WOLAITA SODO

UNIVERSITY

COLLAGE OF AGRICULTURAL

IDENTIFICATION OF MARKET SUPPLY OF MAIZE PRODUCTION:

THE CASE OF CAGNI WOREDA, INIJBIRA ZONE).

A RESEARCH PROPOSAL SUBMITTED TO THE COLLEGE OF

AGRICULTURE, DEPARTMENT OF AGRICULTURAL ECONOMICS, IN
PARTIAL FULFILLMENT IN AGRICULTURAL ECONOMICS

BY: - Esrael Simeneh

ID NO: - AGR/R/1540/12

ADVISOR: -Tilhuen A. (MSc)

JULY, 2023

WOLAITA SODO, ETHIOPI

 ACKNOWLEDGEMENT
First and for most we would like to thank the almighty and beloved God that let us stay in life
with a proper health and that give as limitless aid, costless support, allowance and kindness that
provided us engine force and strength to pass all the challenges in each of the senior essay
hopefully to end up the work on the allocated time successfully.

Second our special appreciation and thanks highly indebted to my advisor Tilhuen A. (MSc)

for his willingness and unreserved comment, evaluation and advice from the beginning up to the
end of the study. Without his encouragement, insight, guidance and professional expertise in
each phase of the senior essay, the completion of this work would not have been possible.

We also highly indebted all our families for their moral, financial and logistics supports being on
the side of ours. And for love, encouragement and patience without any limit at any time which
have contributed a lot to the successful completion of this study.

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Table of Contents
LIST OF TABLE.........................................................................................................................IV
LIST OF FIGURES......................................................................................................................V
ACRONYMS AND ABBREVIATIONS...................................................................................VI
1. INTRODUCTION.....................................................................................................................1
1.1. Background of the Study........................................................................................................1
1.2. Statements of the problem.....................................................................................................3
1.3. Objectives of the study...........................................................................................................5
1.5. Significance of the study.........................................................................................................6
1.6. Scope and limitation of the study..........................................................................................6
2.1.1. Basic Concepts...................................................................................................................7
2.1.2. Maize Production in Ethiopia............................................................................................9
2.2. Approaches to the Study of Agricultural Marketing........................................................12
2.2.1. Functional Approach........................................................................................................12
2.2.2. Institutional Approach......................................................................................................13
2.2.3. Commodity Approach......................................................................................................13
2.3. Empirical literature on Market supply..............................................................................13
2.4. Conceptual Framework of Market Participation and Marketed.....................................15
FIGURE 1. DIAGRAMMATIC REPRESENTATION OF THE CONCEPTUAL
FRAMEWORK............................................................................................................................15
3. METHODOLOGY..................................................................................................................16
3.1. DESCRIPTION OF STUDY AREA...................................................................................16
3.2. Sampling Technique and Sample Size................................................................................16
3.2.1. Data Source and Collection..............................................................................................17
3.3. Data Analysis.........................................................................................................................18
3.3.2. Econometric Analysis......................................................................................................18
3.4. Variables Definitions and Hypothesis for Market Supply of Maize................................20
4 .WORK PLAN AND BUDGET PLAN...................................................................................23
4.1 Work plan...............................................................................................................................23
4.2 Budget Plan............................................................................................................................24
6. REFERENCES........................................................................................................................25

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 List of Table pages
Table 1: Distribution of populations and the selected sample size in sampled KAs---------------------17

Table 2: Work plan---------------------------------------------------------------------------------------------------24

Table 3: Budget Plan-------------------------------------------------------------------------------------------------25

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 ACRONYMS AND ABBREVIATIONS

BLUE Best Linear Unbiased Estimator

CC Contingency Coefficient
CLR Classical Linear Regression
FAO Food and Agricultural Organization
GDP Gross Domestic Product
IMR Inverse Mill’s Ratio
NBE National Bank of Ethiopia
OLS Ordinary Least Square
SPSS Statistical Package for Social Science
USAID United State Agency International Development
VIF Variance Inflation Factors

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1. INTRODUCTION

1.1. Background of the Study

Cereals are the most important food crop of the world and it provides the world with a majority
of its food calories and about half its protein. Cereals occupy more than half of the world's
harvested area and are the most important food source for human consumption. Of the 2.3 billion
tons of cereals produced each year, 1 billion are destined for human consumption; 750 million
tones are used as animal feed and 500 million tones are processed by industry, used as seed, or
wasted. World total cereal production is increase by about 13.4 percent or nearly 68 million tons
in 2014 compared to 2013 year (FAO, 2014).

Agriculture is the main stay of the Ethiopian economy employing the greatest proportion of the
country population mainly of rural areas, which accounts for about 46% of the GDP of the nation
and 90% of its export earnings and hold about 85% of the country’s labor force. Agriculture and
allied activities are the main source of much of the raw materials, investment capital, and foreign
exchange, and labor needed for the economic growth. However, it is still in its primitive stage
although there are some improvements in inputs in recent times. In this regard, improving the
performance of agricultural sector is of critical importance for fast development of countries‟
economy (Tesfaye, 2009).

The production of cereal crops, such as teff, maize and sorghum is economically and socially
important in Ethiopia. Cereals are the major food crops in Ethiopia and 82% of the total land area
covered by grain crops and contributes 87% of the total grain production. Cereal production and
marketing are the means of livelihood for millions of smallholder households and it represents
the single largest sub-sector in the Ethiopian economy, which accounts for roughly 60% of rural
employment (Adugna, 2014) and account for over 90% of input consumption in Ethiopia
(Ebrahim,2013). The contribution of cereals to national income is also large. According to
available estimate, cereal production represents about 30% of gross domestic product (GDP).
This calculation follows from the fact that agriculture is 48% of the nation’s GDP (World Bank,
2007), and that cereals‟ contribute to agricultural GDP is 65% (Diao et al, 2007).

