4.1. Maize value chain actors and their major roles
Actors in the value chain are those who have had a direct or indirect part in the development of the maize value chain. These actors could take part in activities such as input provision, production, marketing, processing, consumption, and support activities, which would have an indirect impact on the final value of the products at different levels of the supply chain. The maize value chain actors identified in this study includes input suppliers, collectors, rural wholesalers, rural retailers, cooperatives, unions, urban retailers, urban wholesalers, processors (Gut industry), millers, consumers, Research institutions Hawassa University Districts' agriculture and natural resource development, non-governmental organizations, transportation service providers, finance institution
Input suppliers
Farmers' ability to increase production and productivity is greatly influenced by the availability of high-quality input at the appropriate time and place. Numerous actors are directly or indirectly involved in the supply of agricultural inputs in the research area at this point in the value chain. The key sources of input supply at the moment are the Sidama elito union, primary cooperatives, and commercial input providers. The aforementioned parties are in charge of giving the farmers in the research region seeds of improved kinds and farming equipment. In the survey, 3.6% of households bought enhanced seed from private sellers while 96.4% utilized improved seed obtained from cooperatives. All of the sample respondents purchased fertilizers (Urea and Dap) from the cooperatives.
Producers
Producers play a key role in both the production and marketing of the surpluses they produce. Mainly they start from input preparation, produce, store, and offer a surplus to the market. All (100%) of the sample's respondents used a hand stick to navigate their maze. The results of a survey showed that producers had a variety of choices for selling their maize output. The respondents said that for the production year 2021/2022, producers sold 40.7%, 25.3%, 17%, 7.7%, 5.5%, and 3.8% to rural wholesalers, urban wholesalers, cooperatives, consumers, rural retailers, and collectors respectively.
Local collectors
These individuals, often referred to as tiny and mobile collectors, visit adjacent rural villages and small marketplaces on foot or by using a mode of transportation to collect maize from local producers while keeping abreast of market prices that are advantageous to them. Survey findings indicate that collectors buy maize from producers to resale for various actors. Urban wholesalers and customers in the Hoko market are mostly served by them. They are the first actor in the study area who connects producers to other active merchants.
Wholesalers
They are the actors in the maize value chain who frequently purchase in greater quantities than the other actors in the marketing system and resale the products to other dealers. During the collection of trader data, two categories of wholesalers—rural and urban—were distinguished. Rural wholesalers were traders working in Kebeles town, namely Melka Desta, Wele Genet, and Odiboko. In Urban wholesalers were traders working in Girja town. In the crop year 2021/2022, smallholder farmers sold 40.7% of the maize they produced to rural wholesalers. Additionally, according to survey results, rural wholesalers delivered 70.5% of their total purchases to urban wholesalers, 13.2% to rural retailers, 6.5% to urban retailers, and 9.8% to processors in the same year. Urban wholesalers, on the other hand, were traders who participated in the district; according to survey data, they delivered 40.9% to urban retailers, 37% to processors, and 22.1% to consumers.
Retailers: Retailers are notorious for having little financial and informational capability, which limits their ability to buy and manage merchandise. Additionally, they are the key players in the market chain who buy and deliver maize to customers. According to the survey's findings, there are two different categories of retailers: rural and urban. Among the 462.37quintals of maize that rural retailers handled, 5.5% came from farmers, 13.2% came from rural wholesalers, and 81.3% came from urban wholesalers. They sold all of their purchases to people in remote areas. Urban retailers bought 40.9% of their quintals from urban wholesalers and 6.5% from rural wholesalers, totaling 1102.44 quintals, of which they sold 100% to consumers (Fig. 2).
Millers
The flour processors in the survey bought all of their maize from urban wholesalers. Maize is converted into flour by flour processors before being sold to final customers, retailers, and wholesalers.
