Abstract
This article is intended to identify coffee market outlets, analyze marketing margins and the determinants of outlet choice by smallholder farmers in seka chokorsa district of jimma zone. Both types and sources of data were used and collected from 124 coffee producers, suppliers, cooperatives and collectors to obtain necessary data and analyzed using multinomial logit model. The survey revealed that 41.1% of smallholders sold their sundried coffee to suppliers, 33.1% reported to have sold to cooperatives and about 25.8% of them sold their coffee to collectors. Analysis of marketing margins showed that the costs incurred by producers are very high almost more than half of the overall costs relative to costs incurred by primary outlets and they obtain fewer margins only about 28 percent which is not fair and seasonable compared to costs. Hence, there is a need to intervene in this gap to increase producers’ share in the area through supplying inputs at low price which in turn reduces production costs. The results of multinomial logit model indicated that the probability of choosing cooperatives marketing outlet was affected by coffee farming experience, educational level of the household head and postharvest value addition compared to suppliers’ outlet. Similarly, the probability to choose the collector outlet is found to be significantly affected by the age of the household head, livestock in tropical livestock unit, access to coffee marketing information and access to extension service relative to suppliers’ outlet the base category. Therefore, these factors requires intervention and promotion by developing farmers’ awareness about post-harvest handling, educating and training farmers; strengthening financial and market capacity of the cooperatives would increase farmers’ choice towards cooperative outlet. Furthermore, establishing and facilitating market access, providing efficient, regular, timely and integrated extension service, improving infrastructure like communication and road to ensure farmers ability in accessing market and market information are recommended to improve farmers’ outlet choice in the study area for future policy intervention. Keywords: Coffee, Marketing margins, Outlet Choice, Smallholders, Multinomial Logit Model DOI: 10.7176/JPID/54-03 Publication date: May 31 st 2020
Highlights
Coffee is one of the most important commodities in the world economy
The analysis of marketing margins from table 3 showed that the producers share, marketing margins of collectors, cooperatives and wholesalers/suppliers are 1062.8ETB (28%), 255ETB (7%), 552.5ETB (15%) and 510ETB (14% share of margin), respectively
Econometric Results Determinants of coffee market outlet choices: The multinomial logit model specified three most widely chosen and used channels by the sample households with suppliers’ market outlet as the base category and was tested for the independence of irrelevant alternatives (IIA) assumption based on Hausman test
Summary
Coffee is one of the most important commodities in the world economy. The production of this commodity varies across regions. Ethiopia and Brazil are the only coffee producing countries that consume a significant portion of their production. The law stipulates that all coffee supply, with the exception of grower direct exports, are to be traded in the newly established Ethiopia Commodity Exchange (USAID, 2010). The cooperative unions are located in Addis Ababa and are exporting coffee directly, by passing the auction at ECX which is serving as a main coffee marketing outlet. They received market price plus Premiums for attributes such as quality, Fair Trade and organic certification. When the union sells the coffee to foreign importing companies, 70% of the net www.iiste.org profit is paid back to the primary cooperatives. In turn the primary cooperatives pay back 70% of their net profit as dividend to the farmers (USAID, 2010)
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