| Abstract: | The study investigated the role of co-operatives in smallholder dairy production and marketing taking
Biftu berga dairy cooperative union as the case study. The study was undertaken to determine the
effectiveness of co-operatives in improving production and marketing as well as in minimization of
transaction costs. Both quantitative and qualitative method were used for this study and primary data were
collected from 90 smallholder dairy farmers which was supplemented by information from focused group
discussion with dairy producers, board members of the cooperative and key informants. Results of the
survey indicate that co-operatives play a positive role in production and marketing activities of
smallholder dairy farmers, although certain developments such as provision of support programmes need
to take place in order for them to make a more significant contribution. Co-operative members produce
and sell higher quantities of milk (19.3% higher and 24.5% higher respectively), which is mainly
attributed to provision of technical inputs. Co-operatives also provide farmers with a reliable market,
although price paid is lower compared to that of independent farmers in the same areas. Low income is
compensated by the fact that co-operative members incur lower transaction costs indicated by the lower
transportation costs per unit of output, adequate access to market information through frequent visits of
extension officers and regular training, as well as a lower percentage of losses incurred compared to
independent farmers. Results of the study confirm the hypothesis that co-operative members perform
better and incur lower transaction costs than independent farmers. Results of the regression model indicate
that distance, access to market information, milk output and co-operative participation significantly
influence the quantity of marketable milk, and hence contribute to lower transaction costs incurred. The
results show that co-operative farmers incur lower transaction costs although they sell their milk at a lower
price. Nevertheless, the fixed price effect renders co-operative farmers not susceptible to price fluctuation
risks that independent farmers are faced with because of their volatile prices. The study suggests that there
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is a need for support programmes that will help motivate individual farmers and strengthen co-operatives,
as their contribution to smallholder production and marketing is still marginal. Support programmes
include provision of a supportive policy environment, infrastructure development, access to financial and
credit facilities and improvement of training and extension to provide more extensive dynamic
opportunities to farmers. In terms of further research, the study recommends that a similar study be
undertaken in other areas of the country so that the study is representative of the whole country. In
addition, further research is needed on performance of dairy co-operatives to enable replication of
successful co-operatives in the country which will go a long way in improvement of the dairy industry as a
whole. |
