In tern a tio n a l

Sch o la rs
Jo u rn a ls
African Journal of Agricultural Economics and Rural Development ISSN: 2375-0693 Vol. 5 (1), pp. 512-524,
January, 2017. Available online at www.internationalscholarsjournals.org © International Scholars Journals
Author(s) retain the copyright of this article.

Full Length Research Paper

Value chain analysis of onion: the case of Ejere district,

West Shoa zone, Oromia national regional state of
Ethiopia
Addisu Hailu*, Lemma Zemedu and Kindie Getnet
Oromia Agricultural Research Institute, Haro Sebu Agricultural Research Center.
Received 11 October, 2016; Revised 07 November, 2016; Accepted 09 November, 2016 and Published 24 January, 2017

This research attempted to analyze value chain of onion in Ejere district. Onion plays a significant role in
increasing food security and income for the poor farmers of Ethiopia. Data for the study were collected from
both primary and secondary sources. The primary data were generated by household survey using a pre-tested
structured questionnaire and key informant interview using checklists. The data were collected from 85
farmers, 30 traders and 35 consumers and analyzed using STATA software. Onion value chain actors identified
in the study include input suppliers, producers, rural collectors, brokers, retailers, wholesalers, processors and
consumers.Producers are price takers and hardly negotiate the price due to fear of post-harvest loss, in case
the product is not sold. Six market channels of onionwere identified during survey year. The highest total gross
margin is 32.55% in channel II for onion.The highest gross marketing margin of producers in onion markets
channels is 72.84%. Policy implications drawn from the study findings include the need to improve the input
supply system,improving farmers’ knowledge and experience on onion production,strengthening the
linkage/interaction among onion value chain actors,expanding accessibility of market infrastructure and
strengthening supportive institutions.

Keywords: Value chain analysis,Market channel,Onion,Actors, Marketing margin, Ejere.

INTRODUCTION

Agriculture is the most important sector in Ethiopia; it agricultural policies and strategies (Aklilu, 2015).
accounts for 46% of GDP, 80% of export value, and Vegetable production is becoming an increasingly
about 73% of employment. The sector still remains important activity in the agricultural sector of the country
largely dominated by rain-fed subsistence farming by following the development of irrigation and increased
smallholders who cultivate an average land holding of emphases given by the government to small scale
less than a hectare. Although agriculture has a long commercial farmers. Recently, due to their high
history in the country’s economy, development of the nutritional value vegetable do have ever rising demand
sector has been hampered by a range of constrains both in local and foreign markets, and are classified
which include land degradation, low technological inputs, among those export commodities’ that generate
weak institutions, and lack of appropriate and effective considerable amount of foreign currency earnings to the
country. As a matter of these facts commercial farms in
Ethiopia used to grow vegetables over a considerable
land area for years (CSA, 2015). Major vegetable types
produced in West Shoa Zone are onion, potato and
*Corresponding author E-mail: [email protected] cabbage. Commodities that are exclusively focused on
Addisu et al. 513

