SNNPR TVT Institute

DAIRY VALUE CHAIN ANALYSIS: THE CASE OF

SOUTH ARI WOREDA, SOUTH OMO ZONE,
SOUTHERN ETHIOPIA

November, 2021
Arbaminch, Ethiopia
SOUTHERN NATIONS NATIONALITIES AND PEOPLE REGION
TECHNOICAL AND VOCATIONAL TRAINING INSTITUTE

DAIRY VALUE CHAIN ANALYSIS: THE CASE OF SOUTH ARI

WOREDA, SOUTH OMO ZONE, SOUTHERN ETHIOPIA

November, 2021
Arbaminch, Ethiopia
Contents
List of Tables ............................................................................................................................................... iii
LIST OF FIGURES ..................................................................................................................................... iv
ACKNOWLEDGEMENT ............................................................................................................................ v
ABBREVIATION........................................................................................................................................ vi
ABSTRACT................................................................................................................................................ vii
1. INTRODUCTION .................................................................................................................................... 1
1.1. Background of the Study ................................................................................................................... 1
1.2. Statement of the Problem ................................................................................................................... 2
1.3. Objectives .......................................................................................................................................... 3
1.3.1. General Objectives ...................................................................................................................... 3
1.3.1. Specific Objectives ..................................................................................................................... 3
1. To examine the role of main actors in the existing dairy value chain in the area. ............................ 3
2. To draw the existing (AS-IS) dairy value chain map in the study area. ........................................... 3
3. To identify the constraints in the existing (AS-IS) dairy value chain. .............................................. 3
4. To identify the bench mark for dairy production, processing and marketing. .................................. 3
5. To select an appropriate technologies to solve the identified constraints. ........................................ 3
1.4. Significance of the Study ................................................................................................................... 3
2. LITERATURE REVIEW ......................................................................................................................... 4
2.1. Dairy value chain in Ethiopia ......................................................................................................... 4
2.2. General Over View of Dairy Production ....................................................................................... 4
2.3. Dairy and Dairy Product marketing ................................................................................................... 5
2.4. Evidences on Dairy Value Chain .................................................................................................... 7
2.5. Dairy value chain in Kenya Description as a reference ...................................................................... 8
2.6. Challenges and constraints of dairy value chain in Ethiopia ..................................................... 10
3. RESEARCH METHODOLOGY ............................................................................................................ 11
3.1. Description of the study area ........................................................................................................... 11
3.2. Sampling methods ............................................................................................................................ 12
3.3. Data Types and Sources ................................................................................................................... 13
3.4. Method of Data Collection............................................................................................................... 13

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 3.5. Data Analysis Methods .................................................................................................................... 14
3.6. Survey team ..................................................................................................................................... 14
3.7. Value chain selection criteria ........................................................................................................... 14
4. RESULT AND DISCUSSIONS ............................................................................................................. 18
4.1. The role of main actors in existing dairy value chain ...................................................................... 18
4.2. Dairy cattle production and marketing............................................................................................. 23
4.3. Mapping of AS-IS and TO-BE Dairy Value Chain ......................................................................... 28
4.3.1. The Existing (AS-IS) Dairy value chain mapping .................................................................... 28
4.3.2. Bench Mark selection criteria ................................................................................................... 28
4.3.3. TO-BE Dairy value chain mapping .......................................................................................... 30
4.4. Analysis of AS-IS and TO-BE Dairy Value Chain.......................................................................... 31
4.4.1. Dairy Value chain analysis of existing practice (AS-IS) .......................................................... 31
4.5. Comparative analysis of dairy value chain AS-IS Vs TO-BE ......................................................... 35
4.6. Identification of Gaps/Constraints ................................................................................................... 36
4.7. Prioritizing of the Constraints .......................................................................................................... 37
5. Conclusion and Recommendations ......................................................................................................... 40
6. References ........................................................................................................................................... 42
7. APPENDIX ......................................................................................................................................... 47

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List of Tables

Table 1. Sampled farmers ........................................................................................................................ 13

Table 2. Sample size of trader .................................................................................................................. 13
Table 3. Field of specialization and Educational level of survey team ................................................. 14
Table 4. Value chain selection comparison ............................................................................................. 15
Table 5. Descriptive result ........................................................................................................................ 20
Table 6. Descriptive result ........................................................................................................................ 21
Table 7. Countries milk consumption and cattle production potential................................................ 29
Table 8. Milk quality practices in Kenya adopted by smallholder farmers ........................................ 29
Table 9: Existing Dairy value chain analysis .......................................................................................... 31
Table 10. Comparative analysis of dairy value chain AS-IS Vs TO-BE .............................................. 35
Table 11. Prioritizing the constraints ..................................................................................................... 37
Table 12. Technology identification and categorization ........................................................................ 38
Table 13. Integrating sectors responsible for the Identified Technologies .......................................... 38

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LIST OF FIGURES

Fig. 1. Study area map................................................................................................................................. 12

Fig 2. Interview of dairy producers at HH level........................................................................................... 20
Fig 3. Equipment’s in which dairy products are stored, collected .............................................................. 22
Fig 4. Dairy cattle barn ................................................................................................................................ 25
Fig 5. UMB usage and making, Feed chopper and grinder machine demonstration by JARC .................. 26
Fig 6. Jinka Poly technique college modified improved churner ................................................................ 26
Fig 6. Improved and local churner evaluation and demonstration by JARC ............................................... 27
Fig 7. The Existing (AS-IS) Dairy value chain mapping ................................................................................ 28
Fig 8. TO-BE Dairy value chain mapping ..................................................................................................... 30
Fig 9. TO-BE value chain map ...................................................................................................................... 36

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ACKNOWLEDGEMENT

First of all we would like to thank the Southern Nation Nationalities Peoples Regional State
Technical and Vocational Education Training Institute for the overall support, coordination and
especially Mr Geletu Genemo for intellectual and technical comment and guidance and
unreserved support for team members. during this study .

Secondly, the gratitude goes to Universities, TVTE colleges and South-Ari Woreda for their
facilitation and participation in data collection and report writing.

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ABBREVIATION

ATA Agricultural Transformation Agencies

CSA Central Statistical Authority
FAO Food and Agricultural Organization
GDP Gross Domestic Production
KII Key Informant Interview
L Liter
MoFED Ministry of Finance and Economic Development
MSE Medium and Small-Scale Enterprise
SNNPR- Southern Nation Nationalities Peoples Regional State Technical and
TVETI Vocational Education Training Institute
TVET Technical and Vocational Education Training
USAID- United state Agency for Inernational Development Kenyan e Kenya
KAVES Agricultural Value Chain Enterprises

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ABSTRACT

Value chain analysis is essential to an understanding of markets, their relationships, the

Participation of different actors, and the critical constraints that limit the growth of dairy
production. This study was aimed to analyze the dairy value chain in South-Ari Woreda of south
Omo Zone. The primary data were collected from farmers and traders. In this study the total
sample size was 19(14 farmers and 5 traders). Data was analyzed through descriptive statistics
(frequency, percentage and mean). According to the result, breed type reared by most
smallholder farmers was cross/ improved (mainly Holstein-Friesian and Jersey breeds) which
accounts 71.43%. However, 28.57% was both improved and local breed cows. The average herd
size per household for local breed was decreasing while that of improved breed was increasing.
As a result, there is a change in the commercial orientation of farmers towards milk production.
Average daily milk yield per local breed dairy cow was 2.32L and for improved breed was 7.39L
(morning and evening milk). According to KII, some farmers get up to 15 L per day per cross
breed dairy cow. The identified constraints in dairy production processing and marketing were:
poor forage production and AI service, lack of improved milking, storage and processing
technologies and lack of awareness about diversified dairy product by smallholder farmers, lack
of quality-based payment and poor-quality control and weak linkage between producer and
potential buyer. Based on this constraint proposed technologies were: feed mixer and grinder,
milk handling, market linkage, dairy cooperatives, milk quality test, milking machine, improved
storage, cooler machine, improved churner, cream separator, soft cheese making, hard cheese
making, packaging services, quality assurance services, selling and exporting, trust on product
by consumer and milk powder making. Therefore; development practitioners who were involved
in dairy production should give due attention on the above mentioned constraints to improve the
sub-sector in the study area.
Keywords: value chain, dairy, actors, production, marketing, processing.

