ANALYSIS OF COFFEE MARKET CHAIN: THE CASE OF GEWATA DISTRICT, KAFFA ZONE, SOUTHWEST ETHIOPIA

Abstract

This study was aimed at analyzing structure, conduct and performance of coffee market, identifying factors affecting market supply of coffee and identifying major factors affecting market outlet choices of coffee producers. Both primary and secondary data were used for the study. Primary data were collected from 121 farm households selected randomly, 20 traders and 11clay pot coffee producers through semi structured questionnaire. The major market chain actors for coffee marketing in the district were smallholder farmers, coffee cooperatives, Union, rural coffee collectors, private traders, ECX, exporters and consumers. Result from analysis of degree of market concentration indicated, that the coffee markets are characterized by weak oligopolistic markets with the buyers’ concentration ratio of 40.86%. The highest producers share in coffee market channels was 82% in private traders’ channels. The result of econometric analysis of 2SLS regression shows that four variables (which are education level of household head, membership to coffee cooperative, transport ownership and quantity of coffee produced) positively and significantly affected market supply of coffee. However, distance to the nearest market affected it market supply of coffee negatively and significantly. The multivariate probit model results indicated that quantity of coffee sold, education level, frequency of extension contact, household size, years of farming experience, distance to nearest market, off/non-farm income, land under coffee and transport access significantly influenced coffee producers choice of market outlet. Therefore, policy implication drawn from the findings aimed at strengthening farmers coffee cooperative and enhancing the financial capacity of cooperative with functional collection center, improving accessibility of transport services and developing infrastructure, improving farmers’ knowledge through adult education as well as their experience sharing with other coffee producing farmers, improving productivity through strengthening supportive institutions(extension service provider).