HARAMAYA UNIVERSITY

POSTGRADUATE PROGRAM DIRECTORATE

BEEF CATTLE VALUE CHAIN ANALYSIS: THE CASE OF SULULTA

AND BISHOFTU DISTRICTS OF ETHIOPIA

M.Sc. Thesis Research Proposal

Feven Yohannes

College: Agriculture and Environmental Sciences

School: Agricultural Economics and Agribusiness

Program: Agricultural Economics

Major Advisor: Adam Bekele (Phd)

Co-Advisor: Mr. Mohammed Aman (Assistant Professor)

Nvember 2016

Haramaya University, Haramaya

 ACRONYMS AND ABBREVATIONS

AGP Agricultural Growth Program

CSA Central Statistics Agency

FAO Food and Agriculture Organization

GCC Global Commodity Chain

GDP Gross Domestic Product

GMM Gross Marketing Margin

GTZ German Technical Cooperation

NMM Net Marketing Margin

SNNPR Southern Nations, Nationalities and Peoples’ Region

SPS-LMM Sanitary and Phytosanitary and Livestock and Meat Marketing

TGMM Total Gross Marketing Margin

USAID United States Agency for International Development

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 TABLE OF CONTENT

Contents Page
ACRONYMS AND ABBREVATIONS ii

TABLE OF CONTENT iii

LIST OF TABELS v

1. INTRODUCTION 1

1.1. Background of the Study 1

1.2. Statement of the Problem 2

1.3. Research Questions 3

1.4. Objective of the Study 4

1.5.Significance of the Study 4

1.6. Scope and Limitations of the Study 4

2.LITERATURE REVIEW 5

2.1. Basic Concepts and Definition of Value Chain 5

2.2. Historical Background of Value Chain 7

2.3.Value Chain Governance 10

2.4. Marketing System and Market Chain Analysis 12

2.5. Theoretical Framework 13

2.6. Methodological Framework 14

2.7 Beef Cattle Production and Marketing 15

2.8. Empirical Evidences 17

2.9. Conceptual Framework 20

3. RESEARCH METHDOLOGY 21

3.1. Description of the Study Area 21

3.2. Data Types and Method of Data Collection 22

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 3.3. Sampling Procedure and Sample Size 22

3.3.1. Sampling for value chain analysis 22

3.3.2 Sampling for assessing determinants of beef cattle sales 23

3.4 Method of Data Analysis 23

3.4.1 Descriptive Analysis 23

3.4.1.1. Description of marketing characteristics 23

3.4.1.2 Value chain analysis 24

3.4.1.3. Analysis of beef cattle value chain performance 25

3.4.2 Econometric Analysis 26

3.5. Variables and Working Hypotheses 27

4. PROPOSED WORK PLAN 33

5.BUDGET BREAK DOWN 34

6.REFERENCE 36

iv
 LIST OF TABELS

Table Page

1.Summary of variable definitions, measurements, and expected signs 32

2. Work plan 33
3. Personal expenses 34
4. Travel expenses 34
5. Supervision fee 35
6. Budget summary 35

v
 1. INTRODUCTION

1.1. Background of the Study

Ethiopia is dominated by agrarian economy and over 80% of the population is located in rural
area. Livestock production is an integral part of Ethiopia’s agricultural sector and plays a vital
role in the national economy. Although estimates vary widely, livestock is thought to
contribute 15–17% of Ethiopian Gross Domestic Product (GDP), 35–40% of agricultural GDP
and 37–87% of the household incomes. They contribute to the livelihoods of 60-70% of the
Ethiopian population (SPS-LMM, 2010). Livestock have multiple uses aside from income
generation, including cash storage for those beyond the reach of the banking system, draught
and pack services, and manure for fuel and fertilizer. Also, a thriving informal export trade in
small and large ruminant animals further emphasizes the significance of livestock in the
Ethiopian economy (Sintayehu et al., 2013).

Ethiopia is generally recognized to have the largest population of livestock in African

(Halderman, 2004). Ethiopia has 52 million cattle including 10.5 million dairy cattle and 47
million shoats (CSA, 2013). As the country has the largest livestock population, which ranks
first in Africa and tenth in the world, it has much to gain from the growing global markets for
livestock products.With this immense and potentially productive resource, with such influence
on household incomes as well as the national economy, it is imperative for the Ethiopians to
maximize the economic value of their animal assets, including use of the animal for value
added products (AGP, 2013).

Livestock production systems in Ethiopia are generally subsistence oriented and productivity
is very low (Belachew and Jemberu, 2002). The supply originates in small numbers from
highly dispersed small producers that supply nonhomogeneous products to local markets. Due
to the low productivity of the animals and the absence of market-oriented production systems,
the volume of marketed surplus is very low. In addition, the different live animals supplied to
the market by pastoralist and farmers do not meet the quality attributes required by diverse
markets. This is because of poor link of producers and other actors in the chain to the critical
support services. Some of the problems related to the support services include; absence of
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Commercial animal health services, non-existence of appropriate trucking equipment, lack of

sufficient air-cargo capacity, underdeveloped feed industry, and lack of commercial fattening
and holding facilities (Adina and Elizabeth, 2006).

The Marketing of value added beef cattle and their products are an important activity all over
Ethiopia. Beef cattle production and marketing systems in Ethiopia are characterized by long
marketing chains featuring great distances, numerous phases of weight gain and feeding
regimes, many levels of formal and informal traders and transactions, a multitude of steps and
exporting processing, and a variety of employment-creating services and inputs The Ethiopian
cattle sector has massive potential, with over $USD 200 million in direct export earnings and
meat exports growing at 25-30% per year (Kefyalew, 2011).

The performance and competitiveness of the livestock sector can be evaluated by undertaking
a value chain analysis. The value chain analysis plays a key role in identifying constraints
affecting the sector as well as the distribution of benefits to actors in the chain. It can be used
to address constraints faced by chain actors by taking advantage of existing opportunities
(Kaplinsky and Morris, 2001). Therefore this study will attempt to analyze the beef cattle
value chain in Sululta and Bishoftu districts of Ethiopia.

1.2. Statement of the Problem

Sululta and Bishoftu district are known for their mixed farming system. Crop production
resulting crop-residues are the considered as major source of local potential feed for cattle.
The districts have a potential of the beef cattle production. Though detailed value addition
linkage system has not yet been systematically studied and documented, the districts seems
suitable for beef cattle production and marketing due to its suitable climatic condition for the
cattle and presence of roads connecting to markets in Addis Ababa.

Though, the districts are expected to have some supply of local inputs for beef cattle
production and supply of beef cattle to the markets, there is lack of awareness about value
addition activities. So, efficient utilization of the inputs might not be there to manage the
animals for high off-take or maximize their value for meat production. Yet, there is lack of
proper selection of beef cattle to feed, practically the beef cattle value chain in these districts
are constrained by shortage of feed supply in terms of quantity and quality during most
 3

seasons of the year. Moreover, the producers of the animals lack awareness about balancing
the available feed resources. Lack of market information and unbalanced follow up after the
beef cattle by household members which may lower the value of the beef cattle during the
value addition period to maintain their potential contribution and raise earnings from the beef
cattle is also the major challenges in these districts. Hence, the producers may not get
reasonable benefit from their marketed beef cattle supply unless appropriate improvement
strategies are put in place.