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1. INTRODUCTION

1.1. Background of the Study

Ethiopia is fundamentally an agrarian country. Although the transformation towards a more

manufacturing and industrially oriented economy is well underway, the agriculture sector
continues to be the most dominant aspect of the Ethiopian economy, accounting for 46% of
GDP, 73% of employment, and 80% of export earnings. Furthermore, the majority of the
agriculture sector is made up of smallholder farmers who live in less than 2 hectares of land. As
such, transformation of the agriculture sector will be central in Ethiopia’s drive to reach middle-
income country status by 2025 (ATA, 2014).
FAO has a long history of working in smallholder dairy development and has learned that well-
designed dairy development program can improve the incomes and nutrition of poor households,
as well as providing employment in milk processing and marketing (Dugdill et al., 2014).
According to FAO (2007), among the 20 major food and agricultural commodities ranked by
value in 2005, whole fresh cow milk is ranked third. Dairy production is crucial for the daily
food security of rural families throughout the world. They are a vital source of nutrition and
provide important livelihood opportunities for dairy farmers, processors, transporters, retailers
and other dairy value chain actors.

There are differences in the demand for milk between rural and urban populations in Ethiopia. In
rural areas, the demand is mainly for fresh whole milk, and it is partially satisfied by home
production and/or purchased from neighboring producers. The demand for commercially
processed milk in the rural areas is, in contrast, very low (Tamconsult, 2008).

The fluctuation in the demand of milk and other dairy products is in line with the various fasting
periods observed by Orthodox Christians, which covers more than 200 days in a year. Producers
and processors have trouble responding to uneven demand and lower prices during these periods.

The dairy sub-sector accounts for 30-35 percent of the national agricultural output and 40 percent
of agricultural export MoARD (2015). In 2008, the livestock sector as a whole contributed about
12-16 percent of national GDP, 15 percent of export earnings, and 30 percent of agricultural
employment (Tamconsult, 2008). However, more recent data by the Ministry of Agriculture and
Rural Development (MoARD) indicated that livestock sector contributes 45 percent of
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agricultural GDP (MoARD, 2015). Livestock provides a safety net, which helps prevent poor
households from falling into poverty.

Ethiopia has a huge untapped potential for market-oriented development of smallholder dairy
production (Tamconsult, 2008; Geleti, 2014). Its agro-ecology, particularly of the mixed crop-
livestock systems in the Ethiopian highlands, is considered conducive and relatively disease-free
to support crossbred dairy cattle (Ahmed, Ehui and Assefa, 2004).

Dairy production, among the sector of livestock production systems, is a critical issue in Ethiopia
where livestock and its products are important sources of food and income, and dairying has not
been fully exploited and promoted in the country.
Despite its huge numbers, the livestock sub sector in Ethiopia is low in production in general,
and compared to its potential, the direct contribution it makes to the national economy is limited.
Therefore, it’s justifiable to generate scientific information on the current production potential
and market success of this dairy production system in the study area. There is a need, therefore,
to differentiate and describe in detail the different types of dairy production and marketing
systems that exist within the agriculture sector so that research recommendations and technical
assistances are tailored to the specific needs of the farmers in each production systems.
Therefore, this study is initiated to fill information gap on dairy production, processing and
marketing analysis in the South-Ari Woreda, South Omo Zone.

1.2. Statement of the Problem

Ethiopia has a leading livestock population in Africa and the sector play a vital role in the overall
development of the country’s Economy (CSA, 2007). Yet, the existing income generating
capacity of livestock and livestock products as compared to its immense potential in the country
has not been exploited.
Dairy production is crucial in as milk and milk product is important source of food and income.
Despite the huge potential, dairy production has not fully exploited and promoted in the country.
A number factors such as use of traditional technologies, limited supply of inputs, inadequate
extension services, and poor marketing infrastructures, market information and limited credit
services have contributed to un-exploitation of dairy potential (Berhanu etal.,2007).

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Therefore, identifying technological options on the dairy value chain and ensuring the resilience
of dairy farmers to rapidly changing market is a key policy issues.

1.3. Objectives

1.3.1. General Objectives

The overall objective of this study was to identify and assess the dairy production system,
processing and marketing; and to set the appropriate technology packages in order to enhance the
production and productivity of dairy farm in the study area.

1.3.1. Specific Objectives

1. To examine the role of main actors in the existing dairy value chain in the area.

2. To draw the existing (AS-IS) dairy value chain map in the study area.

3. To identify the constraints in the existing (AS-IS) dairy value chain.

4. To identify the bench mark for dairy production, processing and marketing.

5. To select an appropriate technologies to solve the identified constraints.

1.4. Significance of the Study

The study was used to provide information on dairy value chain, including chain actors and their
linkage, dairy product marketing channel, opportunities and constraints to intervention of dairy
value chain in the area. This information will help Producers, Traders, marketing Agents,
Consumers and others who need information for different purpose. Also governmental and non-
governmental organizations that engaged in the development of dairy value chain sub-sectors
will be benefited from the result of this study.
1.5. Scope of the Study

The South-Ari Woreda has high potential of dairy production, marketing, and consumption but
there is no ample information about the dairy value chain. Availing crucial information is
believed to help, policy makers, development practitioners and researchers use the information
generated for intervention purpose or make informed decisions. However, in the study Woreda
there were no studies conducted in the issues of dairy value chain. To fill this information gap,
this study aims to analyze the dairy value chain in the South-Ari Woreda of South Omo Zone.

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2. LITERATURE REVIEW

2.1. Dairy value chain in Ethiopia

Value chain is an innovation that enhances or improves an existing product or introduces new
products or new product uses (Fleming, 2005). The major ones include: actors along the chain
and their functions and linkages among themselves, governance mechanisms for the chain and
roles of actors e.g. power relations and principal drivers of the chain functions, impact of
upgrading products, services and processes within the chain and distribution of benefits among
actors within the chain (Kaplinsky, 2000; Kaplinsky and Morris, 2001; Rich et al., 2008).
The core assumption behind ‘pro-poor’ value chain interventions is that vulnerable upstream
agents (such as smallholder farmers) can be ‘pulled’ into specific markets, and therefore
successfully integrated into economic dynamics to which they were hitherto excluded, or, at best,
only participated under very unfavorable conditions. Practitioners aim to accomplish this
through: building and enhancing linkages between the ‘middle’ of the value chain (processors,
traders, exporters and farmers’ organizations) and the market; strengthening the relationship
between the same ‘middle’ of the value chain and smallholder farmers, and strengthening the
supply capacity (ability to produce increased volumes of goods or services with particular
attributes) to ensure that these goods and services are produced at a lower cost and in line with
market requirements, increasing overall competitiveness (SNV,2012).
Dairy value chain development comprises extension, input supply (feed, bull services, and
veterinary services) milk production, dairy processing and milk and milk products marketing
(Tilahun, et al, 2012).

2.2. General Over View of Dairy Production

Ethiopia has the largest livestock population in Africa, with 65 million cattle, 40 million sheep,
51 million goats, 8 million camels and 49 million chickens in 2020 (CSA, 2020a). The Ethiopian
livestock population is almost entirely composed of indigenous animals. Recent estimates
showed that 97.8%, 1.9%, and 0.3% of cattle are indigenous, hybrid, and exotic breeds,
respectively (CSA, 2020a).

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Livestock is a major source of animal protein, power for crop cultivation, means of
transportation, export commodities, manure for farmland and household energy, security in times
of crop failure, and means of wealth accumulation.
The livestock production system is predominantly extensive, with indigenous breeds and low-
input/lowoutput husbandry practices. The productivity of this sector is constrained by several
factors, including poor genetics, low reproductive performance, poor quality and varying
seasonal availability of feed, high disease incidence and parasite challenges, and low
accessibility to services and inputs (Getachew, 2010).

