Structure, conduct and performance of marketing chains: The case
Transcription
Structure, conduct and performance of marketing chains: The case
ISSN: 2408-5480 Vol. 3 (3), pp. 206-213, March, 2015. © Global Science Research Journals http://www.globalscienceresearchjournals.org/ Global Journal of Agricultural Economics, Extension and Rural Development Full Length Research Paper Structure, conduct and performance of marketing chains: The case of milk marketing among pastoralists and agro-pastoralists of Eastern Ethiopia Bedilu Demissie1*, Hussien H.Komicha2 and Adem Kedir3 1 Department of Agribusiness and Value Chain Management, School of Agriculture, Adama Science and Technology University, Asella, Ethiopia. 2 Department of Economics, University of Winnipeg, 515 Portage Ave, Winnipeg, MB, R3B 2E9, Canada. 3 Department of Statistics, College of Computing and Informatics, Haramaya University, Haramaya, Ethiopia. *Corresponding author’s E-mail: [email protected] Accepted 24 March, 2015 Abstract Pastoralists and agro-pastoralists in Ethiopia have untapped livestock resources. However, they have inadequate economic benefits from these resources due to lack of efficient structure, conduct and performance with which these resources have been explored. Despite large livestock resources, the communities experience high incidence of poverty. Their geographic areas are susceptible to frequent droughts. Ethiopian agricultural policies in the past had largely neglected this sector, focusing on mainly crop production and marketing. Policy attention to milk production and marketing in the pastoral and agro-pastoral areas had been negligible. In order to explore efficiency of milk marketing system in pastoral and agro-pastoral areas as well as to generate information for relevant policy formulation, this study attempts to analyze cow and camel milk marketing channels, the role and linkages of marketing agents using the commonly-used Structure–Conduct-Performance (S-C-P) framework and commodity approaches. Primary data from 140 pastoral and agro-pastoral households and several marketing agents were collected and many secondary data sources were also consulted. The study found presence of inadequate provision of public services, and predominantly traditional and fragmented marketing system. Both cow and camel milk markets exhibit strong oligopoly in the area. The study suggests that there is a need to link milk marketing agents through development of institutional arrangements such as dairy cooperatives, traders’ unions and contract marketing scheme; a need for public investment in the development of supportive infrastructure (e.g., telecommunications, roads, electricity, water); extension support to augment traditional production system, such as promotion of cross-bred cows and veterinary services; licensing and inspection of milk traders and producers to ensure achievement of minimum hygiene and quality standards; and a need for development of valueadding processing facilities to minimize waste and increase the profitability of the enterprise. Keywords: Marketing margin, structure-conduct-performance, pastoral/agro-pastoral, dairy, Ethiopia INTRODUCTION Ethiopia has immense and largely untapped livestock resources useful as sources of food, income, services and foreign exchange to the economy (Ayale et al., 2003).However, as compared to its immense potential the existing income generating capacity of the livestock sector has not been exploited. The primary reason, among Glob. J. Agric. Econ. Ext. Rural Deve. 207 others, seems to be inefficient livestock and livestock product marketing characterized by high margins and poor marketing facilities and services (CSA, 2006), lack of well-developed marketing infrastructures and appropriate marketing channel in the country (Getachew, 2003; Gizachew, 2005; CARE Ethiopia, 2009). Pastoralists and agro-pastoralists contribute about 40% of the country’s total livestock population. Nevertheless, Ethiopian pastoralists have the highest incidence of poverty and the least access to basic services compared with non-pastoral areas (Oxfam, 2008). The National Agricultural Sample Surveyof 2001/2002 shows a total cow milk production of 2.6 million MT, of this 2.2 million liters come from pastoralists in the Oromia Region. The country’s pastoralists also produced about 114 million litres of camel milk (Ethiopia Economic Association, 2005). However, pastoralists and agro-pastoralists have not economically benefited to the extent they ought to, as most of the development efforts in the country have focused on crop production in the highlands rather than to production of livestock in the lowlands. This study attempts to shed some light on the conduct and efficiency of pastoral and agro-pastoral milk marketing system for their potential use in policy formulation. Previous studies suggest that, particularly, camel milk production and marketing