11 Value chain unit one.ppt

Bahir Dar University
College of Agriculture and Environmental
Science
Rural Development Management MSc
Programme
Almaz Giziew (PhD)
Gender Directorate Director,
Assistance professor in Rural Development and
Agricultural Extension
Bahir Dar University
E-mail: almazgzw@gmail.com
Mobile: 0913356360

Value Chain Analysis and
Management (Rudm 6033)

Outline
1. Value Chain Analysis: Key Concepts
and Ideas
1.1. Concepts
1.2. Theories of Value Chain
2. Value Chain Study Approaches (Key
issues in value chain analysis)
3. Practical Experience

Lesson objectives
At the end of this unit you should be able to:
 Understand Concepts and Ideas of Value chain analysis
 Identify different Theories of Value Chain
 Describe the different approaches of Value Chain
analysis
 Apply Value chain analysis approaches

5
1. Value Chain Analysis: Key Concepts and Ideas
1.1. Concepts

Actors, value, chain, supply chains and value chains
•Actors are those involved in producing, processing,
trading or consuming a particular agricultural product.
• They include direct actors which are commercially
involved in the chain (producers, traders, retailers,
consumers) and
•indirect actors which provide financial or non-financial
support services, such as bankers and credit agencies,
business service providers, government, researchers and
extensionists.

Value is defined as:
• Value is what makes something desirable!
• Things that make something desirable could be
 price, e.g. cheap or high value.
 Appearance, e.g. looks.
 Experience, e.g. taste.
 Ease of use, e.g. fresh-cut and washed.
 Availability. e.g. year round like Coca . Above all
consumers determine value.
Key Concepts and Ideas (Cont`d)

– Amount a good or service is worth of in the market
– Three types of value
• Form value – associated with the change of the form
of a raw material (production, processing)
• Time value - related with availing at another period
of time produce produced at a period of time
(storage)
• Space value - related with availing at another
location product produced in one location (transport)

Chain: is defined as ‘vertical’ relationships between
buyers and suppliers and the movement of a commodity
from producer to consumer.
This involves an analysis focused on the flows of four key
terms between buyers and suppliers (material
resources, finance, knowledge and information).
A supply chain is a set of linkages between actors
where there are no binding or sought-after formal or
informal relationships, except when the goods, services
and financial agreements are actually transacted.
8

9
• Value chain: A classic definition is that value
chains comprise the full range of activities
required to bring a product or service from
conception, through the different phases of
production – which involve a combination of
physical transformation, inputs by various
service providers, delivery to the final
consumer, and disposal after use (Kaplinsky
and Morris 2002).

10
The value chain concept entails the addition of value as
the product progresses from input suppliers to producers
to consumers.
A value chain, therefore, incorporates productive
transformation and value addition at each stage of the
value chain.
In other words, a value chain can be viewed as a set of
actors and activities, organizations and the rules
governing those activities.
Input
supply
Production Collection Processing
Wholesale
and retailing
Consumpt
ion

11
Value addition results from diverse activities including
bulking, cleaning, grading, packaging, transporting,
storing and processing (Anandajayasekeram and
Berhanu , 2009).
Value addition is simply the act of adding value to a
product, whether you have grown the initial product or
not.

12
Adding value does not necessarily involve altering a
product;
it can be the adoption of new production or handling
methods that increase a farmer’s capacity and reliability
in meeting market demand.
 Value addition activities are essentially meant to add
utilities such as form utility, time utility, place utility,
information utility, among others. total satisfaction received from
consuming goods

13
Value chain Supply chain
1 Value added/ consistency of supply and
quantity
there is no value added
2 Demand driven Supply driven
3 value chains focus more on innovation in
product development and marketing.
while supply chains focus primarily on
reducing costs and attaining operational
excellence
4 Actors are Interdependent (strategic
network)
Independent
5 Actors have intensive communication Actors have limited communication
6 while in the value chain, instead of just
transferring we add certain values to it.
Supply chain consists of series of
activities in which a product or a material
is just transfer from the one point to the
final point.
eg- suppose a supply chain is there
farmers- wholesaler-retailer-consumer
7 while if at each stage, we add some
values to the fruits like grading, sorting
,packaging, cool storing. then this is
called value chain
If the fruits just passes through same
channels without any grading sorting then
it’s a supply chain.
Both supply and value chains need transportation and storage
Market Chain, Value Chain, and Supply Chain