Demand for dairy products has grown steadily and continues to grow, particularly in the urban
centers of developing countries (Dugdill et al., 2014).
Kristjanson et al., (2014) have argued that, even though two-thirds of the world’s poor livestock
keepers are rural women, limited research has been conducted in recent years on their roles in
livestock keeping and the opportunities livestock-related interventions could offer them. Some
published literature is available on gender and livestock ownership; for example, livestock has
been described as an asset that women can sometimes acquire or control more easily than land or
other physical or financial assets (Rubin, 2010), although the relative informality of livestock
property rights can be disadvantageous to women when their ownership of animals is challenged.
It is also more common for women to own livestock jointly with men than to have sole
ownership of them, according to recent surveys in eight countries (Johnson et al., 2016).
However, income from livestock can be advantageous to women even if they do not solely own
the animals; participation in a dairy value chain programme in Bangladesh, for example,
increased the value of assets jointly owned by women and men, and gave women a wider range
of options in saving or accessing credit (Quisumbing et al., 2013). However, the study in
Hammer woreda of south omo zone shows that, Milking of cows mainly performed by male this
activity is influenced by their local culture which is female did not engaged in cow milking
(Buzayehu A and Denbela H, 2020).

2.3. Dairy and Dairy Product marketing

In Ethiopia, fresh milk, butter, fermented or soured whole milk (ergo), cottage cheese (ayib), and
buttermilk (arera) are both formally and informally marketed (Gezu and Zelalem, 2018). The
informal milk marketing system is dominant, accounting for 95% (Anteneh et al., 2010) of

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marketing in the country, and producers directly sell their products to consumers or to unlicensed
traders or retailers. Neither operational licenses or quality checks are used in the informal system
(Yilma et al., 2011). The formal marketing system prevails in peri-urban and urban areas; milk is
collected from producers by cooperatives and private collection and processing plants, which
channel the products to consumers, caterers, supermarkets, and retailers (Tegegne et 20 al., 2013;
Anteneh et al., 2010). Under the formal system, the quality of the milk is tested for acidity and
density on delivery (Yilma et al., 2011). In some urban areas where milk collecting cooperatives
or milk processing plants are absent, such as Bako and Nekemte towns of Oromia in western
Ethiopia, the marketing system is informal (Geleti et al., 2014a). In pastoral and agro-pastoral
areas of eastern Ethiopia, milk from both cows and camels is sold in raw form through the
informal marketing system (Demissie et al., 2014). In this area, cow milk is processed to butter,
and sale of soured milk and butter account for around 10% of the total milk market, while camel
milk processing to other dairy products is uncommon (Demissie et al., 2014). Besides raw milk,
soured milk is also marketed in pastoralist areas like Borana in Oromia region. Milk and other
dairy products generally are marketed in towns and marketplaces.
Actors in the milk marketing system are producers, cooperatives, local assemblers, wholesalers,
retailers, and consumers. The type of actors and market channels between producers and final
consumers vary from place to place and depend on the type of livestock production systems. In
urban areas, producers sell their products directly to consumers or cooperatives or caterers (e.g.,
cafés, restaurants). In rural areas, producers sell their products to cooperatives or assemblers who
then market to wholesalers, who sell to retailers that bring the dairy products to the end users
(Geleti et al., 2014a; Tegegne et al., 2013; Anteneh et al., 2010;). Similar actors are present in
eastern pastoral areas, although the existence of cooperatives was not reported from either the
southern or the eastern pastoral areas (Demissie et al., 2014).

The dairy sector is seen as an important high-value growth sector in the process of agricultural
and economic transformation that, moreover, has the potential to provide good income
opportunities for the poor (Cunningham, 2009; Gulati et al., 2007). Hence, understanding
changes in the dairy sector is important given the likely high poverty alleviation, as well as
nutritional, impacts growth in the sector might foster (Hoddinott et. al., 2015; Sadler K, Catley,
2019). Despite its importance, however, it is not clear how any transformation in the dairy value
chain in developing countries is unfolding.

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2.4. Evidences on Dairy Value Chain

In rural areas, consumption of milk and milk products is heavily influenced by livestock
ownership, but in the urban areas, in particular, the principal determinants of consumption levels
are income and consumption behaviors. There has been growth in demand resulting from a
rapidly growing population, urbanization, change in lifestyle and consumption behaviors, and
some increase in per capita income (Tamconsult, 2008).

According to a study conducted by the Agricultural Growth Programme-Livestock Market

Development (AGP-LMDP, 2013), various factors depress demand for dairy products. Many
middle- and low-income consumers cited in the study stated that the price of milk was increasing
rapidly and that they were finding it increasingly difficult to purchase milk and milk products.
Approximately 92 percent of the cafeterias/hotels and over 91 percent of consumers covered in
the AGP-LMDP survey stated that the very high price of dairy products is a major challenge.

Ethiopia produces approximately 3.2 billion liters per year from 10.5 million milking cows. The
farm-level value of the milk is an estimated 16 billion ETB per year (MOFED 2011; AGP-
LMDP, 2013). The Ethiopian dairy production and market systems face severe constraints. The
average milk production per cow is 1.5 liters per day, well below international benchmarks
(CSA, 2012). Poor genetics, insufficient access to proper animal feed and poor management
practices all contribute to the low productivity levels. Similarly, dairy producers and downstream
actors in the value chains face many challenges in getting milk to market. For the most part, milk
collection, chilling and transport are not well organized and there are few economies of scale.
Transaction costs are high and up 20-35% of milk is spoiled (Feleke et al, 2010).

As is common in other African countries (e.g., Kenya and Uganda), dairy products in Ethiopia
are channeled to consumers through both formal and informal dairy marketing systems
(Mohammed et.al, 2004). Until 1991, the formal market of cold chain, pasteurized milk was
exclusively dominated by the Dairy development Enterprises) which supplied 12 percent of the
total fresh milk in the Addis Ababa area (Holloway et al. 2000). The informal (traditional)
market has remained dominant in Ethiopia. The traditional processing and trade of dairy
products, especially traditional soured butter, dominate the Ethiopian dairy sector and only 5

7
percent is marketed as liquid milk due to underdevelopment of infrastructures in rural areas
(Redda, 2001).
According to study conducted by (Buzayehu and Denbela, 2020), at Hammer Woreda Feed
resource base and feeding dairy cow and the livestock production depends predominately on
natural pasture and range forages as basal diet and some pastoral communities were fed their
animals with crop residues that obtained from sorghum and maize stover became increase its
importance as livestock feed as annual rainfall increases. The most important feed resources
available to livestock, comprises of native grasses, browses and crop aftermath to a lesser extent
(in agro-pastoral areas). Grasses are by far, the most important source of feed for livestock and
other herbivores in the study area.
As the authors indicated that, producers have been followed on communal or private natural
grazing and browsing, and cut-and-carry system during animal feeding systems. The report also
indicated that they have no any practice of supplementing their livestock with agro industrial by
product like a concentrate and improved forage species. However, they indicated that they have
already a practice of supplementing new born kids, calves and Sick animal with locally available
range forage like acacia pod and different tree leaves as supplementary source especially during
the dry seasons (Buzayehu and Denbela, 2020).
The study in Hammer woreda of south omo zone further revealed that, traditional hand milking
is the only type of milking practiced in the study area. The interviewed households used different
materials for milking, storage and processing. All of the respondents reported using “Docha” for
milking, while “Dolla” and “Kill” used for storage and kill for milk churning and “Shorka” for
marketing milk and milk products. The pastoralists in the study area have been doing a
conventional milk processing practices at the household level in order to produce butter,
skimmed milk, yoghurt and “Ayib” (Buzayehu and Denbela, 2020).