information and its contribution to the pastoralists in eastern Ethiopia have been inadequate (e.g., see Yohannes et al., 2009).This study, therefore, attempts to bridge this information gap. The rest part of the article is organized as follows. The next section presents data collection and methodological issues. Results and discussion are presented in section three, and conclusions and policy recommendations are provided in the last section. Sources of Data and Sampling Techniques This section presents the research methods used in collecting and analyzing data from pastoral and agropastoral households in the study area. The field study was conducted during January-March 2010. Data collection focused on household heads, key informants, rapid market appraisal and focus group discussions. Different sources were used to collect secondary data. The selected districts and Peasant Associations (PAs) were selected as they were considered the milk-shed due to their potential for both cow and camel milk production and marketing. Two-stage stratified random sampling was employed to select the sample households. The target population was first stratified into pastoralists and agro-pastoralists based on whether they were also engaged in crop production. The stratification of sample households was based on milk production type, including only cow milk, only camel milk or both cow milk and camel milk producers. The stratification is needed because the sample household milk production type is heterogeneous in the milk-shed which makes the sample selection of household difficult to select by simple random sample method. Based on this stratification, 47, 53 and 40 households were randomly selected from the three categories, respectively, using probability proportional to sample size sampling technique. A total sample size of 140 comprised of 64 pastoralists and 76agro-pastoralists were randomly selected for interview. In addition to these, samples were taken from rural assemblers, wholesalers and retailers. Milk traders were sampled from five markets: Gursum, Babile, Harar, Dire Dawa and Jijjiga. These markets were the recipients of the produce from the selected milk producing areas. As the number of cow milk and camel milk wholesalers and rural assemblers at each stage were very few, all of them were interviewed. Selection of the retailers in each market was made based on the size of the markets after accounting for the number of retailers. Retailers were selected randomly proportional to each market with consideration of a number of retailers. Brief Overview of the Study Area Methods of Data Analysis The study was conducted in the area extending from Gursum to Babile in the east Hararghe Zone of Oromia Region, Ethiopia, along the main road to Jijjiga having an area of 967.3 Km2 and 3022.2 km2, respectively. Gursum and Babile districts are characterized by warm lowlands lying between 1,200m to 2,950m and 950 to 2000m above sea level, respectively. The areas have good potential for livestock production, which is mainly commenced by pastoral and agro-pastoral households. districts’ livestock population comprises of 125,996cattle, 23,160 sheep and 10,936 camel (East Hararghe profile, 2009).Three major local languages are spoken in the area: Afaan Oromo, Somali and Amharic. Majority of the people in the study area speak Afaan Oromo. To identify major cow and camel milk marketing channels, the role and linkages of marketing agents, the Structural Conduct and Performance (S-C-P) framework and the commodity approaches were applied. In agricultural marketing studies, market structural characteristics are used as a basis for classification of three categories of market: competitive, oligopolistic and monopolistic. According to Scott (1995),four salient aspects of market structure could be identified: degree of seller concentration, degree of buyer concentration, degree of product differentiation, and the condition of entry to the market. Market concentration is defined as the number and size of sellers and buyers in the market (Scott, 1995). The METHODOLOGY Demissie et al. 208 greater the degree of market concentration, the greater the possibility of non-competitive behavior in the market will be. To measure the degree of concentration, a few techniques, including Concentration Ratio (C), Hirschman Herfindahl Index (HHI) and Gini-Coeficient could be used. For this study the concentration ratio is implemented as other methods are limited in their application for imposing additional restrictions. The Concentration Ration (C) is defined as Here, it is also better to introduce the idea of producer’s GMM p ) which is the portion of the price gross margin ( paid by consumer that belongs to the producer.Net NMM p ) who acts as marketing margin of producer ( marketing middle men is also computed as: GMM p r C S i2 , i 1,2,3, . . , r i 1 S th Where, i is percentage share of the i firm, and r