ASSESSMENT OF THE ROLE OF CO-OPERATIVES IN SMALL HOLDER DAIRY PRODUCTION AND MARKETING. (THE CASE OF BIFTU BERGA DAIRY COOPERATIVE UNION, OROMIYA NATIONAL REGIONAL STATE, WEST SHOWA ZONE, ETHIOPIA)

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 8 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.