Cooperatives
In the research area, cooperatives are essential for providing farmers with inputs. Additionally, they participate in the harvest-time purchase of agricultural products from farmers. Cooperatives support their member farmers by offering loans throughout the harvest season, acting as a storage facility for output, and 100% of their purchases are delivered to the cooperative union. However, they fall short in terms of timely agricultural input delivery, purchasing of harvested goods, and financial management.
Farmer’s cooperative union
Sidama Elto farmer’s Cooperative union was established in 2004 to facilitate markets for farmers to produce grain and buy grains from member farmers and also to sell bulky quantities to required agency, organizations, and agro-industries. The union found in Hawassa city administration, Sidama regional state of Ethiopia. Among 30 rural districts of the Sidama Region, 15 were grain-producing districts and there are 105 primary cooperatives, and also 21,218 grain-producing farmers. They sold 63% of their purchase to processors (Food Agro industry) and the remaining 37% to food aid
Processor
Processors of the maize are seen as Guts agro-industry PLC is a nutritious food processing company founded in 2005 by two Ethiopian entrepreneurs. Its head office is stated in Addis Ababa, and the manufacturing facilities of the company in Bishofitu town and Sidama Regional State of Hawassa city and it is also located at 213 km far from the study area of Hoko district. Maize for guts agro-industry was the most important crop that is utilized as an industrial input for food processing. The agro-industry currently employed about 152 people out of which about 102 permanent and 50 temporary employees. The major suppliers of maize to the guts agro-industry were cooperative unions and state farms such as Sidama Elto and Anger abaya farmer’s cooperative unions and Hawassa state farms which supply 32,000 quintals of annual maize purchase. Out of which Sidama Elto farmer’s cooperative unions supply 22.7% of annual maize purchases. Then after processing, and inspection of quality done thereby they sold it to food aid recipients such as the World food program (WFP), the Federal disaster prevention commission, Goal Ethiopia and Medic in sans frontiers (MSF).
Consumers
Consumers are the final value chain actors who purchase the product for consumption purposes in different forms. Survey results indicated that retailers were the main suppliers of maize grain to consumers.
Value chain supporting actors
Research institutions (Hawassa Research Center and Hawassa University technology transfer and community research development), districts' agriculture and natural resource development, non-governmental organizations, transportation service providers, coop/union, commercial bank, omo microfinance institution, and Sidama omo microfinance institution were major supportive organizations.
Source: Own computation from survey result, 2022
Commodity flow Information flow Finance flow
4.3. Market channels
To comprehend how commodities move from their origin or producer to the final location or consumer, it is necessary to identify the marketing channels. The fundamental goal of a marketing channel is to improve contact efficiency and close the gap between supply and demand. The cooperatives/unions, producers, rural assemblers, urban wholesalers, rural wholesalers, processors, rural retailers, urban retailers, millers, and consumers were identified as the major actors in the channels by this study.
40.7% of the 4252.75 quintals of maize marketed were bought by rural wholesalers, 17% by cooperatives, 25.3% by urban wholesalers, 5.5% by rural retailers, 3.8% by collectors, and 7.7% by consumers (Fig. 3). 4252.75 quintals of maize were transferred from producers to consumers through twelve different market channels throughout the survey year (2021/2022) in order to get to the final consumers. Each channel has a drastically different amount of maize flown into the market and end users within it. The highest and smallest volumes of the twelve detected maize marketing routes—1208.25 and 37.168 quintals, respectively flowed through channels 13 and 2. The following explanations provide a summary of the primary maize marketing channels:
4.4. Marketing costs and margin analysis
Marketing costs and margin analysis tells about marketing performance in the value chain. In value chain analysis who incur what cost and who get what share from its contribution in the product flow along the value chain creates an important understanding about marketing efficiency in the chain. In this study, smallholder maize producer’s performance was conducted using producers share and other intermediaries’ performance measurement by calculating gross margin along the value chain actors.