is the number of firms considered to calculate the ratio. Kohls and Uhl (1985) suggested that as a ruleof thumb a four large enterprises’ concentration ration of 50 percent or more is an indication of a strong oligopoly, 33-50 percent is a weak oligopoly, and less than that 33 indicates concentrated industry. Bain (1968) contends that a barrier to entry is simply any advantage held by existing firms over those that might potentially produce in a given market. Potential entry barriers would be investigated based on demand conditions, product differentiation, absolute unit-cost advantages, legal and institutional factors, economies of scale, capital requirement and technological factors. Market conduct defines the conditions which make possible competitive or exploitative relationships between sellers and buyers. Competitive forces are directed by market forces. Exploitative relationship is done via unfair price-setting practices including collusive, predatory, or exclusionary. According to Cremer and Jense (1982), market performance refers to the reflection of the impact of structure and conduct on product price, cost, volume and quantity of output. For instance, if the market structure for a given product resembles monopoly or strong oligopoly rather than pure competition, then one can expect the market to perform inefficiently. Market researchers use two major measures of market performance this are net return and marketing margin. Net return per middleman for milk marketing is calculated by subtracting fixed and variable cost from gross return and it verifies the existence of above average profit to middlemen. Marketing margin is one of the commonly used measures of the performance of a marketing system. It is defined as the difference between the price the consumers pay and the price the producers receive. Computing the total gross marketing margin (TGMM) is always related to the final price or the price paid by the end consumer, expressed in percentage (Mendoza, 1995). TGMM Pc Pp PC 100 where TGMM=total marketing margin; price; Pc =producer price Pc =consumer Pc MGM 100 Pc 1 where MGM is marketing gross margin Another parameter to analyze marketing margin is the producers’ share, which is the ratio of producers’ price to consumers’ price (retail). The producers’ share can be expressed as: Ps Px MM 1 Pr Pr where Ps producers’ share; Px producers’ price of Pr consumers’ product and by-products; price of product and by-products; and MM= marketing margin RESULTS AND DISCUSSION In this section, descriptive results on camel and cow milk marketing, especially on marketing channels, and the role and linkage of marketing agents, as well as results of the analysis of costs and margins for key marketing channels in Gursum and Babile milk-shed are presented. In the study area cow butter is used for household consumption and as a cosmetic for female, while milk was used as a source of food and income. Cow milk is sold mainly in fresh (raw) form and a small portion (approximately 10%) of sales is in the form of sour milk or butter. Households who produce camel milk tended to sell liquid milk without processing it into other dairy derivatives because traditionally cheese and butter are not processed from camel milk in large amount as in the case of cow milk. However, in the study area pastoralists and agro-pastoral produce small amount of butter from camel milk by mixing it with cow milk or sheep milk which is not common in other places. Sample Characteristics \Livestock rearing is the most dominant livelihood activities, with some crop production in the agro-pastoral 2 area. Respondents indicated that they own more camels than cows. The number of dairy cows and camels for the sample households in the milk-shed was 1,237 and 519 Tropical Livestock Unit (TLU), respectively. The survey result showed that the average milking days per lactation period in the study areas was 232 days Glob. J. Agric. Econ. Ext. Rural Deve. 209 Table1: Socio-economic characteristics of cow milk market participants and non-participants Variables Mean(Std) Participants Non-participants Age of household head (years) 41(12.02) 41(12.76) Number of household members 7.57(4.05) 10.27(3) Family size in adult equivalent 4.29(2.07) 4.14(1.45) Household members under the age of five 1.47(1.3) 10(4.4) Experience in milk production (years) 19(13.7) 10(4.4) Number of milking cows owned 2.72(2.72) 1.81(1.25) Quantity of cow milk produced per day 6.8(10.15) 3(1.86) Income from non-dairy source per year 4,510.25(7,247) 11,585(10,299) Source: Own survey result, 2010 Note:*, ** and *** represent 10%, 5% and 1% significance levels, respectively for local dairy cows. This result is comparable to Kurtu’s (2003) findings which indicated that an average lactating length of 212 days for local cows in the Harar milk-shed. The average milk yield per day per cow in the study area was estimated to be 2.19 liter. This