. The main driver is the
international division of labor between different regions due to varying labor-intensities of
production and manufacturing activities within a chain.

In the mid-1980s, Porter developed the concept of the value chain in the context of his
work on competitive advantage (Porter 1985). He developed his concept to analyse
specific activities through which companies may create value by breaking down their
activities into value-added. Porter distinguished two important value-adding activities of
an organization: primary activities (inbound logistics, operations, outbound logistics,
marketing, and sales) and support activities (strategic planning, human resource
management, technology development, and procurement) (Porter 1985). However,
Porter’s value chain approach is restricted to the firm level neglecting the analysis of up or
downstream activities beyond the company.

10
In the 1990s, Gereffi and others (1994) developed the global commodity chain (GCC),
originally derived from Wallerstein’s commodity chain (Bair 2005). Gereffi established
four core elements (Kaplinsky / Morris 2002): (a) input-output structure, (b) territorial
(international) structure, (c) institutional framework, and (d) governance structure. The
focus was set on governance referring to institutional mechanisms and inter-firm
relationships. The main attention was paid to balance the power embedded in the
coordination of globally fragmented but interlinked production systems. Gereffi concluded
that many chains are characterized by some dominant actors, who determine the overall
character of the chain. These actors become responsible for upgrading possibilities,
knowledge transfer, and interaction coordination within the value chain.

Based on Gereffi’s GCC, Messner (2002) developed the world economic triangle.
Messner’s concept is based on the assumption that actors, governance and regulation
systems determine the scope of action in the global commodity chains. This approach
focuses on upgrading entire regions or clusters through their integration into chains.
Hence, the horizontal (cluster development) and vertical approaches (value chain) are
linked (Kaplinsky / Morris 2002).

Therefore, there are many definitions given for value chain in different literature.

KIT et al. (2006) defined value chain as: “Specific type of supply chain where the actors
actively seek to support each other so they can increase their efficiency and
competitiveness. They invest time, effort and money, and build relationships with other
actors to reach a common goal of satisfying consumer needs so they can increase their
profits”.

Kaplisnky and Morris (2001) defined value chain as: “The value chain describes the full
range of activities which are required to bring a product or service from conception,
through the different phases of production (involving a combination of physical
transformation and the input of various producer services), delivery to final consumers,
and final disposal after use”.

Dempsey (2006) explains value-chain as: “A value chain is a supply chain consisting of
the input suppliers, producers, processors and buyers that bring a product from its
conception to its end use. A value-chain approach to development seeks to address the

11
major constraints at each level of the supply chain rather than concentrating on just one
group (e.g. producers) or on one geographical location. Constraints often include a lack of
information about or weak connections to end markets, and or inadequate coordination
between actors. Taking a value chain approach is often essential to successful economic
development since micro and small enterprises and smallholder farmers will only benefit
over the long term if the industry as a whole is competitive”.

Hobbs et al. (2000) defined value chain as: “A vertical alliance or strategic network
between a numbers of independent business organizations within a supply chain. The
supply chain refers to the entire vertical chain of activities: from production of farm,
through processing, distribution, and retailing to the consumer i.e. from gate to plate.

Globalvaluechains.org, (2011) defined value chain as: “The full range of activities that
firms and workers perform to bring a product from its conception to end use and beyond.
This includes activities such as design, production, marketing, distribution and support to
the final consumer. The activities that comprise a value chain can be contained within a
single firm or divided among different firms “.

(Raikes et al., 2000) define value chain as: Value chain the concept was used to gain a
more structured understanding of economic processes within production and distribution
systems for agricultural commodities. An agricultural value chain can, therefore, be
considered as an economic unit of analysis of a particular commodity (e.g. wheat) or
group of commodities (cereals) that encompasses a meaningful grouping of economic
activities that are linked vertically by market relationships. The emphasis is on the
relationships between networks of input suppliers, producers, traders, processors and
distributors (UNCTAD, 2010). Generally, value chain definitions can be divided into three
groups:

Activity based: “the term value chain describes the full range of value adding activities
required to bring a product or service through the different phases of production, including
procurement of raw materials and other inputs.” The same definition or definitions similar
in nature are offered by (ILO, 2009, GTZ, 2008 and FAO, 2007).

Actor based: according to UNIDO, 2011 defines a value chain as “actors connected along
a chain producing, transforming, and bringing goods and services to end-consumers

12
through a sequenced set of activities.” Defines a value chain as “all the actors, and the
entirety of their productive activities, involved in the process of adding value to a specific
crop or product.”

Network based: In this case, value chains do not simply exist in a particular space but are
built for the purpose of better responding to consumer demand (Hobbs et al.;2000), CIAT,
2007 defines value chains as a “strategic network among a number of independent
business organizations,” where network members are willing to engage in extensive
collaboration

Generally value chain is the system of linked steps essential to transform raw materials
into a finished product for an ultimate consumer, where each step along the way adds to a
product’s value. It is much like a supply chain, except it focuses on how value is added
rather than how raw materials get from one point to the other. In some ways the value
added is obvious; in other ways, more slight. In the case of wheat value chain, for
example, the value chain begins with procurement of inputs, preparation of land and then
progresses along to farming activities (sowing, weeding, fertilizer, herbicides/ pesticide
application), harvesting, post-harvesting (packaging, storing, transporting), selling,
bulking and assembling, marketing, processing (transforming value added products
spaghetti and macaroni), distribution and consumption. At every point along the chain,
value is added for the consumer.

2.1.2. Value Chain Analysis

Value chain analysis is the process of breaking a chain into its constituent parts in order to
better understand its structure and functioning. The analysis consists of identifying chain
actors at each stage and discerning their functions and relationships; determining the chain
governance, or leadership, to facilitate chain formation and strengthening; and identifying
value adding activities in the chain and assigning costs and added value to each of those
activities. The flows of goods, information and finance through the various stages of the
chain are evaluated in order to detect problems or identify opportunities to improve the
contribution of specific actors and the overall performance of the chain. By going beyond
the traditional narrow focus on production, value chain analysis scrutinizes interactions
and synergies among actors and between them and the business and policy environment
(UNIDO, 2009). Value chain analysis originally emerged as a tool for increasing

13
competitiveness by pinpointing where and how participants could introduce efficiencies,
reduce costs and maximize value. Indeed, value chain analysis provides useful information
on structure linkages, actors, and dynamics. It helps to identify where, how, why, and by
whom value is added and created along the chain, as well as how changes could result in
improved performance (Hawkes and Ruel, 2011).

Agricultural Value Chain Analysis

Are systematically maps, chain actors and their functions in production, processing,
transporting and distribution and sales of a product or products. Through this mapping
exercise, structural aspects of the value chain such as characteristics of actors, profit and
cost structures, product flows and their destinations, and entry and exit conditions are
assessed. As such, value chain analysis is a descriptive construct providing empirical
framework for the generation of data. However, value chain analysis also provides an
analytical structure to gain insights into the organization, operation and performance of the
chain (Kaplinisky and Morris, 2001).

Importance of Value Chain Analysis

Value chain analysis is conducted for a variety of purposes. The primary purpose of value
chain analysis is to understand the reasons for inefficiencies in the chain and identify
potential leverage points for improving the performance of the chain, using both
qualitative and quantitative data. (Anandajayasekeram and Berhanu, 2009).

Value chain analysis is a useful analytical tool that helps understand overall trends of
industrial reorganization and identify change agents and leverage points for policy and
technical interventions. It is increasingly used by donors and development assistance
agencies to better target their support and investments in various areas such as trade
capacity, enterprise competitiveness, income distribution and equity among value chain
participants. In addition, the analysis consists of identifying chain actors at each stage and
discerning their functions and relationships; determining the chain governance, or
leadership, to facilitate chain formation and strengthening; and identifying value adding
activities in the chain and assigning costs and added value to each of those activities
(UNIDO, 2009).

14
It is an innovation that enhances or improves an existing product, or introduces new
products or new product uses. This allows the farmer to create new markets, or
differentiate a product from others and thus gain an advantage over competitors. In so
doing, the farmer can ask a higher premium (price) or gain increased market share or
access. Adding value does not necessarily involve altering a product; it can be the
adoption of new production or handling methods that increase a farmer’s capacity and
reliability in meeting market demand. Value-added can be almost anything that enhances
the dimensions of a business. The key is that the value-adding activity must increase or
stabilize profit margins, and the output must appeal to the consumer (AAFC, 2004).

Traditionally, little attention has been paid to the value chains by which agricultural
products reach final consumers and to the intrinsic potential of such chains to generate
value added and employment opportunities. While high-income countries add nearly
US$185 of value by processing one tone of agricultural products, developing countries add
approximately US$40. Furthermore, while 98 percent of agricultural production in high-
income countries undergoes industrial processing, barely 38 percent is processed in
developing countries. These indicate that well developed agro-value chains can utilize the
full potential of the agricultural sector (UNIDO, 2009).

In the process of preparing an agro-industrial master plan for Ethiopia, a prioritization

process was conducted for several commodities to identify those offering the highest
prospects for growth (UNIDO and FAO, 2009). Group 1: Commodities that are highly
important to the economy due to the large population involved in their production and to
their contribution to national food security. This group includes: (i) cereals (wheat, maize,
teff and barley); (ii) oilseeds (sesame, Niger seed, linseed and rapeseed); (iii) coffee; and
(iv) sugar. Group 2: Commodities that are of importance to the economy, due to the
number of people involved in production, processing and marketing as well as to their
contribution to food security. This group includes: (i) dairy products; (ii) meat; (iii) tea;
and (iv) fruit and vegetables. Group 3: Commodities that entail a competitive advantage
for Ethiopia. This group includes: (i) honey; (ii) pulses; (iii) spices; and (iv) grapes/wine.

2.1.2.1 Dimensions of Value Chain

Value chain analysis can be an important tool with which one examines structural change.
Altogether, a value chain comprises four dimensions; these are the technical structure, the

15
actors in a chain, the territorial, the input-output, and the governance structure (Gereffi,
1994). The analysis of these structures will give answers to a set of questions: How does
the production process run? Who participates at which stage? Where do the different
stages take place? How are they linked? Who has which benefits, etc.? They are needed to
find the relevant points of intervention for a successful integration of poor population
sections. In the following, the different dimensions of a value chain are explained.

In addition, using these four fundamental dimensions, contributions from Gereffi (1999)
and Humphrey & Schmitz (2002) developed an additional element of analysis referred to
as upgrading, which describes the dynamic movement within the value chain by
examining how producers shift between different stages of the chain. Early use of global
value chain methodology focused principally on economic and competitiveness issues,
while recently social and environmental dimensions have been incorporated. Global value
chain research is now exploring new topics such as labor regulation issues, workforce
development, the greening of value chains, and gender (globalvaluechains.org, 2011).

Technical Structure and Actors

The technical production process can generally be separated into five stages: input supply,
primary production, processing, marketing and consumption. On every stage, one to
several different actors can be found. Trading activities do not only take place between the
stages of processing and consumption but also between production and processing or input
supply and production. Nevertheless, it is not mentioned as an own stage of the chain
there. It is assumed that between these stages trading activities are mostly undertaken by
the participants of the respective stages as a pure transfer of goods within the production
process without specific marketing activities (Schipmann, 2006).

Territorial Structure

The territorial structure is understood as the geographic concentration or dispersion of

production and marketing and which gives an overview of the location of the single stages
of a value chain (Stamm, 2004). The globalization of value chain has been facilitated by
improvement in transportation and telecommunications infrastructure and driven by
demand for the most competitive inputs in each segment of the value chain. Today, supply
chains are globally dispersed and different activities are usually carried out in different

16
parts of the world. In the global economy, countries participate in industries by leveraging
their competitive advantages in assets. Usually developing countries offer low labour costs
and raw materials, while rich nations with highly educated talent are behind research and
development and product design. As a result, firms and workers in widely separated
locations affect one another more than they have in the past (globalvaluechains.org, 2011).

Input-output Structure

The input-output relationship concerns the link of inputs, activities and actors involved in
the production, trade and finalization of the commodity for the consumer market and the
geographical coverage (Tuvhag, 2008). The input-output structure gives mainly an
overview about four aspects: the amount and quality of a good that is needed from one
stage of the chain to fulfil the requirements of the following stage, the value that is created
on each stage, the profit distribution in a chain and the information flow between the
single stages of a chain (Schipmann, 2006). This input-output structure involves goods and
services, as well as a range of supporting industries. The input-output structure is typically
represented as a set of value chain boxes connected by arrows that show the flows of
tangible and intangible goods and services, which are critical to mapping the value added
at different stages in the chain, and to layering in information of particular interest to the
researcher (e.g., jobs, wages, gender, and the firms participating at diverse stages of the
chain) (globalvaluechains.org, 2011).

Governance Structure

Governance is a central concept to value chain analysis can be defined as non- market
coordination of economic activity. Governance ensures that interaction between firms
along a value chain exhibit some reflection of organization rather than being simply
random (Roduner, 2004). Another important feature of governance is that it involves the
ability of one firm in the chain to influence or determine the activities of other firms in the
chain. This influence can extend to defining the products to be produced by suppliers. This
power is exercised through the lead firms control over key resources needed in the chain,
decisions about entry to and exit from the chain and monitoring of suppliers (Roduner,
2004). Humphrey and Schmitz (2000) argue that the issue of governance in value chain is
important for market access, fast track to acquisition of production possibilities,

17
distribution of gains, leverage points for policy initiatives, and channel for technical
assistance.