Value Chain Analysis
Attributes ባህሪ Spot-market ዋጋ.ንጥብ Value Chain
Market orientation Supply driven Demand driven
Main orientation Commodity markets Specific markets
Organizational structure Independent Interdependent
Philosophy Self optimization Chain optimization
Information sharing Little or none Extensive & accessible
Primary focus Cost & price Value & quality

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Value chain analysis has its historical origins.
Value chain analysis has emerged since the early
1990s as a novel methodological tool for
understanding the dynamics of economic
globalization and international trade.
Since 1920, deferent theoretical approaches were
developed dealing with issues on value chain research.
For instance, German geographers used the term
“Wirtschaftsformationen” (economic formations) to define
the collaboration between agricultural production and
services that supports it (Stamm, 2004).
1.2. Theories of Value Chain

17
VC
theories
Period Main ideas Proposed
by
The
“filliere”
Concept
mid-
1960’s
Filière means thread, chain
the “Filliere” concept illustrated that a
static module describing the linear flow of
physical input and services in the
production of the final product.
As the “Filliere” concept is a static
module with non changing actors and
national boundaries
 its less functional to analyze the
globalized world economy (Stamm, 2003).
The
French
scholars
The
Porter
Approach
mid
1980’s
The term “value chain” was first used by Porter
(1980).
Porter developed the so called modern value chain
analysis (VCA) as an instrument for identifying the
value of each steep of the production.
focused on actual and potential areas of
competitive advantage for the organization.
an ultimate tool for analyzing the value formed at each stage of the production process.
failure to focus the interconnections and relationships
between vertically grouped actors
Michael
Porter

18
Value chain
theories
Period Main ideas Proposed
by
Global
Commodity
Chains
Approach
mid
1990’s
The term “Global commodity chain
(GCC)” was introduced in the mid 1990’s
(Gereffi, 1999).
A concept that is mainly focusing on the
power relations in the coordination of
dispersed but linked production systems.
boldly pointed governance relationships
between actors in the value chain
G. Gereffi
Global
Production
Networks
Approach
2000
/01
Henderson et al. developed a Global
Production Networks approach in
2000/01.
 Meanwhile pursues with his Global
Production Networks (GPN) a more
comprehensive analysis and understands
his approach as a “direct refinement of
the GCC”.
stresses that all dimensions defined by
Gereffi need to be considered.
Henderson
et al.

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World
Economic
Triangle
2002
Developed the concept of the “world
economic triangle,” where
Actors,
Governance and
Regulation Systems are determining
the scopes of action open to regions in
the global commodity chains.
world economic triangle pointing out
the combination of strong local linkage
within global commodity chains might
bring up grading perspectives for regions
in developing countries and
 thus it’s an approach showing for the
importance of linking vertical (chains)
and horizontal (cluster) integration
Messner
and
Humphrey
A
G R

VCA (Kaplinsky and Morris, 2001)
• Systematically mapping actors, their profit, cost structure, flow of
goods and volume, employment characteristics, destination
(domestic/export)
• Identify governance structures in a value chain: form of
relationships and coordination mechanisms between actors in the
value chain.
• Examine the impact of upgrading within the chain: improvement
in quality, product design, access to new market, diversification,
innovation capability, profits and constraints.
• Identify distribution of benefits of actors in the chain.

VCA
– Could enable to identify the leverage points of
intervention to accommodate the poor in a
commodity value chain.
– Provides the basic understanding needed for
designing and implementing appropriate
development programs and policies to support
smallholders’ market participation.

VCA
• A tool to identify:
– And prioritize constraints in a value chain.
– The underlying policy, institutional, and infrastructural
issues that affect the competitiveness of actors in the
chain and the value chain itself.
– Areas where collaborative bargaining power could
reduce the costs or increase the benefits to smallholders
operating in the chain (through horizontal linkages).

24
2. Value Chain Study Approaches (Key issues in
value chain analysis)
An approach used in value-chain analysis depends on
the research question (Kaplinsky and Morris 2001).
 Accordingly, four aspects of value-chain analysis have
been applied in agriculture:
I. Value chain mapping (Mapping the value chain): a
value-chain analysis systematically maps the actors
participating in the production, distribution, processing,
marketing and consumption of a particular product (or
products).

25
Value Chain Study Approaches cont’d…..
II. Identifying the distribution of benefits of actors in
the chain (Distributional issues):
Through the analysis of margins and profits within the
chain, one can determine who benefits from participation
in the chain and which actors could benefit from
increased support or organization.
Who gains and who loses in value chains?
How is value-added distributed among chain
participants?