The export abattoirs are also required to ensure a consistent and continuous supply of meat or
live cattle in order to meet the demand of the customers in the importing countries. Thus, there
is an urgent need for export abattoirs to devise alternative strategies to ensure adequate market
supply of quality live animals to meet their processing needs in order to improve their
efficiency and competitiveness. The first step towards improving the market supply of quality
live animals is to understand the beef cattle value chain, the cattle producers’ ownership
patternsand marketing behavior, from their source in the Sululta and Bishoftu area. Such
information provides useful insights towards the designing and implementation of strategies to
alleviate the shortage of quality live cattle supply in the market.

Pursuant to these reasons, the value chain analysis of the beef cattle has been initiated to
understand the sources of the problems and recommend viable options to the households to
overcome the problems and improve the production and supply of value added products. To
this end, the present study made an attempt to bridge the existing information gap in beef
cattle value chain in the study areas.

1.3. Research Questions

1. Who are the major actors in beef cattle value chain in Sululta and Bishoftu districts? What
are their roles?

2. Who is benefiting more from beef cattle value chain among the actors in Sululta and
Bishoftu districts?

3. What are the factors affecting volume of beef cattle marketing in Sululta and Bishoftu
districts?

4. What are the opportunities and challenges of beef cattle value chain in Sululta and Bishoftu
districts?
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1.4. Objective of the Study

The overall objective of this study will be to undertake beef cattle value chain analysis in
sululta and Bishoftu districts. The specific objectives are;

1. To map beef cattle value chain and identify major actors, their roles and relationships;
2. To estimate beef cattle marketing costs, margins and value share of the value chain
actors;
3. To identify factors affecting volume of beef marketed by the producers in the study
area.

1.5. Significance of the Study

The study will generate valuable information on value chain analysis of beef cattle that might
assist policy makers at various levels to make relevant decisions to intervene in the
development of beef cattle production, marketing, processing and designing of appropriate
policies and strategies. The findings of the study might also be useful to government and Non-
Governmental Organization input suppliers, producers, traders, consumers, and marketing
agents to make their respective decisions in improving the beef cattle value chain. It may also
serve as a reference material for further research on similar topics and other related subjects.

1.6. Scope and Limitations of the Study

The study will focus on identifying and mapping beef cattle value chain actors and their
relationships, estimating beef cattle marketing costs, margins and value share of the value
chain actors and identify factors affecting volume of beef cattle marketed by the farmers in the
study areas. However, the area coverage of this study is limited to only two districts found
around Addis Ababa.
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2. LITERATURE REVIEW

2.1. Basic Concepts and Definition of Value Chain

A chain: it is a linked set of value-added activities and also it represents the entire input-
output process that brings a product or service from initial conception to the consumer’s
hands. The main segments in the chain vary according to the industry, but typically these
include: research and design, inputs, production, distribution and marketing, and sales, and in
some cases the recycling of products after use. A typical chain includes all of a product’s
stages of development, from its design to its sourced raw materials and intermediate inputs, its
distribution, and its support to the final consumer (McCormick and Schmitz, 2002).

Value chain actors: These are those involved in producing, processing, trading or consuming
a particular agricultural product. They include direct chain actors which are commercially in
the chain producers, traders, retailers, consumers and indirect actors which provide financial
or non-financial support service, such as bank and credit agencies, business service providers,
government, researchers and extensions (KIT, 2006).

Value addition: Value addition is simply the act of adding value to a product. It involves
taking any product from one level to the next. It refers to increasing the customer value
offered by a product or service. It is an innovation that enhances or improves (in the opinion of
the consumer) an existing product or introduces new products or new product uses. Adding
value does not necessarily involve altering a product; it can be the adoption of new production
or handling methods that increase a farmer’s capacity and reliability in meeting market
demand. For farmers, value addition has a particular importance in that it offers a strategy for
transforming an unprofitable enterprise into a profitable one. The farmer is not only involved
in production of a raw commodity but also takes part in value addition and distribution. This
allows the farmer to create new markets or differentiate a product from others and thus gain
advantage over competitors. Value-added is determined by the difference between the cost of
the inputs and outputs at each stage of the chain (Fleming, 2005).

Value chain map: is a visual presentation of the way that the product flows through the
different stages of the chain from production to the consumers.
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Supply chain: is the portion of the value chain that focuses primarily on the physical
movement of goods and materials, and supporting flows of information and financial
transactions through the supply, production, and distribution processes. Many organizations
use the terms value chain and supply chain interchangeably which is obviously not true. Value
chain is broader in scope than a supply chain, and encompasses all pre- and post- production
services to create and deliver the entire customer benefit package. A value chain views an
organization from the customer's perspective, the integration of goods and services to create
value while supply chain is more internally focused on the creation of physical goods.

Value chain (VC):Refers to the full range of activities that are required to bring a product or
service from conception, through the different phases of production (involving a combination
of physical transformation and the input of various producer services); delivery to final
customers; and final disposal after use. In the context of food production, these activities
include farm production, trade and support to get food commodities to the end consumer.
Moreover, Value chain is a specific type of supply chain – one where the actors actively seek
to support each other so they can increase their efficiency and competitiveness. They invest
time, effort and money, and build relationships with other actors to reach a common goal of
satisfying consumer needs – so they can increase their profits (KIT, 2006).

A value chain links the steps a product takes from the producer to the consumer. It includes
research and development, input suppliers and finance. The producers combine these
resources with land, labor and capital to produce commodities. In the traditional selling system
producers produce commodities that are "pushed" into the market place. Producers are isolated
from the end-consumer and have little control over input costs or of the funds received for
their goods (ACDI/VOCA, 2006).

The main idea of value chain is to highlight and map out specific physical commodity flows
within a sector, including key stakeholders, through usually confining the analysis to domestic
markets and ignoring dynamic adjustments to sector characteristics and relationships (Raikes
et al., 2000; Kaplinsky and Morris, 2001).

Value chain analysis is an analytical tool that helps to understand the way in which firms
(large and small) are integrated and linked in the value chain. Value chain analysis involves
 7

research, examination and interpretation of data to increase understanding of the value chain
so as to improve its development. The goal of value chain analysis is to improve efficiency
and profitability in the chain by tackling challenges and taking advantage of opportunities.
Ultimately, value is added or created through innovation and intervention in production,
processing and marketing. Practitioners contend that detailed analysis helps to challenge the
assumptions that often underpin development interventions (Mitchell and Ashley, 2009).

Value chain marketing system, producers are linked to consumers' needs, working closely
with suppliers and processors to produce the specific goods consumers demand. Similarly,
through flows of information and products, consumers are linked to the needs of farmers.
Under this approach, and through continuous innovation, the returns to producer can be
increased and livelihoods can be enhanced. Rather than focusing profits on one or two links,
players at all levels of the value chain can benefit. An integral component of the value chain is
the agricultural supply chain, and in the literature these terms value chain and supply chain
may at times be used interchangeably, or are at least closely related (Fiter and Kaplinsky,
2001).

Value chain approaches have been utilized by development practitioners and researchers alike
to capture the interactions of increasingly dynamic markets in developing countries and to
examine the inter-relationships between diverse actors involved in all stages of the marketing
channel (Giulani et al., 2005; Pietrobelli and Saliola, 2008). The value chain approach
provides the basic understanding needed for designing and implementing appropriate
development programs and policies to support their market participation. Indeed, many
development interventions now utilize the value chain approach as an important entry point
for engaging small farmers, individually or collectively, in high value export markets (GTZ,
2007).