vegetable and fruit production by irrigation were ranked potential it has for onion production. In the second stage,
as potential intervention area in west shoa (Fanos, 2012). with the consultation of District Irrigation and
Onion (Allium Cepa) is the second most popular Development Authority experts, out of 27 kebeles of the
vegetable in the world following tomatoes (Lemma and district, 4 potential onion producers’ kebeles namely
Shimelis, 2003). Onion is considered as one of the most Amaro, Hora, Arebsa and Kimoye were randomly
important vegetable crops produced on large scale in selected. In the last stage, from total onion producers’ in
Ethiopia. The area under onion is increasing from time to Ejere district about 85 samples of household heads were
time mainly due to its high profitability per unit area and randomly selected.
ease of production, and the increases in small scale Data from traders and consumers were also collected.
irrigation areas. Despite the increase in cultivated areas, The sites for the trader surveys were market towns in
the productivity of onion is much lower than other African which a good sample of onion traders existed. On the
countries and the world average. The private farmers’ basis of flow of onion, three markets (Addis Alem, Holota
holdings in ‘meher’ season 2012/2013, the total area and Addis Ababa Piassa Atikilt Tera) were selected as,
coverage by onion crop in the country were 21,865.4 the main onion marketing sites for the study areas. Here
hectare, with total production of 219,188.6 tons with sampling was the very difficult task due to absence of
average productivity of 10.02 tons per hectare recorded list of population of traders and the opportunistic
(Weldemariam, et al, 2015). During the 2013/2014 behavior of the traders. Hence a purposive sampling
cropping season, the total area under onion production method was used to select wholesalers, rural collectors
was estimated to be 24, 375.7 hectares with an average and retailers from specified markets. As a result, 30 onion
yield of about 9.02 tons per hectare and estimated a total traders were selected for the purpose of the study.
production of greater than 2, 19, 735.27 tons (CSA, Furthermore, 25 and 10 consumers were interviewed
2014). This is very low yield compared to the world from Addis Alem and Holota, respectively, which were
average of 19.7 tons per hectare. In spite of the policy selected a purposively to obtain information related to
options provided by the Ethiopian government, there are consumers. Both primary and secondary data were used
very little empirical evidence on value chain analysis of for this study. Secondary data sources include Ejere
onion, to design appropriate policies for the improvement District Irrigation and Development Authority, Ejere
of onion production and productivity in Ethiopia. Value District Bureaus of Agriculture, District Trade and Market
chain is the sequence of activities required to make a Development Office and its associated primary
product or provide a service (Vermeulen et al., 2008). cooperatives and Central Statistical Authority (CSA),
The value chain concept entails the addition of value as published and unpublished reports, bulletins, and
the product progresses from input suppliers to producers websites. Both qualitative and quantitative data were
and consumers. So, this study was proposed to collected and used for the study.
investigate the value chain analysis of onion produced in Primary data sources were smallholder farmers,
Ejere district. Therefore, it helps to find the weakest link wholesalers, collectors, retailers and consumers. Primary
of the chain and to narrow the information gap on the data were collected using informal and formal surveys
subject. and key informants interviews. For informal survey Rapid
The general objective of this study is to analyze onion Market Appraisal (RMA) technique like focus group
value chain in Ejere district of Oromia region with the discussion and key informant interview was used with
following specific objectives: checklists. The formal survey was undertaken through
To identify onion value chain actors, their respective roles formal interviews with randomly selected farmers and
and to draw up value chain map of in the study area. purposively selected traders and consumers using a pre-
To analyze respective marketing costs and margins tested structured questionnaire for each group. Focus
across market channels group discussions were held with two groups based on
predetermined checklists and a total of 15 key informants
were interviewed from different organizations and
METHODOLOGY institutions.

Sampling procedure, type of data and method of data Method of data analysis
collection
Value chain analysis is the process of breaking a chain
The sample for this study was drawn from all actors into its constituent parts in order to better understand its
involved along onion value chain such as producers, rural structure and functioning. The analysis consists of
collectors, wholesalers, retailers and consumers. Three identifying chain actors at each stage and discerning their
stages random sampling procedure was used for the functions and relationships; determining the chain
selection of sample household heads. In the first stage, governance, or leadership, to facilitate chain formation
Ejere district was selected purposively based on the and strengthening; and identifying value adding activities
 514 Afr. J. Agric. Econ. Rural Dev.

Table 1. Proportion of sampled households producing vegetables (in 2015 production year).
Crops type No. of producers Percent Relatives importance

Onion 85 70.8 1
Potato 78 65.0 2
Cabbage 22 18.33 3
Pepper 15 12.50 4
Tomato 13 10.83 5
Sweet potato 11 9.1 6
Garlic 10 8.33 7
Carrot 6 5 8
Beetroot 4 3.33 9
Shallot 2 1.66 10
Source: Own survey results, 2015.

in the chain and assigning costs and added value to each producer. It should be emphasized that growers that as
of those activities (UNIDO, 2009). middlemen also receive an additional marketing margin.
To understand the characteristics of the chain actors of The producer’s margin or share in the consumer price
onion and the relationships exists between them, (GMMp) is calculated as:
including the identification of all actors in the chain; the
flow of product through the chain; the work features and
Consumers Price  Marketing Gross Margin
the destination; information was obtained by conducting GMM P  1
interviews, focus group discussion and by collecting Consumers Price
secondary data from various sources. The study has
employed value chain analysis which is very effective in
GMM P  1  TGMM
tracing product flows, showing the physical value adding
stages, qualitative and quantitative flow of product along where, GMMp is = the producer’s share in consumer
the chain with identified key actors, their relationships price
with other actors in the chain and measured distribution
of their benefits. This could be captured through mapping The net marketing margin (NMM) is the percentage of the
the value chain. Mapping the chain facilitates final price earned by the intermediaries as their net
understanding of sequence of activities, key actors and income after their marketing costs are deducted. Thus
relationship involved in the value chain. This analysis was the net marketing margin is calculated as:
undertaken in qualitative terms.
Gross Marketing Margin  Marketing Costs
Marketing margins are also calculated at different points NMM  X100
along the value chain and then compared with consumer Consumer Price
price. Estimates of marketing margin are the best tools to (3)
analyses performance of market. The cost and price
information used to construct marketing cost and margin RESULTS AND DISCUSSION
have been gathered from onion value chain actors such
as, producers, collectors, retailers, wholesalers and Types of vegetables produced by sampled
consumers. Computing the total gross marketing margin households in Ejere district
(TGMM) is always related to the final price paid by the
end buyer and is expressed as percentage (Mendoza, In Ejere district, different types of vegetables are grown
1995). with different intensities in terms of land and other input
allocation, purpose of production and marketability. The
Final Consumers' Price  Producers'Price survey results revealed that most commonly grown
TGMM   100vegetables in terms of the number of sampled growers
Final Consumers' Price are onion (70.8%), potato (65.0%), cabbage (18.33%),
(1) pepper (12.5%), tomato (10.83%) and Garlic (8.33%).
where, TGMM is total gross marketing margin (Table 1).