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Maize arrived in Ethiopia slightly later, around the late 17th century (Huffnagel 1961 ), and was
mainly grown as a subsistence crop in the mid-altitudes (1500–2000 m above sea level) in
southern, south-central, and south-western parts of the country. The production system in the
1960s and for the first quarter of 1970s was truly subsistence, the yields exceeding 1 metric ton
(Mt)/ha. Maize production and its status in determining food security in the country received a
major focus in the mid-1980s, particularly spurred by the 1984 devastating drought and the
famine that followed. The wide adaptability of the crop and the potential to produce more
calories and food per area of land cultivated than all major cereals grown in Ethiopia were
important factors in considering maize as part of the national food security strategy, including its
inclusion under the government-led intensive agricultural extension program with increased
production driving market prices down, maize became more affordable (e.g., relative to other
staples such as teff and wheat) to rural and urban consumers. It is now increasingly used both
separately as well as in mixed flour with other more expensive cereals in traditional Ethiopian
diets. Maize is the most important staple in terms of calorie intake in rural Ethiopia. The 2004/5
national survey of consumption expenditure indicated that maize accounted for 16.7 % of the
national calorie intake followed by sorghum (14.1 %) and wheat (12.6 %) among the major
cereals (Berhane et al. 2011). Compared to the 1960s the share of maize consumption among
cereals more than doubled to nearly 30% in the 2000s, whereas the share of teff, a cereal that
occupies the largest area of all crops in Ethiopia, declined from more than 30% to about 18%
during the same period (Demeke, 2012).

The popularity of maize in Ethiopia is partly because of its high value as a food crop as well as
the growing demand for the Stover as animal fodder and source of fuel for rural families.
Approximately 88 % of maize produced in Ethiopia is consumed as food, both as green and dry
grain. Maize for industrial use has also supported growing demand. Very little maize is currently
used as feed but this too is changing in order to support a rapidly growing urbanization and
poultry industry. Unlike its neighbour, Kenya, which imports a significant share for its
consumption needs, Ethiopia has increasingly attained self-sufficiency in maize production since
early this decade and even exports some quantities to neighboring countries (e.g., Sudan and
Djibouti) in years of surplus production. If production can be significantly expanded, the

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potential for maize export to all the neighboring countries including Kenya is very high although
the national demand is expected to continue to grow in the coming years (Shahidur, 2010).

According to the study by (Dercon et al. 2009) and (Zeng et al. 2013) the following are major
constraints identified as factors that affect maize. These includes: shortage of supply of disease
resistant and high yield varieties, weed and pest occurrence, low soil fertility , poor soil drainage,
frost and drought, diseases, rising costs of transport, market price fluctuation and others.
According to these authors, most farmers are not able to access pesticide and fungicide in the
nearby market. Problems of adulteration and selling after expiration dates were often mentioned.
At present cooperatives are providing fertilizers but often at unaffordable prices. On marketing
side, low price of product, lack of storage and low quality of product are the major problems of
the maize marketing activities.

1.2. Statements of the problem

Ethiopian agriculture is characterized by small holdings, low capitalization and low yield per unit
of land. Cereal production and marketing are the means of livelihood for millions of households
in Ethiopia. It is the single largest sub-sector within Ethiopia’s agriculture, far exceeding all
others in terms of its share in rural employment, agricultural land use, calorie intake, and
contribution to national income. Cereal crops are the major dietary energy supplier all over the
world and particularly in Ethiopia. The roles of agriculture remain significant in the Ethiopia
economy despite the strategic importance of the industrial sector (Shahidur, 2010).

Agricultural marketing plays a vital role in the production, consumption and the economy in
general. However, due to the underdeveloped markets in Ethiopia, the benefits of exchanges
cannot be realized and the economy remains trapped in a largely subsistence-oriented structure
(Elleni, 2003). The weak performance of the agricultural markets has recognized as a major
hindrance to the agricultural development and the overall economy. Some regions experience
depressed local price due to surplus production but higher in other regions, even when there is a
balance between aggregate supply and demand at national level due to the poor marketing
system. So a critical problem stands in the course of formulating appropriate policies and
procedures for the purpose of increasing marketing efficiency (Haile, 2009).

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Understanding cereal markets is especially relevant in Ethiopia, given the disastrous implications
that poorly functioning cereal markets had on food security in the past, when cereal stocks were
available in some parts of the country while widespread famine occurred in other parts
(Gebremedhin, 2012). Major reasons for historically poorly functioning of cereal markets have
included a lack of market information, poor road infrastructure and high transaction costs, and
distress sales and lack of storage by small farmers (Seneshaw et al, 2013).

In Ethiopia, agricultural growth induces higher overall growth than non -agricultural sectors.
This leads to faster poverty reduction since it generates proportionately more income for farm
households who represent the bulk of the poor. From within agriculture, staple crops have
stronger growth linkage resulting from more than proportionate increase in total GDP. Moreover,
such growth linkage becomes stronger overtime (Diao et al, 2007).