2.2. Historical Background of Value Chain

Value chain analysis has its historical origins in sectoral types of analysis, such as those
elucidated by the French filière approach. In a filière, the main idea is to highlight and map
out specific physical commodity flows within a sector, including key stakeholders, though
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usually confining the analysis to domestic markets and ignoring dynamic adjustments to
sector characteristics and relationships (Raikes et al., 2000; Kaplinsky and Morris, 2001).

The term “value chain” was first used by Porter (1980). Porter defined the “value chain” as a
representation of a firm’s value-adding activities, based on its pricing strategy and cost
structure. Porter’s approach highlights actual and potential areas of competitive advantage for
the firm. Porter argued that individual firms each have their own value chains that are
embedded in value networks (or “value system” in the terminology of Porter), each of which
have different functions within an industry or sector that influence (and are influenced by)
other actors in the network. The salience of Porter’s discussion was to highlight the
interdependences and linkages between vertically arrayed actors in the creation of value for a
firm.

The modification and application of value chain ideas to development issues became more
formalized in the mid- to late-1990s, particularly in the global commodity chain (GCC)
approach of Gereffi and Korzeniewicz (1994). GCC and subsequent approaches focused
predominantly on the value network of Porter in terms of looking at the relationships and
linkages between firms, rather than solely at value creating functions within a firm. GCC
analysis further highlighted governance relationships between actors in the value chain.

The value chain concept entails the addition of value as the product progresses from input
suppliers to producers to consumers. A value chain, therefore, incorporates productive
transformation and value addition at each stage of the value chain. At each stage in the value
chain, the product changes hands through chain actors, transaction costs are incurred, and
generally some form of value is added. Value addition results from diverse activities such as
bulking, cleaning, grading, and packaging, transporting, storing and processing. Value chains
encompass a set of interdependent organizations, and associated institutions, resources, actors
and activities involved in input supply, production, processing, and distribution of a
commodity. In other words, a value chain can be viewed as a set of actors and activities, and
organizations and the rules governing those activities (Anandajayasekeram and Berhanu,
2009).
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Value Chain Development

The value-chain development approach identifies the key bottlenecks in the system, extracts
their root causes and proposes holistic strategies for upgrading that lead to farms and firms
that are more competitive and sustainable. The value-chain approach assesses how value in an
end market is created by a sequential chain of activities conducted by actors who are
supported by various business-service providers and who are influenced by the particular
business environment in which they operate. Value-chain analysis goes beyond behavioral
assessments at the individual actor level by examining the nature of vertical linkages between
suppliers and buyers and of horizontal linkages between agribusinesses of the same type. The
end markets, actors and their linkages, service providers and operational environment are
typically not static, but rather are evolving in various directions. Value-chain development
takes these dynamics into account by looking at ongoing trends and by focusing on the key
growth and upgrading opportunities (Campbell, 2008).

Dimensions of Value Chain

Value chain analysis can be an important tool with which one examines structural change.
Altogether, a value chain comprises five dimensions; these are the technical structure, the
actors in a chain, the territorial, the input output and the governance structure. The analysis of
these structures will give answers to a set of questions: How does the production process run?
Who participates at which stage? Where do the different stages take place? How are they
linked? Who has which benefits, etc. They are needed to find the relevant points of
intervention for a successful integration of poor population sections (Gereffi, 1994).

Agricultural value chain analysis is systematically maps chain actors and their functions in
production, processing, transporting and distribution and sales of a product or products.
Through this mapping exercise, structural aspects of the value chain such as characteristics of
actors, profit and cost structures, product flows and their destinations, and entry and exit
conditions are assessed. As such, value chain analysis is a descriptive construct providing
empirical framework for the generation of data. However, value chain analysis also provides
an analytical structure to gain insights into the organization, operation and performance of the
chain (Kaplinisky and Morris, 2001).
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Importance of value chain analysis

According to Kaplinsky and Morris (2001), there are three main sets of reasons why value
chain analysis is important in this era of rapid globalization. The first reason they raised is that
with the growing division of labor and the global dispersion of the production of components,
systemic competitiveness has become increasingly important. Second, efficiency in production
is only a necessary condition for successfully penetrating global markets. Third, entry into
global markets which allows for sustained income growth requires an understanding of
dynamic factors within the whole value chain.

2.3. Value Chain Governance

Governance refers to the role of coordination and associated roles of identifying dynamic
profitable opportunities and apportioning roles to key players (Kaplinsky and Morris, 2000).
Value chains imply repetitiveness of linkage interactions. Governance ensures that interactions
between actors along a value chain reflect organization, rather than randomness. The
governance of value chains emanate from the requirement to set product, process, and logistic
standards, which then influence upstream or downstream chain actors and results in activities,
roles and functions. Governance is about defining the terms of chain membership,
incorporating/excluding other actors accordingly and allocating to them value-adding
activities that lead agents do not wish to perform.

According to Raikes et al. (2000), trust-based coordination is central for goods and services,
whose characteristics change frequently, making a standardized quality determination for the
purposes of industrial coordination difficult. This applies to the manufacturing industry as well
as agri-food chains. It is possible to identify in one industry several coordination forms used
by different firms where the choices rely on the trust existent between the firms.

Value chains can be classified into two based on the governance structures: buyer-driven value
chains, and producer-driven value chains (Kaplinisky and Morris, 2000). Buyer-driven chains
are usually labor intensive industries, and so more important in international development and
agriculture. In such industries, buyers undertake the lead coordination activities and influence
product specifications. In producer-driven value chains which are more capital intensive, key
producers in the chain, usually controlling key technologies, influence product specifications
 11

and play the lead role in coordinating the various links. Some chains may involve both
producer and buyer driven governance. Yet in further work (Gibbon and Ponte, 2005) it is
argued that governance, in the sense of a clear dominance structure, is not necessary a
constitutive element of value chains. Some value chains may exhibit no governance at all, or
very thin governance. In most value chains, there may be multiple points of governance,
involved in setting rules, monitoring performance and/or assisting producers.

Upgrading

Economic upgrading is defined as firms, countries or regions moving to higher value activities
in GVCs in order to increase the benefits (e.g. security, profits, value-added, capabilities) from
participating in global production (Gereffi, 2005). Upgrading refers to the acquisition of
technological capabilities and market linkages that enable firms to improve their
competitiveness and move into higher-value activities (Kaplinsky and Morris, 2000).

The GVC approach analyzes the global economy from two contrasting vantage points: top
down and bottom up. The key concept for the top down view is the “governance” of global
value chains, which focuses mainly on lead firms and the organization of international
industries; and the main concept for the bottom up perspective is “upgrading,” which focuses
on the strategies used by countries, regions, and other economic stakeholders to maintain or
improve their positions in the global economy. Four types of upgrading have been identified
(Humphrey and Schmitz, 2002):

Process upgrading: increasing the efficiency of internal processes such that these are
significantly better than those of rivals, both within individual links in the chain, and between
the links in the chain. · Product upgrading: introducing new products or improving old
products faster than rivals. This involves changing new product development processes both
within individual links in the value chain and in the relationship between different chain links.

