VALUE CHAIN ANALYSIS OF POTATO IN FARTA DISTRICT ETHIOPIA

Abstract

This study was conducted to analyze value chains of potato in Farta district, Amhara Region. The objective of the study was to analyze the value chains of potatoes in the study area. To address these objectives, both primary and secondary data were used. Primary data were collected from123 producers, 30 traders and 13 consumers by using pre-tested questionnaires. Secondary data were collected by reviewing documents from different sources. To evaluate efficiency of potato markets in the study area, market structure, conduct and performance approach was used. Heckman two stage econometric model was used to analyze the determinants of potato market participation and quantity of sale. The major potato value chain actors in the district were; producers, traders, chain supporters, chain enablers and consumers. The chain is governed by wholesalers’ due to their financial advantage. In the study area four largest value chain actors handled 49.18% of the total quantity of potato purchased. The result indicated that potato markets characterized by a weak oligopolistic market structure. Competition, trade license, and capital were the main barrier to entry in to potato market. The result from marketing margin, 47.11% of total gross marketing margin was added to potato price in the value chain. Out of the total gross marketing margin, 19.5% was taken by local collectors, 11.9 by wholesalers and 15.6% was taken by retailers. Even though all value chain actors received positive profit, barriers to entry, oligopoly market structure, misconduct in price setting were indicators for market performance of potato was inefficient. The results of econometric analysis using Heckman two stage model, in the first probit estimation result indicated that distance to the nearest market, family size, oxen owned by farmers, access to market information, size of land allocated for potato production, and quantity of inorganic fertilizer used were found to be the significant variables affecting the decision to market participation positively except family size. In the Ordinary Least Square estimation result education level of the farmers, farming experience, number of extension contact, size of land allocated for potato and quantity of inorganic fertilizer used were found to be the significant variables influencing quantity of potato market supply positively. Major constraints for production and marketing in the study area were identified. Shortage of quality and improved, seed, diseases, pests and natural factors, lack of capacity in post-harvest management system, too much competition between traders, lack of market information, and lack of policy framework in price setting strategy were production and marketing constraints of potato. The finding of the study indicated the need to access improved inputs, strengthening supply of new varieties that are disease resistant, establishment of proper storage facility, follow up of misconduct in price setting facilitate access to market information service, facilitating conditions which can promote the market to be competitive so as to reduce market inefficiency created by oligopolistic market