Coffee value chain analysis; the case of Gimbo District of kaffa zone, southwest Ethiopia

Abstract

Coffee production is vital to the Ethiopian economy with about one-fourth of the country’s population directly or indirectly deriving their livelihoods from it. Despite its potential capacity for coffee production, the sector in general faces various challenges which in turn affect its value chain actor benefit. This study was aimed at analyzing coffee value chain in Gimbo District of Kaffa Zone SNNPRS with specific objective of identifying coffee value chain actors and their role, identifying factors affecting market supply of coffee and comparing farmers’ performance in conventional and cooperatives chain. Three stage stratifying sampling techniques were used to select small holder farmers. The data were collected from both primary and secondary sources. Primary data were collected from 181 randomly selected farm households, 47 coffee traders, 20 local coffee consumers and 28 local coffee processors. Descriptive statistics, value chain analysis, multiple linear regression and propensity score matching methods were used to analyze the data. Result of value chain analysis indicated that the major coffee value chain actors of the area are; farm input suppliers, small scale and large scale coffee producers, coffee collectors, retailers, local consumers, local coffee processors, coffee suppliers and primary coffee cooperatives. The result of econometric analysis of 2SLS regression shows that education level, membership to coffee cooperative, transport ownership and quantity of coffee produced positively and significantly affected market supply of coffee in the study area. However, distance to the nearest market affected market supply of coffee negatively and significantly. Estimation result of logit model shows that, age of household head, land allotted for coffee and educational level of household head positively and significantly affects producers’ likelihood of being coffee cooperative member. But distance from cooperative office and family size under productive age negatively and significantly affects producer’s likelihood of joining coffee cooperative in the area. Result from computation of average treatment on treated (ATT), indicated that producers who are members of coffee cooperatives on overage supplies between 3.926 and 4.228 quintal of higher coffee than non-members and also they receive more birr which is between 2.203 and 2.228 birr/kg than non-members from sell of coffee. With respect to cost of transaction member producers on average incurs less cost which is between 0.382 and 0.405 birr/kg than non-members. Therefore policy implication drawn from this study aimed at strengthening farmers coffee cooperatives, improving producers’ knowledge through expanding adult education and experience sharing with coffee producers from other areas and improving producers’ productivity through strengthening supportive packages and institutions