According to Wolday and Eleni (2003) in Ethiopia the performance of agricultural marketing
system is constrained by many factors such as: poor quality of agricultural produce, lack of
market facilities, weak extension services which ignored marketing development, poor linkage of
research and extension, absence of marketing information and intelligent services, excessive
price and supply fluctuations, limited access to credit, inefficient handling including, storage,
packaging and transportation problems. Farmers in Ethiopia in general and in North region in
particular are affected by low producer’s price, on one hand, and high consumer’s price, on the
other hand. One of the reasons for this is lack of proper transport facilities and other
infrastructure service. This type of problems discourages market participation and market supply
agricultural commodity. Major reasons for historically poorly functioning of cereal markets have
included a lack of market information, poor road infrastructure and high transaction costs, and
distress sales and lack of storage by small farmers (Seneshaw et al, 2013).

In spite of the fact that markets are crucial in the process of agricultural commercialization,
transaction costs and other causes of market imperfections could limit the participation of farm
households in different markets (Abraham, 2013). This implies that markets could be physically
available but not accessible to some of the farm households.

Ethiopia has favorable agro-climatic conditions for a range of crops including malt barley, as
well as abundant land for agricultural activities. It is home to 18 major agro-ecological zones and

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49 agro-ecologic sub-zones. The country has the soils and climate suitable for growing over
~150 types of crops, including high value commodities such as coffee, sesame and other
oilseeds, cereals, spices, fruits and vegetables USAID (2012). Farmers produce maize but market
participation and market supply of maize to the market is limited. Because of the nature of the
product on the one hand and lack of properly functioning marketing system on the other, often
resulted in volatile producers ‘price of maize grown in the study area mainly for market.
However, determinants of market supply of maize were not undertaken in Semen Bench, which
have potential production volume. Moreover there was a need to employ a commodity market to
fully understand and resolve the problem of maize at all levels. This makes undertaking
determinants of market supply of maize. Hence, this study attempts to look the whole
determinants of maize marketed surplus in the district. This study will be designed to address the
prevailing information gap on market participation, marketed surplus and contribute to proper
understanding of the challenges and assist in developing improved market development
strategies to benefit smallholder farmers.

1.3. Objectives of the study

1.3.1 The general Objective

The general objective of the study will be to identify of market supply of maize production in
Study area.

1.3.2 Specific Objective

1. To identify factors that affect market participation decision of households.

2. To determine factors affecting the quantity of market supply of maize Semen bench.

1.4. Basic research Question

1. What are the factors that influence producer market participation decision?

2. What factors determine market supply of maize in the Semen Bench?

1.5. Significance of the study

The study will be generated valuable information on determinants of market supply maize
production that might assist policy makers at various levels to make relevant decisions to

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intervene in the development of maize production, and marketing to improve the livelihood of
smallholder farmers through market participation and designing of appropriate policies and
strategies. The findings of the study might also be useful to farmers, government and non-
governmental organization to make their respective decisions. It may also serve as a reference
material for further research on similar topics and other related subjects.

1.6. Scope and limitation of the study

The study will be conducted in, cagni woreda and important information is collected from
sample households in the study area. The study emphasizes on market supply of maize that is
factors affecting market participation and intensity of market supply. The study is restricted to
the market supply of maize production in cagni woreda. In addition, the shortage logistics and
budgets unable to consider additional sample of maize producing kebeles and also lack of proper
documentation on the required information is one of the limitations.

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 2. LITERATURE REVIEW

2.1. THEORETICAL LITERATURE REVIEW

2.1.1. Basic Concepts

This section attempts to provide basic concepts of a market, marketing, market participation and
marketed surplus, identifying factors influencing market participation and identifying the factors
affecting the marketed surplus.

Market: The word “market” has many connotations. Bain and Howells (1988; cited in
Muhammed, 2011), define “markets” as a single arrangement in which one thing is exchanged
for another. A market consists of buyers and sellers which facilities to communicate with each
other. It needs not to be specific place (Crammer and Jensen, 1997; cited in Muhammed, 2011)
or spot market. According to Abbot and Makeham (1981; cited in Muhammed, 2011), a market
can be defined as an area in which exchange can take place. Kohl’s and Uhl (1985; cited in
Bosena, 2008) define market is an area for organizing and facilitating business activities and for
answering the basic economic questions: what to produce, how much to produce, how to
produce, and how to distribute production.

Marketing: The term marketing has a variety of meanings. To some shoppers it means
purchasing groceries and all other household needs. From the point of view of farmer or rancher,
it means selling their commodities. From the perspective of handler of the commodity, it means
storing the commodity, transporting the product in to a form that consumers want, shipping it to
retail outlet and promoting its sale (Crammer and Jensen, 1997; cited in Muhammed, 2011).
According to Mendoza (1995; cited in Bosena, 2008), marketing is a system, which comprises
several and usually stable and interrelated structures that along with production, distribution and
consumption, strengthen the economic process. According to Kotler and Armstrong (2004)
defined marketing as a social and managerial process by which individuals and groups obtain
what they want and need through creating and exchanging products and value with others.
Purcell (1979; cited in Muhammed, 2011), forwarded a broader definition i.e. marketing is the
set of economic and behavioral activities that are involved in coordination the various stages of
economic activities from production to consumption.

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According to Lapar et al (2004) Marketing is the process of planning and executing the
consumption pricing, promotion and distribution of idea, goods and services to create exchange
that satisfy individual and organizational goals. Marketing is productive because it adds form,
time and place utility (or satisfaction).