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III. Examining the role of upgrading within the chain
(Identify opportunities for upgrading in the value
chain):
Upgrading can involve improvements in quality and
product design that enable producers to gain higher-value
or through diversification in the product lines served.
 An analysis of the upgrading process includes an
assessment of the profitability of actors within the chain as
well as information on constraints that are currently
present.

27
Possible forms of upgrading include:
I. Process upgrading: improving efficiency through
new processes
II. Product upgrading: introducing higher-value
products
III. Functional upgrading: changing the mix of products
or activities within a firm to add value
IV. Chain upgrading: moving into new chains altogether
Excerise 1. supporting by examples

5.4 Value Chain Upgrading Options
Four possible upgrading options:
• Process upgrading
– This means producing the same product more efficiently
– perhaps by using new technologies or management
methods. For example,
• farmers may grow more by switching varieties or applying
fertilizer;
• they may reduce pest attacks and save costs through integrated
pest management rather than spraying;
• they may invest in build new grain bins to improve storage.
• Farmers can also improve their links with other actors in the
chain – for example, they can sign contracts with input suppliers
or processors
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• Product upgrading
– Farmers can improve their product in various ways.
– For example,
• they may plant a new variety that has more desirable
characteristics; or
• they may stop using agrochemicals and apply for
certification so they can sell their produce as “organic”.
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• Functional or intra-chain upgrading –
– Farmers can take on new activities in the chain, either
upstream or downstream, or change the mix of
activities they undertake.
– For example, they may start grading and sorting their
produce;
– they may bulk it to make pick-up more convenient for
buyers; or
– they may process it (drying, milling, etc.) to improve its
value or increase its storage life.
30

• Chain or inter-chain upgrading
– Farmers can also set out on a new value chain.
– They can start growing a new crop, keep a new
species of livestock, or start a new enterprise such as
dairying or agro-tourism.
– They may be completely new to these activities, or
they may transfer their skills and experience from
their existing enterprises.
31

32
IV. Role of governance in the value-chain
(Governance in the value chain):
Governance in a value-chain refers to the structure of
relationships and coordination mechanisms that exist
between actors in the value-chain.
Who decides what is produced (buyer vs. producer
chains)
How the rules of trade are determined?
The nature of relationships between the participants
Coordination mechanisms (contracts, market sales,
etc)

 Clearly, governance in value chains has something to do
with the exercise of control along the chain.
 At any point in the chain, the production process (in its
widest sense, including quality, logistics design, etc.) is
defined by a set of parameters.
 The four key parameters which define what is to be done
are:
• What is to be produced?
– We refer to this as product definition.
33

• How it is to be produced.
– This involves the definition of production processes
such as the technology to be used, quality systems,
labour standards and environmental standards.
• When it is to be produced.
• How much is to be produced.
34

• From the perspective of smallholders/firms participating in
global value chains, we can think of five forms of value chain
governance.
• Market-
– Market governance involves transactions that are
relatively simple, information on product specifications is
easily transmitted, and producers can make products with
minimal input from buyers.
• Modular-
– Modular governance occurs when a product requires the
firms in the chain to undertake complex transactions that
are relatively easy to codify.
35

• Relational
– In this network-style governance pattern, interactions
between buyers and sellers are characterized by the
transfer of information and embedded services
based on
• mutual reliance regulated through reputation, social and
spatial proximity, family and ethnic ties, and the like.
• Captive-
– In these chains, small suppliers are dependent on a
few buyers that often use a great deal of power and
control.
– Such networks are frequently characterized by a
high degree of monitoring and control by the lead
firm.
36

• Hierarchy-
– Hierarchical governance describes chains that are
characterized by vertical integration and managerial
control within a set of lead firms that develops and
manufactures products in-house.
– This usually occurs when product specifications cannot
be codified, products are complex, or highly
competent suppliers cannot be found.
37

38
Practical Experience
Economic analysis of Vegetables Value Chain in Dugda
District, East Shoa, Ethiopia: a gender perspective
Objectives of the study
To determine profit-shares of men and women actors in
vegetable value chain.
To examine vegetable value chain constraints faced by men
and women actors in the chain.
To identify factors influencing participation-decision in
vegetable value chain for both women and men actors.
To investigate factors influencing level of participation of women
and men actors in vegetable value chain.

