Determinants of participation decisions and level of participation in farm level milk value addition The case of smallholder dairy farmers in Ethiopia

Abstract

On-farm value addition to farm products is recognized and highly promoted through value
chain approaches for its benefit in terms of improving farm income. Growing demand and
high price for value added milk products, together with the availability of ample livestock
resources, would provide opportunities for smallholder farmers in Ethiopia to diversify their
livelihoods. Nevertheless, their participation in milk value addition is perceived to be
generally low. Apart from farm household characteristics, organizational and institutional
issues influence farmers’ participation decisions and level of participation in-farm level milk
value addition. By analyzing survey data using Heckman two-stage selection model, this
article identified determinants of participation decisions and level of participation in-farm
level milk value addition by smallholder farmers in Ethiopia. The first-stage probit model
estimation results indicate that milk yield, distance from urban centers, household
demography (age and child), livestock extension services, the need to extend shelf life,
consideration of milk products for social factors such as holidays and fasting, and availability
of labor for milk value addition determined household’s decision to add values to milk. The
results also show that most of the factors determining decision of participation in milk value
addition also determined the level of participation.