Marketing system: Is defined as the sequential set of kinds or types of business firms through
which a product passes during the marketing process (Branson and Norvell, 1983). Also they
define marketing system as the totality of product channels, market participants and business
activities involved in the physical and economic transfer of goods and services from producers to
consumers. It is usually seen as a “system” because it comprises several, usually stable,
interrelated structures that, along with production, distribution, and consumption, underpin the
economic process (Mendoza, 1995).

Agricultural marketing: Consumers spend a large amount of income on basic foods hence with
the growth of urbanization; the agricultural marketing system is expected to play a great role in
linking the rural and the urban population. Agricultural marketing covers all the activities
associated with the agricultural production and food, feed, and fiber assembly, processing, and
distribution to final consumers, including analysis of consumers’ needs, motivations, and
purchasing and consumption behavior (Branson and Norvell, 1983).

Marketed surplus: is the quantity of the total produce which the producer actually sells in the
market, irrespective of his total personal requirement (Usha, 2013). It is more practical in nature
and refers to that part of the marketable surplus which is actually marketed by the producer, i.e.,
not only the part which is available for disposal but the part which is actually made available to
the market or to the disposal of the non-farm rural and urban population. The term is objective in
nature, because it refers to the marketed amount, i.e., to the actual quantity which enters the
market (Kumar 2007; cited in Parmod et al, 2013). It may be more, less or equal to the
marketable surplus.

Market Participation: Various definitions of market participation have been suggested by

different authors. Some authors consider market participation as any market related activity
which promotes the sale of produce (Key et al., 2000; Holloway & Ehui, 2002; Lapar et al.,
2002; cited in Geoffrey, 2014). According to Jubilee (2014) market participation is defined as the

8
exchange of goods and services for money. Market participation can be referred to as
commercialization (Latt & Nieuwoudt, 1988; cited in Muhammed, 2011). It can also be
described as an individual’s or household’s economic transactions with others, in cash or kind
(Von Braun et al., 1991; cited in Muhammed, 2011). Staal et al. (1997, cited in Geoffrey, 2014)
mentioned that a low proportion of products exchanged in the market reflect limited market
participation. With the three possible states of buying, selling or not trading, (Goetz 1992, cited
in Geoffrey, 2014) defines market participation using household purchases and sales.

Volumes of produce traded are used to determine market participation. In agricultural market
economy, market participation or commercialization occurs mainly when farmers stop being
mostly subsistence farmers and become profit-oriented. Market participation is in that case
defined as earnings from market activities (Makhura et al., 1997; Makhura, 2001).

The various market participation definitions and measurements do not rule out quantity or
produce sold or sales volumes. In this study, the presence of quantity produced was used as a
measure for market participation. This is because market participation for subsistence
smallholder farmers is directly related to generation of a marketed surplus, which in turn depends
on productivity levels.

2.1.2. Maize Production in Ethiopia

Maize is one of Ethiopia’s most important cereals in terms of production, with four million tons
produced in 2011 by eight million farmers across two million hectares making it a significant
contributor to Ethiopia’s economic and social development. There is significant market potential
for maize in Ethiopia and eastern Africa. However, once harvested, maize production is
extremely vulnerable to significant post-harvest losses due to mold, vermin and theft. Moreover,
only a small fraction of the eight million farmers use hybrid maize seed.

Maize production in Bench has been a source of nutrition to many households providing
carbohydrates which is a vital ingredient to human health. Very important aspect with effect of
maize production is it supports efforts of the government to make food secure country and
alleviate hunger to its citizens. Improving the productivity of maize-based farming could
significantly reduce hunger, enhance food security and alleviate poverty through increasing the

9
purchasing power of the farmers. Increases in agricultural productivity lead also to agricultural
growth and can help to alleviate poverty in poor and developing countries, where agriculture
often employs the greatest portion of the population. As farms become more productive, the
wages earned by those who work in agriculture increases. At the same time, food prices
decrease and food supplies become more stable, laborers therefore have more money to spend on
food as well as other products. However, it is not only the people employed in agriculture who
benefit from increases in agricultural productivity. Those employed in other sectors also enjoy
lower food prices and a more stable food supply. Their wages may also increase. Agricultural
productivity is becoming increasingly important as the world population continues to grow a
productive farm is one that provides most of the resources necessary for the farmer's family to
live, such as food, etc. It is a farm which ensures food security as well as a way to sustain the
well-being of a community (survey result, 2015).

2.1.3. Maize Marketing in Ethiopia

Agricultural markets continue to be seen as the means for ensuring that smallholder farmers are
effectively integrated into the mainstream of national economies, especially in Ethiopia, Obi et
al., (2011). Markets provide the opportunity for farm production to contribute to poverty
reduction through the cash income realized from sales of farm produce (Minot and Hill, 2007).

According to Siziba et al. (2011), reported on cereal market participation by Sub Saharan Africa
smallholder farmer that household size, experience, cultivated land, animal manure, price
information, road net and ICT significantly influenced market participation whereas membership
in cooperative, radio, livestock owned, off farm income, extension training, research
participation, price information, average market distance, credit amount and ICT significantly
determined level of participation.

According to Musah et al. (2014), reported on market participation of smallholder maize farmers
in upper west region of Ghana indicated that age of household head, education status of
household head, household size, farm size, off farm income, output produced, access to credit
and market information were the significant factors which affect market participation decision
whereas age, gender, education, household size, household income, off farm income, quantity of

10
output, access to credit, price, market information and point of sale of output were significant
factors affecting the level of market participation of smallholder maize farmers.