Furthermore, governance analysis allows one to understand how a chain is controlled and
coordinated when certain actors in the chain have more power than others. Gereffi (1994)
defined governance as “authority and power relationships that determine how financial,
material and human resources are allocated and flow within a chain.” Governance refers to
the role of coordination and associated roles of identifying dynamic profitable
opportunities and apportioning roles to key players (Kaplinsky and Morris, 2000).
Governance ensures that interactions between actors along a value chain reflect
organization, rather than randomness. The governance of value chains emanate from the
requirement to set product, process, and logistic standards, which then influence upstream
or downstream chain actors and results in activities, roles and functions.

2.1.3. Value Chain Study Approaches

According to FAO (2013), the term commodity chain analysis is used to refer to the overall
group of economic agents (or the relevant activities of those agents) that contribute directly
to the determination of a final product. Thus the chain encompasses the complete sequence
of operations which starting from the raw material, or an intermediate product, finishes
downstream, after several stages of transformation or increases in value, at one or several
final products at the level of the consumer. The definition of a commodity chain for an
agricultural product starts with the raw material, as grown in the country and can then be
divided into a system of “sub-chains”, representing the different uses and processes
involving the product after harvesting. One of the most critical concepts in commodity
chain analysis is that of value added. Many of the calculations carried out are in terms of the
value added created by individual agents involved in the chain. Value added (VA) is
defined by the equation:

VA = Y -II Eq (1)

II is the value of intermediate inputs used and Y is the value of the output, i stand for each
actor and it starts from 1 then the difference, Y-II, represents the value which the agent has
added during the accounting period to the value of the inputs in the process of production
or processing. At this stage, the calculation of value added is carried out using market

18
prices. The value Y of the final product incorporates the value of all the factors which go
to make up the production of Y. The value added of the entire chain is calculated as the
amount:

VA chain= Y chain – Ii chain Eq (2)

Or, since values added are additive, we can add algebraically the value added of each of
the agents of the chain:

VA chain= ∑VA agents Eq ( 3 )

2.1.3.1 Value chain Mapping

Value chain mapping refers to describing value chains in detail and carrying out an
economic analysis as well as benchmarking. The mapping follows market research and
includes presenting in visual format the chain functions, operators and linkages.

Quantifying adds numbers to the basic map numbers of actors (measuring quantity of
value and express in terms of numbers then adding to the map of actors or this involves
adding detail to the basic maps drawn initially, structure and flow), volume of produce or
the market share of particular segments in the chain (UNIDO, 2009). According to
McCormick and Schmitz (2002), value chain mapping enables to visualize the flow of the
product from conception to end consumer through various actors. It also helps to identify
the different actors involved in the wheat value chain, and to understand their roles and
linkages.

2.1.3.2 Market System Performance Analysis

a. Market Structure

Abbott and Makeham (1979) define market structure as the market behaviour of the firms
and it is defined as characteristics of the organization of a market which seem to influence
strategically the nature of competition and pricing behaviour within the market. Structural
characteristics may be used as a basis for classifying markets. Markets may be perfectly
competitive, monopolistic, or oligopolistic. In general, market structure can be studied in
terms of the degree of seller and buyer concentration, the degree of product differentiation,

19
the existence of entry or exit barriers, and the power distribution (Scott, 1995 and Duc
Hai, 2003).

b. Market Conduct

Market conduct refers to the patterns of behaviour that firms follow in adapting or
adjusting to the markets in which they sell or buy. Such a definition shows the analysis of
human behavioural patterns that are not readily identifiable, obtainable, or quantifiable.
Thus, in the absence of theoretical framework for market analysis, there is a tendency to
treat conduct variables in descriptive manner. The specified structure features of
homogeneous product, and free entry and exit require a form of conduct such that each
firm must operate as if insolation. Market conduct is exceedingly complex, encompassing
as it does virtually all human decision making within business organizations and, by
extension, household, on top of the market structure, the legal environment and the
internal organization of the business enterprise influence the market conduct (Kizito,
2008).

c. Market Performance

Market performance refers to the impact of structure and conduct as measured in terms of
variables such as prices, costs, and volume of output. By analyzing the level of marketing
margins and their cost components, it is possible to evaluate the impact of structure and
conduct characteristics on market performance (Pomery and Trinidad, 1995).

Kizito (2008) defines the market performance as the extent to which markets result in
outcomes that are deemed good or preferred by society. Market performance refers to how
well the market fulfils certain social and private objectives. This includes price levels and
price stability in long and short term, profit levels, cost, efficiency and qualities and
quantity of food commodities’. For firms acting as sellers, these results measure the
character of the firm’s adjustment to the effective demands for their outputs; for firms
buying goods, they measure the quantity of adjustments made by firms to the supply
conditions of the goods, they purchase.

20
Methods of Evaluating Marketing Performance

Estimates of the marketing margins are the best tools to analyse performance of market. A
marketing margin is the percentage of the final weighted averages selling price taken by
each stage of the marketing chain. The total marketing margin is the difference between
what the consumer pays and what the producer/farmer receives for his product. In other
words, it is the difference between retail price and farm price (Cramers and Jensen, 1982).
Computing the total gross marketing margin (TGMM) is always related to the final price
paid by the end buyer and is expressed as percentage (Mendoza, 1995). Mathematically,
can be expressed as:

𝑐𝑜𝑛𝑠𝑢𝑚𝑒𝑟 𝑝𝑟𝑖𝑐𝑒−𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑟 𝑝𝑟𝑖𝑐𝑒

TGMM = [ ]×100 Eq (4)
𝑐𝑜𝑛𝑠𝑢𝑚𝑒𝑟 𝑝𝑟𝑖𝑐𝑒

Where, TGMM =Total gross marketing margin,

It is useful to introduce the idea of farmer’s portion or producer’s gross marketing margin
(GMMP). Which is the portion of the price paid by the consumer that goes to the producer
and it also provides an indication of welfare distribution among production and marketing
agents. The producers’ margin is calculated as;

𝑐𝑜𝑛𝑠𝑜𝑚𝑒𝑟 𝑝𝑟𝑖𝑐𝑒−𝐺𝑟𝑜𝑠𝑠 𝑚𝑎𝑟𝑘𝑒𝑡𝑖𝑛𝑔 𝑚𝑎𝑟𝑔𝑖𝑛

GMMP = [ ] × 100 Eq (5)
𝑐𝑜𝑛𝑠𝑢𝑚𝑒𝑟 𝑝𝑟𝑖𝑐𝑒

Where, GMMP = Gross marketing margin of the producer

Furthermore, marketing margin of each actor at a given stage (GMM) was computed as:

𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒−𝐵𝑢𝑦𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒

GMM = [ ] × 100 Eq (6)
𝐶𝑜𝑛𝑠𝑢𝑚𝑒𝑟 𝑝𝑟𝑖𝑐𝑒

Where, GMM = Gross marketing margin for each actor other than producers Net
Marketing Margin (NMM) is the percentage over the final price earned by the
intermediary as his/her net income once his/her marketing costs are deducted. The
equation tells us that a higher marketing margin diminishes the producer’s share and vice-
versa. It also provides an indication of welfare distribution among production and
marketing agents.

21
 𝑀𝑎𝑟𝑘𝑒𝑡𝑖𝑛𝑔 𝑐𝑜𝑠𝑡
NMM = GMM-[𝐶𝑜𝑛𝑠𝑢𝑚𝑒𝑟 𝑝𝑟𝑖𝑐𝑒] × 100 Eq (7)

Where, NMM = net marketing margin

2.2 Review of Empirical Study

In agricultural development, value chains are increasingly being used as conceptual and
operational frameworks to help identify entry points to support resource-poor actors in the
production, processing and marketing of their agricultural products. Value chains are
relationships where actors are linked in the entire value chain. The objective of innovation
in value chains development is to make agricultural markets more efficient by overcoming
fragmented marketing relations, improve access to services, information and inputs and
balance asymmetric distribution of information and power (Methu et al., 2013).

A study was conducted on soybean value chain in Tanzanya, the findings shown that, the
soybean value chain is confounded by many technical and institutional impediments from
supply and use of inputs, via production and processing to marketing and retailing. The
chain is fragmented, uncoordinated, disorganized and uncontrolled in spite of being
overregulated.

It is not known exactly how many smallholders are producing soya but, few households
appear to be involved in primary production. The horizontal and vertical linkages of the
value chain are generally weak and uncompetitive, and need support to strengthen.
Participants in the chain include primary producers, traders, processors, wholesalers,
retailers and consumers. Most participants are rather specialized and their functions
usually only connect to one or just a few links in the value chain (FAO, 2015).

According to Chagomoka et al. (2013) a study made on value chain analysis of indigenous
vegetables from Malawi and Mozambique by applying both the commodity based analysis
approach and value chain approach, for a microeconomic level analysis as was the case for
the study, the commodity based analysis approach ideally provides better insights into the
organizational structures and strategies of different actors. This approach was found to be
a consistent fit for the objectives of the study and was adapted to reflect the situation of the
study area, focusing on identification of target customer segments where value chain
clients can focus their sales and marketing efforts and understanding the value chain’s
capabilities, potential markets and positioning in the market. The value chain approach

22
involved development of a value chain map that provided alternative actor linkages from
the producer to the final customer. Constraints and opportunities within the value chains
were categorized into appropriate classifications and analysed. In addition, the types of
market services available along the value chain were described to serve as conduits for
outlining constraints and opportunities of identified value chains. Constraints were
expressed: High susceptibility to diseases for exotic vegetables, limited knowledge on
seed quality features and limited knowledge on technical advices for production. Results
from the survey suggest that there is some degree of networking among the indigenous
vegetables marketing channel actors.

USAID (2010) used Ethiopia’s staple foods value chain analysis. Particularly, wheat value
chain analysis to identify constraints and opportunities wheat value chain in the country.
The study indicated that wheat producers include smallholders and state and commercial
farms. The major producers and suppliers, however, are the smallholders, accounting for
more than 89% of the market supply. About 53% of the wheat is processed by the mills
before it reaches the final consumer and the balance (47%) is distributed to consumers in
the form of whole grain. The major players in the wheat value chain are the input
suppliers, smallholders, state and commercial farms, rural assemblers, cooperative unions,
grain wholesalers, flour mills, processed food wholesalers, grain retailers, bakeries and
pastries, and retailers of processed food.

However, the study shows that there are a number of constraints that hinder the
intensification of wheat production. These include: weak seed production and distribution,
lack of participation by private firms and farmers’ organizations in the production and
distribution of improved wheat varieties, high seed cost due to high transport and handling
costs, Inadequate coordination between research, seed multiplication and extension, Lack
of market information for traders, producers and farmers’ organizations, lack of access to
appropriate storage and marketing facilities and infrastructure, Non-existent of forward
contractual agreement between producers and millers, Lack of access to bank credit, and
inadequate road infrastructure and high cost of transferring wheat from surplus areas to
consumption centers.

23
 2.3 Conceptual Framework

The conceptual framework of wheat value chain shows as a network of horizontal and
vertically integrated value chain actors that are jointly providing products to customers.
The value chain of wheat is explained by its network of activities which includes the
function of input supply, production, distributing, processing and finally consumption.

The conceptual framework also consists of different actors; their role, linkage and
interaction; attitude, practices and habits of the different actors, enabling environment
including policies, institutional arrangements and incentives that affect the capacity and
efficiency of actors to innovate across the value chain.

CONSUMER

OTHER SERVICE DISTRIBUTER

PROVIDERS
GUIDLINES

PROCESSOR
UNIVERSITIES
POLICIES

DISTRIBUTER
RESEARCHERS REGULATIONS

PRODUCER RULES
NGOs

SUPPLIER ENVIRONMENT
GO

CHAIN SUPPORTERS CHAIN ACTORS CHAIN ENABLERS

Source: Haymanot Asfaw (2014)

Figure 2 1 Conceptual Framework of wheat value chain

24
 CHAPTER THREE

3 RESEARCH METHODOLOGY
3.1 Research Design

Research design can be thought of as the logic or master plan of a research that throws
light on how the study is to be conducted. It shows how all of the major parts of the
research study– the samples or groups, measures, treatments or programs, etc– work
together in an attempt to address the research questions. According to Mouton (1996, p.
175) the research design serves to "plan, structure and execute" the research to maximise
the "validity of the findings". It gives directions from the underlying philosophical
assumptions to research design, and data collection. Yin (2003) adds further that
“colloquially a research design is an action plan for getting from here to there, where
‘here’ may be defined as the initial set of questions to be answered and ‘there’ is some set
of (conclusions) answers”.

Being the study has describing the characteristics of the population, it was descriptive type
of research. This researcher used mixed (both qualitative and qualitative analysis) research
design. Quantitative data was analysed by using descriptive statistics and the data were
collected by using semi structured questionnaire. Mean, frequency and percentage were
used to analyse descriptive statistics. Qualitative data were analysed through narration and
the data were collected through key informant interview and focus group discussion.

3.2 Description of the Study Area

Koga Irrigation Project is found in Amhara Region W/Gojjam zone Mecha woreda. And is
located 523 KM from the capital city Addis Ababa and 38 KM from the regional city
Bahir Dar. It covers 7004 hectare of land and 8210 farmers are live within the project area
from this 6610 are male and 1660 are female (KIPO, 2017).

3.3 Data Type, Sources and Collection Method

For this study both the primary and secondary data were used.