39
Practical Experience cont’d…
1. Value Chain Operators/ Actors/ And
Supporters
1.1. Value Chain Operators/ Actors/ and their
Functions
The major actors in onion value chain in the study
area is input suppliers, producers, brokers,
wholesalers, exporters, retailers and consumers.
And the functions performed by them are described
in the following tables.
VALUE CHAIN ANALYSIS IN DUGDA DISTRICT

40
Practical Experience
1. Input suppliers:
This segment of the value chain consists of the
actors in the value chain that provides the starting
materials for the proper functioning of the
subsequent onion value chain.
The actors under consideration include:
Insecticide supplier, Herbicide supplier, seed supplier,
fertilize supplier, extension service providers, etc

41
2. Producers:
The next major onion value chain actors following
input suppliers are onion growers.
 They are generally smallholder farmers having
different land size.
The smallholder producers in the Dugda district are
the major suppliers of onion for domestic
consumption for the towns along Meki-Adama-
Modjo- Beshoftu- Addis Ababa .

42
Particularly the smallholder producers of Meki supply
onion to the terminal markets of Adama-Modjo-
Beshoftu-Addis Ababa two ways a year.
 Farmers grow onion mainly for marketing purpose.

43
The different functions carried out by farmers are
briefly described below:
A. Production Process
The onions produced in the study area go through
the following basic operations under nursery
management and activities after transplanting

44
Nursery Management
Seed preparation
Seed bed preparation & planting
Bed covering/Mulching
Grass cover removal
plant protection & Guarding
Fertilization and Weeding
Bed Irrigation
Cultivation/ Land preparation
Transplanting of Seedlings
Crop Management After Transplanting
Plant protection & Guarding
Irrigation
Harvesting
Fertilization and Weeding
Family labor
Family labor & hired labor
The functions and inputs applied in the production process are presented in
Figure 1.

45
B. Post harvest handling
Sorting and grading
Transportation

46
Stage of the
value chain
Actors Role/ function played by the actor
Input
supply
Private input suppliers Input supply ( fertilizer, chemicals and
improved seeds)
Research centers Organization of FREG as seed grower to
facilitate seed supply
Provision of initial basic seeds to seed growers
to make on farm
seed multiplication
Facilitation of farmer-to-farmer informal seed
exchange
Station based seed multiplication for scaling
up
Meki Batu Vegetable & Fruit
Growers
cooperative Union Limited
Provision of agricultural input(seed, fertilizer,
chemical and fuel)
multiplication of improved seeds and
machinery service
Farmers Input supply (via farmer-to-farmer seed
exchange)
Production Farmers
workers
Cultivation of onion
Exchange of knowledge and information with
other farmers
Summary of value chain actors & Their functions

47
Stage of the
value chain
Marketing Farmers Selling onion to consumers, retailer, wholesaler
via broker sometimes to direct to wholesalers at
Meki
Road side
petty retailers
Purchasing onion from wholesaler and retail it to
Consumers
Consumers
Purchasing onion from large/ small retailer and
retail it to consumer
Urban
vegetable
shops
Consumers
Urban
wholesaler
Buy and sell produce in bulk and varies in size
from small, medium to large
Importing of onion from Meki and retail it to
 urban retailers
 Road side petty retailers
 Consumers

Stage of the
value chain
Marketing Rural wholesalers They buy and sell products in bulk or wholesale.
Sometimes, the wholesalers also sell the products for a
commission/ brokers.
In the local village towns who procure onion from with
or without brokers and sell to other wholesalers out of
the district with or with out the brokers
Urban /rural retailer Selling in small quantities
 consumers
 Road side petty retailers
Urban/ rural Brokers
=facilitated the buying and selling activities between
farmers and other marketing agents
= disseminate price and other information to the market
participants and influence onion trade and price
formation mainly in between producers in the district
and wholesalers out of the district such as Mojo, Debre-
Zeit, Adama and Addis Ababa.
Search for products for the trader
Connect the farmers and wholesale traders
48

49
Stage of the
value chain
Marketing
Exporter
Importing of onion from Dugda export to , , ,
Maintain the quality of the product and pack it
􀂃 Deal with export clearance
􀂃 Pay necessary fees for export
􀂃 Export the product and remit the income
Transportation Transporters take the produce to distant markets on vehicle,
hand cart.
Consumption rural dwellers Consumption
Urban
dwellers
Consumption
universities/
colleges,
hospitals
Consumption