In Ethiopia, participation of smallholder farmers to the maize market has long been considered
an important part of the agrarian transformation of low income economies and a means of
ensuring food security, enhanced nutrition, and enhanced incomes, Eleni, (2009). This is because
the majority of populations live in rural areas where agriculture typically constitutes 50–90% of
the total household income contributed mostly by maize production.

Despite the importance of maize market in agrarian transformation, smallholders farmers,

especially in Ethiopia, have encountered several challenges in participating to markets (Minot
and Hill, 2007; URT, 2008; Tilburg and Schalkwyk, 2011). However, this was less of a problem
in the era of the marketing boards, when a parastatal organization the marketing board–tended to
provide essential output market services such as collection of the harvest, quality assessment,
buying and storage (Jayne et al., 2006; Barrett, 2007).

According to Shilpi and Umali-Deininger (2007) documented that participation of small holder
farmers at the market increases significantly with an improvement in market facilities and a
decrease in travel time from the village to the market. Along with transportation costs to the
nearest market, the characteristics of the nearest market can also influence the transaction costs
of taking products to markets. For instance, a highly congested market with few facilities can add
substantially to waiting time, product deterioration and losses, and costs to farmers and traders.

According to Admassie (2013), well-functioning market facilities helps in modernizing

agricultural production, creating economic opportunities, improving food security, motivating
farmers to acquire and use productivity increasing inputs, assuring effective vertical integration
and coordination in input supply, credit and output marketing, and encouraging farmers to
specialize in productions where they have competitive advantage.

Generally, market facilities are important aspects for the development of the agricultural sector
and poverty reduction in rural areas. Availability of markets for agricultural products is
important in stimulating agricultural production. Availability of improved markets facilities in
the market also ensure better producer prices for farmers. URT (2010) argue that improvement
and construction of rural roads and market infrastructure are important for efficient inputs and
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output marketing. Investment in facilities is also important for attracting private investment in
agricultural related activities such as agro-processing, increasing producer prices and farmers’
income. For example in the context of India, Acharya (2004) noted that congestion and delays in
the markets due to lack of proper market infrastructure resulted in long waiting periods for the
farmers and hence limit the successful participation of small holder farmers in markets. World
Bank, similarly explained that lack of market infrastructure and facilities added substantially to
marketing costs of the traders.

2.2. Approaches to the Study of Agricultural Marketing

Different circumstances involved in the demand and supply of agricultural products, and the
unique product characteristics, require a different approach for analyzing agricultural marketing
problems (Johan, 1988; cited in Ayelech, 2011). The major and most commonly used approaches
are functional, institutional and commodity approaches.

2.2.1. Functional Approach

One approach to study marketing is to break up the whole marketing process into functions -
specialized activities performed in accomplishing the marketing process (Kohl’s and Uhl, 1985;
cited in Ashenafi, 2010). Regardless of how the marketing system is organized, the economic
functions necessary for the production of form, time, and place utilities must be performed. The
efficiency with which the various economic functions are performed is important (Andargachew,
1990). The approach helps to evaluate marketing costs for similar marketing middlemen and/or
different commodities and costs and benefits of marketing functions (Kohl’s and Uhl, 1985; cited
in Ashenafi, 2010). The approach promotes careful identification of corrective measures as it
pays special attention to particular functions. At the same time it has drawbacks as the
improvement measures formulated in isolation may not necessarily fit very well into the rest of
the marketing system (Kohl’s and Uhl, 1985; Purcell, 1979; cited in Ashenafi, 2010). Since the
focus on the functions performed usually leads to consideration of institutions and a particular
commodity, the functional approach provides the skeletal framework for a more encompassing
approach to the study of marketing problems. Most contemporary marketing texts follow to
varying degrees functional approach.

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 2.2.3. Commodity Approach
In a commodity approach, a specific commodity or groups of commodities are taken and the
functions and institutions involved in the marketing process are analyzed (Kohl’s and Uhl, 1985;
cited in Ashenafi; 2010). This approach is said to be the most practical as it helps to pin point the
specific marketing problems of each commodity as well as improvement measures. The
approach follows the commodity along the path between producer and consumer and is
concerned with describing what is done and how the commodity could be handled more
efficiently.

2.2.2. Institutional Approach

The institutional approach to the studies on agricultural marketing problems pays attention to the
nature and characteristics of the various middlemen and related agencies and organization of
marketing machinery (Kohl’s and Uhl, 1985; cited in Ashenafi, 2010). The institutional analysis
is based on the identification of the major marketing channels and it considers the analysis of
marketing costs and margins. The human element receives primary emphasis in this approach.
There can be no change and no adjustment without action by the institutions. But emphasis on
mere institutions is not sufficient. In the final analysis, it will be the interactions along the
marketing continuum from producer to consumer that determines the degree of co-ordination and
total system efficiency achieved. Neither detailed descriptions of the institutions involved, nor in
depth analysis of the actions of the institutions will contribute in any significant way toward
increased efficiency in marketing unless the focus of attention is extended to include the inter-
stage actions and interactions.