2.5. Dairy value chain in Kenya Description as a reference

According to USAID-KAVES (2014), the dairy value chain comprises many players, from
farmers who are the primary producers to consumers who are at the end of the value chain. The
Kenya dairy value chain is either formal or informal, depending on whether the milk undergoes
processing (pasteurization) before sale or not. The number of actors involved varies depending
on the level of the value chain. A higher level of integration may be witnessed during milk

8
collection. Milk collectors are informal traders who collect milk from farms and use motorcycles
to transport it to bulking or cooling centres. The other level of integration occurs where products
from the formal value chain are traded in the informal value chain and vice versa. However,
some steps in both value chains may be the same. For instance, milk destined for formal
processing may be transported from the farm to bulking centres in plastic containers (a practice
common in the informal value chain) rather than in the recommended aluminium cans. The dairy
value chains in urban, peri-urban and rural systems differ in several other ways. For example,
milk produced in rural farms passes through a number of channels such as collection centres,
cooling centres, dairy co-operatives and processors while milk from urban (USAID-KAVES,
2014).

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2.6. Challenges and constraints of dairy value chain in Ethiopia

The dairy sub-sector is currently facing a number of problems that have persisted for decades.
Productivity of the dairy herd is low with an average lactation period of 180 – 210 days (CSA,
2008). Producers in the rural areas lack access to markets and extension services which reduces
the ability of smallholder producers to be competitive. Feed production and distribution is not
coordinated. Only 0.15% of rural livestock holders are involved in an on-farm production of
improved forages like alfalfa and Napier grass (Tefera, 2010); the use of industrial by-products
like oil cake, bran, and brewery residue is negligible (0.8%) (Tefera, 2010). Moreover, market-
orientation of the production systems and the possibility of exporting Ethiopian dairy products
are limited by high transaction costs despite low costs of production (Ahmed et al. 2004).

Development of a vertically integrated and coordinated milk value chain is thus an important
option to reduce operational and transaction costs to meet consumers’ demand and to encourage
partnerships along the chain (Costales et al. 2006). There is a serious concern, however, that
smallholder agricultural producers are often excluded from participation in value chain since
they usually lack access to credit, make limited investment in their human capital (including
skills and entrepreneurship training), and are isolated by physical distance from the market
(Mendoza and Thelen, 2008).

The structure and performance of livestock and its products including dairy products marketing
both for domestic consumption and for export is generally perceived poor in Ethiopia (Ayele et
al. 2003) due to:
Underdeveloped and lack of market-oriented production,
Lack of adequate information on livestock resources,
Inadequate permanent trade routes
Facilities like feeds, water, holding land ,

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3. RESEARCH METHODOLOGY

3.1. Description of the study area

The study was conducted at South Ari Woreda of South Omo Zone southern Ethiopia. It is one
of the 10 Woredas in South Omo Zone with an area of 1,220 km 2 and is located at 50.67'-60.19'
N & 360.30'-360.73'E and has a human population of 219,708. The population density of the
woreda is 144.4 persons per km 2. The woreda is bordering with Semen Ari and Weba-Ari
woreda in north, Mago national park in South, Salamago woreda in west, Malle woreda in east
and Baka-Dawul/ woreda in South East. There are 33 kebeles in the woreda. The altitude of the
woreda ranges between 500m a.s.l and 3000 m a.s.l. The traditional agro ecologies Dega, woina-
dega and kola Covers 30, 65 and 5 percent respectively of the total area. The woreda has a rain
fall pattern of bimodal type / Belg = February – April and Meher = July – September /. The mean
annual rainfall ranges between 601- 1600 mm. The mean annual temperature ranges between 10-
10 c and greater than 27.50 c. The woreda has an animal resource with an estimate of about
202,018 cattle, 108,167 sheep, 52,160 goats, 14,113 equines, 117,519 chickens and more than
15,000 bee family. Maize, sorghum, barley, wheat, teff and coffee are the major crops grown in
the area. Regarding the land use, the proportion of cultivated land, grazing land, forest land,
cultivable land, non - cultivable land and others is 17, 15.08, 22.43, 8.3, 15.36 and 21.81 percent
respectively. The Ari ethnic group is the only one in the woreda with mixed /crop- livestock/
farming system (SOFED, 2020).

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Fig. 1. Study area map

3.2. Sampling methods

In this study a purposive multistage sampling technique was employed. In the first phase South-
Ari Woreda was selected purposively due to its potential in dairy production.
Secondly, out of 33 Kebeles found in South-Ari Woreda two Kebeles (Gazer and Metser) were
selected purposively due to their potential in dairy production.
The lists of potential households who have at least one lactating cow were identified and
obtained from Kebele administrations. Accordingly, all potential actors were included in this
study. The number of sample producers/ farmers and traders (collector and retailer) as shown
below in Table 1and 2. The total sample size for dairy producer was 14 respondent 7 from each
kebele.

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Table 1. Sampled farmers

No Sampled Kebeles Sample producer

1 Gazer 7
2 Metser 7
3 Total 14
Sources: Kebele administrations
To collect data from Trader (Local collectors and retailer) two kebeles from Jinka town were
used.
Table 2. Sample size of trader

No Type of trading Number of sample

1 Collectors 2
2 Retailers 3
Total 5
Source: own design (2021)

3.3. Data Types and Sources

In this study, both primary and secondary data were used. The primary data were collected by
using questionnaire from the value chain actors, starting from dairy producers up to the retailers.
The secondary data were also reviewed from published and unpublished materials.

3.4. Method of Data Collection

For this study, both questionnaire and KII were used. The questionnaire was designed for both
producers and for traders/distributors.

The structure of the questionnaire was designed as both open ended and close ended. The KII
was held with local leaders, DAs and expert. This discussion was used to supplement, to increase
the reliability and validity of the questionnaire response.

13
3.5. Data Analysis Methods

Descriptive statistics (frequency, percent and mean) were used for the socio-economic and
demographic characteristics of the respondents, amount of commodity flow through each
channel of the selected dairy marketing.

3.6. Survey team

The survey team is composed of experts from different institution and their educational
background is seen prior to the team formation process.

Accordingly every team member’s field of specialization and Educational level is list in the
table form as follows.

Table 3. Field of specialization and Educational level of survey team

Name Educational Educational Institutional

background qualification affiliation
1 Mr. Agidew Abebe Rural Development MSc. Arba Minch
and Agricultural University
Extension
2 Ms. Antu Kabeto Leather Engineering BSc. SNNPR TVETI
3 Mr. Tekalegn Basa Chemical Engineering BSc. Arba Minch Poly
(Food Engineering) Technic and satellite
institute
4 Mr. Abebe Alemayehu Agronomy MSc. Jinka University
5 Mr. Mekete Girma Animal beading and MSc. Jinka Institute of
Genetics Agricultural Research

3.7. Value chain selection criteria

The dairy Production was selected to undertake simple value chain analysis due to the following
reasons:

 Size of Sub-sector (potential)

14
 Employment (creation of job opportunity for smallholder farmers and youths)

 GDP Share: an Economic development of a country is the total sum of GDP shares for
every product/subsector. A product that has a greater GDP share in an economy is more
likely to create jobs and alleviate poverty. A selected value chain should be those
products/subsectors with a relatively higher share of national GDP
 Market share: If a product is not competitive in quality and price on the market to
satisfy customer requirements it no longer exists in the market. So the value chain we are
in a position to develop should have a sustainable and significant market share.
 Share of export: Shares of the product/subsector from the country`s total export of
goods and services.
 Growth potential: The mathematical probability that a business will become larger.
 Market potential: The estimated total sales revenue of all suppliers of a product in a
market during a certain period, for both domestic and export scenario.
 Factor Condition (human, material, knowledge, capital, and infrastructure)

Table 4. Value chain selection comparison

No Comparison points for the Dairy Meat Hide and Poultry

product type production production skin production

5 4 3 2 1 5 4 3 2 1 5 4 3 2 1 5 4 3 2 1
1 Size of Sub-sector X X X X
2 Employment X X X X
For countries like Ethiopia,
unemployment is a critical
problem. The selected value
chain will create a
considerable amount of job
opportunities and absorb
unemployed labor force. Thus,
beyond supplying of quality
products a value chain
expected to reduce
unemployment.
3 GDP Share X X X X
An Economic development of
a country is the total sum of

15
 GDP shares for every
product/subsector. A product
that has a greater GDP share in
an economy is more likely to
create jobs and alleviate
poverty. A selected value chain
should be those
products/subsectors with a
relatively higher share of
national GDP
4 Market Share X X X X
If a product is not competitive
in quality and price on the
market to satisfy customer
requirements it no longer
exists in the market. So the
value chain we are in a
position to develop should
have a sustainable and
significant market share.
5 Share of Export XX X X
Shares of the product/subsector
from the country`s total export
of goods and services.
6 Growth Potential X X X X
The mathematical probability
that a business will become
larger.
7 Market Potential X X X X
The estimated total sales
revenue of all suppliers of a
product in a market during a
certain period, for both
domestic and export scenario.
8. Factor Condition (human, X X X X
material, knowledge, capital,
infrastructure)

16
 Other condition factors related
with human resources, the
accessibility of the materials,
knowledge imposed, amount
of capital and infrastructure in
producing the product and
services should be considered
in selection of value chain
development.