25
Primary data: were collected from main actors such as farmer households, local collectors,
retailers wholesalers, cooperatives unions and processors. And also from key informants
from different organizations. To collect primary data, a semi structured questionnaire,
interview of key informants (2 union marketing heads, district woreda CPO, Koga
irrigation project head and agronomist, agronomist from BOA, 2 brokers, 3 cooperatives)
and focus group discussion were employed. Questionnaires were pre-tested and modified
and personal observation was made.

Secondary data: were collected by reviewing documents of secondary sources namely,

Koga Irrigation Project Office, district office of agriculture and rural development, office
of trade and transport, reports of Central Statistical Agency (CSA), and office of Finance
and Economic Development of Amhara Region, from government institutions available in
the district, and nongovernmental organizations operating in the district whenever
necessary. Besides, different and relevant published and unpublished reports, bulletins and
websites were consulted to generate relevant secondary data.

3.4 Sampling Technique and Sample Size

Both purposive and two-stage random sampling techniques were used to select sample
wheat producers and value chain actors. In Koga Irrigation Project, there are 12 blocks and
all blocks are potential wheat producers. In the first stage, out of 12 blocks found in the
area, 6 blocks were selected to represent the selected wheat producer area. This was done
based on their relative level of production potential and those that are working area
(members) of multipurpose primary cooperatives were selected. Hence, the total
population of the study is the number of households in those 6 blocks, i.e. 5828. In the
second stage, using the household list of the sample blocks, wheat producers’ households
were selected by using simple random method based on probability proportional to the
population size of each block.

According to Yamane (1967) the sample size is determined by considering 95%

confidence level with degree of variability 5% and level of precision equal to 9% are used
to obtain a sample size required. The formula used to calculate and determine the sample
size were:

𝑁
n = 1+𝑁(𝑒)² Eq (8)

26
Where: n is the sample size, N is the population size of wheat producer blocks and e is the
level of precision considered. The minimum level of precision is acceptable at 10%.
However, for this study 9% of precision level were used. Because, if a precision level is
less than 9%, the sample size is large and costy.

Hence the sample size for producers was:

𝑁 5828
n = 1+𝑁(𝑒)² , n =1+5828(0.09)2 = 121

The sample distribution among the blocks were made and represented in the table below.

Table 3 1 Description of population and sample size of each selected blocks

Name the block Total population Sample size

Adbera 937 19

Tagel 732 15

Teleta 1122 23

Shihona 859 18

Ambo Mesik 1186 25

Tekle Dib 992 21

Total 5828 121

Source, KIP (2017)

For this study, data from traders (collectors, wholesalers, retailers, primary cooperatives,
cooperative unions) and processors were also collected. The sites for the trader were
market towns in which wheat traders permanently exist. On the basis of flow of wheat,
four markets; Bahir Dar, Merawi, Tekledib and Wotet abay were selected purposively,
which are the main Wheat marketing sites in the area. The total lists of traders in the towns
were gained from district trade and industry office. In the study area there are 7 collectors,
6 wholesalers, and 27 retailers. In addition only 6 processors existed in Bahir Dar City
which uses wheat from koga, all are selected for the data collection.

27
 3.5 Methods of Data Analysis

Descriptive statistics and qualitative data analysis such as narration method of qualitative
analysis were employed to analyse the data collected from wheat value chain actors and key
informants to meet the objectives of this study.

3.5.1. Descriptive Statistics

Descriptive research presents a picture of the specific details of a situation, social setting,
or relationship. The major purpose of descriptive research, as the term implies, is to
describe characteristics of a population or phenomenon. Descriptive research seeks to
determine the answers to who, what, when, where, and how questions (John W. Creswell,
2009)

Descriptive Statistics analysis were used to clearly compare and contrast different
characteristics of the sample households. Hence, descriptive statistics such as frequencies,
percentages and means were computed to analyse the collected data.

3.5.2. Narrative Analysis

Narrative research is a strategy of inquiry in which the researcher studies the lives of
individuals and asks one or more individuals to provide stories about their lives. This
information is then often retold or restored by the researcher into a narrative chronology. In
the end, the narrative combines views from the participant’s life with those of the
researcher’s life in a collaborative narrative (Clandinin & Connelly, 2001).

Therefore, narrative research were used to analysis the qualitative data which are collected
form key informant interviews.

28
 CHAPTER FOUR

4. RESULTS AND DISCUSSION

This chapter of the thesis deals with discussion and interpretation of the findings from
descriptive analysis. It has six main sections. The first section deals with descriptive
statistics of the sample households and traders. The second section focuses input
utilization of producers. The third section presents value chain analysis actors and their
roles. The fourth section focuses on value chain map, marketing channel and channel
choice determinants of producers. The fifth section presents conduct and performance
analysis of the value chain, which includes marketing costs and margins, and market
surplus shares of actors in the value chain. The sixth section of the finding deals with
constraints and opportunities of wheat in production, marketing and processing.

4.1. Household Characteristics

4.1.1. Demographic Characteristics of Sample Households

The sample population of wheat producer respondents handled during the survey was 121.
From Table 4.1 out of the total interviewed Wheat producers 92.56% were male-headed
households and only 7.44% were female-headed. The survey showed that the majority of
respondents were married 94.21%, 1.66% being single and 4.13% Divorced.

Table 4 1 Demographic characteristics of sample household

Variable Number (N=121) Percent

Sex of the household head

Female 9 7.44

Male 112 92.56

Marital status

Single 2 1.66

Married 114 94.21

Divorced 5 4.13

Source: Survey result, 2017

29
It is believed that age of the household head determines whether the household benefits
from the experience of an older person or base its decision on the risk taking attitude of the
younger producer. As revealed in Table 4.2, the average age of the sample household
heads was 41.43 years with minimum and maximum ages of 23 and 67 years, respectively.
The average family size of the sample households was 5.65 persons, with minimum and
maximum family size of 1 persons and 11 persons, respectively. Farming experience is
taken to be the number of years that an individual was continuously engaged in wheat
production. The average years of wheat farming experience for the sample was about only
4.61 years, minimum and maximum farming experience of 2 and 5 years, respectively.
This shows that wheat production was introduced or started in the area about five years
ago.

Table 4 2 Demographic characteristics of sample households

Variable Mean (N=121)

Age (years) 41.43

Family size 5.65

Farming experience (years) 4.61

Source: Survey result, 2017

Socio Economic Characteristics of Sample Households

According to the survey result, regarding the respondents’ religion, most of the household
heads 100% were Orthodox Tewahido Christians. It is clear that education can influence
productivity of producers and adoption of newly introduced technologies and innovations.
Hence, literate producers are expected to be in a better position to get and use information
which contributes to improve their farming practices. According to the survey results,
42.15% of respondents were literate while 57.85% were illiterate. Farming was the main
occupation and source of livelihood for all sample producers where the major ones are
crop production and animal husbandry. Moreover, in addition to the farming activities,
some respondents (11.57%) have also engaged in non-farm activities like petty trading and
transport services using donkey carts to earn additional income.

30
Table 4 3 Socio economic characteristics of sample households

Variable Number (N=121) Percent

Religion

Orthodox 121 100

Literacy

Literate 51 42.15

Illiterate 70 57.85

Nonfarm income

Yes 14 11.57

No 107 88.43

Source: Survey result, 2017

Land Size and Land Use

Land is perhaps the single most important factor of production and measure of wealth in
the study area. The average land owned by wheat producers was 0.875. Cultivated land
used for the production of crops covered 86% and of the total land holdings of wheat
producing sample household on average had. The remaining land represents land used for
pasture, homestead farm, fallow land.

In terms of farmland allocation, the dominant crops produced by households in meher

season are maize, finger millet and teff with mean value of 0.38ha, 0.24ha and 0.18ha,
respectively and wheat, potato and onion through irrigation with the mean value of 0.26ha,
0.11ha and 0.07ha.

4.1.2. Institutional Factors

Institutional support services are essential precondition for enhanced wheat value chain.
More specifically, access to cooperative services, access to market information, access to
credit, access to extension contact and access to wheat quality information are the most
important services in the development of wheat value chain and thereby increase income

31
of the producer. According to Martin et al., (2007), access to information or knowledge,
technology and finance determines the state of success of value chain actors.

Cooperatives member

Cooperatives improve understanding of members about market and strengthen the

relationship among the members. Of the total interviewed sample respondents 76.03%
were members of farmer multipurpose primary cooperatives and 93.38 % were members
of Koga Irrigation Producers primary cooperatives while 1.65% were not members of both
farmer primary cooperatives.

Access to market information

In the study area 47.93% of producers knew price to be offered by market outlet before
selling wheat. Major sources of market information for producers include 57.85% traders,
30.57% cooperatives, 9.91% market participant producers and 1.67% other sources. This
indicated that the use of modern communication mass media like radio, television and
printouts was lacking. In this line, access to modern communication mass media is
extremely limited in the Ethiopian grain market (Gebremedhin, 2001). Even though,
producers have access to information from different directions, the type of information
they get particularly input availability and price is from primary cooperatives.
Furthermore, during group discuss the producers reported that they lack reliable
information and the power of deciding on the price of wheat. This shows that there is a
potential to expand information sources through effective use of modern communication
technologies for enhanced wheat value chain. Again, this shows that more promotional
effort is needed to reach majority of producers to expand markets.

Access to extension services

The survey result shows that among the total sample of wheat producers 71.9% have better
access to extension services in 2016/2017 production year. Koga Irrigation Project through
its DA is the major actor who provides information and advisory service on wheat
production and management practices. Besides, model farmers, neighbour farmers/friends
and other commercial wheat producers were also mentioned as source of information,
advice and experience.

32
Furthermore, producers indicated that they are getting information particularly input
application and farming method, however, there is the a shortage of trained man power
(DA) where the maximum number is only 1 Agronomist per Block to disseminate the
required extension service is not acquired on time by sample respondents.

Access to credit

According to the survey results, only 32.23% from the total sample households had access
to credit and the remaining 67.77% had no access to credit. Cooperatives, Amhara credit
and saving institution, traders and families/relatives are the sources of credit in the study
area. Particularly at harvesting time traders also lend loans to the producers and then
secure their supply. Although taking interest is not their priority, they tend to secure their
supply by giving the loans and increase their bargaining power. Their intension is by
lending money, they can afford paying less than the market price for the wheat they
purchase from the producers and secure supply of wheat.

Quality information

In the study area only 23.97% of producers have information about local wheat processors
quality requirements. About 21.49% sample households had awareness about physical
purity. And about 2.48% of sample households had awareness about hardness and softness
of the wheat product. This indicated that in the study area sample households have limited
access to information about the wheat quality issues particularly, local wheat processors.

Table 4 4 Institutional factors of farmers

Variable Number (N=121) Percent

Cooperative member

Yes 118 97.52

No 3 2.48

Market information

Yes 121 100

No

33
Extension contact

Yes 87 71.9

No 34 28.1

Access to credit

Yes 39 32.23

No 82 67.77

Quality information

Yes 29 23.97

No 92 76.03

Source: Survey result, 2017

Livestock Ownership

Livestock production is an integral component of the farming system in the study area
and contributes very much to crop production in general and to wheat production in
particular. Important animals kept by the sample farmers are cattle, sheep, donkey,
poultry and honeybees.

About 95.21% of the respondents owned ox (oxen). Oxen are the main source of farm
power for land preparation and threshing. Out of this, 76.86% have a pair and above two
oxen and the rest, 23.14% have single ox. About 97.52% of respondents replied that they
use their own animal source and exchange with relatives for power. The rest 2.48
respondents reported they rent oxen for land preparation.

Nearly 55.37% of the respondents have donkeys, which have main role in transportation
inputs for wheat production as well as transport of produce from the field to home and to
the market.

4.1.3. Demographic Characteristics of Traders

The demographic characteristics of traders shown that 100% were male traders. This
implies that women’s participation in wheat trading was lower. The mean age composition
of traders was 34.7 years with 24 minimum and 47 maximum age, which is the productive

34
labor age group. Regarding to marital status, 87.5% of the traders were married and 7.5%
were single and 5% were divorced. It indicated that when traders get married their labor
force for trading would increase. In relation to mean family size of the sample trader were
4.3 family members per household with minimum of 1 and maximum of 7 family
members. The result for educational level of traders shown that 95% of the traders were
attended formal education in year of schooling and 5% were not attended in formal
education and also mean educational level in year of schooling was 7.2 years. Because as
the educational level increased the ability to acquire new idea in relation to market
information and new technologies adaptation become increased. In addition, the mean
wheat trading experience of the sample traders were 3.7 years with a minimum of 1 year
and maximum of 6 years.

Table 4 5 Demographic characteristics of sample traders

Variable Mean Minimum Maximum

Age 34.7 24 47

Family size 4.3 1 7

Education level 7.2 0 12

Trading experience 3.6 1 6

Sex
Male 40
Female -

Marital status
Single 3
Married 35
Divorced 2

Source: survey result 2017

4.2.Input Utilization and Trend of Wheat Production

4.2.1. Input Utilization

Input application is one of the most important agricultural practices that are used by Wheat
producers in the study area. Moreover, proper application of the recommended input rate

35
is important to obtain the required quality and quantity produced thereby increasing
quantity of market supply.

Wheat Varietal Technology

Seed is a basic requirement and one of the most precious resources in crop production
(Almekinders and Louwaars, 2008). The use of improved wheat seed varieties is no doubt
part of the solution towards increased and sustainable wheat production to meet the ever
increasing wheat demand of the country‘s food processing industries. About 46.28% of
wheat producers used improved wheat seed varieties from known sources distributed
through cooperatives while 53.72% of wheat producers used their own and other farmers
next generation improved seed varieties. This implies that the district wheat producers
prefer improved seed varieties to local seed varieties and also almost all sample of
respondents have awareness about the importance of improved seed varieties.