2.3. Empirical literature on Market supply

A number of studies pointed out factors that centrally affect marketable supply of agricultural
commodities. For example, Agete (2014) study factors influencing participation of smallholder
farmers in red bean marketing in Halaba special district. The results showed that out of the
fifteen variables hypothesized to influence red bean farmers‟ market participation decision, nine
were statistically significant. The factors that significantly and positively influenced the
likelihood of farmers participating in the red bean market were price, ownership of means of
transport, number of extension visits per year, quantity of red bean produced, awareness about

13
quality standards, market information, access to credit and family size. The result indicated that
increase in the values of the variables also increased market participation decision of red bean
farmers. Gender negatively but significantly influenced red bean market participation, indicating
that female-headed households were more likely to participate in red bean marketing than their
male-headed counterparts. In the second stage (extent of participation decision), only four out of
fourteen factors were statistically significant. The positive ones were red bean price, ownership
of means of transport and quantity of red beans produced.
Muhammed (2011) the study conducted in Alaba special woreda Among the different variables
hypothesized to determine the supply of teff and wheat, econometric result showed that four
variables such as quantity produced, access to market information, access to extension service
and sex of the household head significantly affected the volume of teff supplied to the market.

Musah et al. (2014), reported on market participation of smallholder maize farmers in upper
west region of Ghana indicated that age of house hold head ,education status of house hold head
house hold size, farm size, off farm income, output produce, access to credit and market
information where the significant factor which affect market participation decision.
Solomon et al. (2015) the study conducted on barley value chain in Ethiopia among different
variables hypothesized to determine supply of barley; the econometric result showed that three
variables such as distance to road and region, tropical livestock unit and age of house hold head
significantly affected volume of barley to the market.

Tadelemelaku et a l (2016) identify factors affecting teff and wheat market supply using cross-
sectional data and eleven explanatory variables were hypothesized to affect the household level
marketable supply of teff and Wheat. Among these variables, only five variables namely
(quantity produced, age and market access, experience and price) were found to be significant
while (education, quantity produced and extension access) were found significant for Wheat. The
quantity of teff and Wheat produced at the farm level affected marketable supply of Teff and
Wheat positively and significantly.

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 2.4. Conceptual Framework of Market Participation and Marketed

Market participation of smallholder farmers is affected by numerous factors such as,

demographic factors, service and information access factors, socio-economic factor and the
natural disasters and calamities also affect market participation. These factors will be positive or
negative effects, which could either improve or cause a decline in the welfare of the farmers as
illustrated in (figure 1). The main approach is that greater market participation of farmers results
in more commodities being traded and this may lead to more return being obtained by the
farmers. This becomes an incentive to increase production and hence a positive supply response
is achieved.

Figure 1. Diagrammatic representation of the conceptual framework

Demographic characteristics
Sex
Family Size
Service and information
Education
Age access factors
Access to extension
service,
Access to credit,
Socio-economic factor Market participation Current prices of output,
Quantity of output, Lagged price,
non-farm income Marketing information, and
Landholding and Distance to the market
Number of livestock
Source; self-formulation Market supply

Improved household income

15
 3. METHODOLOGY

3.1. Description of Study Area

Cagni Woreda is one of the injibira of found in amhara regional state. it is located 410 KM from
Addis Ababa and 10 KM from Cagni also bounded by the kebele like kelem meda in the
south ,kuta ber in the north albero in the west(boru meda kebele office, 2009). According to
extension workers census total number of population is estimated 3151 from these 1478 were
male and 1673 female. also have total number of 898 house hold from these 595 were male
house hold and 303 were women house hold (borumeda kebele office, 2010). based on the
relationship between elevation and temperature the kebele experience two agro ecological zones
the largest portion of the kebele comprise 60%dega and 40%winadega the average annual
temperature is 12-16 degree cilices.(boru meda kebele office , 2010).

It has 30 Kebeles administration. The total area coverage is 92165 hectare, which is used for
cultivation 28799 hectare, 13552 hectare for irrigation, 2525 for grazing and 17.875hectare for
natural forest 284 hectares swap area 185 hectares shrubs forest 1450 hectares impossible to farm
activity and 27532for other. The topography is 55%hill, 30% of mountain, and 15% of plain, and
the types of soil include black, red and blackred, reddish-brown and clay Lome soil. The study
area has on average altitude of 500-2500m above sea level. The farming system practiced in the
area is mixed farming system, semen bench woreda (Woreda agricultural office, 2018).

The majorly economic activity of the area is mixed farming system mainly crop production and
livestock raring. The most commonly cultivated annual cropping the area is Maize, Sorghum,
and Tomato. Their annual crops are cultivated by subsistence farming in the study area. We
selected the area because of its accessibility, access to information and proximity to the campus.

3.2. Sampling Technique and Sample Size

A combination of different sampling procedure will be used to select the samples to successfully
meet the objectives of the study. The sample will be determined largely by the financial and time
constraints. However, effort was made to improve the reliability of the samples by taking care at
each level of data collection processes. . The sample frame of the study will be the list of

16
households in the selected kebeles, which are found in the Semen Bench Woreda .From the total
house holds 70 of them are selected as sample size. A two stage sampling procedure will be
employed to select potential maize producer households.

First, some potential maize producer kebeles from 30 kebeles are select through random
sampling method. During the selection, the kebele’s potential for maize production and the
accessibility of the areas to travel will be taken into consideration. In the second stage, using the
population list of maize producer farmers from sample kebeles, the intended sample size will
determined based on probability proportional to size from the respective kebeles the sample
respondent will be selected by using random sampling method. The list of total household heads
in \the selected kebeles, are obtained from the office of each kebele. The distribution of
populations and the selected sample size in sampled kebeles are presented in (Table1 below)

Table 4. Distribution of populations and the selected sample size in sampled KAs

Name of Total sample HHs in the sample kebeles Selected sample HHs
kebeles

Male Female Total Male Female Total

Tamatin 210 150 360 11 5 16
Tekos 270 220 490 21 15 36
Dizu 195 170 365 11 7 18
Total 675 540 1215 43 27 70

3.2.1. Data Source and Collection

The sources of data will be both primary and secondary sources. The situations of the marketing
system and the producing farmer will be assess thoroughly through rapid market appraisal and
formal survey. Data will be collect on production, buying and selling, pricing, market
participation, problem and opportunities and characteristics of the market.