Functional upgrading:-increasing value added by changing the mix of activities conducted

within the firm or moving the locus of activities to different links in the value chain. · Chain
upgrading: moving to a new value chain. For example, Taiwanese firms moved from the
manufacture of transistor radios to calculators, to TVs, to computer monitors, and to laptops.
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Upgrading entails not only improvements in products, but also investments in people,
knowhow, processes, equipment and favorable work conditions. Empirical research in a
number of countries and sectors (Humphrey and Schmitz, 2000) provide evidence of the
importance of upgrading in the agricultural sector

2.4. Marketing System and Market Chain Analysis

Market chain is the term used to describe the various links that connect all the actors and
transactions involved in the movement of agricultural goods from the producer to the
consumer. Commodity chain is the chain that connects smallholder farmers to technologies
that they need on one side of the chain and to the product markets of the commodity on the
other side (Mazula, 2006). Market chain analysis, therefore, identifies and describes all points
in the chain (producers, traders, transporters, processors, consumers), prices in and out at each
point, functions performed at each point/ who does what?, market demand/ rising, constant,
declining, approximate total demand in the channel, market constraints and opportunities for
the products (CIAT, 2004).

Market chain analysis: is used to describe the numerous links that connect all actors and
transactions involved in the movement of agricultural products from the farm to the consumer
(Lunndy et al., 2004). It is the path one good follow from their source of original production to
ultimate destination for final use. Functions conducted in a marketing chain have three things
in common; they use up scarce resources, they can be performed better through specialization,
and they can be shifted among channel members (FAO, 2005).

In a Value Chain marketing system farmers are linked to the needs of consumers, working
closely with suppliers and processors to produce the specific goods required by consumers.
Using this approach, and through continuous innovation and feedback between different stages
along the value chain, the farmer's market power and profitability can be enhanced. Rather
than focusing profits on one or two links, players at all levels of the value chain can benefit.
Well-functioning value chains are said to be more efficient in bringing products to consumers
and therefore all actors, including small-scale producers and poor consumers, should benefit
from value chain development (Alteburg, 2007).
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2.5. Theoretical Framework

The value chain approach is a framework for understanding how inputs and services are
brought together and then used to grow. This approach looks at how to transform or
manufacture a product; how the product then moves physically from the producer to the
customer; and how value increases along the way. Value chains focus on value creation
typically via innovation in products or processes, as well as marketing and on the allocation of
the incremental value among the actors in the value chain. The value chain perspective thus
helps us understand business-to-business relationships that connect the chain, mechanisms for
increasing efficiency, and ways to enable businesses to increase productivity and add value.
This perspective also provides a reference point for improvements in supporting services and
the business environment (World Bank, 2009).

The value chain approach is particularly helpful in analyzing sectors where global buyers play
the leading role in establishing the parameters of the chain, defining what, how, and under
what conditions a product is produced, as well as who gets included and excluded from the
chain (Gereffi and Kaplinsky, 2001).

Specifically, analysis of a value chain stresses that the market is increasingly organized
through networks linking spatially dispersed market agents. Keesing and Lall (1992) argue
that producers in developing countries are expected to meet requirements that frequently do
not (yet) apply to their domestic markets. The outputs in the chain are determined by the
requirements of the market agents including quality, consistency, cost, variety, value-added,
food safety, and ethical credential; which are, in turn, responding to the demands of their
customers (Dolan and Humphrey, 2000). This reduces risks which may be a particular
characteristic of global value chains integrating developing country producers with developed
country buyers. Value chain analysis is also useful as an analytical tool in understanding the
policy environment, which provides for the efficient allocation of resources within the
domestic economy, notwithstanding its primary use thus far as an analytic tool for
understanding the way in which firms and countries participate in the global economy
(Kaplinisky and Morris, 2001).
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2.6. Methodological Framework

Agricultural value chain analysis systematically maps chain actors and their functions in input
supply, production, trading, processing, transporting and distribution and sales of the beef
cattle. Through mapping exercise, structural aspects of the value chain such as characteristics
of actors, products flow and their destination, market participation and opportunities and
constraints in the value chain are to be assessed. As such, value chain analysis is a descriptive
construct providing empirical framework for the generation of data. However value chain
analysis also provides analytical issues in to the organization, operation and performance of
the value chain (Kaplinisky and Morris, 2001).

Agricultural value chain is a dynamic approach that examines how markets and industries
respond to changes in the domestic and international demand of supply for a product,
technological change in production and marketing, and developments in organizational and
institutional arrangements or governance techniques. The analysis should look at the value
chain as set of institutions and rules; as a set of activities in the market participation, supply
and as a set of actors involved in performing the value adding functions. Value chain analysis
focuses on changes over time in the structural and functional settings of the beef cattle value
chain, particularly in response to the market participation and supply and the existing
opportunities and constraints, technologies and polices (Kaplinisky and Morris, 2001).

There are two main methodological approaches to study value chain supply market. These are
the functional approach and institutional approach which are also used in this study. (Kohls
and Uhl, 1985)

Functional approach: in this approach each function is analyzed in relation to the importance
of its performance in the value chain of the beef cattle product market supply and according to
the nature of its performance by different value chain institutions

Institutional approach: this approach concentrates on the description and analysis of the
different organizations engaged in the value chain of beef cattle market participation and
supply, including the producers (beef cattle suppliers), whole sellers, agents, abattoir,
butcheries and pays special attention to the operations and problems of each type of value
chain institutions
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2.7 Beef Cattle Production and Marketing

Livestock system represents a potential pathway out of poverty for many smallholders
in the developing world. The majority the world’s rural poor, and a significant
proportion of the urban poor, keep livestock and use them in a variety of ways that
extend beyond income generation. In many cases, livestock are central component of
smallholder risk management strategies (Baily et al., 2004).

Meat is one of the essential foodstuffs, and plays a significant role in the human diet
because of its nutritional aspects. In Ethiopia cattle, goats, sheep, camel and poultry are
used as resource base for meat production. Meat production offers opportunity to serve
a vast export market as well as Ethiopia’s domestic market. It also drives much of the
rest of the livestock value chain in Ethiopia, particularly hides, skins and leather
(Brane, 2014). Meat production and consumption is important in the Ethiopian
economy and ruminants contribute over 3.2 million tons, representing over 72% of the
total meat production (Belete et al., 2010).

Ethiopia has the tenth largest livestock inventory in the world, yet the country’s share in the
global export market for meat is quite small. In 2011, the volume of global meat exports was
estimated at USD 105 billion, and Ethiopia accounted for less than one percent of this total
(0.75 percent or USD 79 million), of which most was low-value, chilled sheep and goat
carcasses. This ranked Ethiopia as the 43 rd largest meat exporter. The many reasons for this
include very low off-take rates; large numbers of animals that by-pass abattoirs and are
exported live, producers who are not commercially oriented and sell only in need of cash or
when draught animals get too old, and lack of certifications and acceptable international
standards by meat processors (USAID, 2013).

At the household level, 70% of all Ethiopians rely on livestock in some form to contribute to
their family’s livelihood. Livestock marketing operations are generally small-scale family
businesses. The livestock producers supply to the market is not based on market demand,
rather buyers must choose from whatever is available in the market. The live animals are
either transported in trucks or herded over long distances to feedlot operators, export abattoirs,
or major markets. These final market destinations are far away from supply sources, and the
 16

transportation costs associated with getting live animals to markets can result in significant
weight loss and even death; stock routes are characterized by lack of adequate feed, water, and
resting places. It can be argued that the long supply channels lead to high costs and reduce the
competitiveness of live animal or meat exports. The spot market transaction dominates
livestock marketing activities. In some cases repeat transactions are possible. However, there
are no binding contractual arrangements among different market actors. Price is determined
through bargaining at the market; livestock producers are usually less informed about price,
supply, and demand situations. Suppliers (producers) are highly fragmented, while there is a
concentration of major livestock buyers, a situation which might lead to noncompetitive
pricing and marketing behavior (CSA, 2005).