Table 4 6 Access to variety and required on time by producers

Variable Number (N=121) Percent

Access to improved variety

Yes 121 100

No

Access to required quantity

from known sources
Yes 56 46.28

No 65 53.72

Access to get on time

Yes 74 61.16

No 47 38.84

Access to type of varieties

Yes 13 10.74

No 108 89.26

Source: Survey result, 2017

36
Even though producers prefer improved seed varieties, they always obtain below their
requirement and the quantity, the quality, the uniformity and time is not at the desired
level. Besides, according to focus group discussion participant producers said that seed
supply is limited. This has led to most of the producers recycling seed from the previous
crop which reduces yield per unit area over time. Moreover, in the study area producers
used improve seed on average at a rate of 1.65 quintals per hectare while the
recommended one is 1.25 quintals per hectare (ARARI, 2016). Furthermore, Table 4.7
indicated that Peakaflour (Kekeba) is the most preferred improved wheat variety.

But kekeba wheat seed variety become susceptible for disease and its productive potential
has become reduced through time (BOA agronomist).

Table 4 7 Sample respondents by their most preferred wheat variety

Variable Number (N=121) Percent

Local 0 0

Improved

Peakaflour (Kekeba) 108 89.26

King bird 10 8.26

Tie 3 2.48

Source: Survey result, 2017

Furthermore, Table 4.7 revealed that 46.28% and 39.67%, 14.05% of the respondents got
improve seed varieties from the primary cooperatives, seed multiplier farmers, and use
own next generation seed respectively. According to this, the major seed source in the
district is farmer’s primary cooperatives.

Table 4 8 Source of wheat seed for sample producers

Source of seed Number (N=121) Percent

Cooperatives 56 46.28

Other farmers 48 39.67

37
Own seed 17 14.05

Source: Survey result, 2017

Fertilizer use

It is evident that chemical fertilizer could boost both production and productivity.
Particularly reports have also shown that increased usage of fertilizer is considered to be
one of the primary means of increasing wheat grain yields in Ethiopia (Asnakew et al.,
1991. According to this study 100% of the sample respondents reported that they applied
NPS on their wheat farms, whereas 98.34% of the sample respondents reported that they
applied both NPS and Urea. The average amount of NPS and Urea applied per hectare
were about 125 kg and 75 kg respectively. This indicated that fertilizer application in the
study area is generally below the recommended level of 200kg of NPS and 150kg of Urea
per hectare for wheat (ARARI, 2016).

Table 4 9 Access and payment of fertilizer by respondents

Variable Number (N=121) Percent

Access to fertilizer
Yes 121 100

Payment
Cash 118 97.52
Credit 3 2.48

Reason not use

recommended amount
High price 52 42.98
lack of access 65 53.72
Lack of credit 4 3.30

Source: Survey result, 2017

About 42.98% sample respondents reported that high price of fertilizer, 53.72% sample
respondents reported that lack of access and 3.30 % of sample respondents reported that,

38
lack of credit was the main reason not using it as recommended. The major sources of
fertilizer in the study area were cooperatives, traders in local markets and Koga union.
According to the survey result about 95.87% of wheat producers reported that they
purchased fertilizer through cooperatives, about 1.65 % of wheat producers purchased
fertilizer from traders in local market, and 2.48 % of respondents procured fertilizer from
the union.

4.2.2. Trend of Wheat Production

Table 4 10 Wheat production in the study area

Crop year Land allocated for Average Total production

wheat production productivity per
hectare

2013/14 4199.34 30 125980

2014/15 5032 30 150975

2015/16 2576.35 28 72138

2016/17 2003.5 28 56098

Source; KIP office 2017

Table 4.10 indicates trends of wheat production in the study area. Based on the survey
results 102 (84.3%) of the respondents replied that wheat production over the last four
years (2013/14 to 2016/17) decreased. The rest 19 (15.7%) respondents reported that the
production of wheat remains the same. Based on the survey result the reason for reduction
of wheat production was, disease and pest infestation, lack of irrigation water, low price
for wheat, lack optional improved seed and lack of buyer.

Table 4 11 Factors mentioned for reduction of wheat production

Contribution factors for reduction of wheat Frequency Percent

production
(N=102)

Lack of irrigation water 97 95.1

Low price for wheat 94 92.16

39
Disease and pest infestation 76 74.5

Lack of optional improved seed 62 60.78

Lack of buyer 39 38.23

Source; survey result

4.3. Actors, Their Role and Relationship in Wheat Value Chain

According to the VCA framework, the actors in the value chain refer to those individuals
or entities who engage in a transaction for moving a product from inception to end use.
They must exchange money (or an equivalent service) as well as a product, which
generally increases in value with each transaction (Campbell, 2008).

Based on the survey result the primary wheat value chain actors are those functions which
have directly involved in the production, processing and distribution of the product. These
actors are input suppliers, producers, farmer primary cooperatives, union, local collectors,
wholesalers, processors/factories, retailers, hotels/restaurants, and ultimate consumers.

Whereas the supportive actors are not directly involved in production and movement of
the product, these actors have significant impact on the quality, efficiency of production
and distribution. Support activities serve as the value chain’s enabling environment. These
actors are finance providers, research centers, government, cooperatives, union, district
administrators, NGOs and the like. Actors and their role are described as follows:

4.3.1. Primary Actors

Input suppliers: value chain function starts from inputs use to produce wheat and value
added products. There are many actors who are involved directly or indirectly in
agricultural input supply in the area. Currently, according to the collected data the district
primary cooperatives, district bureau of agriculture (DBoA), seed multiplier farmers,
Amhara seed enterprise (ASE), Ethiopian seed enterprise (ESE), Merkeb union and Koga
union. All such actors are responsible to supply agricultural inputs like improved seed
varieties, fertilizer, herbicide and pesticide, and farm implements which are essential
inputs at the production stage.

40
In the study area seed multiplier farmers are actor responsible for the multiplication
improve seed varieties and sale their seed to public and private seed producing companies
as well as for producing farmers.

Seed

The main seed variety used in the study area is Peakaflour (Kekeba). Moreover, improved
seed such as King bird and Peakaflour (Kekeba) are supplied by Ethiopia Seed Enterprise,
Amhara Seed Enterprise and Merkeb union. However, both Amhara seed enterprise and
Ethiopia seed enterprise exercised to multiple Peakaflour (Kekeba) seed variety on wheat
producers’ farm land with contact of agreement for the last 5 years. Model farmers were
selected on cluster base by district office of Agriculture with the presence expert from the
enterprise. Based on the agreement seed was sold by both enterprise to selected model
farmers for seed multiplication. Finally, farmers were received to multiple the seed with
the agreement to sell with 15 % additional price to the enterprise on the agreed market
day. And this was the source for seed producing farmers and for other farmers in the area.

Fertilizer

Farmers Multipurpose Primary Cooperatives are the main supplier of inorganic fertilizers,
followed by Koga union. Wholesaler mainly purchased the fertilizer illegally from farmers
and then sold to other farmers who need fertilizers for planting vegetables and other crops
using irrigation.

According to Bureau of Agriculture, inorganic fertilizer imported from Russia, Jordan,

Italy and France through Agricultural Input Supply Corporation. The Corporation supplied
to Merkeb Union, the union in turn distribute to farmers primary cooperatives. The
primary cooperatives based at Kebele levels provide warehouse service and distribute the
inputs. Through this supply system 95.87% of the respondents accessed fertilizer like NPS
and Urea for their wheat production. Fertilizer delivery system carried out jointly by
Cooperatives and ACSI. There are two modalities to get fertilizer from primary
cooperatives, on cash and credit. Farmers’ cooperatives provide fertilizer to the farmers
when the farmers presented the receipt or coupons from ACSI. In this case, farmers paid
40 Birr per quintals as service charge to cooperatives and ACSI.

41
Agriculture tools and machineries

Agriculture tools such as sickle, knapsack, combine harvester, shovel, and harvester
supplied through primary cooperative, office of agriculture and privet traders.

Producers: Wheat producers are the main actors who perform most of the value chain
functions right from farm inputs, preparation of their farms or procurement of the inputs
from other sources to post-harvest handling and marketing. The major farming and value
adding activities that wheat producers perform include ploughing, sowing, fertilizing,
weeding, pest/disease controlling, harvesting and post-harvest handling.

The sample farmers’ survey indicated that from the average volume of wheat produced by
sample wheat producer farmers in the production year (2016/17), 3.63 (13%) quintal was
consumed, 24 (85.7%) quintal was sold, 0 .37 (1.3%) quintal was used for seed from they
produce per hectare.

As stated earlier, an average land allocated for wheat production per sample households
was 0.375ha, and on average producers produce 28 quintals of wheat per hectare. They
sell large quantities of their production during and soon after the main harvest through
cooperatives and traders within the same production year. In the study area, due to the
recent government and other stakeholders' intervention in promoting group marketing
through cooperatives, majority of wheat producers are members of such cooperatives and
have interest to sale their wheat to the cooperatives. However, member wheat producers
indicated that as the cooperatives purchase both from members and non-members
producers with same price, and the dividend is still not distributed to members this
discourage the members from active participating and reduce member trust they have on
the cooperatives.

Producer’s primary cooperatives: Primary cooperative are established by law. There are
agricultural primary cooperatives were established in the district with the aim of
increasing farmers’ bargaining power in the exchange processes. Among these, there are
three multipurpose primary cooperatives with in the study area (Merawi, Tekiledib and
Wotet abay) and twelve Koga Irrigation primary cooperatives. The cooperatives are
governed by elected members that negotiate on purchase price with the producers and

42
bargain selling price with processors with assist of their union. They keep stocks using
both members’ working capital and loan.

According to the survey result, the existence of cooperatives in wheat value chain has two
functions. Initially, they supply agricultural inputs like seed, fertilizer, agro- chemicals,
packaging sacks and farm machineries.

Secondly, cooperatives are acting as major actors of wheat value chain that has a
stabilizing role in the local market through purchasing the product.

In the study district cooperatives purchase wheat from members and non-members based
on prevailing market price, they set purchasing price 20-25 Birr per quintal above
prevailing market price based on the quality of wheat.

Unions: as stated earlier in the district there are 12 Irrigation primary cooperatives. These
cooperatives jointly established one union named as “Koga union” for the purpose of
further increasing producers barging power and supplying the bulk volume of wheat to the
processors. And three of multipurpose primary cooperatives with in the study area are
member of Merkeb union located in Bahirdar city.

Like the primary cooperatives, Merkeb union has two functions: purchasing input
(specially improved seed, fertilizer and chemicals) based on input demand from primary
cooperatives and BoA following an auction process. Ultimately, it distributes the
purchased input to the respective primary cooperatives sale inputs directly to producers at
union office. The union provides cash in advance to Koga union to resolve capital problem
of Koga union. The union purchases wheat from Koga union as a contract basis and by
providing 20 birr margin in addition on the market price.

Koga union which is located in the study area also participated on providing agricultural
input like seed by purchasing from private and public seed producing companies and
mainly purchasing farmers produce (wheat and other products) and sell to multipurpose
unions, processors and wholesalers. It also provides loan for Koga irrigation primary
cooperatives in advance to purchase member farmers wheat product. Starting from
2016/2017 production season the union starts distributing chemical fertilizer to farmers in
the area.

43
Local collectors: These are producer traders or part-time traders found in each Blocks of
the study area. They collect wheat product for the purpose of reselling it to retailer and
wholesalers. They do know areas of surplus; they speak the local language well and
usually use their financial resources. They play important role in the wheat value chain.
Thus local collectors are the actors responsible for the trading of 5.7% from production
areas to rural wholesalers in the study areas. The value adding activities of collectors
include buying, assembling and selling to retailers and wholesalers. Furthermore, surveyed
local collectors stated that lack of credit access, lack of warehouse, lack of transport access
and lack of potential markets (in Bahidar and Mrawi market) information are the major
challenges they face.

Wholesalers: These are suppliers of bulk of wheat to the processors. Wholesalers are
mainly involved in buying wheat from local collectors and retailers occasionally they
collect directly from producers in larger volume and then transport it by lorry or truck to
Bahirdar and Addis Ababa and to sell it to processors through their brokers/middlemen/.
Survey result indicates that 6 rural wholesales are found in Merawi and Bahirdar whom
participate on wheat trading. Merawi and Bahirdar city are the main assembly center for
wheat wholesalers in their surrounding producers. They have better financial facilities,
storage, and transport and communication access than other traders fund in the district.
Almost all wholesalers have a warehouse, either owned or rented. However, lack of
market information particularly about availability, prices and potential markets (in Bahir
dar and Addis Ababa) creates uncertainty and hence they are forced to sale to commission
agents /middlemen/.

Brokers: Brokers or locally called delalas are agents who work for a commission on
behalf of other party. The role of brokers as one of the important marketing actor along the
chain is seen negatively in the agricultural marketing system (EIAR, 2008). However, in
the study area brokers found in Merawi and Bahirdar, they concentrate in bringing
retailers, wholesalers and processors together. Hence, they broadcast price and other
information to the retailers wholesalers and play the leading role in influencing wheat
trade and price formation in potential market mainly in Bahirdar. Most brokers neither
have license nor pay tax and also they do not invest their own capital. Most of the time,
the commission of the brokers was 2-6 birr per quintal of wheat.