4.4.1. Maize production cost
Production costs such as seeds, fertilizers, chemicals, land, labour including land preparation, ploughing weeding, harvesting and shelling were computed. As most of households used their own family labour and land, opportunity costs were used to compute costs of production. Accordingly, Table 2 average cost of maize production for a sample household was 395 ETB/quintal
Table 2
Maize production cost per quintal for farmers in 2021/2022
Production cost of items | Cost per quintal in birr | Percentage share |
Fertilizer | 63 | 15.9 |
Improved seed | 19 | 4.8 |
Land value | 142 | 35.9 |
Labour value | 171 | 43.3 |
Total cost of production | 395 | 100 |
Source: Own survey result, 2022 |
In this study, the major actors in maize value chain were producers, collectors, rural wholesalers, urban wholesalers and retailers, cooperative, union, processor (Gut industry), millers and consumers. Average cost of maize production for sample maize producers was 395 ETB/quintal. When the commodity flows from producers to consumers, actors in the value chain add costs. Maize produced by farmers passed through one actor to another, the actors improved the product quality by sorting, cleaning and creating time utility as well as incur some costs. In the chain, Producers had the highest share of market margin (47%), and profit margin (62.41%). Share of marketing margin of the traders compared to producers; collectors (6%), cooperative (5.3%), union (6.47%), collectors (1.99%), rural wholesalers (3.42%), rural retailers (1.52%), urban wholesalers (4.5%), urban retailers (1.71%), millers (6.47%) and processors (21.49%) whereas; share of profit margin were respectively 62.41%, 5.52%, 7.27%, 3.32%, 3.24%, 1.75%, 4.79%, 2.91% and 7.15% respectively (Table 3)
Table 3
Cost item | Producers | Coop | Union | Collectors | Rural wholesaler | Rural retailers | Urban wholesalers | Urban retailers | Millers | Processor |
Production cost | 395 | - | - | - | - | - | - | - | - | - |
Purchasing price | - | 1640 | 1780 | 1635 | 1645 | 1650 | 1730 | 1845 | 1845 | 1950 |
Marketing cost | | | | | | | | | | |
Storage cost | 0.93 | 1.02 | 1.05 | - | 1.07 | - | 1.10 | - | | |
Telephone | 1.50 | 3.50 | 4 | 1.70 | 3.30 | 1.90 | 3.60 | 2.40 | 3.50 | 5.75 |
Processing cost | - | - | - | - | - | - | - | - | 100 | 400 |
Tax | - | 4.50 | 5.50 | - | 3.60 | | 4.70 | - | 2.75 | 5.75 |
Personal expense | 3.50 | 5.10 | 5.60 | 2.10 | 4.50 | 1.80 | 5.60 | 2.20 | 2.50 | 3.25 |
Loading/unloading | - | 3 | 5 | - | - | - | 3 | - | - | 5 |
Transport | 6 | 0 | - | 7 | 7 | - | - | 5 | - | - |
Package | 2.2 | 2.98 | 3 | 2 | 1.98 | 2.04 | 2 | 1 | 2.3 | 3 |
Commission fee | - | - | - | | 3 | - | 3 | - | - | - |
Daily labor in Warehouse | - | 2 | 3 | - | 2 | - | 3 | - | 2 | 3 |
Total market cost | 14.13 | 32.1 | 27.65 | 12.8 | 26.45 | 5.74 | 26 | 12.8 | 113.05 | 425.75 |
Total cost | 409.13 | 1672.1 | 1807.65 | 1647.8 | 1671.45 | 1655.7 | 1756 | 1857.8 | 1958.0 | 2375.75 |
Total cost share in% | 2.43 | 9.95 | 10.75 | 9.80 | 9.94 | 9.85 | 10.45 | 11.05 | 11.65 | 14.13 |
Selling price | 1632 | 1780 | 1950 | 1687.50 | 1735 | 1790 | 1850 | 1890 | 2015 | 2515 |
Marketing margin | 1237 | 140 | 170 | 52.50 | 90 | 140 | 120 | 45 | 170 | 565 |
% share margin | 47 | 5.3 | 6.47 | 1.99 | 3.42 | 1.52 | 4.5 | 1.71 | 6.47 | 21.49 |
Profit margin | 1222.87 | 107.9 | 142.35 | 65.3 | 63.55 | 34.26 | 94 | 32.2 | 56.95 | 139.25 |
% share profit | 62.41 | 5.52 | 7.27 | 3.32 | 3.24 | 1.75 | 4.79 | 1.64 | 2.91 | 7.15 |
Source: Own survey result, 2022
4.4.2. Marketing margins of maize in different channels
The marketing margins of actors in the maize value chain were computed using the average sales prices of various actors, including producers, collectors, rural wholesalers, rural retailers, urban wholesalers, and urban retailers.