17
Primary and Secondary Data Collection Method: the primary data will be collected from
producer through interview schedule. In addition, secondary data will be collected from
supporting institutions such as, available reports from trade and industry office and records from
the agriculture and rural development offices of the study area and published journals from
websites and unpublished literatures from different sources.

3.3. Data Analysis

Data from the field will be edited, coded, and cleaned to ensure consistency, uniformity, and
accuracy. Data will be entered into computer software for analysis. SPSS version 20 computer
program will be used to process the data. Two types of analysis, namely: descriptive and
econometric analyses will be used for analyzing the collected data.

3.3.1. Descriptive Statistics

The main descriptive indicators that are t-test and Chi square to investigate the relative difference
between market participants and non-market participants of maize facilities, services and
household characteristics.

3.3.2. Econometric Analysis

Econometric analysis will be used to for processing the data obtained from the survey. The
appropriate econometric models that can help to identify the factors affecting the amount of
maize sold to the market and the market participation decision is Tobit model.

Tobit model will be used because of the restrictions put on the values taken by the regression
and, this model can be called limited dependent variable regression model. The data have a
censored sample as dependent variable, that is household didn’t supply maize even if they
produce maize from the total samples, the data are censored, and Tobit estimation is relevant. If
zero values of dependent variables were the result of rational choice of farmers, a Tobit model
would be more appropriate (Abrar, 2004). Thus, maximum likelihood Tobit estimation (Tobin,
1958) was used in the analysis of factors affecting sales volume.

18
One can concern with the model; recall that in a Tobit with left-censoring at zero.

Y*i= β0+ βiXi+ Ui ……………………. (1)

Where

Y*i = market supply of maize (dependent variable)

β0 = an intercept

βi = coefficients of ith independent variable

Xi = independent variable, and 'i' is 1, 2, 3…., n

Ui = unobserved disturbance

i=1, 2 ............ n

Where: - y=y* if y*>0,

y=0 if y*≤0 and

y=max(y*, 0)

The parameter estimates of the above model may not be Best Linear Unbiased Estimator (BLUE)
when some of the assumptions of the Classical Linear Regression (CLR) models are violated,
thus, it is important to check the presence multi collinearity among the variables that affect
supply of maize in the area. There are two measures that are often suggested to test the existence
of multi collinearity. These are: Variance Inflation Factor (VIF) for association among the
continuous explanatory variables and Contingency Coefficients (CC) for dummy variables. To
detect multi collinearity problem for continuous variables, variance inflation factor (VIF) define.

As a rule of thumb, Gujarati (2004) states that if the variance inflation factor (VIF) value of a
variable exceeds 10, which will happen if Rj2(explained variation) exceeds 0.90, then, that
variable is said to be highly collinear. Therefore, for this study, variance inflation factor (VIF) is
used to detect multi collinearity problem for continuous variables. On the other hand,

19
contingency coefficient is used to check multi collinearity of discrete (dummy) variables. It
measures the relationship between the raw and column variables of a cross tabulation. The

2
CC 
2 N
formula for contingency coefficient is as follows

Where, CC is contingency coefficient,

χ 2 is chi-square value and

N is total sample size.

The decision criterion with the contingency coefficient is that if the value of CC is greater
than0.75, the variables are said to be collinear (CC > 0.75).

3.4. Variables Definitions and Hypothesis for Market Supply of Maize

Dependent Variable

Market participation decision (MKT PART): it is a dummy participation decision dependent

variable that will be regressed for the respondents who participate in maize market = 1, and = 0
for the respondents who did not participate in2016/2017. In the study all producers do not
participate in marketing maize since; it serves as consumption purpose.

Quantity supplied to the market (QUASUP): it is a continuous variable which represents

dependent variable the actual supply of maize by farm household to the market measured in
quintals.

Independent variables

1 Quantity of maize produced (QMP): it is measured in quintals as a continuous variable. High

maize production will be hypothesized to have a positive effect on market participation and
extent of participation as measured by the quantity of maize supplied in the market. Wolday
(1994) observed that output of food grains (wheat, teff, and maize) had a positive effect on the
quantity supplied to the market in Ethiopia.

2. Farm allocated to maize (FARM): the total land used for maize production is measured in
terms of number of hectares the household owns and it is expected to affect the household level

20
of maize marketable supply positively because, a producer who owns a large area of land for
maize production than a producer who own less area of land and under the same input utilization
condition can produce more.

3. Current market price (CMP): current year price is expected to affect the market supply of
maize positively because prices stimulate marketable supply. If the current market prices are low
producers store the produce until the price rises after meeting their immediate needs. It is
measured in birr per quintal.

4. Distance to market (MKT DIS): distance to the market is a continuous variable measured in
killometers from the household residence to the market centers. The closer the residence of the
household to the rural market center, the more is the quantity of marketable supply. The
assumption here is that the closer a household is to the market, the more the household is
motivated to produce maize and supply it to the market. Therefore, this variable is expected to
have an inverse relationship with marketable supply.

