ANALYSIS OF DAIRY INDUSTRY AND ITS IMPACT ON HOUSEHOLD MARKET PARTICIPATION, INCOME AND FOOD SECURITY IN MEKELLE CITY, ETHIOPIA

Abstract

This study deals with the analysis of dairy industry and its impact on household market participation, income and food security in Mekelle city, Ethiopia. The study employed cross-sectional data obtained from 797 respondents were 427 of them constitute the whole population of producers, processors and traders and 370 were consumers selected using multistage random sampling technique. The data were analyzed using value chain mapping, descriptive statistics, cost-margin analysis and econometric models including Multivariate probit, Tobit model, Heckman two-stage, Propensity score matching, Binary logit and Generalize Propensity Score matching. The value chain result shows that dairy producers supply their products to subsequent actors and they are also reselling depending on the chain and reaching final consumers with actors earning their benefits. The MVP model result indicated that age, milk output, payment system and cooperative membership were the significant factors positively affecting the dairy producers̕ choice of consumers market outlet. Milk output and access to credit significantly and positively affected producers’ choice of processors market outlet, while transportation cost, non-farm participation, payment system, milk adulteration and market access affected it negatively and significantly. Transportation cost positively and significantly affected producers’ choice of traders’ market outlet, whereas education level, payment system and milk adulteration affected it negatively and significantly. The tobit model result indicated that family size, average customer holding, religion followed and processing equipment holding positively and significantly affect dairy producer’s participation in milk value addition, while importing product access and transportation cost affected it negatively and significantly. The findings of Heckman model shows that age, access to market information, access to extension service, contract agreement and access to concentrate feed significantly and positively affected dairy producers market participation decision. Access to market information, average customer holding, access to concentrate feed, improved breed holding and monthly extension contacts affected dairy producers’ level of market participation positively, whereas family size and religion followed affected it negatively and significantly. The logit model results indicated that education level, farm experience and average xviii customer holding affected the dairy producers̕ food security status, while milk gift to others and non-farm participation affected it negatively and significantly. The PSM model result revealed that milk value addition has a positive and significance impact on households’ level of market participation and income. Lastly, GPSM model results showed that milk commercialization has a positive and significance impact on dairy producers’ food security status. Based on the findings, the study suggested that the government and private organizations needs to implement differential policies that separately address the specific determinants of farm households’ milk commercialization, milk value addition and food security status.