The role of agricultural POsin improving quality and reducing transaction costs in the Ethiopian potato chain

Purpose – The current market for agricultural products is creating new challenges and opportunities for (smallholder) producers in many developing countries. Their ability to compete in the market is limited by new constraints related to product quality characteristics and the prevalence of market imperfection. The paper aims to assess the role of seed/ware potato cooperatives with respect to quality improvement, market access, and transaction costs. Research methodology – We draw our conclusion based on an in-depth analysis of five cooperatives found in the central and southern parts of Ethiopia. Findings – the case study result suggests that members of seed potato cooperatives were able to benefit more than members of the ware potato producing cooperatives in terms of receiving technical assistance (related to seed quality), accessing better market opportunities, and reducing transaction costs. This perhaps explains why there are relatively many seed potato coops and almost no ware potato coops in the country where nearly 27,000 primary coops reportedly exists. However, recent trends show that the seed market is also highly constrained by a thin market environment. The private sector’s involvement in the seed market is negligible leaving the sustainability of the market in doubt. It was also shown that the involvement of an international agribusiness firm in the potato sector in some parts of Ethiopia under out growers’ scheme brought better opportunities for potato growers in reducing transactional risks associated to market access. However, that requires a coordinated effort between the agribusiness firm and external parties (NGOs & GOs) with the former focusing on technical assistance and marketing activities and the latter on input provision necessary for potato production