5. Market information (MKT INFO): this variable is measured as a dummy variable taking a
value of 1 if the farmer had access to market information and 0 otherwise. It has been
hypothesized to affect marketable supply of maize positively. Producers that have access to
market information are likely to supply more maize to the market than informed producers. The
finding is consistent with the findings of Astewel (2010) access to market information positively
and significantly affects market participation and quantity supply of rice to the market.
6. Education of household head (EDU HH): it is a dummy variable and refers to the formal
schooling of a respondent during the survey period. Those household heads who had formal
education determines the readiness to accept new ideas and innovations, and easy to get supply,
demand and price information and this enhances farmers’ willingness to produce more and
increase volume of sales. Therefore, formal education was hypothesized to positively influence
market participation and marketed surplus.

7. Family size (FAM SIZE): it is a continuous variable, measured in man equivalent i.e. the
availability of active labor force in the household, which affects farmer's decisions to participate
in market. Since production is the function of labor, availability of labor is assumed to have
positive relation with volume of supply. However, family size is expected to have positive

21
impact on market participation and volume of sales, but larger family size requires larger
amounts for consumption, reducing marketable surplus. A study by Sing Rai (1998) found
marketed surplus of buffalo milk to be negatively affected by family size. However, a study
conducted by wolday (1994) showed that household size had significant positive effect on
quantity of teff marketed and negative effect on quantity of maize marketed.

8. Age (AGE): it is a continuous variable measured in years. A farmer with longer period of
experience in production was assumed to have a better knowledge than who has a lower
experience in agriculture because through time producers acquire skill about marketing and
supply better than those who are less experienced. It is also assumed that as age increases the
production capacity will decrease and amount produced and marketed supply decrease. Hence,
both inverse and direct relation is assumed to the amount supplied Eleni Z. (2009).

9. Income from off-farming activity (OFFF INC): it is a dummy variable that show obtained
from non-farming activities by the household head. This income may strength farming activity or
reluctant to produce maize to generate money rather than getting income from non- farming
activities. However, getting income from non- farming activity is assumed to have direct or
inverse relation with market participation and marketable surplus Gebre-medhin B. (2012).

10. Number of livestock owned (TLU): a continuous variable and measured by tropical
livestock unit (tlu). It could be that ownership of livestock is negatively associated with crop
output market participation by offering alternative cash income sources. According to Rehima
(2006) this variable influenced the quantity of supply negatively. This is mainly due to the fact
that farmers with more tropical livestock unit tend to specialize in livestock production.

11. Sex of household head (SEX): it is a dummy variable; both men and women participate in
production of maize. Male households to have a better tendency than female household to enter
into maize market and volume supply. Literature indicate that female-headed households have
less access to improved technologies, land, and extension services as compared to male headed
households Tufa et al. (2013). Male households have been observed to have a better tendency
than female household to participate in the market and volume of supply.

22
23
 4 .Work plan and Budget plan
Table 5: Work plan

No Activities May Jun July Aug

1 Title selection √

2 Specific study √

3 Literature review √

4 Contact advisor √

5 Preparing proposal √ √ √

6 Data collection √

7 Data analysis √

8 Conclusion and recommendation \ √

9 Submission and Presentation √

24
 Table 6: Budget Plan

No Measurement Quantity Unit cost Total cost

1 Stationary Paper Package 1 120 120

Pen Piece 10 10 100

Boundary 1 25 25

Flash memory Piece 1 250 250

Minute 1 100

Per page 5 6 300

2 Telephone Expense Per page 120 1 120

3 Typing and printing -

4 Questionnaires - 1215

Misceancous cost 1215

Total 1215

25
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Appendix Survey Questionnaire

1. Sex of household head 1. Male 2. Female

2. Age of house hold head ____________ year

3. Education level household head

1. Illiterate 2. Read and write 3. Years of formal education______4. Other

4. Age and sex of family member

Age of household No female No male

category
<10
10-13
14-16
17-60
>60

5. Quantity of maize produced in 2008 E.C _____________ (in quintal)

6. Have you ever participated in maize marketing? 1. Yes 2. No

7. If your answer for question #2 is yes, Quantity of maize marketed ____________ (in quintal)

Quantity of maize consumed _____________ Quantity of maize saved for seed

______________

8. What was your input for maize production and in 2008/09?

Type Amount Value in Cash =1

31
 birr Credit=2

Fertilizer DAP

UREA

Organic

Insecticide

Herbicide

Seed

Other

9. From where did you get those inputs?

a) Cooperative b) market c) agricultural office d) own production

e) if other specify

10. What type of maize variety are you using?

a) Improved seed b) local c) both

11. Did you store maize in 2008/09? 1. Yes 2. No

12. If yes for question no 8 for what purpose?

a) Expecting high price b) lack of market demand

c) Consumption purpose d) if other specify

13. Did you participate off-farm activity? 1 yes 2 no

14. If yes what type of activity?

32
 a) Paid daily labor b) petty trade c) handicraft d) other

15. Did you get market information for maize?

1. Yes 2 No

16. If yes how did you get information on supply, demand & price of maize in the markets?

Use coded Source of information

Supply 1. Cooperative 4. extension
Demand agent
Price 2. Telephone 5. Others
3. Radio

17. Who decided on your selling price 2008/09? _

a) Myself c) negotiation

b) By the market d) cooperative e) other (specify

18. Total land holding size (in hectare or in timad)……………………………

19. Land size under maize production ……………………. (In hectare or in timad)

33