Value Chain Analysis of Wheat (Triticum aestivum): The Case of Dembecha District, West Gojjam Zone, Ethiopia

Abstract

Wheat market in Dembecha district experienced in poor market linkage, disproportional benefit share, and inadequate market supply and market alternatives. This study was aimed to analyze value chain actors’ interaction and their role, wheat market structure-conduct and performance, factors affecting market supply and market outlet choices of smallholder wheat producers in Dembecha district of West Gojjam zone. The study used cross-sectional data collected from a sample of 130 farm households selected through two-stage sampling techniques. Additionally, thirty traders, two bakers, one processor, four cooperatives and ten consumers were used to collect the data. Descriptive statistics and econometric models were used to analyze the data. Result from functional and institutional approach of value chain analysis showed that input providers, producers, cooperatives, collectors, wholesalers, retailers, and processors were found to be important wheat value chain actors. Market concentration ratio (CR4) at district level was found to be 39.78 percent and there were observed barriers to entry into wheat market. These structural characteristics indicate oligopolistic market structure of wheat market at District level. Buying, selling, and pricing strategies, which are indicators of market conduct, showed deviation of wheat market from competitive market norms. Analysis of marketing margins indicated that from total gross marketing margin processors received the highest (39.72%) marketing margin and retailers received the least marketing margins (4.85%) in wheat value chain. Wheat market is also characterized by relatively good producers’ share when they sale to consumers, collectors and wholesalers but they incurred high operating cost which reduces their profit level. Even though, wheat market in the study area deviate from competitive market norms as a result of oligopolistic market structure and conduct, profitability analysis of wheat market showed all market actors operated at profitable level. The results obtained from OLS regression analysis indicated that the quantity of improved seed varieties used, quantity of wheat produced, educational level of the household heads, lagged market price of wheat and frequency of extension contact ware significantly affecting the market supply of wheat positively as expected. The multivariate probit model results also revealed that the quantity of wheat sold, distance from nearest market nearest market, sex of household head, ownership transport facilities, non/off farm income, cooperative membership and bargaining power determine a market outlet choice decision of wheat producers in the study area. Encouraging producers to use recommended improved seed, strengthening provision of education and infrastructural development, strengthening extension service and increasing farmer’s awareness on different market outlet wheat produce to enhance producers benefit are recommended to strengthen wheat value chain development.