result is higher than the national milk yield of 1.54 liter/day per cow (CSA, 2008). For camels the average milk yield per day was 4.8 litres. Moreover, total milk production in the study area for camel and cow per day was 1,720 litres, and 543 litres respectively or 12,042 litres and 3,803 litres of milk per month. The average milk yield per lactation per head was 1,391 liters for camel and 512 litres for cow. The indigenous cow breeds, although generally considered as low milk producers, are the major source of milk in the study area, and there is no exotic cross breeds in the herds surveyed. The share of milk sold for camel milk producer households and cow milk producer households was about 78% and 57%, respectively. The share of camel milk producers was high due to their large milk production and more market-oriented production objective by pastoralists and agro-pastoralists. The share of cow milk producers’ market participation was found to be small in terms of quantity, which may be due to less production of the indigenous breed cow and less demand of cow milk as compared to camel milk by traders in the study area. The mean milk production per day per dairy households in the milk-shed during the survey period was found to be 6.31 for cow milk producers and 18.49 for camel milk producers, which is three times greater than that of cow milk producers. For the sample pastoralist and agro-pastoralist dairying was found to hold 78% and 83.31% of annual income value of Gursum and Babile, respectively. This result confirms that, milk is a cash product for the sample dairy households and it is most important source of livelihood. Milk Market Participants and Non-participants The survey indicates that 98.9% and 87.4% of sample camel and cow milk producer households respectively were milk market participants during the survey period, whereas the remaining 1.1% and 12.64% of camel and cow milk producer households were non-participants at the time of the survey. Table 1 shows mean comparison t-value -0.085 2.115** 0.88 -2.13** -2.13** -1.081 -1.238 2.624** of the two groups of households. The t-test statistics for milk producer households with household members under five years of age shows that milk market participants and non-participants were significantly different at less than 5% probability level. This indicates that households with more number of under-five children had low market participation than households with older members. This shows pastoralists and agro-pastoralists give more priority for children’s milk consumption before supplying to the market. The average experience in cow milk production of market participants and non-participants was 18.9 and 10 years, respectively, and this difference is statistically significant at 5% level. This suggests that pastoralists and agro-pastoralists with more experience in milk production are more likely to supply more milk to the market than the less experienced households as experience matters for proper milk handling, especially for unprocessed, raw milk, a result also similar Woldemichail’s (2008) finding. The independent sample t-test shows that there is statistically significant difference (<5%) in the mean value of financial income from non-dairy sources between participating and non-participating sample milk producers. The non-participant sample milk producers had about 2.5 times higher non-dairy financial income than participating sample dairy households. This indicates that households who have fewer source of income from non-dairy source could sell more milk to earn money from the sale of milk, as perhaps milk is their only source of income. Access to Public Service Provision of adequate services for the forgotten pastoral/agro-pastoral communities enhances the communities’ socio-economic development in general and the well-being of individuals in particular. However, as the study shows the provisions of public services such as access to livestock extension, credit, road and market information is generally very weak in the study area. Despite the county’s extensive investment in promoting extension services, the survey shows that only about 21% and 19% of the total sample respondents from Gursum and Babile districts received dairy extension Demissie et al. 210 Figure 1: Camel milk marketing channel study about 82% of the total sample households had milk market information on supply, demand and price before they sold their milk from unorganized market information systems such as milk traders, personal observation and friends. Milk being a perishable commodity, good access to market is of paramount importance. Some 27% of the sample respondents had to travel more than 20 km to reach the nearest district market, more so for respondents from Gursum district. Milk Traders’ Social and Intellectual Capital Source: Own Survey Result, 2010 Figure 2: Collection centers by rural assemblers at Bekeka/Qorre and