9. Product Diversification X X X X
Enterprise is expanding
opportunities through
additional market potential of
an existing product. Achieved
by entering into
additional markets and/or prici
ng strategies.
10. Potential impact to MSE X X X X
Promotes the establishment of
MSEs by creating jobs, and
strengthening the linkages with
large industries
11. Women Empowerment X X X X
Women's empowerment,
referring to
the empowerment of women in
our present society, has
become a significant topic of
discussion in regards to
development. Equal rights for

17
 men and women as a basic
human right is given great
considerations. The value
chain that we are going to
select should consider gender
equal opportunity

Total rating 48 38 27 45

 5=Very High, 4=High, 3=Moderate, 2=Low, 1=Very Low

4. RESULT AND DISCUSSIONS

4.1. The role of main actors in existing dairy value chain

The main actors in dairy and its products market include: smallholder producers, collector,
retailer, hotels/cafeteria and individual consumers.

1. Smallholder Dairy producers

The dairy producers in the study area is mainly comprises smallholder farmers. In general,
smallholder farmers in dairy farming in the study area are characterized as follows:

18
The breed type reared by most smallholder farmers was cross/ improved (mainly Holstein-
Friesian and Jersey breeds) which accounts 71.43%. However, 28.57% was both improved and
local breed cows. According to the KII results, the average herd size per household for local
breeds is decreasing while that of improved breeds is increasing. As a result, there is a change in
the commercial orientation of farmers towards milk production.

Average daily milk yield per local breed dairy cow is 2.32L; for improved breeds it is 7.39L
(morning and evening milk). According to KII, some farmers get up to 15 L per day per cross
breed dairy cow.

The total of 483.5L per day (morning and evening) produced by 14 sampled household.
However, the proportion of milk marketed by dairy producers was 82.5% (399L). The remaining
17.5% (84.5L) of the produced milk used for household consumption.

The feeding regime of the study area is fully dominated by semi grazing. The result in table 3
revealed that out of the totally 100% of the household responded that the treatment services for
dairy cow provided by experts /vet doctors. Smallholder farmers use different materials for milk
handling, according to the result 100% have used plastic.

19
Fig 2. Interview of dairy producers at HH level

Table 5. Descriptive result

Type of variable Category N %

Sex of HH. Male 12 85.71
Female 2 14.29
Education status of HH. Not attended formal education 1 7.14
Primary school 5 35.71
Secondary school 5 35.71
College 3 21.43
Type of breed reared by HH. Local 0 0.00
Cross/ improved 4 28.57
Both 10 71.43
Cattle feeding practices free grazing 0 0.00
Semi-grazing 14 100.00
Treatment services Own 0 0.00
Experts 14 100.00
Milk handling Plastic only 14 100.00
Aluminum only 0 0.00
Both 0 0.00

20
Table 6. Descriptive result

Type of Variable N Minimum Maximum Mean

Age of HH 14 36 60 42.57
Household size 14 5 14 7.35
Land holding 14 0 4 0.73
Livestock holding 14 3 12 5.86
Number of Lactating cow/HH 14 3 12 5.57
Milk Yield/day/Household 14 12 95 34.54
Milk yield/ day/ local breed 14 2 5 2.32
Milk yield /day/ improved breed 14 6 10 7.39
Milk Supplied to market/day/HH 14 9 80 28.5
Total milk produced/day by HHs 483.5L

2. Local Collectors

Collectors are one of the important actors in the dairy value chain. By collecting fresh milk in
their rented collection shops at Jinka town. They collect fresh milk from smallholder milk
producers from Gazer and Metser area. Some of them also collect from their own dairy farm.
They usually use Plastic cane “Jarikan” to transport the milk to Jinka town. In order to detect the
milk quality, they mainly use visual observations for their regular customers.

Daily collecting amount of milk was from 25 to 80 liters. The collected milk was transported to
Jinka and sold to consumers (individual consumers), and also retailers (hotels, restaurants, cafe).

The buying price of milk from farmers was 20 birr/lit from Tolta area, 23 birr/L from Metser and
Gazer. Accordingly the selling price of milk was from 35 to 50 birr range (at Café and
restaurants 50 birr, at collection center 35 birr/L). The values added to fresh milk to sell by the
collectors include yoghurt, Butter and Cheese.

According to collectors (KII), constraints or problems associated with milk production and milk
value addition are;

- Lack of milking machine at the area

21
 - Lack of improved churner
- Transportation problem,
- Lack of improved milk storage and distribution/transportation equipment
- Equipment shortage at producer level, (the collector submit them an equipment)
- Sanitation problem at producer level
- Lack of milk refiner
- Lack of milk testing machine to test its quality (testing is done visually or locally)
- Shortage of grazing land, forage feed
- Lack of concentrate feed (and also no supplier of concentrate feed)
- No grazing land for cattle, also no land for cultivating forage (improved/indigenous)

The major problems associated with dairy marketing are lack of organized collectors and dairy
cooperative. There is no market problem instead there is a shortage of products

There is only one dairy cooperative at woreda level at Metser kebele, but due to lack of support
and lack of feed for their dairy cattle, the cooperatives are not fully functional. Also with the help
of the regional Livestock and fishery they were supported a milk churning machine, but the
machine still not submitted to them (it was at woreda store level).

Fig 3. Equipment’s in which dairy products are stored, coll ected

22
 3. Retailer
Retailers purchase fresh milk from wholesalers and smallholder farmers and supply for
individual consumers. Retailers those live in Jinka town have purchased fresh milk from
smallholder farmers and collectors then sell there for individual consumers.
4. Hotels and Cafeterias

Hotels and Cafeterias at Jinka town directly purchase whole milk (morning and evening milk)
from collectors and retailer based on contractual agreement. According to this finding, the hotels
and cafeterias consider quality parameters such as freshness, adulteration with water, taste,
hygiene and price in their decision to buy liquid milk.

5. Individual Consumers

Individual consumers at Jinka town and also from Gazer and Metser town) directly purchase
fresh milk (morning and evening milk) from smallholder producers and retailers. There are four
main dairy products consumed by individual consumers in the study area: fresh milk, yogurt,
butter (edible and cosmetic) and Skimmed milk. Smallholder dairy producers are still very
important supplier of milk for individual consumers of the study area.

4.2. Dairy cattle production and marketing

According to KII;

Main problems and challenges associated with forage production, breeding, health and dairy
technologies are:

- Lack of new technologies introduced on dairy

- Low milk production of cattle’s due to feed shortage, low breed intervention, knowledge
gap on husbandry practice and low health control intervention.
- Marketing problem (no organized cooperative, no collection centers and price set by the
collectors/traders on producers)

Major problems and challenges associated with milk and milk product value chain are

- Transportation problem (only motor bike and public transport used)

23
 - Milk equipment problem (only plastic materials such as Jerikan, pots and plastic
equipments used for transportation and storing)
- Lack of Improved Milk churner, (local materials such as plastics and pots used for
churning milk)
- Extension gap (knowledge problems) on support of husbandry and breeding.