It is useful to introduce here the idea of “producer Profitability of onion production in Ejere district
participation”, “farmer’s portion” or “producer’s gross
marketing margin” (GMM) which is the portion of the price Table2 shows the profitability of onion production per
paid by the end consumer that belongs to the farmer as a hectare of land. Onion can be produced in two cycles
 Addisu et al. 515

Table 2. Average cost of production and profitability of onion (Birr/ha).

Item Onion (N=85)
Seed (Birr) 6919.41
DAP (Birr) 2979.52
Urea (Birr) 2520
Labor for crop management(Birr) 1246.23
Labor for Harvesting(Birr) 1126.24
Fuel (Birr) 3436.23
Chemicals (Birr) 5229.23
Total variable cost (Birr) 23,456.86
Rental value of land (Birr/year) 4000
Depreciation of farm implements (Birr) 538.47
Total fixed cost (Birr) 4,538.47
Total production cost (Birr/ha) 27,995.33
Yield (qt/ha) 118
Income 98,530
Net return (income) 70,534.67
Cost (Birr/qt) (Production cost) 237.25
Source: Own computation from survey result, 2015.

Both Local and Improved varieties

Local Varieties
23.3%
22.5%

Improved Varieties
54.16%

Figure 1. Type of vegetables seed used by sampled producers.

Source: Own survey results, 2015.

during a year. This will permit crop rotation and effective rental value of land were reported by the sampled
use of land. Based on the survey data, the costs of respondents. The mean productivity of onion was 118
production and returns at the prevailing prices were used qt/ha, respectively which was reported by sampled
to estimate the benefits. This section aims at identifying households. Rental value of land was imputed by taking
and quantifying different costs, which are incurred by the into account the prevailing rents in the study area per
farmers in production process. The cost involved in onion hectare per year for potato. Depreciation charges on farm
cultivation can be subdivided in two ways: variable cost implements were calculated using the straight-line
and fixed cost. method, i.e., by dividing the original cost of item (less
The labor cost given in Table 2 was estimated based on salvage value) by the expected life of the item. Average
the price or wage of labour in locality per man day. Urea onion output was valued at farm gate price of households
and DAP were valued at Birr 1200 and 1400 per qt, which was on average about Birr 835.Income from onion
respectively. Chemical costs, seed cost, fuel cost and, is the value of total production at the farm gate price.
 516 Afr. J. Agric. Econ. Rural Dev.

Table 3. Sources of onion seeds for sample respondents.

Source of seed Onion(N=85)
Frequency %
Own seed - -
BoA 16 18.8
Market 68 80.0
Fellow farmers - -
Research Center - -
Cooperatives 1 1.2
Total 85 100
Source: Own survey results, 2015.

Table 4. Sources of fertilizer and chemicals use for onion production.

Fertilizers use (inorganic fertilizer)
Frequency Percent
Yes 84 98.8
No 1 1.2
Total 85 100
Source of fertilizers

BoA 35 41.2
Market 3 3.5
Cooperative 47 55.3
Total 85 100
Source of chemicals (pesticides and herbicides)

Private traders (Market) 71 83.6

BoA 7 8.2
Cooperatives Shops 7 8.2
Total 85 100
Source: Own survey result, 2015.