Table 4
Marketing margins of maize in different channels
Maize business type | Average Purchasing Price ETB/Qt | Average selling Price ETB/Qt | Average marketing cost ETB/Qt | Gross margin ETB/Qt |
Cooperative | 1640 | 1780 | 32.1 | 140 |
Union | 1780 | 1950 | 27.65 | 170 |
Collector | 1635 | 1687.50 | 12.8 | 52.50 |
Rural wholesaler | 1645 | 1735 | 26.45 | 90 |
Rural retailer | 1650 | 1690 | 5.74 | 40 |
Urban wholesaler | 1730 | 1850 | 26 | 120 |
Urban retailer | 1845 | 1890 | 12.8 | 45 |
Millers | 1845 | 2015 | 113.05 | 170 |
Processor | 1950 | 2515 | 425.75 | 565 |
Source: Own survey result, 2022 |
According to Table 4, there were differences in the prices paid by customers across the various market channels, with Channels VI and II having the largest and lowest overall gross marketing margins at 35.11% and 3.8% percent, respectively. Of this, 20.2% highest total Gross Marketing Margin (TGMM) added to maize price in the channel when it reached the final consumers by cooperative and union to food aid received 5.88% and 7.59% of TGMM respectively. In other words, the market channels with only one actor between producers and consumers showed low TGMM.
For instance, in channel II only 3.8% of maize price was added when it reached final consumers. This implied that as the market margin becomes wide, the price becomes high for consumers and low for producers. Of all actors, producers have got the highest GMM in channel I when she/he sell direct to consumers but this channel conveys a limited amount of maize marketed and producers have got the lowest GMM in channel VI 64.89% (Table 5).On other hand, net marketing margin was computed from the difference between percentage shares of gross marketing margin and total marketing costs as the percentage of retail prices in the channels. Table 5 showed that 35.89% in channel VI was the highest TNMM and 23.67% minimum NMM was taken in channel II. Of all actors, producers have got highest NMM(74.9%) in channel I when she/he sell direct to consumer and the lowest MM in channel VII were 48.62%. The distribution of NMM among actors in each channel was not showing significant differences and also shows a relatively fair distribution.
For instance, only 3.8% of the price of maize was added when it was sold to consumers in channel II. This suggested that as the market margin widened, prices for consumers would increase while remaining cheap for producers. Of all actors, producers had the maximum gross merchandise margin (GMM) in channel I when they sold directly to consumers, but this channel only advertised a little amount of maize. Producers received the lowest GMM in channel VI, at 64.89% (Table 6). On the other hand, net marketing margin was determined by subtracting the percentage shares of total marketing costs from the percentage of retail prices in the channels. Table 5 revealed that the highest TNMM was found in channel VI at 35.89%, and the lowest NMM was found in channel II at 23.67%. From all actors, producers had the highest NMM (74.9%) in channel I when selling directly to consumers and the lowest MM (48.62%) in channel VII. The distribution of NMM among actors in each channel does not demonstrate a discernible difference and also demonstrates a very even distribution.