44
Processors: They entail the transformation of wheat into a variety of value-added
products including Wheat flour and Bread. Processors have strict quality
standards/parameters/ and expect their wheat suppliers to meet these standards. These
standards have different priorities in various Wheat markets (processors). However major
and most common wheat quality factors stated by sample processors were protein content,
gluten strength, impurity, colour, moisture content, semolina milling potential and cooking
quality.

Wheat processors are the key towards improving wheat quality as well as increasing the
volume of domestically produced Wheat products (Wheat flour and Bread) sold to
consumers. Currently, there are of 23 wheat processors (flour factories) in Bahirdar city.
Among this 6 processors purchase wheat from Koga irrigation sources. They also
processed subsidy wheat which was offered by the government.

Urban retailers: These retailers buy wheat flour from wheat processing factories the then
resale to end users, hotels and cafterias. Those retailers are located in big cities like
Bahirdar. In Bahirdar there are two retailers whom purchase and distribute wheat flour
sourced from Koga irrigation producers.

Consumers: Consumers are the end actors in the wheat value chain and those purchasing
the products for consumption. Consumers of wheat such as; households, café/restaurants
and institutions higher education institutions and other institutions like hospital and
imprisonment houses. The private consumers are employees, traders, and other urban
dwellers that purchase and consume wheat product. Private consumers purchase wheat
products from producers, urban retailers, cafes/hotels and processors. Farmers also make
important segment of the rural consumers because they consume part of their products
especially households who have large family members consume more of their product.
Institutions particularly make their purchase of wheat mostly from processors.

4.3.2. Supporters in the Value Chain and their Roles

This section provides an overview of wheat value chain supporters (Go and NGO) provide
supporting services to the wheat value chain actors in the study area.

45
Capacity building on wheat seed

Training is an important entry point to acquire skills of rural communities and it

contributes for achievement of sustain development. According to the results of this
survey 71.9% of the respondents replied that they got training on selection of wheat seed
quality. About 70.25% respondents replied that Office of Agriculture and Koga Irrigation
Project was the major institutions that delivered training in the study area. NGOs (ISSD)
also provided training to the farmers on wheat production especially for wheat seed
producers. Moreover, Producers reported that they received extension service from
Agriculture Office, Koga Irrigation Project and capacitated by other GOs and NGOs
(ISSD).

Office of Agriculture

For wheat, being one of a cash crop for the area, staff of Koga Irrigation Project office and
agricultural offices from regional to district level has provides expertise service to wheat
producers in appropriate agronomic practices and on pre and post-harvest wheat
production management. They provides good agriculture practice services to the farmers
through the whole production system to post- harvest handling. Moreover, they record the
allocated land for wheat production and facilitate the provision some chemicals that are
not available at markets.

Cooperative Promotion Office

Regional Cooperative Promotion Agency formulate and provide cooperative principles,

guidelines, obligations for cooperatives and unions to protect the interest of member
farmers and to control their overall activities. District cooperative promotion office
provides marketing, management and financial training and support for primary
cooperatives.

Office of Trade

District Trade Office provides information about the price of wheat and other crops. The
information collected at producers, processors and retailers level every week and let them
to know through Koga union. Regional trade office formulate and provide trade guidelines

46
and obligations to control illegal agricultural product marketing. Moreover, the district
provides license to wheat traders and processors.

Finance Service Providers

Wheat production requires money for different production activity (for input/fertilizer and
weed control). Farmers in the study area received credit used to purchase fertilizer,
payment to rent additional land for wheat cultivation, purchase of donkey for
transportation and for payment of hired labour. During focus group discussion they
reported that their sources of credit are ACSI, local traders, relatives/families and rural
saving and credit cooperatives (RSCCo). Farmers participated on focus group discussion
reported that ACSI’s interest rate is 18 % and RSCCo 14 %. ACSI accessed credit to the
farmers on group (3-7 farmers) as a collateral system. Whereas RSCCo provides credit to
members only and it provides up to 5000 birr. In this case members of the cooperatives
select their colleagues for collateral. Farmers complained that group collateral affects
their income as well as their social relationship when some group members failed to pay
the loan, other members of the group is forced to pay the loan.

Chain influencers (Enabling environment): These are the value chain environment and
systems for wheat value chain performance in the study area. These include; regulatory
framework, land tenure security right, and legal service, security for farmers/actors.

Regulatory framework provides knowledge and information about rules and regulation for
farmers and traders, land tenure security provides the right to land for farmers, market and
trade regulation provides market place development, transportation, and communications,
marketing and business support services include market information services, market
intelligence, facilitation of linkages of producers with buyers, organization and support for
collective marketing system.

4.4.Value Chain Map and Marketing Channel of Wheat

4.4.1. Marketing Channels

Wheat market channels were constructed based on the data collected from the whole
wheat chain actors. The result revealed that there are 7 major marketing channels obtained

47
 in terms of quantity flow of durum wheat in 2016/17. It is from producer to consumer
through different intermediaries are:

Channel 1; producers - consumers

Channel 2; producers - retailers - processors - consumers
Channel 3; producers - collectors - retailers - processors - consumers
Channel 4; producers - retailors - wholesalers - processors - retailers - consumers
Channel 5; producers - cooperatives - unions - processors - consumers
Channel 6; producers - cooperatives - unions - processors - cooperatives - consumers
Channel 7; producers - collectors - retailers - wholesalers - processors - retailers -
café/hotels – consumers
4.4.2. Value Chain Map of Wheat

Producers

1.6% 23.24%
5.7%
Consumers
69.46%
Collectors Cooperatives

100% 100%

Retailers Unions
Wholesalers
30.1%

66.9%
100% 100%

Processors
24% 19.3%
3.5%
46%
Café/hotels Cooperatives Retailers Institutions

7.2%
100%
100%
100% 100%

Consumers

Source: survey result 2017

Figure 4. 1 Basic wheat value chain map in the study area

48
Value Chain Actors’ Linkage

Actors in the wheat value chain in the study area were linked backward and forward,
vertical and horizontal each other. Producers were linked with input suppliers (backward
linkage) and input suppliers were linked with producers (forward linkage in financial and
information cases). Producers were linked with local collectors, retailer and consumers in
vertical linkage for giving product and downward linkage for receiving money. Processors
also have backward linkage with producers by providing by-products (animal feed) for
producers. Chain supporters and chain influencers were linked horizontally each other in
their similar functional activities respectively and vertically with other value chain main
actors in the wheat value chain in different functional activities. Wheat farmers made
horizontal linkage with other fellow farmers for the purpose of market transaction,
exchange of different seeds and sharing farming experience. But, their linkage was seems
to be weak. In the same way traders also made horizontal and vertical linkage with each
other in the same function and in different functions respectively in the entire wheat value
chain.

4.4.3. Channel Choice Determinants of Wheat Producers

Based on the survey result sample farmers reported that they sold 69.46% of wheat
product to retailers, 5.7 % of wheat product to local collectors and 23.24% of wheat
product cooperatives. And the rest 1.6 of wheat product was sold to directly consumers.

As the survey result indicated sample producers reported that there were different factors
which affects their channel (buyer) selection. As a result immediate cash payment by
buyers, distance to market, trust on weighing scale, better price buy buyers, and to get
dividend from cooperatives were major factors that affect the choice of buyers by
producers.

Table 4 12 Factors that determine channel choice of producers

Activities listed as determinant factor Respondents replied ‘Yes’

Frequency (n=121) %

Better price 117 96.69

Immediate cash payment 79 65.29

49
Distance to market 73 60.33

Trust on weighing scale 56 46.28

To get dividend from cooperatives 31 25.61

Source: Survey result, 2017

4.5.Conduct - performance Analysis of wheat market

4.5.1. Market Conduct

Market conduct refers to the patterns of behaviour that firms follow in adapting or
adjusting to the markets in which they sell or buy. In the absence of a theoretical
framework for market analysis, there is a tendency to treat conduct variables in a
descriptive manner. The following indicators to be considered for analyse wheat market;
traders’ price setting, purchasing and selling strategies (Kizito, 2008).

Price Setting Strategy

According to the survey result, about 12.39% of sample farmer respondents reported that
market price was set through negotiation and haggling with traders. And 36.36%
respondents reported that price was set by the market. The remaining 51.24% of farmer
respondents reported that the selling price of their produce was set by traders. The other
89.26% of sample respondents sold their product with the existing price as soon as they
produce. The remaining 10.74% sell their produce after they store until the price rises.

Price received by producers for their wheat depends on the period of production and the
information they obtained. Producers who delivered during high production season and
who have no access to market price information they faced low price after supplying their
product to the market. The majority of farmers identified that price was the major
determining factor that affect their decision as to whom and which market to sell their
produce.

Purchasing and Selling Strategy of Traders

Generally, grain trading is based on eye appraisal of the commodities and exchange takes
place on bargaining. The strategies of traders in maximizing profit and develop bargaining
power include the use of regular partner, long term relation with clients or suppliers, the

50
use of intermediaries, trading with personalized network, availability of market
information and its impact on price, feasibility of alternative market outlets and price
setting practices etc.

Based on the data from sample trader’s survey, about 37.5% and 12.5% of respondents
reported that buying price was set by the market and discussion with other traders
respectively. The rest 10% and 40% of sample traders reported that market price was set
by negotiation with suppliers and by traders themselves respectively.

According to the survey result, the number of market visited per week by the sample
traders during purchase ranges from 1 to 4 markets. And the average number of markets
visited per week by all traders was 2.6 and rural collectors visited the highest average
number of market per week (2.34) followed by wholesalers (2.29) and retailers (2.12).

Based on the survey result about 81.48% of sample retailers reported that they use brokers
to sell their product and 18.52% of sample respondents reported that they personally
negotiate with buyers. On the other hand, 66.67% of wholesalers respond that they use
brokers to sell wheat and 83.33% of wholesalers used brokers to purchase wheat product.

With regard to the payment mode while sample traders sold their product, the survey result
depicted that about 40% of sample traders (more of wholesalers) sold their product on
cash and credit. Around 45% of traders particularly of local collectors and retailers sold
their product through cash only. Few of the traders 5% sold though credit. And the
remaining 10% of sample respondents sold their product though combination of cash,
advanced payment and credit.

4.5.2. Analysis of Market Performance

Marketing performance of wheat market were analyzed by estimating the marketing

margin, by taking into consideration associated marketing costs for key marketing
channels. Based on production costs and purchasing prices of the major market
participants along the chain, margins at farmer, local collectors, wholesalers, cooperatives,
processors and urban retailer’s levels were estimated and analyzed.

51
 4.5.2.1.Analysis of Wheat Profitability

Producers’ profitability analysis

Whenever profitability analysis of any activity is under taken, production costs and
revenues (benefits) obtained must be included in the analysis. In the case of wheat,
production costs are costs related to production and production process. In economics
terms these costs are termed as either fixed or variable costs a farmer incurred in the
production and production process of wheat. Fixed costs are costs that do not change with
a change in output (production). On the other hand fixed costs simply mean costs incurred
regardless of the presence or absence of production. Land rent, oxen rent are some of the
fixed costs a farmer incurred in the study area. However, variable costs are costs that are
liable to change with a change in production. These are costs of fertilizer, seeds, chemical
herbicides, labor costs etc.

First, in order for sample farmers understood well the detailed production cost structure
and profitability of wheat production, data were collected on the bases of ‘timad’ unit
which is equal to quarter of a hectare. Later on for the purpose of data analysis and readers
understanding the ‘timad’ units were converted in to hectare so that it can fulfill the
standard unit of measurement.

The survey result indicated that the average productivity of wheat production in the survey
area was 28 quintals per hectare. The average cost of production per quintal was Birr
572.9 for wheat. In order of importance, the major costs incurred by sample farmers in the
area for production of wheat were labor (47.12%), fertilizer purchase (17.22%), seed
purchase (16.67%) and land preparation (10.68%) were major costs incurred for the
production of wheat.

The total revenue obtained from the production of wheat per hectare was simply
estimating the amount of wheat produced multiplied by a corresponding average price a
farmer received in the production year. The total revenue a sample farmer owned from
hectare of land from production of wheat was 800 per quintal. Subtracting the average
production costs from the value of total revenue it would reach positive profit of 227.1
ETB per quintal. This showed the profitability farm business. Higher productivity and
profitability made wheat production more competitive implying that the need for

52
encouragement of wheat production in the study area from economic as well as food
security perspective.

Table 4 13 Cost structure and profitability of sample producers

List of costs Cost per quintal Percent

Land preparation 61.2 10.68

Seed 95.5 16.67

Fertilizer 98.70 17.22

Labor 270 47.12

Pesticide chemicals 28 4.88

Sack 7.5 1.3

Transporting 12 2.09

Total cost of production 572.9

Average selling price/qt. 800

Profit 227.1

Source: Survey result, 2017

Profitability analysis of wheat traders and processors

Table 4.14 clearly depicted analysis of profitability of the different traders of wheat
namely rural collectors, wholesaler, retailer, cooperatives and processors described in
detail across the markets. During analysis of profitability, the average purchased price of a
quintal of the commodities (wheat) and the different average transaction costs associated
with the marketing process of a single quintal till it reached the next dealer was assessed.

