Determinants of Choosing a Particular Dairy Marketing Arrangement and Assessing Its Impact on Household Livelihood Evidence from Northern Ethiopia, Tigray

Abstract

This study aims at identifying determinants of choosing a particular dairy marketing arrangement and assessing the impact of the arrangement to household livelihood. 387 households in four woredas of Tigray were administered through structured questionnaire. Descriptive statistics and multinomial logit models were employed to determine the significance of the factors affecting selection of a particular marketing arrangement. The three methods of coordination implemented in the areas were spot, contracts and cooperative market, but cooperative was dominantly exercised in the dairy chain. Propensity Score Matching was also employed to examine the impact of marketing arrangements on household livelihood in terms of asset formation, milk production and human capital. Free riding and lack of commitment were the problems in cooperative marketing as indicated by focus group discussion. Long Fasting dates and feed constraints have identified as a negative impact for milk selling and production in the selected sites. Model results indicated that cooperative marketing arrangement in general, provides higher prices, stable market, producing larger volume of milk and higher income to producers than other marketing arrangements. Price volatility was high in spot marketing arrangement as compared to contract and cooperative marketing. The results of this study showed amount of milk production, price flexibility, active local administrative participation and distance to main market significantly affecting the producer’s choice for cooperative marketing in relative to spot and contract marketing arrangement. Among the three marketing arrangements, contract marketing arrangement offered higher buyer access in the market. Volume of milk production, price flexibility, distance to the main market and active local administration participation were significant and positively related for the choice of cooperative marketing arrangement. The model result also indicated vertical coordination was a mechanism for enhancing producer’s livelihood in terms of asset accumulation and milk production for the market. The study has a potential policy implication for improving dairy marketing arrangement and livelihood of producers through promotion of large private investment in the area, which at the end will introduce new technology in the sector such as improved cross breed cow, feed and veterinary service.