The major challenges to Livestock production in Ethiopia were severe feed shortage, high
disease prevalence, high predatory, poor market, genetically less productive breed, severe
water shortage and high shortage of laborer (Fisseha et al., 2010).

Livestock and meat products have been among the fastest growing components of the global
agriculture and food industry. This growth reflects not only increasing demand for meat as
global incomes have risen, but also improved efficiencies in production, processing and
transportation declining real feed prices (Morgan and Tallard, 2015). Global meat trade is
forecast to expand at a moderate rate of 1.7 percent in 2015, to 31.2 million tones, a significant
slowdown from the 3.1 percent registered last year (FAO, 2015).

Meat production and consumption is important in the Ethiopian economy and ruminants
contribute over 3.2 million tons, representing over 72% of the total meat production (Belete et
al., 2010). Even if, the Cattle population in the majority of tropical country is higher, there is a
strong unsatisfied demand, due to the increment of population growth in the majority of
tropical countries, for milk and meat (FAO, 2015). However, the actual consumption is
seriously restricted by the low purchasing power of the majority of the consumers, for whom
retail prices are already too high. At the other extreme, the producer is in a difficult position
and the course taken, notably for beef, does not allow to envisage the introduction of more
intensive techniques, the only ones which would enable an increase in production when the
limits of expansion of the pasture area are reached (Rege and Lipper, 2012).
 17

All of the existing abattoirs have limited facilities for beef cattle. These abattoirs get their beef
cattle supplied by traders or through their agents. When the demand is high and the supplies
are limited from their usual sources, some of them buy the beef cattle from big traders at their
factory gate. Upon arrival animals undergo physical examination and are rested for two to
three days in a holding area where they receive feed and water. Before slaughtering, they are
held in lairage for 12 to 24 hours with access to water but not feed. During their stay in the
lairage, animals undergo ante mortem or pre-slaughter examination. Animals that pass the
examination are slaughtered using the Halal procedure. Afterward the carcass is chilled at -2
to 2 degrees Celsius for 24 hours. In most cases slaughtering is done when abattoirs receive
orders from their customers (AGP, 2013)

2.8. Empirical Evidences

The Ethiopian beef cattle and live animal value chains have been developed over the years
into a series of complex constituents involving various actors that include producers,
collectors, small private and cooperative fatteners or feedlots of beef cattle’s, various (and in
some places, numerous) middlemen, livestock trading cooperatives, individual traders and
exporters (AGP, 2013).

Jackson et al. (2014) conducted a research on the assessment of performance and

competitiveness of Somaliland livestock sector using livestock value chain analysis. Results of
the analysis revealed that, livestock production involving cattle, sheep, goats and camels is the
region’s primary economic activity. Market channels are served by a number of
interconnecting primary and secondary markets linked to several production areas. Local
markets involve livestock slaughter and marketing of beef cattle to local consumers. More
over the study revealed that livestock slaughter and marketing of beef cattle suffer constraints
that include poor design and hygiene of slaughter facilities and lack of beef cattle inspection
services. The main players in the sector include pastoralist producers, animal trekkers,
livestock traders/exporters, brokers, livestock transporters, slaughterhouses operators,
butchers, beef cattle traders, beef cattle transporters and hides skins traders. Finding that the
paper came up with is that livestock productivity is affected by occurrence of livestock
diseases, scarcity of water and pastures due to recurrent droughts and rangeland degradation,
inadequate animal health and veterinary extension services and loss of value along the
 18

livestock marketing chain. Their result suggests that productivity can be enhanced by
improving fodder production and conservation, water harvesting and provision of animal
health extension services. To enhance competitiveness of livestock export, there is need to
develop livestock disease testing facilities in livestock markets, as well as strengthen financial
services to support livestock exporters. On the other hand, competitiveness of beef cattle
marketing can be enhanced by rehabilitation/improvement of slaughter and beef cattle
production and marketing facilities and services.

Gezehagn (2015), analyze beef cattle value chain in Konso district, SNNP Region, Ethiopia
revealed that the major actors in the value chain are input suppliers, beef cattle producers,
smaller traders, butchers, hotel and restaurant owners, larger traders and consumers. The result
from heckman two step sample selection model showed that market participation in beef cattle
being significantly and positively affected by sex of the household head, age of the household
head, household size, access to veterinary service, distance of feed source, beef cattle body
condition and access to credit. Moreover, quantity of the beef cattle supplied is affected
negatively by access to veterinary service, distance from feed source, market distance and
access to credit while household income affected it positively. Some of the major
opportunities and constraints are identified to be market, feed, disease, drought and water.

A study conducted by Kefyalew (2011), on the value chain of beef cattle production and
marketing in Ethiopia revealed that, the beef cattle production system and sources of beef
cattle brought to markets, the marketing systems and the main actors in marketing live animal,
export as well as the challenges and opportunities for the beef cattle value chain were
elucidated. He found that there was no strategic production of livestock for marketing except
some sales targeted to traditional Ethiopian festivals. Both legal and illegal livestock
marketing systems are operating at different magnitudes. Small farmer exporters and traders
are the major actors in the illegal cattle marketing system while medium to large-scale
licensed exporters are dominantly operating in the legal system. He examined that the main
challenges for the beef cattle production and value chain was the unofficial cross-border trade
dominated by influential personalities and illegal exporters. Limited access to production and
market-related information such as production systems, prices, value chains, competitors,
consumer preferences and lack of capital to invest in assets, equipment and inputs that would
 19

improve quality were also the major challenges faced by the market value chain. Therefore,
empowering poor smallholder farmers will help to provide high-quality, sustainable livestock
production with an identified market destination and access to basic production inputs, credit,
capacity-building, market-related information.

Ayele et al. (2003) reported that current knowledge on livestock market structure,
performance and price is poor and inadequate for designing policies and institutions to
overcome perceived problems in the marketing system. One of the major challenges facing the
beef cattle marketing and value chain has been that the competitiveness of these firms in the
domestic and export markets has been limited by the underutilization of the processing
capacities. It has been observed that the live animal throughput is inadequate resulting in the
existing beef cattle processing facilities operating at less than 50% of their operational
capacities.

Addisu et al. (2012) conducted value chain analysis on beef and animal feed in order to map
and characterize the beef and feed value chain activities focusing on constraints and
opportunities in and around Adama district. The study enabled the identification of the major
value chain actors and core functions carried out categorized as: input supply, production,
trade (marketing), processing and consumptions. They found that availability of feed is limited
to purchased crop residue and native hay from distant locations. The continuous rise of feed
price in recent years has created a discouraging effect for the smallholder beef producers. The
feeding practice is not market-oriented. The study revealed that the existing feed purchase cost
coupled with the use of older animals which biologically have lower conversion efficiency
lowers the marginal profit from the commodity. They also found that the producers lack skill
and knowledge with regard to profitable beef production. Furthermore, the value chain actors
in the study areas employed low level technologies. The brokerage activities supposed to assist
the transaction in the market places operate mostly based on fraudulent conditions. The
analysis also revealed that the profits are distributed mostly towards the retail end of the value
chain; the income derived from the sale of the animal is concentrated at the retail end of the
chain.
 20

2.9. Conceptual Framework

The value chain includes all the links that begin with an idea for product or service and
continue through to when that product or service is consumed. For instance, sheep value
chains include all inputs and services that enable live sheep production (eg. feeds and services
and stock), through transporting, processing and marketing of outputs, to creation of added
value products such as beef cattle through consumption of the animal source foods and related
products. Input suppliers, producers, processors and buyers are actors along the value chains.
The different actors are supported by a range of technical, business and financial service
providers. Value chains also include the institutional and governance arrangements that enable
these systems to function. Value chain analysis considers how and by whom the value in the
value chain is captured (Gereffi and Kaplinsky, 2001; Legese and Hordofa, 2011).