As a survey result indicates, the amount of average transaction costs incurred across
traders varies. Accordingly, the total costs incurred by rural collectors, retailers,
wholesalers, cooperatives and processors of wheat were Birr 7.5, 11.5, 19.5, 20.2 and
22.75 respectively. Since buying and selling of the product by rural collectors had taken
place on their nearby village market, they were not liable to different costs associated with

53
 marketing process. As a result, rural collectors exercised lowest average transaction costs
per quintal than any other traders.

With respect to the profitability of the commodity, the overall average profitability across
the different markets indicate that at every stage of transaction, trading business was
profitable. However, Table 4.14 revealed that processors were who obtained the highest
net profit per quintal than that was 59.25 ETB for wheat. Cooperatives obtained least net
profit per quintal. This might be due to and higher transaction costs associated with the
marketing process and they pay higher price than other traders for farmers. Nevertheless,
their lower net profit could be compensated through transaction of higher volume of
commodities.

Table 4 14 Cost and profitability of traders and processors

List of costs Collectors Retailers Wholesalers Cooperatives Processors

Purchase price 780 800 815 820 900

Sack price 7.5 7.5 7.5 8.20 16.40

Fill, weigh and stitch 2 4 6 4

Loading unloading 6 8 10

Transportation 32 11

Electricity 21

Water 1.75

Maintenance 6.2

Storage and other 13

Infrastructure

Labor 8.4

Other costs 12 126

Total costs 7.5 11.5 51.5 20.2 200.75

Selling price 800 824 900 850 1160

Net profit 12.5 12.5 20.5 9.8 59.25

Source: Survey result, 2017

54
 4.5.2.2.Marketing Margin

Marketing margins are the difference between prices at two market levels. The term
market margin is most commonly used to refer to the difference between producer prices
of an equivalent quantity and quality of a commodity. However, it may also describe price
differences between other points in the marketing chain, for example, between producer
and wholesale, or wholesale and retail, prices (Spencer, 1971). Marketing margin is the
percentage of the final weighted average selling price taken by each stage of the marketing
chain. The margin covers costs involved in transferring produce from one stage to the next
and provides a reasonable return to those doing the marketing. It can be interpreted as a
cost of providing a mix of marketing services.

Therefore, wheat marketing margins were analyzed based on the average sale price of
different marketing agents in the marketing channels of producers, local collectors,
retailers, wholesalers, cooperatives, and processors. According to Table 4.15, the total
wheat gross marketing margin that was added to wheat price, while passing through
marketing system to reach final destination (consumers) was 31.03%. And out of the total
gross marketing margin of wheat 31.03%, processors received the highest of all marketing
actors which is 22.4% and local retailers received the lowest margin which is 1.7%. The
remaining 2.07%, 7.32%, and 2.6% of marketing margin were received by retailers,
wholesalers and cooperatives respectively along different channels. Furthermore, wheat
producers share in consumer price was 68.97%.

Table 4 15 Margin of actors in wheat marketing channels

Marketing Actors GMM NMM TGMM

Producers 68.97 31.03

Local collectors 1.7 1.05

Retailers 2.07 1.08

Wholesalers 7.32 2.88

Cooperatives 2.6 1.14

Processors 22.4 5.1

55
Source: Survey result, 2017

4.6. Opportunities and Constraints in wheat Value Chain

One of the purposes conducting value chain analysis is to identify the major constraints and
opportunities for the development of value chain starting from input supply to consumption
across the value chain. Accordingly, a number of constraints and opportunities are explained
by value chain actors in the survey.

4.6.1. Opportunities and Constraints of Wheat Producers

Production Constraints

There are different factors that constrained production of wheat in the study area. Based on the
result obtained from the survey of all sample farmers, the major production constraint included
shortage of land, use of traditional production methods which dilatory production, limited
access to and input supply which is caused mainly due to shortage of supply, high input price,
inappropriate delivery system and delayed input supply especially inorganic fertilizer was also
another production constrains farmers reported, limited knowledge on seed quality features,
limited knowledge on technical advices for production, shortage of improved seed, high cost
of inorganic fertilizer, absence of modern production technology, lack of technical training,
lack of irrigation water supply, lack of input credit access, and lack of adequate
pesticide/herbicide were major constraints of wheat production.

Diseases, pest and natural factors: According to BOA agronomist, Rust, Smut, and Aphids are
the most common and major disease and pest problems that producers faced. This is caused in
related to use of poor quality seed, damaged seed, use of home stored seed, using seed of
unknown origin, limited use of resistance varieties and lack of proper production management
system.

Table 4 16 Constraints of wheat production in the study area

Activities listed as constraints Respondents replied ‘Yes’

Frequency (n=121) %

Disease and pest problems 118 97.52

Lack of irrigation water supply 101 83.47

56
Lack of seed accessibility and variety option 89 73.55

Lack of knowledge and skill on wheat production 68 56.2

Less input utilization by the respondent 48 39.67

Lack of extension services 37 30.58

Lack of production land 28 23.14

Source: Survey result, 2017

Opportunities for Wheat Production

Mecha district is naturally endowed for wheat production. The district geographical location,
environmental condition, fertile arable land and irrigation water are very suitable for wheat
production. Wheat is used as cash income source and for home consumption (KIP office
agronomist).

Increasing price periodically and its continuous demand in the market, can store for long time
until price increases, high productivity potential related to other cereal crops are the
opportunities of wheat production as most sample farmers reported. The survey result shows
that 97.5% of the farmers interested to expand wheat production due to those listed
opportunities. In addition the progress of provision of infrastructure facilities like roads,
telecommunication, and credit and saving institutions are the service that facilitate the
production and marketing of wheat in the district.

Table 4 17 Opportunities of wheat production in the study area

Activities listed as opportunity Respondents replied ‘Yes’

Frequency (n=121) %

Natural resources availability 119 98.35

High productivity of the crop 107 88.43

Can store for long time 96 79.34

Good market for the product 54 44.63

Availability of supportive institutions 53 43.80

Increasing trend of consumers demand 51 42.15

Source: Survey result, 2017

57
Marketing Constraints of Producers

Distance from market, low price for wheat, transportation problem, lack of market
information were the marketing constraints reported by sample producer respondents.
According to the survey result average distance to market were 2.84 km and 72.5%, and
27.5% of respondent replied that they used Mule cart and Donkeys respectively to
transport their product to the market.

Marketing Opportunities of Producers

Based on the survey result respondent reported that, availability of potential buyers,
existence of farmers cooperatives and improvements in infrastructures such as road,
mobile network were major opportunities. Producers also reported that farmers
cooperatives were their bargaining power regard with price.

4.6.2. Opportunities’ and Constraints of wheat marketing

Marketing Constraint

Traders of wheat product reported that, wheat marketing is constrained by different factors.
The major marketing constraints are limited access to market, low price of product during high
supply, price fluctuation, too much competition between traders, lack of storage, lack of
modern packaging services, lack of working capital, lack of transportation service, poor road
condition (inadequate infrastructure facility), lack of market information, market value of
wheat is subject to very limited negotiation, given that almost all farmers sell to intermediaries
rather to final consumers, absence of standardized packing and weighing scales, low quality
product that cannot meet consumers demand, absence of contractual agreements for
marketing, lack of policy framework in price setting strategy, lack of market integration
among traders.

Table 4 18 Constraints of wheat marketing in the study area

Activities listed as constraints Respondents replied ‘Yes’

Frequency (n=40) %

Price fluctuation 36 90

Lack of working capital 33 82.5

58
Lack of market information 29 72.5

Lack of storage 27 67.5

Wheat product quality problems 14 35

Source: Survey result, 2017

Marketing Opportunities

Availability of market demand (consumer demand) throughout the year, good experience in
wheat trading, the increasing number of wheat processing factories, improvements in
infrastructures such as road and mobile network, and periodically increasing value of the
product through processing as a result increasing urban consumers demand for processed
product as population growth in town.

Table 4 19 Opportunities of wheat marketing in the study area

Activities listed as opportunity Respondents replied ‘Yes’

Frequency (n=40) %

Availability of market demand 31 77.5

Improvements in infrastructures 27 67.5

Increasing number of processors 16 40

Source: Survey result, 2017

4.6.3. Opportunities and Constraints of Processors

Constraints;

There are different factors that affect the efficiency of wheat processing factories. Almost all
processors reported that they face different challenges mainly power problems, water supply,
lack of credit access, lack of working capital and to expand the investment, lack of skilled man
power whom operates the machinery, price fluctuation of wheat throughout the year, the
imported subsidy wheat by the government, lack of wheat supply and lack of quality wheat
product.

59
Table 4 20 Constraints of wheat processors in the study area

Activities listed as constraints Respondents replied ‘Yes’

Frequency (n=6) %

Power problem 6 100

Price fluctuation 6 100

Lack of wheat supply 6 100

Lack of Water supply 5 83.33

Lack of demand 5 83.33

Lack of skilled man power 4 66.67

Lack of quality wheat product 3 50

Source: Survey result, 2017

Opportunities;

The increasing demand by consumers for wheat products (flour and bakery), the increasing
quality improvement of wheat product, the increasing number of wheat traders.

Table 4 21 Opportunities of wheat processors in the study area

Activities listed as opportunity Respondents replied ‘Yes’

Frequency (n=6) %

Increasing demand for wheat products 4 66.67

Improvement of wheat quality 3 50

Increasing number of wheat traders 3 50

Source: Survey result, 2017

60
 CHAPTER FIVE

5. SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1. Summary and Conclusion

This study was undertaken with the aim of analysing value chain of wheat in Koga
Irrigation Project area. The specific objectives of the study include identifying wheat value
chain actors and understand the role of chain actors; examining the performance of actors
in the chain; and identifying opportunities and constraints of value chain actors.

The data were generated from both primary and secondary sources. The primary data were
generated from individual interview using pre-tested semi-structured questionnaire and
checklist.

The primary data for this study were collected from 121 randomly selected households
from six Blocks of the area, 7 local collectors and 27 retailers from Merawi, Wotet abay
and Tekledib small towns, 6 wholesalers and 6 processors were selected randomly from
Merawi and Bahir dar cities. The analysis was made using descriptive statistics such as
frequencies, mean and percentages and qualitative analysis such as narration. The findings
of this study are summarized as follows.

Wheat value chain analysis of the study area showed that the main value chain actors are
input suppliers, wheat producers, cooperatives/union, local collectors, wholesalers,
processors, urban retailers, and consumers. There are also governmental and
nongovernmental organization supportive actors who support wheat value chain indirectly.
Amhara credit and saving institution, district office agriculture, Amhara seed enterprise,
development agents, cooperatives and union, Amhara office of agriculture and rural
development, Amhara office of trade and industry, district administrations, district
cooperative promotion office, informal credit providers and NGOs (ISSD) are the major
wheat value chain enablers/supporters/ in the district.

Merawi, Wotet abay and Tekledib multipurpose primary cooperatives other 12 Koga
irrigation primary cooperatives purchase wheat directly from member and non-member
wheat producers. Those 3 multipurpose primary cooperatives sell to Merkeb union directly

61
and those 12 Koga irrigation primary cooperatives sell to the processor (Merkeb union)
based on price agreement through Koga union.

Currently, Koga union has already developed a relational marketing agreement with
Merkeb union (has also a wheat flour processing machine) to sell wheat product collected
from its’ member cooperatives. Cooperatives purchase durum wheat only by inspecting
physical quality (colour, impurity and separate variety) of durum wheat. Only physical
quality inspection not enough to check the whole wheat quality. Therefore, at project level
laboratory sampling test is necessary to have.

Local collectors were engaged in purchasing wheat from rural areas and sell for retailers.
Those retailers purchase wheat from both producers and local collectors and sell to
wholesalers and processors by using brokers. Processors transform wheat into a variety of
value added products including wheat flour and bakery to sell to consumers, urban
retailers, institutions (universities) and cafes/hotels. Urban retailers in turn found at
Bahirdar city distribute wheat flour to consumers, café/hotels and bakery processors.
Whole wheat market channels link producers, cooperatives, union, traders (local collectors
and wholesalers), processors, urban retailers, high learning institutions, hotels/cafes and to
consumers. The initial point in the durum wheat market channels is the producers of koga
irrigation project. The ultimate users of the value added durum wheat products (wheat
flour and bakery) are the household consumers in Bahir dar.

Producers in the study area have three main wheat marketing channels (cooperative and
local collectors and retailers marketing channels). Even though, producers prefer to sell to
the cooperative marketing channels, the large volume of wheat of producers goes to
retailer channels (69.46%). This is due to the limited purchasing ability of cooperatives in
the area.

There are also different factors that affects producers channel choice in the study area.
Sample respondent reported that immediate cash payment, distance to the market, better
price, to get dividend from cooperatives and trust to weighing scale are major determinant
factors that affect producers to choose their buyers.

Regarding the cost of the chain actors, producers of wheat in the study areas incur costs
mostly during production periods rather than marketing their produce. In this study, the

62
analysis of market performance of durum for different marketing actors with in the value
chain were carried out.

According to the survey result, the total wheat gross marketing margin that was added to
wheat price, while passing through marketing system to reach final destination
(consumers) was 31.03%. And out of the total gross marketing margin of wheat, 31.03%,
processors received the highest of all marketing actors which is 22.4% and local retailers
received the lowest margin which is 1.7%. The remaining 2.07%, 7.32%, and 2.6% of
marketing margin were received by retailers, wholesalers and cooperatives respectively
along different channels. Furthermore, wheat producers share in consumer price was
68.97%.