50
1.2. Support Service Providers & Their functions
Along with the woreda Bureau of Agriculture and Rural
Development of the district, the lead organizations that provide
agricultural support services in Dugda district are:
Keblele Administration,
District Administration,
District Information,
Ethiopian Quality and Standards Authority,
Meki Batu Vegetable & Fruit Growers cooperative Union
Limited,
NGO'S (Rift valley, IDE, Meki catholic secretariat, EOC,
Integrated women's empowerment programme, SNV),
Dugda District Women's and children's affairs,
SMI,
Oromiya cooperative bank,
Cross Boarder Transporting Companies

51
1.2. Support Service Providers & Their functions
including Ethio-Djibouti Rail Way, Local Transporters,
Melkasa agricultural Research center,
Adami Tulu agricultural Research center
Government market regulators,
Export Marketing Quality inspection service and
export documentation service providers
such as Ministry of Trade, Ministry of Agriculture,
Ethiopian Revenues and Customs Authority and
National Bank of Ethiopia.

52
Summary Support Service Providers & Their functions
Supportive Actors Functions
DAs Training of farmers
Delivery of advisory service to farmers
Preparation of farmers field days
BoARD Provision of advisory service
Provision of training to DAs and farmers
Field supervision
Facilitation and provision of technical
support to farmer cooperatives/union
Keblele
Administration
Community mobilization and awareness
creation
District Administration Facilitation and coaching
District Information Office Documentation and promotion of
activities done on onion to other area
through mobile video show

53
Ethiopian Quality and Standards
Authority
Product standardization and
certification
Governme
nt market
regulators
(Export
Marketing)
Ministry of Trade Provide trading license to
exporters
Ministry of Agriculture Quality, safety and health
certification for export
National Bank of and
Commercial Banks
NBE provides export permits
through commercial banks
and control hard currency
repatriation
Commercial banks facilitate
and provide guarantee to the
exporter payment systems
Ethiopian
Customs and Revenue
Authority
Documentation and clearing

54
Practical Experience cont’d…..
Transport
Service
providers
Cross Boarder Transporting
Companies including Transporting the products to
markets in the neighboring
country or to ports
Local Transporters Transport the products from
farmers plot to local market
centers
Transport the products to the
market places in & other big
towns.
Transport the products from
production to assembly centers
in Dire Dawa or Jijiga
Financial
service
providers
Saving and credit associations
SMI, Banks
Credit services
Developing the financial
capacities of farmers, traders and
exporters

55
Research
centers
Melkasa
agricultural
Research center
Adami Tulu
agricultural
Research center
Development/adaptation of improved onion
varities and production technologies
On farm demonstration of improved onion
technologies
Formation of farmers research and extension
group (FREG)
Delivery of training and advisory service for
SMSs, DAs and FREG farmers
Preparation of filed days /experience share tour
Meki Batu Vegetable & Fruit
Growers cooperative Union
Limited
Market information & linage
Technical trainings and support, credit service,
continuous advisory service, promotion of saving
and credit cooperatives,
Encouragement of social service, regulate world-
wide financial crisis through the participation of
farmers cooperative union and relate agricultural
strategy with mechanized & new technology,
cooling and packing facility provide

56
Practical Experience…..
NGO'S (Rift valley, IDE, Meki
catholic secretariat, EOC,
Integrated women's
empowerment programme,
SNV)
Market information & linage
Technical trainings and support,
credit service, continuous advisory service,
promotion of saving and credit cooperatives,
Save land from renting,
Adult Education for rural women , fund rising
Women's and children's affairs,
Dugda District
Organize, Facilitate and mobilize fund

GOs, Agricultural Research Centres, BoARD, District Women's and
children's affairs, Meki-Batu Vegetable & Fruit Growers cooperative
Union Limited & NGO'S
GOs, Meki-Batu Vegetable & Fruit Growers Cooperative
Union Limited & NGO'S
F
u
n
c
t
i
o
n
s
O
p
e
r
a
t
o
r
s
S
u
p
p
o
r
t
e
r
s
s
Consumer
Trader
Smallholder
farmers
Input Supplier Transporter
Rural dwellers,
urban dwellers,
universities/colleges
hospitals
Exporters, broker, wholesaler,
retailers, vegetable shops, road
side retailers, farmers,
homestead retailers
Vehicle owners,
Vehicle drivers
&Hand cart drivers
Farmer, workers
Importers, Private
Input suppliers,
Research centres,
Union, & Farmers
Inputs
Transport
service
providers
Production Trading (Wholesaling,
Exporting,
Brokerage & retailing)
Transpor
tation
Buying the
product for
consumption
Sorting, Packaging, Grading,
Transporting, buying, selling to
the local market or export
Loading, unloading,
take the produce to
distant markets on
vehicle hand cart
Seedling Preparation, land
preparation, Transplanting
of Seedlings, Guarding &
Plant protection,
Fertilization and Weeding,
Irrigation, & Harvesting.
Supply fertilizer,
chemicals &
improved seeds,
Technical support &
equipment’s.
Consumpti
on
Figure 3: Value Chain Actors, Functions and Support Service Providers (Own Outline)