The analysis of the value chain stresses that the market is increasingly organized through
networks linking market agents dispersed spatially in different places. The outputs in the chain
are determined by the requirements of the market agents including quality, consistency, cost,
variety, value-added and innovation, food safety, and ethical trade; which are, in turn,
responding to the demands of their customers (Dolan and Humphrey 2000). Access to the
value chain is influenced by a wide range of factors at the macro and micro level including the
nature of state and regional policy, level of infrastructure and access to technology, as well as
the character of markets.

In value chain analysis, vertical and horizontal integration are the two basic strategies that
groups of farmers can use to improve their incomes. Vertical integration means taking on
additional activities in the value chain: processing or grading produce. Horizontal integration
on the other hand means becoming more involved in managing the value chain itself – by
farmers’ improving their access to and management of information, their knowledge of the
market, their control over contracts, or their cooperation with other actors in the chain (KIT,
2006).
 21

3. RESEARCH METHDOLOGY

3.1. Description of the Study Area

Sululta district is one of the six districts of Oromia Special Zone Surrounding Finfinne of
Oromia National Regional State. The districts’ capital town, Chancho, is 40 kms away from
Addis Ababa towards the North-west. According to CSA (2012), population of district was
about 149,494 (male 74,753 and female 74,741). Concerning the land use pattern, out of the
total area of the district which is 109,269 ha, about 26,662 ha (24.4%) is cultivated land, and
15,145 ha (13.9%) is covered by forest, bush and shrub land, 38,720 ha (35.4%) is grass lands,
and 28,742 (26.3%) are other land use types (SDAO, 2012).

The district is bordered with different districts of North Shewa zone; Welmera in the West,
Wuchale in the North, Jida in the East, Addis Ababa city administration in the South. The
altitude of the district ranges from 2851 to 3700 meters above sea level. The highest annual
rainfall is 1447 mm with mean of 1140 mm and minimum of 834 mm. In the area, the months
with high rainfall are (July to September) with low temperature, whereas the temperature is
high in the months between December to March. The farming system of the district is rain-fed
and mixed agriculture. Livestock husbandry and crop production are the predominant
economic activities and the major source of livelihood in the district.

The main farming of the study area is livestock rearing followed by crop production, mostly
cereal crops such as barley, wheat, teff, and pulse crops such as horse bean, pea, lentil and
others growing in the district. The livestock feed resource is hay, crop residue and grazing
land. The total cattle population in the district is estimated at 224,600 (15% are cross-breed)
(SDAO, 2012). The district has 23 kebele administrations, 3 sub-towns (Chancho, Dubar and
Derba), and 22 Farmer Training Centers, 64 development agents and 68 different types of
cooperatives. From these cooperatives in the district, 12 are primary dairy cooperatives
affiliated to the Selale Dairy Cooperative Union (SDCU, 2012).

Bishoftu is located at 47 km Southeast of Addis Ababa and at latitude and longitude of 8°45′N
38°59′E and elevation of 1885 meters above sea level. The mean annual rainfall of the town is
866 mm with a bimodal pattern. The mean annual minimum and maximum temperatures are
14°C and 26°C, respectively and a relative humidity of 61.3% (NMSA, 2003).
 22

3.2. Data Types and Method of Data Collection

For the value chain analysis checklist will be prepared to interview input suppliers, producers,
abattoirs, butcheries, processors, consumers and supporting actors in the study areas.
Furthermore, focus group discussion will be made at different places with abattoirs,
butcheries, processor and consumer out of study areas. In addition to the beef value chain, the
dairy value chain will also be incorporated in this study.

For the remaining economic analysis both primary and secondary data will be collected.

Primary data will be collected from the field through focus group discussion, key informant
interview, structured questionnaire interview and personal observations.

Secondary data will be collected from zonal and district level Agriculture Offices, the re
bureaus, institutes or organizations and other web based sources. In addition to that data will
be collected from published and unpublished sources; working papers, regular and statistical
reports.

3.3. Sampling Procedure and Sample Size

3.3.1. Sampling for value chain analysis

Researchers often disagree on the sample size and sampling procedures that should be used in
each segment of the marketing chain. The decision involved are partly a function of
information known, time and resources available, accessibility to and openness of the
marketing participants themselves, as well as the estimated size of the trading population
There is no hard-and-fast rule to help one determine the number of interviewees required for
each stage or segment of each marketing chain. In some studies of marketing channels and
margin, as many as 30% of all traders and wholesalers, between 5% and 8% of producers, 5%
of retailers and less than 1% of consumers are surveyed (Mendoza, 1995).

For this study, beef value chain actors will be selected on the basis of their availability andsize
and interview based on their respective functions in the chain. Respondents may be classified
based on the type of livestock (whether dairy or other livestock).
 23

3.3.2 Sampling for assessing determinants of beef cattle sales

Three stages sampling technique will be used to select sample respondents. In the first stage,
two districts will be selected purposively based on their beef cattle production potential. In the
second stage, stratified sampling technique will be used, household in each of the two districts
will be grouped into two strata: Stratum one which represents small scale beef cattle producer
and stratum two which represents large scale beef cattle producer. Finally, using the list of
beef cattle producers in the district and the sampled kebeles in each district, 120 beef cattle
producers will be selected randomly using probability proportional to size sampling technique
from each strata and sampled kebele or the maximum number of respondents will be
determined by using a formula developed by Yamane (1969). To determine the required
sample size at 95% confidence level, with a 0.5 degree of variability and a 9% level of
precision

N
n=
1+ N ¿ ¿

Where:

n=is the sample size for the research use

N = is the population size (total number of households in the selected kebeles)

e =is the level of precision (=0.09)

3.4 Method of Data Analysis

Descriptive and Econometric analyses will be used to achieve the objectives of the study.

3.4.1 Descriptive Analysis

3.4.1.1. Description of marketing characteristics

Descriptive analysis involves use of descriptive statistics such as ratios, percentages, means,
variances and standard deviations in order to examine and describe marketing functions, farm
household characteristics, characteristics of market players, role of intermediaries, market and
traders characteristics and also to identify key constraints in beef cattle production and value
 24

adding activities, Statistical tests will also be used to assess similarities or differences in
important characteristics.

3.4.1.2 Value chain analysis

The analysis of beef cattlevalue chains highlight the need for enterprise development,
improvement of product quality, and quantitative measurement of value addition along the
chain, promotion of coordinated linkages among producers and improvement of the
competitive position of individual enterprises in the marketplace. Likewise, individual
enterprises may feed into numerous chains; hence, which chain (or chains) was/were targeted
depends largely on the point of entry for the research inquiries (Kaplinsky and Morris, 2001).

The following procedures of value chain analysis will be applied in this study: Beef cattle
value chain map will be sketched, characteristics and function of beef cattle value chain actors
including primary and supporter actors will be identified and discussed, beef cattle market
channels will be identified, which will help to identify whether the sale of cattle is from dairy
herds that then enter the meat chain or the sale of cattle is directly for meat and to identify the
sale of sick cattle and the consumption of infected beef by farmers and/or farmworkers and
their households, margin and financial profit share of actors’ will be assessed. Finally, chains
which need upgrading and governance role will be identified.

