Farmers’ preference for bundled input–output markets and implications for adapted dairy hubs in Tanzania—A choice experiment

Elizaphan J.O Rao,I Baltenweck,A Omore,E Twine,N Mtimet

doi:10.1002/agr.21565

Elizaphan J.O Rao, I Baltenweck + Show 3 more

Open Access

https://doi.org/10.1002/agr.21565

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Abstract

AbstractDairy business hubs (DBHs) are flexible mechanisms for linking farmers to input and output markets. Yet participation by smallholders in these hubs will only be realized if the hub options are adapted to the needs of farmers. We analyze preference for DBHs in Tanzania using survey data from smallholder dairy producers in Tanga and Morogoro. Applying choice experiment method, we find significant preference for hub options with higher milk prices and payment for milk on a fortnight rather than cash basis. Farmers also prefer options that bundle milk marketing with input provision. For bundled inputs, farmers prefer hub options that allow payment for such inputs via credit or check‐off rather than cash. Our analyses also reveal significant heterogeneity in preference among farmers that should be considered in adapting dairy hubs to Tanzania. Emerging dairy hubs in Tanzania should be supported to either establish in‐house input provision arrangements or to enter contracts with agro‐input dealers in their environs. [EconLit citations: C25, C99, Q13]

Highlights

Tanzania dairy value chain has been characterized by stagnation in dairy output and supply of milk, which has over the years led to low milk consumption per capita (FAO, 2012)
The hub approach is aimed at addressing the underlying causes of productivity constraints faced by smallholder dairy farmers, much of which arise from inadequate access to essential inputs and services as well disincentives emanating from unreliable access to output markets
This study sought to understand preference among dairy farmers for attributes of dairy business hubs currently being implemented by International Livestock Research Institute (ILRI) and other partners in the Tanzania dairy value chain

Summary

Introduction

Tanzania dairy value chain has been characterized by stagnation in dairy output and supply of milk, which has over the years led to low milk consumption per capita (FAO, 2012). In order to address some of these challenges, there is need for improved organizational models that would enhance economies of scale and minimize transaction costs associated with production and marketing of dairy products (Fischer and Qaim, 2012; Markelova and Mwangi, 2010; Wambugu et al, 2011) This is specially so in the face of smallholder predominance of the dairy sector in Tanzania. The hub approach is aimed at addressing the underlying causes of productivity constraints faced by smallholder dairy farmers, much of which arise from inadequate access to essential inputs and services as well disincentives emanating from unreliable access to output markets. We present and discuss results before making some concluding remarks

Study area and data collection

Analytical approach

Results and discussion

Conclusion