58
wholesaler2 Exporter
broker1
Producer
Consumer
Retailer1
Producer
Exporter
broker1
Producer
Producer Consumers
Produce
r
Retailer
2
Wholesal
er2
Consuer
broker1 wholesaler2 Consumer
Producer
Producer broker1 large retailer2 Consumer
broker1 Wholesaler
2
retailer
2
r
Producer Consumer
broker1
Producer large
retailer2
wholesaler2
Consumer
small
retailer2
Wholesa
ler1
Produc
er
broke
r1
Wholesa
ler2
retailer
2
Consu
mer
union
Producer
consumer
association Consumer
broker1
Produce
r
broker
2
Wholesale
r2
retailer2 Consum
er
Onion market channel
CH1
CH2
CH3
CH4
CH5
CH6
CH7
CH8
CH9
CH10
CH11
CH12

59
CH1
CH2
CH3
CH4
CH5
CH6
Seed Onion Marketing Channel
Farmer Farmer
Research
center BoARD
Farmer
union Farmer
Farmer
Importer union
Farmer union
Farmer
Farmer
Importer trader

60
Retailer 1
Producer
Consumer
Wholesaler2
Exporter
Consumer
Association
broker
2
large
retailer2
broker 1
Union
Wholesaler
1
Small
retailer2
Map
of
onion
production

61
Map of Seed Onion Marketing Channel
Trader
Union Importer
Farmer
Research center
BoARD
Farmer

62
The value chain analysis is done using a standard
format which shows all costs, losses, margins and
prices along the chain and the share of each actor as
the product moves form production to local traders,
wholesale market, retail market and finally up to
consumer.
Economic analysis of onion value chain

Tomato Value chain actors
Producers Brokers Wholesalers Retailers Consumers
Sales Price (Birr/quintal) 350 4 28 637 872
%Share from Gross marketing margin 40 18 33 27
Gross cost (Birr/quintal) 206.49 3.50 566 704
Gross profit (Birr/quintal) 143.51 424.50 71 168
% of gross profit 17.78 52.60 8.80 20.82
Producers Wholes
alers
Retailers Consumers
Brokers
Onion Value chain actors
Sales Price (Birr/quintal) 310 393 588 7 67
Gross marketing margin% 40 21 33 23
Gross cost (Birr/quintal) 268.92 3.50 541.2 610.10
Gross profit (Birr/quintal) 41.08 389.5 46.8 156.9
% of gross profit 6.48 61.41 7.38 24.74
Producers Wholesal
ers
Retailers Consumers
Brokers
Source: Own survey, 2013. TGMM (complete distribution channel) for both onion and tomato is 60%
Table 5. Marketing margin and profit along actors in the onion and tomato
value chain

Tomato Value chain actors
Sale Price (Birr/quintal) Male 375 437 644 860
Female 285 370 590 873
Gross marketing margin% Male 44
18
32 25
Female 33 37 32
Gross cost (Birr/quintal) Male 213 3.50 581 706
Female 182 444 682
Gross profit /loss (Birr/quintal) Male 162 424.50 63 154
Female 103 146 191
% of gross profit Male 10.9 52.66 2.65 9.29
Female 6.9 6.14 11.53
TGMM (complete value chain in male) = 56% TGMM (complete value chain in female)=67%
producers Wholesa
lers
Retailer
s
Consumer
s
Brokers
Onion Value chain actors
Sale Price (Birr/quintal) Male 314 3 96 592 743
Female 297 364 547 7 69
Gross marketing margin% Male 42
21
33 20
Female 38.62
33.46 28.87
Gross cost (Birr/quintal) Male 271.37 3 .50 544.2 599.73
Female 260.56 510.6 611.60
Gross profit /loss (Birr/quintal) Male 42.63 386.50 47.8 143.27
Female 36.44 36.4 157.40
% of gross profit Male 3.49 61.41 4.43 11.79
Female 2.99 3.37 12.95
Producer Wholes
alers
Retailer
s
Consum
ers
Brokers
TGMM (complete value chain in male) = 58% TGMM (complete value chain in female) = 61.38% Source: Own survey, 2013.
Table 6. Marketing margin and profit along female and male actors in the tomato value chain