Therefore, this study will use value chain analysis which is very effective in tracing product
flows, showing the value adding stages, identifying key actors and the relationships with other
actors in the chain. Generally thefollowing four steps of value chain analysis; summarized by
M4P (2008) will be adopted:

Mapping the value chain: This is to understand the characteristics of the chain actors and the
relationships among them, including the study of all actors in the chain; the flow of beef cattle
through the chain; of employment features; and of the destination and volumes of domestic
and foreign sales. This information can be obtained by conducting surveys, interviews and by
collecting secondary data from various sources.

Identifying the distribution of actors’ benefits and costs in the chain: This involves
analyzing the margins and profits within the chain and therefore determining who benefits
 25

from participating in the chain and how much; who would need support to improve
performance and gains.

Defining upgrading needs within the chain: By assessing profitability within the chain and
identifying chain constraints, upgrading solutions can be defined.

Emphasizing the governance role: The concept of value chain governance is defined as: the
structure of relationships and coordination mechanisms that exist among the value chain
actors. By focusing on governance, the analysis will identify institutional actors that may
require support to improve capabilities in the value chain, increase value added in the sector
and correct distributional distortions.

3.4.1.3. Analysis of beef cattle value chain performance

After having developed the general conceptual map of the value chain, the next step will be to
analyze the chain’s economic performance. Production costs, margins and price markups, are
among the possible measures of chain performance. Here, economic analysis will be employed
to assess marketing costs, margins and value share of the different marketing participants.

Marketing margin analysis deals with comparison of price at different levels of marketing over
the same period of time. It measures the share of the final selling price that is captured by a
particular agent in the marketing chain and always related to the final price or the price paid
by the end consumer, expressed in percentage (Mendoza, 1995). Because precise marketing
costs are frequently difficult to determine in many agricultural marketing chains, the gross and
the net marketing margin is calculated. Thus, the marketing margin should be understood as
the gross marketing margin.

The formula to calculate Total Gross marketing margin (TGMM) is given as:

End Buyer price-Farmer's Price

×100
End Buyer Price
TGMM= (1)

It is useful to introduce here the idea of producer participation, farmer’s portion or producer’s
gross margin (GMMp) which is the portion of the price paid by the end consumer that belongs
 26

to the farmer as a producer. The producer’s margin or share in the consumer price GMM P is
calculated as:

The consumer price share of market intermediaries is calculated as:

Price paid by end buyer-Gross Marketing Margins

×100
Price paid by End Buyer
GMM= (2)

SP-BP
×100
EBP
GMM= (3)

Where: GMM = Gross Marketing Margin (%)

SP = Selling price at each level

BP = Buying price

EBP = End buyer price

In marketing chain with only one trader between producer and consumer, the net marketing
margin (NMM) is the percentage over the final price earned by the intermediary as his net
income once his marketing costs are deducted. The percentage of net income that can be
classified as pure profit (i.e., return on capital) depends on the extent to which factors such as
the middleman`s own, often imputed, salary are included in the calculation of marketing costs.

Gross Margin-Marketing Cost

×100
Price Paid by End Buyer
NMM= (4)

3.4.2 Econometric Analysis

Model for volume of marketed Beef cattle

In order to increase the leading role that agriculture plays in economic growth and poverty
reduction, producers need to improve their marketed supply. A higher volume of marketed
supply can help producers to participate in a high value markets by increasing their level of
 27

income. Therefore, investigating the nature of volume of marketed is a major component of

agro value chains.

To address the determinants of volume of beef cattle marketedin the study area multiple linear
regression model will be used in the study. This model is selected for its simplicity and
practical applicability (Greene, 2000). It is used to estimate the parameters as it is appropriate
when the dependent variable is continuous. In addition, it is intuitively appealing and simple to
use (Gujarati, 2004). Accordingly, the model can be specified as in the following form

Q j=β +β 1 j X 1 j + β 2 j X 2 j +β 3 j X 3 j +β nj X nj + ρnj λ nj ( X nj β ) j +ε j
(5)

Where

Q ji= volume of market supply; (ji= Beef cattle)

Xnj = exogenous variables per beef cattle

bij= coefficients; (j= beef cattle)

n =running from 1….n.

λ nj ( X nj β ) j
- Inverse Mill’s Ratio

j= farmer

Xi –Xn–explanatory variables

Ei- random term for substantial equation

3.5. Variables and Working Hypotheses

Dependent variables
Amount of beef cattle supplied to the market (ATSS): it is a continuous dependent variable
that to measures the actual supply of beef cattle within year to the marketand it has a positive
value. It is measured in terms of monetary.
 28

Independent variables
Different empirical research results have indicated that socio-economic, cultural and
demographic factors are expected to be the major factors influencing the market supply of beef
cattle. So, some of the major explanatory variables that are anticipated to determine and affect
the market supply of beef cattle in the value chain of this study will be the following:

Total size of farmland owned (LANDSIZE): Total size of land owned by the household, is a
continuous variable measured in hectares and taken as an explanatory variable to influence
market supply of the beef cattle. According to study conducted by Pilirani (2009) the
production factor land was found to play a major role where more than 50% of the food
consumed originates from own food production. The more land owned the more could be the
feed for the cattle so the probability of market supply of cattle is high. Thus this variable is
expected to influence market supply of beef cattle positively.

Sex of the household head (SEXHH): It is a dummy variable taking 1 if male and 0
otherwise. In mixed farming system, both men and women take part in livestock management.
Generally, women contribute more labour input in areas of feeding, cleaning of barns,
milking, butter and cheese making and sale of milk and other products. However, obstacles,
such as lack of capital and access to institutional credit, competing use of time, and access to
extension service, may affect women’s participation and efficiency in cattle production (Tanga
et al., 2000). Therefore, it is not possible to tell a priori about the likely sign of the coefficient
of sex, in market sales volume.

Education level of the household head (EDUHH): This variable is a dummy variable taking
a value 1 if the household head is literate and 0 if the household is illiterate. Those household
heads who had education determines the readiness to accept new ideas and innovations, and
easy to get supply, demand and price information and this enhances farmers’ willingness to
produce more and increase volume of sales. Therefore this variable is hypothesized to
influence volume beef cattle market supply positively.

Access to veterinary service (VETSERV):This variable is a dummy variable that takes a

value of 1 if the beef cattle producers get veterinary service and 0 otherwise indicating
veterinary service households are getting to secure their beef cattle from different animal
 29

diseases. Obviously, if households get access to veterinary servicetheir probability of

supplying beef cattle in the market will be high. According to Gezehagn, 2015 in his study on
an analysis of beef cattle value chainhe found that access to veterinary service to affect
amount of beef cattle supplied to markets significantly and negatively. It was due to the
existence of higher prices, illegal and expired veterinary drugs in the market. Also impact of
traditional veterinary ways (for example, heating the infected beef cattle body part by fire) of
treating beef cattle makes the beef part wounded and reduces the amount of beef cattle supply
to markets Therefore this variable is hypothesized to influence volume beef cattle market
supply positively or negatively.