Table 5
Marketing margins of maize in different channels
Market margin % | i. | ii. | iii. | iv. | v. | vi. | vii. | viii. | ix. | x. | xi. | xii. | xiii. |
TGMM % | 0.00 | 3.8 | 11.79 | 13.87 | 8.83 | 35.11 | 16.31 | 9.16 | 13.65 | 19.01 | 19 | 19 | 15.01 |
GMMp | 100 | 96.2 | 88.21 | 86.13 | 91.17 | 64.89 | 83.69 | 90.84 | 86.35 | 80.99 | 81 | 81 | 84.99 |
GMMco | - | - | - | - | - | 5.88 | 7.59 | - | - | - | - | - | - |
GMMu | - | - | - | - | - | 6.76 | 8.72 | - | - | - | - | - | - |
GMMrc | - | 3.8 | - | - | - | - | - | - | - | - | 2.75 | - | - |
GMMrw | - | - | 5.57 | 5.45 | - | - | - | 6.09 | 5.45 | - | - | 5.11 | 5.11 |
GMMuw | - | - | 6.22 | 6.22 | - | - | - | - | | 10.82 | 8.06 | - | 5.71 |
GMMrr | - | - | - | - | 8.83 | - | - | 3.07 | - | - | - | - | - |
GMMur | - | - | - | 2.2 | - | - | - | | 8.2 | - | - | - | - |
GMMm | - | - | - | - | - | - | - | - | - | 8.19 | 8.19 | 13.89 | 8.19 |
GMMpr | - | - | - | - | - | 22.47 | - | - | - | - | - | - | - |
TNMM % | 26 | 23.67 | 25.38 | 23.85 | 30.58 | 35.89 | 24.46 | 26.22 | 30.24 | 31.91 | 28.57 | 33.33 | 28.66 |
NMMp | 74.9 | 72.46 | 66.1 | 66.7 | 68.32 | 48.62 | 62.71 | 68.32 | 64.7 | 60.69 | 60.69 | 60.69 | 60.69 |
NMMco | - | - | - | - | - | 4.29 | 5.53 | - | -- | - | - | - | - |
NMMu | - | - | - | - | - | 5.66 | 7.3 | - | - | - | - | - | - |
NMMrc | - | 3.87 | - | - | - | - | - | - | - | - | 3.24 | - | - |
NMMrw | - | - | 3.44 | 3.88 | - | - | - | 3.55 | 3.36 | | | 3.15 | 3.15 |
NMMuw | - | - | 5.08 | 4.97 | 1.91 | - | - | - | - | 4.66 | 4.67 | - | 4.67 |
NMMrr | - | - | - | | | - | - | 1.91 | - | - | - | - | - |
NMMur | - | - | - | 0.69 | - | - | - | -- | 1.70 | - | - | - | - |
NMMm | - | - | - | - | - | - | - | - | -- | 2.83 | 2.83 | 2.83 | 2.83 |
NMMpr | - | - | - | - | - | 5.54 | - | - | - | - | - | - | - |
Source: Own survey result, 2022
4.5. Determinants of Maize market supply
In Table 6, the results of multiple linear regressions show that of the thirteen variables that were hypothesized to have an impact on the supply of maize, seven variables—sex, age, family size, the amount of maize produced, contact frequency with extension agents, net annual income of the household head, and use of credit services—had a significant impact on the supply of maize.
Table 6
OLS results of factors affecting farm-level marketable supply of maize.