Erare Gudda Peasant Associations to transport milk to Jijjiga and Harar In this study 46 milk traders and owners of five hotels and restaurants were interviewed. Among 46 milk traders some 12% were engaged in only cow milk trade, 37% in only camel milk trade and 51% were engaged in both camel and cow milk trade. Average milk trading experience, in years, was found to be about 11 years. Female traders accounted for 94.2% of the sample households, dominating both camel and cow milk trade in all market centers. However, traders at wholesale level were found to be male and were only engaged in camel milk trade. As to the source of working capital, majority of the traders respond as they used their own capital from the time they began milk trade at the time of survey. Of the total interviewed traders, only 31% of milk traders used credit from relatives and friends to run their milk trading business, while the other67% had equity fund. All respondents reported that that there was no formal credit source for milk traders in the study area. Milk Marketing Channels, Participants, Their Roles and Linkages services, respectively. In addition, milk producers’ contact with development agents was not adequate. Rapid market assessment results also show that some development agents did not have the time to offer technical advice as they were involved in other nonrelated activities. The source of extension service for milk producers in the districts were government agents and NGOs such as Meschen für Meschen. The survey showed that 0.7% and 5% of the sample milk producing households in Gursum and Babile districts had access to credit, respectively. About 41% of the sample milk producing households in Gursum and 52% in Babile were in need of credit from the total sample households. Studies show that market information is more perishable than the commodity itself as timely market information is vital for business success. According to this Different camel and cow milk market participants were identified in the exchange functions between producers and the final consumers. These include producers (pastoralists and agro-pastoralists), rural assemblers, retailers, commission agents, wholesalers, hotels and restaurants and consumers for camel milk marketing, and producers, rural assemblers, retailers, hotels and restaurants and consumers for cow milk market. A marketing chain may link both formal and informal agents. The survey showed that milk in the study area was found to be marketed only through informal marketing channels. Furthermore, dairy marketing chains prevailing in the milk-shed were found to be comprised of various camel milk and cow milk marketing channels. The camel and cow milk markets showed a little difference in their market channel. The camel milk markets had longer route as there was the participation of wholesalers unlike the cow milk market channels. The actual marketing channels of camel and cow milk was more complicated. However, the main marketing channels of camel and cow milk market in terms of quantity flow in 2010 was as shown in figure 1 and 2. Glob. J. Agric. Econ. Ext. Rural Deve. 211 40.8% Camel milk producers 100% (1,483.87 litres/day) 46% 12% 10.1% 23.5% 1.9% Hotels and Restaurants Rural Assemblers Commission Agent 78% 100% 100% 22% 18.4%% Retailers Wholesalers 100%% 100% Out of Country Domestic Consumers Most pastoralists sold milk in open collection centers and markets in their vicinities. As Figures 1 and 2 shows, 18.4% and 52.3% of the total camel and cow milk produced, respectively, pass from producers to consumers. The cow milk sold in this channel (producers to consumers) accounted for the largest share than the other channels. On the other hand, 46% and 40.8% of the camel and cow milk, respectively, of the total milk sold comes from pastoralists to rural assemblers at vicinity milk collection centers. The main duty of rural assemblers in the study area was that they accumulate milk from the rural village of pastoralists and agropastoralists for sale to retailers in the regional markets, hotels, restaurants and consumers in urban markets. Milk producers in the study area supply milk in two ways, the first way of supplying milk to market is as a unit of household and the second way is by forming informal type of groups locally called ‘affosha’ and supply milk to one another by grouping themselves up to 10 persons together to market milk by round up to same amount as they were agreed. Cow milk producers 100% (382.15liter/day) 5.5% 1.4 % 20% Hotels and Restaurants Rural Assemblers 67% Retailers 13% 100% 52.3% 100% Domestic consumer Figure 3: Cow milk market channel Source: Own Survey Result, 2010 As Figures 1 and 2 shows, about 10% and 6% of camel and cow milk produced by pastoralists/agro-pastoralists was sold for retailers at rural and urban market, respectively. The lowest share from the total for both camel and cow milk produced went