Abstract:
Ethiopiaʼs economy primarily depends on agriculture. The sector is dominantly run by smallholder farmers and contributes to about 50%
of GDP and provides employment for about 83% of the total population. Dairy farming agriculture is considered important for stimulating
growth, economic development, food security and poverty reduction. As a remedy, this study was initiated with the objectives of
determining factors affecting dairy market participation and financial profitability of dairy farmers in Bako Tibe. Data came from the survey
of dairy producing households and from secondary sources such as District Agricultural Office, Bako Agricultural and Mechanization
Research Centres and the like. Maximum likelihood estimation procedure such as logit model was employed in identifying factors affecting
decision to sell dairy products, tobit model was used in investigating factors affecting decision on volume of dairy sales. Total revenue
less total variable costs and OLS were used in examining financial profitability of the dairy farmers. Results show that farm householdʼs
market participation decision is affected by household demographic and socio-economic characteristics and transaction costs represented
by distance to market and urban centers. Volume sale of dairy is affected by intellectual capital, transaction cost represented by distance
to district capital and markets. Financial profitability is affected by distance from market, extension visit, education level of the household
head, number of milking cows owned and family size. The results suggest that production and marketable surplus should be improved
through introduction of improved technologies and adequate marketing infrastructure like roads and transport facilities should be
established between rural and urban areas in the district to support enhanced market participation. With the aim of reducing transactions
cost adequate marketing link should be established between the rural producer and urban consumer through institutional arrangements
such as dairy cooperatives. Relaxing the criteria required in obtaining bank and micro credit and forming a well functioning urban and
rural financial system would enable resource poor farm households to participate in dairy market and improve its supply of dairy products
to the urban consumers.