65
S.No List of cost type No. kert Cost in birr per ha
(ETB/ha)
1 Seed/seedlings 2400
2 Fertilizer 7200
3 Chemical 30000 1
4 Family labor 4800
5 Hired labor Seed bed preparation 1400
transplanting
Weeding &
digging
15000
Box carrying & harvesting 4000
6 Total labor cost 25200 2
7 Guard's food 2000
8 Guarding , Chemical spreading, cleaning,
watering
2000
9
Traction
power
Sandy loam soil 2400
Clay loam soil
10 Oxen fee 640
11 Electricity 4000
12
Fuel Gas 9520 3
Benzene
13
Transport cost Seed
fertilizer
chemicals
production
Fuel
TOTAL 114
14 Land rent 8000
15 Other costs
16 Total cost per hectare 93474
17 Average selling price/kg 6 BIRR
18 Yield Qt/ha 24000
19 Revenue/ha of production 144000
20 Net profit(Loss)/Qt 50526

66
Producer’s margin
Attributes Unit Amount
Yield Qt/ha 240
Total production cost ETB/ha 93474
cost per qt (Value addition) ETB/qt 389.5
Average selling price ETB/qt 600
Farmer's margin ETB/qt 210.5
Gross profit ETB/ha 50526
Value addition and margin in onion producers
Value Addition and Margin

67
Value addition and margin in onion wholesalers
Wholesaler’s margin
Cost items Unit Wholesaler
Meki
Wholesaler
Modjo
Wholesaler
Adama
Wholesaler
Bishoftu
Wholesale
r
Purchased price of quality onion
per quintal
ETB/qt 600 600 600 600 600
Packaging material ETB/qt 0 3.64 3.64 3.64 3.64
Load ETB/qt 10.9 10.9 10.9 10.9 10.9
Unload ETB/qt 9.09 9.09 9.09 9.09 9.09
Brokerage ETB/qt 0 12.72 12.72 12.72 12.72
Transportation: Vehicle ETB/qt 6.36 18.18 21.81 27.27 36.36
Rent of Wooden box & scaling ETB/qt 2.14 2.14 2.14 2.14 2.14
License fee ETB/qt 4 4 4 4 4
Taxes and fee ETB/qt 37 37 37 37 37
Wage for permanent ETB/qt 4 4 4 4 4
Storage loss ETB/qt 12 12 12 12 12
Warehouse rent ETB/qt 4.17 4.17 4.17 4.17 4.17
Telephone expense ETB/qt 0.42 0.42 0.42 0.42 0.42
Watching and warding ETB/qt 3.64 3.64 3.64 3.64 3.64
Total costs ETB/qt 687.36 721.9 725.53 730.99 740.08
Selling price ETB/qt 775 800 800 800 800
Wholesaler
's margin
ETB/qt 87.64
78.1 74.47 69.01
59.92
Value added ETB/qt 87.36
121.9 125.53 130.99
140.08
Purchased from:
Farmers Broker Wholesalers Retailers Consumer

68
Value addition and margin in onion retailers
Retailer’s margin
Cost items Unit Retailer
Meki
Retailer
Adama
Retailer
Modjo
Retailer
Bishoftu
Retailer
Purchased price of quality
onion per quintal
ETB/qt 800 800 800 800 800
Packaging material ETB/qt 0 3.64 3.64 3.64 3.64
Load ETB/qt 5.0 5.0 5.0 5.0 5.0
Unload ETB/qt 4.0 4.0 4.0 4.0 4.0
Brokerage ETB/qt 0 0 0 0 0
Transportation: Vehicle ETB/qt 7 10.40 10.40 10.40 10.40
Rent of Wooden box & scaling ETB/qt 2.14 2.14 2.14 2.14 2.14
License fee ETB/qt 4 4 4 4 4
Taxes and fee ETB/qt 30 30 30 30 30
Wage for permanent ETB/qt 1 1 1 1 1
Storage loss ETB/qt 12 12 12 12 12
Warehouse rent ETB/qt 0 0 0 0 0
Telephone expense ETB/qt 0.42 0.42 0.42 0.42 0.42
Watching and warding ETB/qt 0 0 0 0 0
Total costs ETB/qt 865.56 872.6 872.6 872.6 872.6
Selling price ETB/qt 875 900 900 900 900
Retailer's margin ETB/qt 34.44 27.4 27.4 27.4 27.4
Value added ETB/qt 65.56 72.6 72.6 72.6 72.6
Purchased from:
Farmers Broker Wholesalers Retailers Consumer