to hotels and restaurants which accounted for 1.9% and 1.4% of the total milk sold. For camel milk commission agents collected about 23.5% of the total milk sold from the pastoralists and agro-pastoralists at the nearest collection centers for wholesalers, who informally exported it to Somali Land. Structure, Conduct and Performance of Cow and Camel Milk Market Market concentration refers to the number and relative size and distribution of buyers and sellers in a market. For an efficient market, there should be sufficient number of buyers and sellers in each market. However, the milk market for the sample milk market was found to be inefficient in general as almost all of the sample milk markets were characterized by a strong oligopoly. The concentration ratios for the four large enterprises (CR4) for Gursum and Babile milk markets were 63.87% for camel and 69.02 for cow milk, and 93.48% for camel and 86.19 for cow milk, respectively. For Harar the CR4 was 66.65% for camel and 51.33% for cow milk; for Dire Dawa it was 73.32 for camel and 77.75 for cow milk; and for Jijjiga it was 45.06% for camel and 75.34% for cow milk. However, the camel milk market in Jijjiga was found to be weakly oligopolistic. For the remaining markets CR4 was found to be 66.65% and 51.33% for Harar, 73.32% and 77.75% for Dire Dawa, 45.06% and 75.34% for Jijjiga camel and cow milk markets, respectively. Of the sample markets Jijjiga was the only weakly oligopolistic market. The reason for this is that there were a number of producers who bring camel milk from nearby rural areas to Jijjiga market. Demissie et al. 212 Table 2. Cow milk market channel and marketing margin Marketing actors Marketing measures Cow milk marketing channels* CH-I CH-II CH-III CH-IV Quantity flow (liter) 199.86 20 31.18 104.45 Producers’ Price/liter 7 4.5 4.5 4.5 Rural assemblers Price/liter 8 7.5 7 Gross margin/liter 3.5 3 2.5 Marketing cost/liter 0.45 0.45 0.45 Net marketing margin/liter 3.05 2.55 2.05 Retailers Price/liter 8 Gross margin/liter 1 Marketing cost/liter 0.1 Net marketing margin/liter 0.9 Hotels and restaurants Price/liter 13 Gross margin/liter 5.5 Marketing cost/liter 0.75 Net marketing margin/liter 4.75 Total gross marketing margin (%) 0 43.75 65.38 43.75 Producers portion (%) 100 56.25 34.61 56.25 Rank of channels by producers’ share 1 3 5 3 Rank of channels by volume (liter) 1 5 3 2 Source: Survey result, 2010; prices are given in Ethiopian Birr CH-V 21.01 6 8 2 0.1 1.9 25 75 2 4 CH-VI 5.35 6.5 13 6.5 0.75 5.75 50 50 4 6 Table 3: Camel milk market channel and marketing margin Marketing cost Marketing measures Camel milk marketing channels* CH-I CH-II CH-III CH-IV CH-V CH-VII CH-VIII Quantity flow (liter) 273.67 68.22 81.87 532.17 150.61 328.84 28.5 Producers’ Price/liter 7 4.5 4.5 4.5 6 5 6 Rural assemblers Price/liter 8 7 6.5 Gross margin/liter 3.5 2.5 2 Marketing cost/liter 0.35 0.35 0.35 Net marketing margin/liter 3.15 2.15 1.65 Retailers Price/liter 8 8 Gross margin/liter 1.5 2 Marketing cost/liter 0.1 0.1 Net marketing margin/liter 1.4 1.9 Wholesalers Price/liter Gross margin/liter Marketing cost/liter Net marketing margin/liter Hotels and Restaurants Price/liter 12 12 Gross margin/liter 5 6 Marketing cost/liter 0.75 0.75 Net marketing margin/liter 4.25 5.25 Total gross marketing margin (%) 0 43.75 62.5 43.75 25 50 Producers portion (%) 100 56.25 37.5 56.25 75 50 Rank of channels by producers’ share 1 3 5 3 2 4 Rank of channels by volume (liter) 3 6 5 1 4 2 7 Source: Survey result, 2010; prices are given in Ethiopian Birr; CH stands for Channel, CH-I stands for Producers to Consumers, CH-II stands for Producers to Rural assemblers to Consumers, CH-III stands for Producers to Rural assembles to Hotels and restaurants to Consumer, CH-IV stands for Producers to Rural assembles to Retailers to Consumers, CH-V stands for Producers to Retailers to Consumers, CH-VII stands for Producers to Commission agents to Wholesalers to Out of Country, CH-III stands for Produces to Hotels and restaurants to Consumers. The most important factors considered by sample milk producers in their decision as to whom to sell were proximity to a market center which had greater influence (57% of the respondents) followed by price of milk (43% of the respondents). The structure of the markets indicates that licensing and formal education did not hinder entry into milk market, as there was no need of licensing to start camel milk and most of the traders (56.9%) were illiterate in the sample markets. However, business experience, clan relationship, risk and capital were important barriers to enter into the milk market. There was no organized standardization and grading system in purchasing and selling of milk. However, locally, milk traders can differentiate quality by testing the milk. And the marketing system for milk was predominantly traditional and fragmented, and characterized by adulteration, poor quality, weak