Distance of home from farmland to provide feed (DIFESOU): This variable is a continuous
variable measured in kilometer from the producer’s home to farmland. Crop residue as a
source of livestock feed has begun to rise in recent years, as a result of increased areas of
cultivation and changing patterns of leaving land fallow for regeneration. This is especially
evident in the highlands where crop cultivation is increasingly intensive and becoming very
important (Sintayehu et al., 2010). So, its distance is expected to influence volume of market
supply of beef cattle negatively. As a sample producer lives far from crop residue area it
becomes difficult to produce beef cattle and supply beef cattle to the markets.

Beef cattle production farming experience (EXP):It is a continuous variable measured in

number of yearsstayed in beef cattle production and marketing. A household with better
experience in beef cattle production is expected to produce more amounts of beef and, as
result, he/she is expected to supply more amounts of beef to market than those with only less
experience. Farmers with longer farming experience are expected to be more knowledgeable
and skillful (Ayelech, 2011). Therefore, experience in beef cattle production is expected to
have a positive relation with volume marketed.

Household’s income (HHINC): This variable, on-farm income plus off-farm income, is
measured as a continuous variable. If a household has high or adequate income to purchase
feed and residue “tata” or “atela” from the local drink chaqa and katikala respectively. The
income earned can be used to purchase inputs and hence boost the production of beef cattle.
Household income which consists of both farm and off-farm income has positive and
 30

significant impact on quantity supply of beef cattle to markets (Gezehagn, 2015). Hence, it
was hypothesized to affect the volume of market supply of the beef cattle positively.

Number of cattle owned (CATTSZ): It is a continuous variable measured in terms of TLU

owned by sample households. It is expected that the TLU of cattle owned by a household
could have a significant impact on the volume of supply of beef cattle. The results revealed by
Shambel, 2013 show that an increase in the number of cattle owned by an individual farmer
influence the value obtained from the sale of cattle significantly and positively.It is therefore,
hypothesized that it influence volume of supply of beef cattle positively.

Body condition of Beef Cattle that household owned (CATBC): This variable is a dummy
variable with value 1 if the cattle owned by the household have a good beef body condition
and 0, otherwise. It will be based on household perception about the body condition of their
cattle and through personal observation. As Solomon argued in his research, due to lack of
weighing facilities, mostly cattle transaction is done, based on evaluation and assessing the
body conditions, which tend to be highly subjective (Solomon, 2004). It is therefore,
hypothesized that good beef body condition/appearance of beef cattle is expected to influence
volume of market supply of beef cattle positively.

Household size (HHSZ): Family size is a continuous variable measured in terms of head
count (Strock, 1991). It is included in the model as a variable explaining variation in market
participation. Families with more household members tend to have more labour. Production in
general and marketable surplus in particular is a function of labour. Thus, family size is
expected to have positive impact on market participation but larger family size requires larger
amounts for consumption and negatively influences beef cattle supply by reducing marketable
surplus.

Distance to the nearest market (DISMKT): It is a continuous variable measured in walking

time (minute) which producers spend to reach the nearest market. If the producer is located in
a distant place from the market, access to market is considered as poor. If closer to the market,
the lesser would be transportation cost and time spent. According to Wolday (1994), in his
report on food grain market based on research in Alaba Siraro, he argued that poor market
access has significant and negative effect on quantity of agricultural food product supply. So,
 31

it is hypothesized that distance to market is negatively related with the volume of market
supply of beef cattle.

Access to credit (ACRED): it is a dummy variable that takes values of 1 if the household has
access to credit and 0, otherwise. Agricultural service, in this case credit, is believed to
enhance the ability of farm households to withstand input supply constraints, ease of liquidity
and there by enhance crop choice and productivity (Lerman, 2004). Therefore a household
who has an access to credit can be able to buy either farm implements and other inputs which
can foster choice and level of crop and/or livestock to be grown or reared and, linking with the
use of modern farm technology. Therefore, the more access to credit, the more it will be
market oriented, positive effect. In the present study, it is expected that households with better
access to credit would be more likely to sale more volume of beef cattle market.

Herd structure(HRDST):it is a dummy variable that takes a value of 1 if herd structure cattle
with dairy mix and 0 no dairy cattle. If the cattle owned by household is mix of dairy cattle or
no dairy cattle. In the present study household with herd structure of mix of dairy cattle are
expected to sale more volume of beef cattle.So, it is hypothesized that herd structure of cattle
is positively related with the volume of market supply of beef cattle.
 32

Table 1.Summary of variable definitions, measurements, and expected signs

S. No. Notation Variable label Type Variable definition and Expected sign
measurement

1 LANDSIZE Total land owned Continuous Hectare +

2 SEXHH Sex of household head Nominal Male=1, female=0 -/+
3 EDUHH Education level household Dummy Literate=1, illetrate=0 +
head
4 VETSERV Access to veterinary Dummy Access=1, unless=0 +/-
services
5 DIFESOU Distance of home from Continuous Kilometer -
farmland to provide feed
6 EXP Experience in beef cattle Continuous Number of years +
production
7 HHINC Household income Continuous Amount of birr +
8 CATTSZ Number of cattle owned Continuous Tropical livestock unit +
9 CATBC Body condition of the Dummy Good=1, unless=0 -/+
cattle
10 HHSZ Number of household size Continuous Head count +
11 DISMKT Distance to market Continuous Minute -
12 ACRED Access to credit Dummy Access=1, unless=0 +
13 HRDST Herd structure of cattle Dummy Cattle (dairy mix)=1, unless=0 +
 33

4. PROPOSED WORK PLAN

Table 2. Work plan

S.No Activity Duration Outcome

1 Full Proposal September 2016- Full proposal developed

November 2016

2 Review of literature August 2016- Adequate literature is reviewed

February 2017

3 Questionnaire November 2016 Survey questionnaire developed

development

4 Pre-test of November 2016 Survey questionnaire developed

questionnaire

5 Data collection November 2016- The necessary data collected

December 2016

6 Data cleaning and December 2016 Data is cleaned and made ready for entry
preparation

7 Data entry December 2016 Data is entered to SPSS, STATA, other

appropriate data bases

8 Data analysis December 2016 Data is analyzed with appropriate statistical

package

9 Report writing- draft January 2017 Data is interpreted and draft report is prepared
thesis

10 Final thesis writing January 2017 Draft report is reviewed and edited and final
report is prepared

11 Submit final MSc March 2017 Submitted to Postgraduate Studies

thesis

12 Defense MSc thesis May, 2017 Defended MSc thesis

13 Make correction May, 2017 Submitted final MSc thesis to Postgraduate

defended outcome studies
 34

5. BUDGET BREAK DOWN

Table 3. Personal expenses

No Description No-of participants No-of days Perdiem /day Total cost (ETB)

1 Investigator 1 27 206 5562

2 Major Advisor 1 10 206 2060
3 Co-Advisor 1 10 206 2060
4 Assistant data collectors 60 3 50 9000
5 Data coders 40 3 50 5850
Sub-Total 24,532.00

Table 4. Travel expenses

S/N Activity Departure Destination No. of trips cost Subtotal costs (ETB)
/trip(ETB)
HU A.Ababa 1 160 160
A.Ababa HU 1 160 160
1 Investigator
Sub-Total 320.00
 35

Table 5. Supervision fee

N/S Description ET. Birr

1 Super vision 3,000.00

Table 6. Budget summary

S/N Budget category sub total
1 Personal expenses 24,532.00
2 Travel expenses 320.00
3 Supervision fee 3,000.00
Grand total 27,852.00

Budget source: MoE (Ministry of Education)

 36

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