Assessment of Performance and Improving the Role of Dairy Cooperatives in the Milk Value Chain: The Case of Degem District, North Shoa Zone, Ethiopia

The study revealed that there were eight (six formal and two informal) marketing channels that smallholder farmers used as their milk outlets in Degem district. The function of the main actors was producing, trading, bulking, processing, retailing and consuming. 57% of the milk produced in the district was sold through traders, 24% was sold through the collection sites of large milk processors,13% was sold through the collection sites of small milk processors and only few 6% were through the primary dairy cooperative, the main reason for this was that the primary dairy cooperative did not have any cooling facilities and cooling tanks that forced them to collect the milk as early between 4 to 5 AM. The cooperative sells the milk every day to the union that transports the milk to Addis Ababa where the processors are found. The study also shows that 15,390 liter of milk was sold per day from the district. The only customers available having cooling facilities track in the district are traders and the large processors, which transport the milk to their own chilling center soon after collection. The results of the study indicate that all of the members of cooperative small holder milk producers mainly produced between 11-18 (18 during rainy season 11 in the dry from cross breed) liters of milk per cow per day and sell 8.5 -16 liters per cow per day. Testing for milk quality was done at collection point using Organoleptic, Alcohol and Lactometer tests; the milk price was determined by processors and the other actors follow this price. The price of milk is the same for all milk buyers (8.50ETB July, 2014). The majority of the producers 87.5% were not satisfied with the price of milk that was being offered by the buyers. It was noted that 32.5% of the producers were living more than 5 kilometres from the capital town of the Degem district Hambiso the main milk market place, this affected the milk quality, the greater the distance the lower the milk quality. The lack of milk cooling and chilling facilities in the district forces the dairy cooperative and small processors to transport every day to the large processor found in Addis Ababa, which contributes to an insufficient milk collection. But large processors have chilling facilities at the neighbouring Town Shola at Fiche 12 km far and mama at Debre tsige 35 km far from the district milk collection centre. Traders have cooling facilities equipped trucks, which they are using to transport milk to Addis Ababa and sold to both large and small processors.Rural smallholder milk producers, especially non-members of the cooperative are located far from the major urban milk markets. Thus, their main milk outlet is through the informal channels and they are forced to transport the milk by donkey over long distances to sell to traders and milk collectors in Hambiso, the capital town of the Degem district where the collection site was present. It was noted that several factors constrain the milk market environment which includes poor road infrastructure, increasing transport costs, long distances between producers and the milk markets, lack of collective marketing and insufficient coordination among the chain actors. Therefore, forming farmers organisations, and similar forms of collective action are an asset to reduce high transaction costs, increase bargaining power and obtain the necessary information. Improving the road infrastructure and introducing innovation to the existing marketing channels can open up new marketing opportunities for rural smallholder milk producers. Building farmer’s capacity through training and improving coordination among chain actors will improve the milk business environment