seasonal demand and low price. It was also found that although livestock husbandry played important role both in economic and socio-cultural tradition, there were no commercial farms, value addition at primary level and agro-processing industries in the study area. As a result, the current income generating capacity of dairy was not encouraging and the share of final price received by producers was apparently small. The producers’ share of the consumers’ price was found to be the highest along channel-I, channel-II and channel-IV that was 100%, 75% and 56.27%, respectively for both cow and camel milk (see Tables 2 and 3 below for more). Glob. J. Agric. Econ. Ext. Rural Deve. 213 Note: CH stands for Channel; CH-I stands for Producers to Consumer, CH-II stands for Producers to Rural assemblers to Consumer, CH-III stands for Producers to Rural assemblers to Hotels and restaurants to Consumers, CH-IV stands for Producers to Rural assemblers to Retailers to Consumers, CHV stands for Producers Consumers, CH-VI stands for Producers to Retailers to Consumers. CONCLUSIONS AND POLICY IMPLICATIONS The results of this study suggest the following policy implications for the future intervention strategies in camel and cow milk production and marketing. One of the constraints to dairy marketing in the study area is inadequate horizontal integration among the rural producers and lack of vertical integration among rural producers, rural assemblers, retailers, wholesalers and consumers. This missing vertical and horizontal linkage can be enhanced through institutional arrangement, such as dairy cooperatives and traders’ unions among the milk producers and traders, as cooperatives and trade unions are more likely than individual agents both in overcoming information asymmetry and in attaining competitive edge by forming a strategic alliance in the milk market chain. The development of these milk producer cooperatives and traders unions could also allow the development of persistent and horizontal network relationship rather than the existing spot market relation, which would enable milk marketing agents to develop higher level of trust and interdependence which would facilitate development of contractual agreements and business to business relationships in the milk marketing chain. As most of the milk traders in the study area are females, improving the milk trading practice through vertical and horizontal linkage would empower the female milk traders to enhance their capacity and productivity. Collecting and transporting camel and cow milk from the distant agro-pastoralist and pastoralist production sites to the transformation unit or consumption zone is a very challenging task to the milk producers and traders exacerbated by poor transportation, roads and telecommunication services. To improve the situation, government should increase its efforts to develop appropriate dairy policy, investment in infrastructure and special support to the dairy subsector in pastoral and agro-pastoral areas. It was also found that the indigenous cow breeds were the only sources of milk in the study area. Therefore, the government and other pastoral and agro-pastoral development partners should support introduction and adoption of highyielding cross-bred cows in the region in order to enhance dairy productivity and market participation of the pastoralists and agro-pastoralists. In the study area milk marketing system was predominantly traditional and fragmented due to lack of proper milk standardization, grading, inspection and licensing. It was also characterized by adulteration, poor quality, weak seasonal demand and low price. Hence government intervention in terms of adult education and training, extension services, licensing and inspection of competing milk traders and producers is required to ensure achievement of a minimum hygiene and quality standards in the production and marketing of milk in the region. The seasonal surplus and shortage in milk production and the mismatch between seasonal production and demand also require the development of processing facilities that would enable production of storable dairy products, such as milk powders, or hard cheese. Dairy processing would add value, increase shelf life of the product and profitability of the enterprise, and enhance food security in the pastoralist and agro-pastoral areas. Acknowledgements The authors are greatly indebted to the Italian contribution to the Education Sector Development Program (ESDP)-Postgraduate Program (PGP) Haramaya University. REFERENCES Ayele Solomon, Assegid Workalemahu, Tabbar MA and Belachew Hurissa, 2003. Livestock marketing in Ethiopia. A review of structure, performance and development initiatives. Socio-economics and Policy research Working paper 52. ILRI (International Livestock Research Institute). Nairobi, Kenya. 35pp. nd Bain, J. S., 1968. 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