Major problems associated with dairy marketing

- Lack of organized dairy cooperatives

- Transportation
- Sanitation and quality problem
- Extension gap (lack of trainings on dairy handling)
- Price setting by the collectors
- Low milk production due to low feed availability especially supplementation
- Milk handling and storing and transportation materials problem which results low quality
of milk
- Lack of refrigerator’s

Opportunities and constraints/challenges to increase milk and milk value chain at the area
are;

Opportunities:-

- Huge livestock population

- High demand on milk and milk products
- High interest of dairy cattle producers on the production
- Conducive environment for dairy cattle production

Constraints:-

- Lack of pure dairy breeds

- Lack of feed processing units and forage supply
- Disease of dairy cow especially mastitis
- Lack of new dairy technologies

24
 - Transportation problem
- No dairy cooperatives (collection centers)
- The market is only for restaurants and consumers
- Collectors set Low cost at producers and sell the product with high cost for consumers.
- Extension/knowledge gap (lack of trainings on husbandry practice and management of
dairy cows)

Fig 4. Dairy cattle barn

Disseminated technologies on dairy production

Technologies that were disseminated to communities in the last years on dairy development;

- With Jinka Agricultural Research Center (JARC) different improved forage technologies
(grasses and legumes) were disseminated and evaluated, also forage chopper, UMB usage
and makings were demonstrated at the district,

25
Fig 5. UMB usage and making, Feed chopper and grinder machine demonstration
by JARC

- Jinka poly technique and Jinka University were disseminated forage grass chopper which
are developed and designed by the poly technique.

Technologies that were disseminated to communities in the last years on dairy value chain
development

- Jinka poly technique college developed and redesigned improved milk churner with
different capacity but not disseminated to the district communities

Fig 6. Jinka Poly technique college modified improved churner

- Jinka Agricultural Research Center (JARC) disseminated and evaluated 10 improved

churners to selected households in the district
-

26
Fig 6. Improved and local churner evaluation and demonstration by JARC

27
 4.3. Mapping of AS-IS and TO-BE Dairy Value Chain

4.3.1. The Existing (AS-IS) Dairy value chain mapping

Milk Collection Processing Trading Consumption

production

Local/ cross Milk handling Yoghurt Retailer Individual

Dairy cow consumer
Transportation
Cottage
Feed
cheese
Hotel and
And (ayib)
distribution cafeteria
Veterinary
service
Skimmed
milk
Backyard
key
Management Butter
Main chain
Bull and AI
Services Sub chain

Fig 7. The Existing (AS-IS) Dairy value chain mapping

4.3.2. Bench Mark selection criteria

Bench mark selection is the crucial section in value chain analysis. So many researches have
been studied so far but the impact on the ground is few and in some sectors approach to none.
Even though the reasons for such gaps are many, the one and most reason is the researches
suggested only the problem and do not intervene to the solution. Existing value chain is taken
from the current experience producers or service delivers, whereas bench mark are selected and
adopted from best experience countries. To select the bench mark four parameters were
considered (yield and quality) for this study. Accordingly Kenya has the best potential in terms
of Yield and quality of Milk Production

The table 7 below explain that the amount of milk production is more than Ethiopia this implies
that they can have good trend than Ethiopia by milk production.

28
 In order to increase milk production also what they use during feeding, milking and artificial
insemination (AI) then following this trend we can also increase the amount of milk
proportional to the number of cows what we have.
Table 8. Below shows that smallholder farmers in Kenya in three selected sites have used
different practices to control the quality of milk production.

Table 7. Countries milk consumption and cattle production potential

No Countries Dairy cow no Average milk Yearly milk production in

in million production billion from total lactating
liter/cow/day cow
1 Kenya 12.8(27800) 25 3.5(194.6ሚ)
2 Uganda 11.4(4.2) 12 1.65
3 Tanzania 21 million 22 1.65
4 Rwanda 1.2 million 3.2 185ml
5 Sudan 22.5(38,325) 14 1.3
6 Ethiopia 41.5 (292100) 10 4.6(68mi)
(Addis Abeba)
Source: FAO, 2003.

Table 8. Milk quality practices in Kenya adopted by smallholder farmers

Milk quality control Parameters Laikipia Nakuru Nyandarua

n=211 n=220 n=224
Farmer performs mastitis test 47.4 52.7 50.7
Farmer performs teat disinfection before milking 30.3 21.4 25.3
Farmer performs teat disinfection after milking 33.2 17.3 21.3
Farmer uses treated or treats water used for household 20.9 22.3 23.3
Milkier washes their hand before milking 93.8 89.5 9 96.8
Milker dries udders after washing & before milking 93.8 79.1 96.4
Milker uses milking cream during milking 87.2 79.1 95.9
Milker dries hands before milking 84.4 67.3 84.6
Milking and storage container Aluminum 43.1 46.8 56.1
Milking and storage container Plastic 56.9 53.2 43.9
Milker uses different towels for cleaning and drying each cow 33.6 23.2 34.8
Farmer discards milk from treated cows 4.7 5.0 10.4
General hygienic practices Farmer cleans milk area before 56.9 50.5 46.2
milking
Farmer regularly cleans cow shed 44.1 34.1 23.5
Source:

29
 4.3.3. TO-BE Dairy value chain mapping

Milk Collection Processing Marketing Consumption

production

Pure Dairy Dairy Milk quality Product Milk

cooperative
breed test collection handling
Improved Trust on
Improved Transportation Market
Cream product
Feed linkage
separation
Veterinary Testing milk
Selling and
service quality Improved
exporting
Churning
Good Cooling Soft cheese
Management

Storing Hard cheese

AI

Milk powder key

Feed mixer
and grinder
Product Main chain
Milking packaging Sub chain
machine
Quality
Improved assurance
milk handling

Fig 8. TO-BE Dairy value chain mapping

30
4.4. Analysis of AS-IS and TO-BE Dairy Value Chain

4.4.1. Dairy Value chain analysis of existing practice (AS-IS)

Table 9: Existing Dairy value chain analysis

Main chain Inputs of production

Function Problem
Dairy cow – low milk yield
– Use local and cross breed – Using poor genetic potential breeds
– Breed selection is not based on
– Bull service and AI pedigree and other criteria
– Poor breed improvement
– Poor AI service
– Poor bull service
Training – Continuity problem
– Modular training – No gap based training
– Field level/practical training – More focuses on theory
– Training given is not implemented
Feed – Low commercial available feed/
– Free grazing fodder, mineral premixes, oil seed
– Cutting and carry system cake, molasses
– Banana and Enset steam – Unbalanced ration/not based on
– Atela nutrient requirement of the animals
– Lack of forage development site
– Lack of urea treatment
Veterinary service – no time based treatment
– poor support of expert
– Treatment – in appropriate dosage
– Vaccine – lack drug supply
– lack of skilled experts

Main chain Inputs of production

Function Problem
Back yard management – Very poor sanitation, Sewerage
– housing system
AI – Lack of trained and experienced AI
– genetic improvement service technicians
– Low conception rate
– Lack of nitrogen containers
– Poor quality semen
– Lack improved semen storage
technology
– Lack improved semen handling and

31
 transportation technology
– Knowledge gap on heat detection
and also on AI technology
Main chain inputs of collection

Milk handling -Lack of sanitation

– Distribution -poor quality control
– Storage - lack of improved equipment
– Collection/Transportation - Absence of collection centers
Transportation -lack of improved transportation
– Distribution

Main chain Inputs of processing

Function Problem
Yoghurt – Poor quality
– For market and household consumption – Poor sanitation
– Poor handling/processing equipment
Cottage cheese – Lack of improved cheese maker
– For market and household consumption – Poor quality
– Poor sanitation
– Labor and time consuming
– Undiversified product
Skimmed milk – Traditional churner
– For household consumption – Poor quality
– Poor sanitation
– Lack of cream separator
Butter – Lack of improved churner
– Edible and cosmetics – Poor quality
– Poor sanitation
Main chain in puts for Trading
Retailer – Poor handling (at collection,
– Distribution transportation, processing and
storage)
– Poor quality control
– Poor sanitation
Main chain inputs for consumption
Individual consumer – Poor handling
– Buying from producer and retailer – Poor quality control
– Poor sanitation
Hotels and cafeteria – Poor handling
– Buying from producer and retailer – Poor quality control
– Poor sanitation