Actors with in the value chain face different challenges and have also opportunities. Based
on the survey result disease and pest problems, lack of irrigation water supply, lack of
accessibility of improved seed and varietal options, less utilization of fertilizer, lack of
extension service were major constraints of wheat production that hinders quantity and
quality of production. On the other hand natural resource availability for wheat
production, increasing demand of wheat product, productivity of the crop, can store for
long time wheat were major opportunities reported by sample farmer respondents.

Regard to wheat marketing sample respondents reported that price fluctuation, lack of
working capital, wheat product quality problem, lack of market information were
constraints. On the other hand increasing demand of the product, improvements in the
infrastructures, and increasing number of wheat processors were major opportunities
reported by respondents.

Sample processor respondents reported that power problem, price fluctuation throughout
the year, lack of water supply, lack of skilled manpower to operate the machine, lack of
wheat supply and quality problem of wheat product were major challenges they face.
Increasing demand of wheat products with regard to the population growth, wheat quality
improvements and increasing number of wheat traders were major opportunities reported
by processors.

63
 5.2.Recommendations

Given the potential of the area for wheat production and its significant contribution to
ensure food security and self-sufficiency as well as source of income for producers and
meeting ever increasing demand of local wheat processors, results of this study have
implications for wheat value chain development in the study area.

To begin with, the survey results of this study indicated that the quantity and quality of
wheat production is significantly affected by utilization of improved seed. Therefore,
dissemination and provision of required amount of improved seed technologies is essential
in increasing the productivity, production and thereby increase volume of wheat supply to
the market. Sample respondents and regional agronomists during the discussion reported
that the dominant variety in the area which is Kekeba is becoming susceptible to disease
like rust and smut and also for insects like aphids and also it its productive potential has
deteriorates. Hence new variety options need to be available to producers.

As the wheat breeders develop new varieties, producers' constraints should be considered.
It is, therefore, clearly indicated that varieties should be developed by considering
attributes related to quality based on local processors requirements, maximum yields,
resistant to disease and pests. And also regional governments and responsible stakeholder
should be provided continuous training, follow up and other supports to the area seed
multiplier farmers thereby increase seed provision in the area.

The survey result of this study indicated that lack of irrigation water supply was one of
major determinant factor that affects the quantity of wheat production in the area.
Especially farmers at the downstream of irrigation sub canals (tertiary canal) lacks
irrigation water. Therefore, the designing of canals need to be restructured to make
available of similar distribution of irrigation water along canals.

Utilization of chemical fertilizer is the essential factor that affects the quantity and quality
of product. The survey result indicated that lack of availability of fertilizer in the study
area affects the volume of production of wheat. Sample respondent and regional input
distribution experts reported that the imported chemical fertilizer have considered only for
meher crop production. Due to the reason producers during the winter season through the
support of irrigation water lacks accessibility and availability of chemical fertilizer.

64
Especially farmers lack Urea fertilizer for side dressing application during the growing
stage of the wheat crop. This lets illegal fertilizer traders to impose high price on wheat
producing farmers in the area. Therefore, Regional Bureau of Agriculture (BOA) should
consider irrigation producing farmers when importing chemical fertilizer and make it
available during the winter season.

According to the survey result credit access affects the utilization of recommended
agricultural inputs by producers and the capability of traders and cooperative to purchase
and sell more wheat product. Thus, viable credit market could be strengthened to
encourage the producers to use more of the rightful inputs, to facilitate their market access
and to improve their value addition activities. There is a need for policy and institutional
arrangements to strengthen already established cooperatives and increasing number and
availability of other credit services providers beside the cooperatives to improve access
and availability of modern means of production and marketing.

Cooperatives were one of the major marketing channels according to the survey result. But
more of wheat product passes through traders, this was due to lack cooperatives to
purchase more quantity wheat as a result of lack of working capital. Cooperative also used
as bargaining power to producers. During the group discussion of producers, they reported
that when cooperatives stop purchasing their wheat product due to financial problem
traders lowers price of wheat. Therefore, district cooperative promotion office need to
promote the importance of cooperatives and organizing internal capitalization campaigns
to resolve working capital problems.

Availability of market information was the one of the problem that influence price
decisions by producers and traders. According to the survey result most of market
information especially terminal markets such as Bahirdar and Addis Ababa was controlled
by brokers. And this affects the price decision by producers and traders. Therefore, GOs
and NGO need to work on make available quality market information through mass media
or other information dissemination means. In addition market linkages between producers
and processors, traders and processors has been conducted to facilitate and make easy
selling and purchase of wheat product.

To encourage farmers to increase product volume of wheat they need have to get better
price and guaranteed market for their product. To make it happen GOs and NGOs need to

65
facilitate contractual farming between producers and processors that contains different
term of agreements.

Furthermore, value chain analysis result indicated that in each stage of the chain there
were major problems need strong interventions. The first point regarding producer’s
production challenges, the regional governments should train, qualified and adequate
extension workers.

Furthermore, stakeholders should be arranged and delivered continuous training on wheat

production, farm management practices, processors quality requirements and value adding
activities for the durum wheat producers in order to enhance the current production of
wheat.

66
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7. APPENDICES

7.1 Questionnaire and Interview Guides Used During the Survey Work
BAHIR DAR UNIVERSITY COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MARKETING MANAGEMENT

Wheat Value Chain Analysis: The Case of Koga Irrigation Project, Amhara Region,
Ethiopia.

Instruction:
1. Introduce yourself before starting the interview. Tell the respondents politely
from where you come and the purpose of the study (below).
2. Write using a pencil.
3. Put a circle on the number(s) for choice and yes or no questions.

Introduction: The purpose of this study is to learn more about your role in
wheat production and marketing. Your answers will help the research to
assess and analysis the wheat value chain development in the area. Therefore,
please speak freely and give honest answers. The data will not be shared with
anybody and so be assured of the confidentiality of any information you
provide.

PART ONE: Questionnaires for Producers

General
o Date of interview: ___________________Code: _________
o Name of Interviewer:__________________________
o Name of supervisor:___________________________

A. General Information about respondents

1. Name of Respondents: ____________________________________
2. District: _________ Kebelle: ________Village: _______Phone no__________

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3. Age of the respondents: ______ years
4. Sex of the respondent: 1. Male 2. Female
5. Marital status: 1. Single 2. Married 3. Divorce 4. Widowed
6. Family size: Male ___ Female ____ Total_____
7. Number of working persons (14-64 ages group): Male____ Female____ Total______
8. Number of dependents (< 14 and >64 age’s group): Male___ Female____ Total____
9. How long have you practiced production of Wheat? ________ Years
10. Education level of the respondents: _______Years of schooling
11. Distance to all weather roads you access: ______Kilo meter
12. Distance of your residence from your nearest market center: _______Kilo meter.
13. Distance of your residence to your nearest development center: _____Kilo meter.
B. Sample farm Households Resource Information
1. What is your major source of income?
1. On- farm income 2. Livestock production
3. Both On- farm income and livestock production 4. Others (like petty trade,
Carpenter, builder etc.)
2. Do you participate in any Non/off farm activities? 1. Yes 2. No
3. Do you own arable land? 1. Yes 2. No
4. Total crop land: in timad ____in hectare____. (Note: 1 ha = 4timad or 1 timad = 0.25ha)
5. Total grazing land: in timad _____
6. Total irrigable land: in timad ____ in hectare _____.
7. How many timad or hectare of land you allocated for Wheat production? _____
8. Do you have livestock? 1. Yes 2. No
9. If your answer for Q.8 is Yes, livestock Number: Oxen/bulls___, Cows/heifers___,
Calves___, Goats____, Sheep___, Donkeys____, Horses___, Mules___, Chickens___, Bee
hives ___, others ____
C. Inputs used and Wheat Production

1. How many quintals of Wheat do you produce in the production year? ________
2. How many times do you produce Wheat in the production season? ________
3. Inputs for Wheat production during production year? (Including; seed, pesticides, fertilizer,
farm equipments, labour, and irrigation equipments).
Crop type Labor per seed fertilizers Compost Manure in pesticides

76
 day local imroved NPS in Urea in in quintal local unit
quintal quintal

Wheat

4. What is the source of labor you used for Wheat production? (Multiple responses are
possible)
1. Family labor 2. Cooperation 3. Hired labor
4. Labor exchange 5. Family labor and Cooperation 6. Family labor, Cooperation
and Hired labor.
5. Do have oxen? 1. Yes 2. No, If yes, what the source of oxen and how many do you have?
1. Own 2. Rent 3. Other (specify) and ________
6. If you rent Oxen for traction power, cost incurred in hours or days

crop NO. of oxen rent Hours or days Rate of payment if rented

(Birr/day)

Wheat

7. If you have ever encountered problems with the use of Wheat seeds, what type?
(Multiple responses are possible).
1. There is germination problem 2. Unknown origin 3. Low quality
4. High price 5. Others (specify) ______________
8. What type of Wheat production system do you practiced?
1. Inter cropping 2. In rotation with other crops 3. In both 4. Others (specify)
______________
9. If you use irrigation for Wheat production, what is source, method, frequency of use, and
costs of irrigation? (Multiple responses are possible).
___________________________________________________________________________
___________________________________________________________________________
10. What type of farm equipments do you use for Wheat production? Give years of purchase
and the price?
1. Plough 2. Hoe 3. Harrow 4. Motor Pump 5. Others (specify) ____________
11. How is the trend of volume of Wheat production during the past 4 years?

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 1. Increasing 2. Decreasing 3. The same

12. If the production increases, what are the reasons? __________________________

13. If the production decreases, what are the reasons? __________________________
14. Would you like to expand Wheat production? 1. Yes 2. No
15. If your answer for Q.14 is yes, why? ________________________
16. If your answer for Q.14 is no, why?_________________________
17. What are the wheat production constraints on your farm?

Krop Oxen Disease Drought Weeds Flood Frost Seed Fertilizer Lack of Others
type shortage & insects shortage pesticide (specify)
shortage

D. Institutional services for Wheat producers

1. Do you have access to credit? 1. Yes 2. No, if yes what are the sources?
1. Governmental banks 2. Private banks 3. Credit institutions
4. Cooperatives 5. Others (specify) _______________________
2. Do you get extension contact in relation to Wheat production? 1. Yes 2. No, if yes how
often you contact with the extension agent specifically for Wheat production and marketing?
1. Weekly 3. Monthly 5. Once in a year
2. Once in two week 4. Twice in a year 6. Any time I ask them
3. Have you ever used additional agricultural inputs (chemical fertilizer, chemicals, improved
seeds etc.) for the production of potato? 1. Yes 2. No
4. If your answer for Q.3 is No, what was the main reason behind? ________________
5. If your answer for Q.3 is yes, which type and from which source did you get such inputs in
the Wheat production process? __________________________________________________
____________________________________________________________
6. Why did you prefer the chosen sources to get the needed inputs? _________________
7. How did you get the input from the mentioned sources?
Types of input used Used source (write codes) Possible sources

Improved seed 1. Through purchase

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Chemical fertilizer 2. On credit bases
3. As a gift
Pesticide 4. Through exchange
5. Others (specify)
Farm equipments (specify)

8. Do you always get inputs at the right time? 1. Yes 2. No

9. Have you encountered problems in accessing those inputs? 1. Yes 2. No
10. If your answer for Q.9 is yes, what are the problems? (Multiple responses are possible)

Types of input used Problems encountered Possible problems

(write codes)

Improved seed 1. Through purchase

2. On credit bases
Chemical fertilizer 3. As a gift
4. Through exchange
Pesticide 5. Others (specify)

Farm equipments (specify)

11. How did you solve these problems? _______________________________________

E. Marketing;
1. Did you participate in wheat marketing? 1. Yes 2. No
2. How many quintals of wheat do you sell per season? _____________
3. If your answer for Q.1 is yes what time do you sell your Wheat?
1. Immediately after harvest 2. After storage
4. If your answer for Q.3 is after storage for how long do you store? Maximum
days______
5. How much and to whom do you sell your Wheat? (Write the codes and multiple responses
are possible

79
 crop Amount Amount To whom At
produced(qt) sold(qt) (write code) where(write
code)

1.Collectors 1.farm gate

2. Wholesalers 2. Market center
3. Retailers 3. Retailing
4. Consumers yourself
5. Institutions (hotels, 4.Others(specify)
colleges/universities, etc.)
6. Cooperatives
7. Exporters
8. Processers
9. Brokers
10. Others(specify)

6. To whom do you sell most of your wheat? ____________________________

7. What are your determinant factors to choose your buyer?
Buyers Distance Availability Providing Accessibility Accessibility High Immediate Others
quality and from the Of market storage market of road price payment (specify)
standard buyer information service infrastructures
requirement

8. To which one of the following marketing center do you have access?

1. Merawi 2. Wotet Abay 3. Bahir Dar 4. Tekledib
9. What kinds of means of transportation you used?
1. Back animals 2. Man power 3. Vehicle
4. Back animals and Man power 5. Others (specify) _______________
10. If you used vehicles, is it easily accessible? 1. Yes 2. No
11. If you do not used vehicles, why? ___________________________________
12. What price do you get for your wheat you sold in 2015/16? Was it attractive? ________
13. How is the trend of price per unit of sales of wheat during the last 4 years?

