Analysis of Grain Marketing in Southern Zone of Tigray Region, Ethiopia

An efficient agricultural marketing is crucial for effective agricultural and rural development, particularly with regard to sustained increase in agricultural production, and farmer’s income. The market for grain is the largest of all markets in Ethiopia in terms of the volume of output handled, the number of market participants involved, and the vastness of the geographical area of operation. This study examined grain marketing in Ofla and Endamohoni wereda with the specific objectives of identifying marketing channels, organizational structure and coordination of the grain markets, and identifying factors affecting grain supply in the weredas. A total of 145 head of households were selected randomly using probability proportional to sample size (PPS). Data from 24 traders was also collected from the two markets. This particular study revealed that 41% of the total grain production in the sample area was supplied to the market. According to the results of the study in 2009/10, 30% and 23% of farmers’ production was purchased by cooperative unions and directly by consumers, respectively. The measures of market concentration indicated that the grain market structure in the study area is fairly competitive; however the existence of barriers to entry, and the constraints facing traders have a negative impact on the performance of the grain marketing system. The major barriers to entry in to grain trade in the study areas included lack of working capital, market information and high competition with the cooperative unions and unlicensed traders. The major determinant factors affecting market participation decision and quantity of grain supply were estimated by Tobit and Heckman two stage econometric models. Among the variables included in the analysis, 5 variables such as nonfarm income, total livestock unit, oxen number, market information and yield influence the quantity of grain supply positively significantly and family size affected negatively the supply of grain at 5% significant. Transport cost was identified as the major cost component of marketing costs which accounted 44.19% and 45.13%, for wholesalers and assemblers respectively. The main grain marketing constraints for traders are shortage of capital, shortage of supply, lack of timely and accurate market information, poor access to credit and competition with unlicensed traders were few of the inherent problems. The possible recommendations forwarded are support formal access to credit for traders and farmers, strengthen access to market information encourage licensing of traders, intervention to increase production by using improved agricultural inputs, strengthen cooperatives and their unions and conduct a research on the different components of the marketing system.