32
 4.4.2. Dairy Value chain analysis of the Bench mark practice (TO-BE)

Table 9. Value chain analysis of bench mark practice (TO-BE)

Main chain Inputs of production

Function
Pure dairy breed – High quantity of milk yield

Improved feed (Concentrates and forages) – More palatable

– Increasing milk yield
Veterinary service – Improved veterinary services
– Disease control
– Increased milk yield
Good management (Improved husbandry – Improved house condition
practice) – Good sanitation and ventilation

Main chain Inputs of production

Function
AI (semen with its equipments) – high breeding value bulls source
– Access to improved semen storage
technology
– Low cost (affordable by producers)
– Access to improved semen handling
and transportation technology
Bull service – High conception rate
– No need of trained man power
– High cost on keeping bulls
Feed mixer, chopper and grinder – Access to concentrate feed
– Access to high quality feed
– Access to balanced feed
– Palatable forage feed
Milking machine - Time and labour saving
- Increasing milk quantity
Improved milk handling – Good quality

Main chain Inputs of collection

Function
Dairy cooperatives – Product collection

33
 – Product processing/ value addition
– Product distribution
– Benefit producers
– Better quality handling equipments
Improved transportation – Keeping the freshness of milk
– Creation of place utility
Testing milk quality - Quality control
Cooling – Keeping the freshness of milk
Storing – Creation Time utility
Main chain Inputs of processing
Function
Milk quality test – Quality control
Cream separation – Creation diversified Product
Improved churning – Butter separation
– Time and labor saving
Soft cheese – Diversified product
Hard cheese – Diversified product

Main chain Inputs of processing

Function
Milk powder – Diversified product
Product packaging – Keeping the quality and quantity of
the product
Quality assurance – Licencing
Main chain Inputs of marketing
Function
Product collection – Purchasing and Storage
Market linkage – Market information
– Price determination
Selling and exporting – Creation of place utility
– Product Distribution
– Price making
Main chain inputs for consumption
Purchasing and Milk handling – Keeping quality
Trust on product – Increasing demand

34
 4.5. Comparative analysis of dairy value chain AS-IS Vs TO-BE

Table 10. Comparative analysis of dairy value chain AS-IS Vs TO-BE

Value chain Parameter

Variety/ quantity Quality Cost Time
1. Production AS-IS TO-BE AS-IS TO- AS-IS TO-BE AS-IS TO-BE
BE
1.1. Breed type/cow low High Low High Low High High Low
1.2. Feed Low High Low High Low High High Low
1.3. Feeding Low High Poor Good Low High High Low
1.4. Veterinary Poor Improved High Poor Moderate Moderate Moderate Moderate
services
1.5. Milking Low High Low High Low High Low High
1.6. Milk handling Poor Good Poor Good Low High High Low
2. Collection AS-IS TO-BE AS-IS TO- AS-IS TO-BE AS-IS TO-BE
BE
2.1. Milk handling Poor Good Poor Good Low High High Low
2.2. Transportation Poor Good Poor Good Low High High Low
2.3. Distribution Low High Low High Low High Low High
2.4. Cooling Poor Good Poor Good Low High High Low
3. Processing/Val AS-IS TO-BE AS-IS TO- AS-IS TO-BE AS-IS TO-BE
ue addition BE
3.1. Storage Poor Good Poor Good Low High High Low
3.2. Cooling Poor Good Poor Good Low High High Low
3.3. Cream No High No High No Moderate No Low
separation
3.4. Churning Low High Poor Impro Low High High Low
practice ved
3.5. Cheese making Cottag Hard and Low High Low High High Low
e soft
cheese cheese
4. Marketing AS-IS TO-BE AS-IS TO- AS-IS TO-BE AS-IS TO-BE
BE
4.1. Transportation Low High Poor Good Low High High Low
service
4.2. Distribution/sel Low High Low High Low High High Low
ling
5. Consumption AS-IS TO-BE AS-IS TO- AS-IS TO-BE AS-IS TO-BE
BE
5.1. Purchasing Low High Poor Good Low High High Low
5.2. Handling Low High Poor Good Low High Low High

35
 4.6. Identification of Gaps/Constraints

The following TO-BE value chain map has explained the sub-chain gaps and constraints which were
existed in the AS-IS dairy production practices.

Production Collection Processing Marketing Consumptio

n

Dairy Milk quality Market Purchasing

Pure breed
test linkage Milk
cooperative
s handling
Concentrat Improved Cream Selling and
& forage Trust on
transportati separation exporting
feed product
on
Veterinary Testing milk Improved
`
churning
service quality
Soft cheese
Cooling
Good
key
manageme
Hard cheese
nt Storing Main chain
Feed mixer
and grinder Milk powder Mismanaged approach
Milking Product
Gap
machine packaging

Improved Quality
milk assurance
handling

Fig 9. TO-BE value chain map

36
 4.7. Prioritizing of the Constraints

Table 11. Prioritizing the constraints

Rank Gap/constants Describe reason for prioritization

1 Concentrate & Forage No supply of industrial concentrate feeds, lack of improved forage seed
feed (source of supply supply & forage improvement technologies (UMB, urea treatment)
and seed)
2 Lack of feed mixer and Majority of farmers use free grazing and there is no feed processing
grinder and forage development practice in the area
3 Poor Milk handling Majority of the producer, collectors and retailors use plastic jar for
milk handling with poor sanitation
4 Poor Market linkage There was poor market linkage among actors and poor information
flow
5 Absence of Dairy There was no well-established dairy cooperative in the area.
cooperatives
6 Poor Milk Quality test All of the actors use visual observation for quality test rather quality
testing equipment
7 Absence of Milking Producers in the area use hand milking practice
machine
8 Lack of Improved There was poor storage facility for dairy in the area
Storage
9 Lack of Cooler machine There was poor cooling services of dairy products
10 Absence of Improved Farmers use traditional churning system
churner
11 Absence of Cream There were no cream separator in the area but it is very important to
separator diversify the product
12 Lack of knowledge on There is only cottage cheese making practices
Soft cheese making
13 Lack of knowledge on There is only cottage cheese making practices
Hard cheese making
14 Poor Packaging services There is no packaging practice of dairy products in the area
15 Lack of Quality There is no quality assurance practices in the area
assurance services
16 Poor Selling and The dairy product is selling only in Jinka area and there was no
exporting product exported to other areas.
17 Lack of Trust on product Consumers have low trust on the dairy product
by consumer
18 Absence of Milk powder There is no powdered milk product in the area
maker

37
 Table 12. Technology identification and categorization

Rank Gap/constants Techno ware Human Info ware Orga ware

ware
1 Concentrate & Forage feed (source of
supply and seed)
2 Lack of Feed mixer and grinder
3 Poor Milk handling
4 Poor Market linkage
5 Absence of Dairy cooperatives
6 Poor Milk Quality test
7 Absence of Milking machine
8 Lack of Improved Storage
9 Lack of Cooler machine
10 Absence of Improved churner
11 Absence of Cream separator
12 Lack of knowledge Soft cheese
making
13 Lack of knowledge Hard cheese
making
14 Poor Packaging services
15 Lack of Quality assurance services
16 Poor Selling and exporting
17 Lack of Trust on product by consumer
18 Absence of Milk powder maker

Table 13. Integrating sectors responsible for the Identified Technologies

No Technology category Rank Responsible sector

1 Concentrate & Techno, 1st Micro & small enterprise, TVET, Universities,
Forage feed (source info & orga Research centers and Bureau of Livestock and
of supply and seed) ware Fishery Development
nd
2 Feed mixer and Techno 2 TVET, Universities, Research centers and Bureau
grinder (feed ware of Agriculture
processors)
3 Milk handling Human 3rd TVET, Universities, Research centers and Bureau
(milking method, Ware of Agriculture
milk management,
teat management)
4 Market linkage Info. ware 4th Bureau of micro and small enterprise, Bureau of
trade and industry
5 Dairy cooperatives Org. ware 5th Bureau of micro and small enterprise, Bureau of
trade and industry, Cooperative Bureau
6 Milk Quality test Techno 6th Bureau of trade and industry, Bureau of