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 1. Increasing 2. Decreasing 3. The same

If increasing, Why? ____________________________________

If decreasing, Why? ____________________________________

14. Would you like to expand Wheat selling? 1. Yes 2. No

15. If your answer for Q.14 is yes, why? ____________________________
16. If your answer for Q.14 is No, why? _____________________________
17. Do your Wheat have preferred qualities by buyers? 1. Yes 2. No
18. If your answer for Q.17 is No, what interventions are needed to improve quantity and
quality of Wheat production to attract better prices? ___________________
19. Do you consider quality requirement of your customers in your product?
1. Yes 2. No

20. If your answer for Q.19 is yes, what quality requirement do you consider for Wheat?
_____________________________________________________
21. Do you carried out any value addition on your Wheat? 1. Yes 2. No
22. If your answer for Q.21 is yes, what are those value adding activities? (Multiple responses
are possible)
Crop type Value adding When you carried
activities(write out
code)

Wheat 1.Cleaning
2. Cutting
3. Storage
4. Grading
5. Packing
6. Storing
7. Others(specify)

23. Linkage with commercial value chain actors:

1. Local Collectors, 2. Wholesalers, 3. Retailers
4. Processors 5. Consumers, 6. Others (specify) ___________________
24. Do you have marketing information? 1. Yes 2. No

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 25. If your answer for Q.24 is yes, from whom did you get the market information?
1. DAs 2. Kebele administration 3. Woreda experts 4. Family members
5. Friends 6. Radio 7. From market 8. Others (specify) _______
26. What type of information do you want to get?
1. Price information 2. Market place information
3. Buyers’ information 4. Other (specify)
27. At what time interval do you get the information?
1. Daily 2. Weekly 3. Monthly 4.Other
28. Was the information you get is valuable? 1. Yes 2. No
29. Do you know the market prices before you sold your Wheat? 1. Yes 2. No
30. Do you face difficulty in finding buyers when you want to sell your Wheat?
1. Yes 2. No
31. If your answer for Q.30 is Yes, due to:
1. Inaccessibility of market 2. Lack of information
3. Low price offered 4. Others (specify) __________________
32. What are the main Wheat marketing constraints?

Crop type Low price Lack of Poor Low Low High Others
of transportation linkage quality consumer market (specify)
product facility with of demand distance
value product from
chain living
actors place

wheat

33. What do you do if you did not get the expected price for your Wheat supply?
1. Took back home 2. Sold at lower price
3. Took to another market on the same day 4. Sold on other market day
34. Do you have any contract market agreement for your Wheat product?
1. Yes 2. No
35. Is storage for Wheat product a problem for you? 1. Yes 2. No
36. If your answer for Q.35 is yes, indicate the total volume of the product damaged in
Quintal and then the percentage loss at field and after harvest

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 37. Average return of Wheat crop.
Selling Total cost birr per quintal and per hectare revenue
price
(birr/qt)

Input Crop harvesting Storing Packaging tax Others Total

purchased management (specify)

38. Who sets your selling price for Wheat during marketing?
1. Yourself 2. Buyers 3. Set by demand and supply
4. Negotiations 5. Others (specify) ____________
39. What are the constraints of in the wheat production in priority?
1) Lack of knowledge and skill
2) Lack of information
3) Lack of appropriate technologies (improved seed, farm machinery…)
4) Lack extension service support
5) Less use of input (multiple answer is possible)
6) Others specify _________________
40. What are the opportunities for wheat production?
1) Natural resource availability (land and water 2) Conducive weather condition
3) Availability of institutions working on rice 4) Good market compared to other
crops 5) increased demand of rice consumers 6) Better government emphasis 7)
Less damage of rice by insect pest 8) High productivity (multiple answer is
possible in priority order)
41. What are the threats to increase quality production in priority order?
1) Lack of improved/high yielding varieties 2) Fertilizer is not available 3)
Limited access to credit 4) Poor physical infrastructure (Road) 5) Less training
opportunity 6) Absence of supplementary irrigation 7) Change in weather condition
8) Poor market access 9) Labor shortage 10) Lack of plowing oxen
11) Damage of over flood 12) Insect pest damage (multiple answer is possible)

------THE END-----

Thank you very much for your cooperation and valuable information!!

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2. Actors (Collectors, Wholesalers, Retailers, and Processers) Interview Guide

A. General Information about Actors

1. Name of Actors__________________: Sex______Age__________
2. Address: _________ Zone_________District/ Town _____________
3. Marital status 1. Single 2. Married 3. Divorced 4. Widowed
4. Family size: Male________ Female________ Total ___________
5. Educational level of the respondent________ years of schooling
6. Type of trade: 1. Collector 2. Wholesaler 4. Retailer 5. Processor 6. Others
7. How long have you been operating in potato marketing business? _________years
8. Did you trade alone or in partnership?
1. Alone 2. Partnership
3. Alone and Partnership 4. Other (specify)
9. If partnership, how many of you are in the business? ___________Persons.
10. What is your main business? Put in order of your business proportion
Activity Business proportion

Collecting

Retailing

Wholesaling

Processor

Exporter

Others (specify)

11. Do you participate in Wheat trading year round? 1. Yes 2. No

12. If your answer to Q.11 is No, at what period of the year do you participate?
1. When purchase price becomes low 2. During high supply 3. Other (specify)
13. Do you practice trading other than wheat? 1. Yes 2. No
14. If your answer to Q.13 is yes, what additional trading you are engaging? __________
15. How many number of market days are in a week? __________________
16. What was the amount of your initial working capital when you started Wheat trade
business? ___________Birr.
17. What is the amount of your current working capital? _________Birr.
18. What is your source of working capital?
1. Own 2. Loan 3. Gift

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 4. Share 5. Own and Loan 6. Others sources (specify)
19. If it was loan, from whom did you borrow?
1. Relative/family 2. Private money lenders 3.Governmental banks
4. Private banks 5. ACSI 6. Cooperatives 7. Others (specify)
20. What means of transportation do you use to transport your Wheat?
1. Man power 2. Animal back 3. Vehicle
4. Cart 5. Animal back and Vehicle 6. Others
21. Do you carry out any physical treatment to maintain product quality?
1. Yes 2. No
22. If your answer to Q.21 is yes, mention them; _________________________________
24. Are there entry barriers in Wheat trading? 1. Yes 2. No
25. If your answer to Q.24 is yes, what are the barriers?
1. Capital 2. Information asymmetry 3. Administrative problems
4. Hard competition with unlicensed traders 5.High monopoly power to control
market 6. Other (specify)
26. Linkage with commercial value chain actors: (Multiple responses is possible)
1. Farmers 2. Local collectors 3. Wholesalers
4. Retailers 5. Consumers 6. Others (specify) ____________
B. Purchase practice of Actors
1. From which market and supplier did you buy wheat? (Multiple market area is possible,
multiple answers are possible and write the codes in correspondence to the market area and
other answers should be written in accordance)
Market From Possible suppliers Quantity Average % of Payment
location (write purchased price/qt purchased 1.Cash
code) 2. Credit
3. Advance
payment

1.Producers
2. Collectors
3. Wholesalers
4. cooperatives
5. Retailers
6. Brokers
7. Unknown

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 8. Others

2. From which market do you prefer to buy most of the time? ______________________
3. Why do you prefer this market?
1. Better quality 2. High supply 3. Shortest distance
4. Others (specify)
4. Are all your purchasing centers accessible to vehicles? 1. Yes 2. No
5. How do you measure your purchase? 1. By sack 2. By basket 3. By weighing (kg)
4. Others (specify) ____________
6. Who sets the purchase price?
1. Myself 2. Set by demand and supply 3. Sellers 4.Other
7. How do you attract suppliers?
1. Giving better price 2. By negotiating with them 3. Fair scaling /weighing
4. Extending credit 5. Other (specify) _______________
8. Do you consider quality requirement of your customers in purchasing activities?
1. Yes 2. No
9. If your answer to Q.8 is yes, what quality requirement do you consider for Wheat? _____
10. Which are the months of the year when prices are lowest for Wheat? _____________
11. Which are the months of the year when prices are highest for Wheat? ____________
12. How many regular suppliers do you have? Producers’ ________, Collectors _______,
Whole sellers________, Retailers ________, Processors _________, others
13. Have you ever stopped purchasing due to lack of fund? 1. Yes 2. No
14. If your answer to Q.13 is Yes, for how long? ___________________days
15. Have you ever stopped purchasing due to lack of supply? 1. Yes 2. No
16. If your answer to Q.15 is Yes, for how long __________day.
C. Selling Practices of Actors
1. To which market and to whom did you sell Wheat. (Multiple market area is possible,
multiple answers are possible and write the codes in correspondence to the market area and
other answers should be written accordingly)
Market To whom Possible suppliers Quantity Average %share Payment
location (write sold (qt) price/qt buyers 1.Cash
code) 2. Credit
3. Advance

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 payment

1.Processors
2. Collectors
3. Wholesalers
4.Cooperatives
5. Retailers
6. Brokers
7. Unknown
8.Hotels and other
organizations
9. Consumers
10. Others(specify)

2. How did you sale your produce?

1. Direct to the purchaser 2. Communication with phone before supplying the
product 3. Through commission agents 4.Other (specify) __________
3. When did you get the money after sale?
1. as soon as you sold 2. After some hours 3. In advance
payment
4. On the other day after sale 5. Others (specify). ______________
4. What do you do, if the product is not sold on time?
1. Took back home 2. Took to another market
3. Sold it at lower price 4. Sold on other market day
5. When did you sell? Selling strategy select the number
1. Store and sell when price rises 2. Sell as soon the purchase
3. Sell in pieces as buyers come 4. Sale before purchase 5.Others (specify) _____
6. How did you attract your buyers?
1. By giving better quality to others 2. By communication
3. By using commission agents 4. By fair scaling 5. Others (specify) __
7. How many regular buyers do you have? Whole sellers_____, Assembler______,
Retailers _____, Processors______, Consumers_______, others (specify) _________
8. What is your packaging material? 1. Sisal sack 2. Plastic sack 3. Basket 4. Others
(specify) _______________
9. What percent of the total produce is sold on local/District market? __________%

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10. What percent of the produce is sold to outside the District markets? _________%
11. Who sets selling price?
1. Myself 2. Set by demand and supply 3. Buyers 4. Other (specify) _____
12. Are there charges (taxes) imposed by government or license officials at the market?
1. Yes 2. No
13. If your answer to Q.12 is yes, what are they and what is the basis of payment?
Types of taxes Amount (birr) Bases of payment Rate of payment
(birr)

14. Do you want to expand Wheat trading? 1. Yes 2. No

15. If your answer to Q.14 is yes, why? ___________________
16. Indicate your average cost incurred per quintal in the trading process of Wheat.
Type of costs Cost incurred in birr/qt Remarks

Purchase price

Labor for packing

Loading/unloading

Transportation fee

17. Are there problems on Wheat marketing? 1. Yes 2. No

18. If your answer to Q.17 is yes, what are the problems?
problems Write by giving priority

Credit

Price setting

Storage problem

Lack of demand

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Information flow

Quality problem

Lack of government support to imrove

Informal Wheat marketing

Government policy

Others (specify)

19. What do you think the causes of the problems? ___________________

20. Major challenges and opportunities

Challenges:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________
Opportunities:
__________________________________________________________________
__________________________________________________________________
____________

21. Any suggestion /comments/ recommendations you would like to make:

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
____________________

------THE END-----

Thank you very much for your cooperation and valuable information!!

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4. Key Informant Interview Guide
1. Name of the organisation____________________
2. Location ________________________
3. Main purpose of the organisation
__________________________________________________________________
_____________________________________________________________
4. Major roles in the value chain
__________________________________________________________________
______________________________________________________________
5. When you start your role in the value chain
__________________________________________________________________
______________________________________________________________
6. How the trend of wheat production during the last 4 years in the area
__________________________________________________________________
______________________________________________________________
7. What are pricing strategies of producers and traders?
__________________________________________________________________
__________________________________________________________________
____________________________________________________________
8. Who do you think takes the highest margin with in the value chain
________________________________________________________________
9. What are constraints and opportunities of producers
 Constraints
____________________________________________________________
____________________________________________________________
____________________________________________________________
___________________________________________________
 Opportunities
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________
10. What are opportunities and constraints of traders

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  Constraints
____________________________________________________________
____________________________________________________________
____________________________________________________________
___________________________________________________
 Opportunities
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________
11. Opportunities and constraints of processors
 Constraints
____________________________________________________________
____________________________________________________________
____________________________________________________________
___________________________________________________
 Opportunities
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________
12. What improvements do you think should done to improve the value chain
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________

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3. Checklists Used for Focused Group Discussion

1. When does wheat production started?

_____________________________________________________________________
How?
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________

2. How the wheat production trends and average yield/ha since started
_____________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________
3. How is the consumption and marketing ratio of wheat since started?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
____________________________________________________________

4. What is the price trend of wheat over

years?___________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________________

5. What are the major crops growing in the

area?____________________________________________________________________
________________________________________________________________________
_______________________________________________________________________

6. How profitable is wheat relative to other crop

options?__________________________________________________________________
________________________________________________________________________
_______________________________________________________________________

7. What type of service you get for your wheat production and by whom?

______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
____________________________________________________________________

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8.What are the quality of service you get?

______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
___
9. What are the primary wheat production constraints faced? (E.g., inputs, water,
labour)___________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________________

10. What are the best solutions to critical pre harvest of wheat constraints? (E.g., inputs,
water, labor)
________________________________________________________________________
__________________________________________________________________
11. What are the primary post-harvest constraints faced by farmers? (E.g. storage,
processing….)
________________________________________________________________________
__________________________________________________________________

12. What are the best solutions to critical post-harvest constraints? (E.g. storage,
processing……)
________________________________________________________________________
__________________________________________________________________

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