Abstract:
The study was designed to generate empirical evidences on the value chain of major spices in Sheka and Kafa zones, Southwestern Ethiopia. The core objectives of the study were to map the value chain, quantify the value addition and marketing margins among actors and analyze factors affecting marketed surplus, market outlet choices, farm level value addition and export performances of the two major spices. Both cross-sectional and panel data were used. Cross sectional data were obtained from a sample of randomly selected 165 turmeric and 205 korarima producers, and from purposively selected 34 turmeric and 59 korarima traders. Panel data were collected from official secondary sources to identify the determinants of export performance of those spices. Descriptive statistics and econometric models such as OLS, multivariate probit and random effects GLS gravity models were employed to analyze the data. The study results show that the marketing channels were found to be long with limited value-added products such as dried and/or polished turmeric rhizomes and dried korarima capsules for domestic and export markets. The linkages and coordination among value chain participants are weak, inadequate and there is power asymmetry as the regional supplier and exporters were dictating the value chain in terms of setting product requirements, processing and prices. Analysis of market margins indicate that the profits are unevenly distributed among actors where the processors and regional wholesalers captured the highest marketing profit which accounted for 35% and 33% in turmeric value chain. In the case of korarima value chain, producers and exporters earned higher profit margins which accounted for 56% and 35% respectively. OLS model output depicted that sex, educational status, farming experience, land size, quantity produced, perceived prices, labor and access to services such as training, extension, and market information were found to have a significant positive effect on turmeric marketed surplus; whereas, distance from the market has a significant negative influence on turmeric marketed surplus. Education level, family size, land size, quantity produced, market distance, access to extension, market information and ownership of transport means were significantly influencing the marketed surplus of smallholder korarima producers. The MVP model revealed that sex , land size, quantity of turmeric produced, labor availability, market distances, transport means, price perception, group membership, access to training, extension, market information and credit services had significantly affected the market xvi outlet choices of turmeric producers. The model also showed that sex, age, educational status, family size, livestock owned, land size, labor availability, quantity produced, price perception, market distance, group membership, access to extension and credit services were found to have significant impact on korarima market outlet choices decision of smallholder producers. Moreover, the OLS model results showed that sex, age, family size, farming experience, quantity produced, livestock owned, transport means, price perception, access to credit and market information have positively influenced turmeric value addition while market distance has a significant negative effect. The OLS model result further showed that age, education, market distance, quantity produced, prices of other crops, market information, access to extension and credit services have positively and significantly affected value addition of korarima at the farm level. Furthermore, the random effect GLS model output indicate that population, foreign direct investment, real exchange rate and institutional quality, importers' (GDP, GDP per capita and population), geographical distance, and sharing common border had significantly affected the export performances of major spices. However, intuitional quality and COMESA membership were found to have unexpected negative effects on the export performance of spices. Based on the findings of the study it is suggested that the government and concerned stakeholders should work on promoting improved planting material, encouraging the use of labor-saving technologies particularly for turmeric processing, strengthening the existing institutional services, promoting cooperation among actors, contractual enforcement, empowering women, strengthening the road and transport system, enhancing access to market information and creating a competitive markets. There is a need to formulate strategies that would promote institutional quality, improve internal supply capacity, attracting foreign direct investment, strengthen trade liberalization, deepening economic integration and targeting export destinations that could reduce transportation costs to improve the export performance of both spices.