38
 ware Agriculture
th
7 Milking machine Techno 7 TVET, Universities, Research centers and
ware Microfinance institutions
8 Improved Storage Techno 8th TVET, Universities, Research centers and
ware Microfinance institutions
9 Cooler machine Techno 9th TVET, Universities, Research centers and
ware Microfinance institutions
10 Improved churner Techno 10th TVET, Universities, Research centers and
ware Microfinance institutions
11 Cream separator Techno 11th TVET, Universities, Research centers and
ware Microfinance institutions
12 Soft cheese Human 12th Bureau of Agriculture
making Ware
13 Hard cheese Human 13th Bureau of Agriculture
making Ware
14 Packaging services Techno 14th TVET, Universities, Research centers and
ware Microfinance institutions
15 Quality assurance Info. ware 15th Bureau of trade and industry
services
16 Selling and Info. ware 16th Bureau of trade and industry
exporting
17 Trust on product Human 17th Bureau of trade and industry
by consumer Ware
18 Milk powder Techno 18th Food processing factories, TVET, Universities
making ware and Research centers, Bureau of Agriculture

39
5. Conclusion and Recommendations

The breed type reared by most smallholder farmers in the study area was cross/ improved
(mainly Holstein-Friesian and Jersey breeds) which accounts 71.43%. However, 28.57% was
both improved and local breed cows. The average herd size per household for local breed was
decreasing while that of improved breed was increasing. As a result, there is a change in the
commercial orientation of farmers towards milk production. Average daily milk yield per local
breed dairy cow in the study area was 2.32L; for improved breed was 7.39L (morning and
evening milk). According to KII, some farmers get up to 15 L per day per cross breed dairy cow.
The Ethiopian dairy production and market systems face severe constraints. The average milk
production per cow is 1.5 liters per day, well below international benchmarks.

The identified constraints in dairy production processing and marketing were: poor genetics of
dairy breeds, insufficient access to proper animal feed and poor management practices on dairy
cattle, poor forage production and AI service and lack of awareness about diversified dairy
product by smallholder farmers, lack of quality-based payment and poor-quality control and
weak linkage between producer and potential buyer all contribute to the low productivity levels.

Daily collecting amount of milk was from 25 to 80 liters. The buying price of milk from farmers
was 20 birr/lit from Tolta area, 23 birr/L from Metser and Gazer. Accordingly the selling price of
milk was from 35 to 50 birr range (at Café and restaurants 50 birr, at collection center 35 birr/L).
The values added to fresh milk to sell by the collectors include yoghurt, Butter and Cheese,
According to collectors (KII), constraints or problems associated with milk production and milk
value addition are; Lack of milking machine at the area, lack of improved churner, transportation
problem, lack of improved milk storage and distribution/transportation equipment, equipment
shortage at producer level, Sanitation problem at producer level, lack of milk refiner, lack of
milk testing machine to test its quality (testing is done visually or locally), shortage of grazing
land, forage feed, lack of concentrate feed (and also no supplier of concentrate feed), also no
land for cultivating forage (improved/indigenous) lack of organized dairy cooperatives, Price
setting by the collectors and No refrigerator’s. The major problems associated with dairy
marketing are lack of organized collectors and absence of dairy cooperative.

40
Retailers those live in Jinka town have purchased fresh milk from smallholder farmers and
collectors then sell there for individual consumers. Hotels and Cafeterias at Jinka town directly
purchase whole milk (morning and evening milk) from collectors and retailer based on
contractual agreement.

Individual consumers at Jinka town and also from Gazer and Metser town directly purchase fresh
milk (morning and evening milk) from smallholder producers and retailers. There are four main
dairy products consumed by individual consumers in the study area: fresh milk, yogurt, butter
(edible and cosmetic) and Skimmed milk. Smallholder dairy producers are still very important
supplier of milk for individual consumers of the study area.

To alleviate constraints facing in dairy production and to propose the best bench mark, a number
of related literature reviews have been carried out. As a result, Kenya dairy production value
chain was reviewed and compared with Ethiopia’s AS-IS dairy production value chain.
In order to carry out the value chain analysis, a number of data analysis methods were
implemented. To mention few: mapping the AS-IS value chain, mapping the bench mark value
chain (To Be), comparison of AS-IS with To Be are the major ones. The proposed technologies
were: Feed mixer and grinder, Milk handling and its techniques (milking method, milk
management, teat management), creating market linkage, establishing dairy cooperatives,
adopting milk quality test, introducing small and medium scale milking machine, availing
improved storage materials, enabling the collectors and producers to have a cooler machine,
adopting improved churner, adopting cream separator machine, training on soft and hard cheese
making, adopting packaging services for diversified dairy products, maintaining quality
assurance services, elevating the product to central market selling and exporting, trust on product
by consumer and adopting technology of milk powder making.

Generally, following the analysis result, the study figured out that the bench mark (To Be) has
depicted a lot of gaps/constraints with its possible solutions and the corresponding actors and
stakeholders. Therefore, the development practitioner involved in dairy production should give
due attention on the above mentioned constraints to improve the sub-sector in the study area.

41
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7. APPENDIX

Questions for the Participants/Actors along the Main Chain

I. Questions answered by milk producers

1. Woreda: _______________Kebele: _____________ Date: ___________________
2. Sex of respondent: 1. Male 2.Female
3. Age of respondent:________________
4. Household Size_____________________
5. Education Level:___________________
6. Land Holding size in Hectare:_______________
7. Total Herd size in :________________
8. Have you participated in Dairy production: 1. Yes 2. No
9. What type of dairy breed do you have and their quantity?
A/ exotic______ No_______
B/ cross breed _______No_________
C/ local________ No_________
10. Who supply the feed, veterinary service and improved breed
11. Number of lactating cows:

A. local (product\liter) B. cross breed (product\liter) C. exotic (product\liter)

12. How many liters do you supply daily for the market?
13. For whom you sell the product?

A. cooperatives B. collector C. retailer D. consumers

14. Price per liter--------------------------------

15. What values do you add to the product?

A. yoghurt B. butter C. cheese D. skimmed milk

16. What are constraints and their solution associated with dairy Production, product handling and
value addition ( breed, feed, veterinary service, improved breed)----------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------

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 17. What are constraints and solutions associated with marketing of dairy production?------------------

II. Questions answered by Local Collector/ Retailer

1. Amount of milk collected per day---------------------------------

2. From where do you bring the milk?

a) Producer b) Collector C) Wholesaler D) retailer E) Processor

3. How many liters of milk do you serve for the market? _________________

4. For whom do you serve the milk?

A. cooperatives B. collector C. retailer D. consumer E. hotels and cafeteria

5. Buying price per liter? --------------------------------

6. Selling price per liter? ______________________

7. What values do you add on the product?

A. yoghurt B. butter C. cheese D. skimmed milk

8. What are the opportunities, constraints and their solutions associated with product handling
and value addition?---------------------------------------------------------------------------------------------
-----

9. What are opportunities and constraints associated with marketing of dairy production?

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III. Questions answered by livestock expert

1. What are constraints associated with dairy production? (Feed, production and supply,
improved breed, veterinary services, etc.)

______________________________________________________________________

2. What are the constraints associated with product handling and value addition? (Milk container,
transportation, feed processing, etc.)

______________________________________________________________________

3. What type of technologies are distributed to improve dairy production in the area?

____________________________________________________________________________________

4. What type of technologies are distributed to improve dairy production handling and value addition in
the area? ____________________________________________________________

5. What are the constraints associated with marketing of dairy production? (milk supply, market place,
transportation, price determination ,quality)

__________________________________________________________________________

6. What are the opportunities associated with dairy product handling and value addition?
___________________________________________________________________

7. What are the opportunities associated with marketing of dairy production?

_______________________________________________________

49