69
Actors Cost incurred in
Birr per Quintal
Sales Price in
Birr per
Quintal
Gross
Margin
Birr %
Producers 389.5 600 210.5 35
Wholesalers 723.72 775 51.28 7
Retailers 865.56 900 34.44 4
Gross Margin for onion Following Market Channel 8
Value chain
Sales Price in Birr per
Quintal
7.75 9.0
Cost of row material 3.895 7.2372 8.6556
Gross value added 2.105 0.5128 0.3444
% of total value added 71.06205 17.31146 11.62649
producer
consumer
Wholesalers
6.0
Retailers
Distribution of value addition among major actors
Total value added = Birr 2.9622 per KG

70
Constraints in vegetable value chain
The constraints of gender in vegetable value chain
include paucity of
relevant information,
capital,
access to resources,
capacity development,
empowerment intervention,
institutional services and
enabling environments .
The organization and coordination of actors in the
value chain are highly influenced by gender-based
limitations.

71
Empowerment, access to resources, information,
capital, institutional services, capacity development
and enabling environment are contributing to the
improvement of gender in vegetable value chain.
D:main constraints.doc

72
Value chain governance
The dominant value chain actors play facilitation role.
They determine the flow of commodities and level of
prices.
In effect they govern the value chain and most other
chain actors subscribe to the rules set in the marketing
process.
The market visit made indicates that the wholesalers
assisted by the brokers are the key value chain governors.
They have sufficient information about the supply of
onion and which direction it flows along the marketing
channels and markets in different parts of the country.
They also set prices.

73
Value chain governance
The smallholder farmers are not organized and are
not governing the value chain.
 Hence, they are price takers and hardly negotiate
the price due to fear of post harvest loss, in case the
product is not sold.
In the study area, Meki Batu Vegetable & Fruit
Growers cooperative Union has 61 producers
association.
And since 2009, the union tries to link the producer
with the trader and exporter.

74
Value chain functions Constraints
Shortage of Foreign currency, shortage of seed supply
lack of skill in modern agricultural practices; low productivity and production
=Lack of working capital =Insecurity =Availability of electricity
=High price of diesel =Expensive fuel for irrigation =Shortage of seeds
=Shortage of fertilizer =Shortage of pesticides
=inadequate farmer's skills and knowledge of production and product management
=Poor quality of water used for irrigation (high salinity). =high production costs
=Lack of post-harvest facilities (pre-cooling, cold storage, calibration) results in post-harvest losses of 10-
15% by volume. =Limited use and improper application of fertilizers
=Poor infrastructure, poor linkage among actors =less awareness of possible market actors (consumers,
retailers and whole seller)
=imperfect pricing system, Lack of transparency in market information system mainly in the export market.
=lack of capital,
• Lack of awareness about proper packaging and grading is causing high losses
Lack of awareness and interest of local traders for quality and standard.
Lack of good governance and business ethics among some actors
Long trade channel that resulted high involvement of brokers and traders in transactions and that escalate
costs and hinder direct contact and negotiation between producers and final buyers
=shortage of supply
=quality problem
=lack of enabling environment
No local quality control and standard at the local level
high price
Input Supply
consumption
Production
Trading
( wholesaling,
brokerage &
retailing)
Export

Exercise on mapping value chain actors
• Identify actors then Put the listed actors in map following their role and
function in the overall value chain
• Identify potential constraints and opportunities at different stages in
the value chain
• Calculate production cost
• Calculate margins

76
Exercise
Value chains seem to be the keyword in recent
agricultural development debates, often in conjunction
with rural economic development and agribusiness
promotion. Economic development involves the
transformation of rural agricultural based economies
into more urban industrial and service based
economies. In the current scenario of developing
country, value chain study is important. Therefore,
discuss the important of value chain study for Ethiopia
in relation to the country’s policy.

11 Value chain unit one.ppt

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11 Value chain unit one.ppt