Quantity of maize supplied(Quintal) | Coefficient | Std. error | t -value |
Sex of household head | 0.996*** | 0.0049 | 13.61 |
Age of household head | -0. 217** | 0.013 | -1.23 |
Family size of household head | -0.197* | 0.111 | -5.77 |
Educational status of household head | 0.025 | 0.064 | 0.40 |
Maize farming experience | 0.006 | 0.019 | 0.34 |
Land allocated for maize | 0.327 | 0.387 | 0.84 |
Frequency of extension contact | 0.076** | 0.037 | 2.05 |
Maize produced | 0.949*** | 0.028 | 33.53 |
Net annual income of the household | 0.0038* | 0.0002 | 1.75 |
Access to price information | 0.166 | 0.583 | 0.29 |
Use of credit service | 0.871** | 0.410 | 2.12 |
Tropical livestock unit | 0.101 | 0.112 | 0.89 |
Distance to the nearest market | -0.006 | 0.053 | -0.12 |
Constant term | 6.91** | 3.93 | 2.38 |
Number of obs.=182 Prob > 0.000R2 = 89.7 Adjusted R2 = 88.9 |
Source. Own survey result, 2022 ***, ** and * represents significant at 1%, 5% and 10% respectively
Sex of the household head
As anticipated, the household head's sex had a positive and significant impact on the supply of maize at a probability level lower than 1%. The marginal effect result showed that male-headed households were 40.1% more likely to supply the maize market than female-headed households, other things being equal. In a previous study, Dawit (2010) found that in the Tigrayan regions of Alamata and Atsbi- wombat Woreda, the sex of the household head is one of the characteristics that positively affects the marketable supply of chicken.
Age of the household head
As per prior expectation, the age of the household affected negatively the volume of maize market supply at less than a 5% probability level. The result of the coefficient indicated that in ceteris paribus, older farmers were 0.217% less likely to supply maize to the market comparison with younger farmers. This implies that younger people are more enthusiastic to participate in the maize market than older people the finding of the study is in consistence with that of Getahun, et al., 2017 showed that amount of banana supplied to the market decreases as farmer gets older and older.
Family size of household head
This variable had a negative impact on volume of maize marketed and it was significant at 10% significance level. The coefficient result implied, other things remain constant, when the family member increases by one unit in adult equivalent, the volume of maize supplied will decreases by about 0.197 quintal. The negative and significant relationship indicates that households with more number of family members supply less amount of maize to the market than those households with relatively less number of family members because of the increase consumption at home. This finding confirmed by the findings of study by (Girma 2015) who found marketed surplus of Teff to be negatively affected by family. Studies of Abate et al., 2021; Ayantu (2018); and Nugusa (2018) agree with this result.
Frequency of extension contact
The findings showed that, at a 5% level of significance, the frequency of extension contact was positively and substantially related to the amount of maize supplied to the market. The coefficient result showed that, ceteris paribus, the amount of maize supplied to the market rises by 0.076 quintal when the frequency of extension each month increases by one day. This shows that having access to extension services makes technology-related knowledge available, which enhances output and has an impact on the marketable surplus. This is consistent with a prior research by Mohammed et al. (2018), who discovered that the volume of wheat supply was significantly and favorably impacted by the frequency of extension contact.
Maize produced
As expected, this variable had a positive and significant effect on volume of maize marketed at 1% level of significance. The regression coefficient showed that, keeping other things remain constant, as maize produced increase by one unit of quintal, the volume of maize marketed increased by 0.949 quintal. This indicates that the larger amount of the maize produced that households the more would be the volume of maize marketed. The result confirms with Desalegn, 2018); Usman, 2016 and Mohammed et al., 2018.
Net annual income of the household head
The income of the household head was found to be significantly and positively influences maize market supply at 10% significance level. The coefficient result revealed that, keeping another exogenous variable at their mean level, as farmers’ net annual income increases by one ETB the maize market supply increase by 0.0038 quintals. This could be due to the fact that farmers who have additional income would have the chance to buy food for consumption at any time and increase their marketable crops. This result is similar with Ashenafi (2010) who studied about Analysis of Grain Marketing in the Southern Zone of the Tigray Region, Ethiopia. The result indicated that household income positively affected the supply
Use of credit service
At a 5% level of significance, access to finance services had the expected positive and significant impact on the market supply of maize by producers. According to this finding, farmers who have formal finance available to them are more likely to produce maize that is suitable for sale than those who do not. According to the coefficient results, the market supply of farmers increased by 0.87 quintals when they gained access to financial services. This conclusion is consistent with Habtamu's (2015) assertion that households receive credit for the purchase of inputs necessary for potato cultivation, increasing market supply in response to higher output.