Accordingly, the total average cost of production of onion and farm implements are supplied by cooperatives, BoA,
is Birr 237.25 per quintal. The net income per hectare of traders, and informal farmers to farmer’s exchange.
onion is Birr 70,534.67. Adequacy and quality of onion seeds are crucial for
increased production. Sampled producers were asked
Onion value chain actors and major functions whether they use local or improved variety of seed and
the largest proportion of the producers (54.2%) used
Value chain is a sequence of related business activities improved varieties while 23.3% both improved and local
(functions), from the provision of specific inputs for a varieties and (22.5%) only local varieties of onion seed
particular product to primary production, processing, sales (Figure 1).
and distribution, to final consumption. It is clear that along The survey results indicates that about 80% of sampled
with the farmers, a number of actors participated in the producers purchased seed from market for onion production
marketing of onion from the production point to the (Table 3). The majority of farmers prepared their own
consumer point. From an institutional perspective, a value seedling.
chain can be defined as the organizational arrangements Regarding fertilizers, the majority of producers used
linking and coordinating the producers, processors, traders, inorganic fertilizer (DAP and Urea) depending on the land
and distributors who perform these functions (Joshi and size allocated to vegetables and the soil fertility status as
Gurung, 2009). The main actors involved in the onion value perceived by the producers while some producers used
chain, their roles and inter relationships are discussed inorganic fertilizer (manure and compost). The results
below. indicated that most of the sampled producers who used
fertilizer procured it from cooperatives (55.5%), from BoA
Inputs suppliers (41%) and from local market (3.42%) while source of organic
fertilizer is producers themselves.
Agriculture value chain analysis begins at the input The survey results further revealed that in Table 4,
supply level. Inputs such as seeds, fertilizer, pesticides, farmers purchase pesticides and herbicides from different
Addisu et al. 517

Table 5. Proportion of households with their own motor and source of water for irrigation.
Source of irrigation water Frequency Percent
Rivers 80 94.12
Ponds 3 3.53
Hand dung Halls 2 2.35
Total 85 100
Owned motor for irrigation
Yes 44 51.8
No 41 48.2
Total 85 100
Source: Own survey results, 2015.

Table 6: Onion production mechanism of producers.

Onion growing Frequency Percent
Sole cropping 82 96.5
Inter cropping 2 3.5
Total 85 100
Source: Own survey result, 2015.

sources. The major suppliers of chemicals are private reduction. From the sampled farmers 51.7% of them
traders from market, cooperative shops, and through have owned motors and the rest 48.3% of them rented or
theagriculture and rural development office. Regarding farmed in partnership apart from those who have motors
farm implements, the major suppliers are local market, and pumps (Table5).
agriculture office, and fellow farmers. As it is depicted in the Table 6, 96.67% of sampled
respondents were producing onion by sole cropping and
Producers small proportion 3.33% were producing by inter cropping
with others short cycled products. Most farmers sell the
Farmers are the primary and most valued actor in the majority of their onion products at harvest time, keeping
onion value chain. Two categories of farmers were only small amount for home consumption and for seed.
noticed in production areas: subsistence farmers and Farmers are producing onion for market and they sell to
small investors’ farmers. Producers decide, what input to wholesalers at farm gate and village markets. They also
use, when to seed and harvest, how much to consume, sell to different types of actors such as rural collectors,
and how much to sell, considering the available resource. consumers and retailers (with varying volume of sell) at
They perform most of the value chain functions right from local market.
farm inputs preparation on their farms to post harvest
handling and marketing. The major value chain functions Rural collectors
that onion producers perform include land preparation,
growing/planting/, fertilization, irrigating, protecting from Rural collectors are independent operators at primary
weed, pest/disease, harvesting and post-harvest handling markets who assemble and transport onion from smallholder
and marketing. farmers, using pack animals and small trucks for sale to
In Ejere district onion is produced based on irrigation and larger markets. The local traders play the key role as in the
small number of farmers indicated that they had used onion value chain in area; their trading activities include
rained system. From sampled producers about 90% are buying and assembling, repacking, sorting, and selling to
wholesalers typically transport on donkeys or cart to nearest
engaged on onion production using irrigation and
town. Their major sales outlets are relatively wholesalers.
remaining 10% produced onion under rain fed. Water for
And most of these outlets own or rent storage but usually do
the irrigated agriculture is fundamental resource not store for more than two or three days. These local
otherwise it could not be possible to cultivate vegetables. traders collect onion for wholesalers and wholesalers
Berga River and its catchments is the major source of purchase from rural collectors by covering all cost and also
water for sampled respondents. The survey results additional fee for their services.
depicted that, about 93.58% of sampled households’
access irrigated water from River while about 4.59 and Brokers/middle men
1.83% of irrigated waters comes from pond and hand
dung hall, respectively. Most of the farmers in the districts Brokers in the district have regular and temporary
rely on River for irrigation this was the means of water customers from major towns and cities across the
 518 Afr. J. Agric. Econ. Rural Dev.

country. Brokers facilitate transaction by convincing between producers and consumers. There are two types
farmers to sale his onion and facilitating the process of of retailers in the study area district retailers and central
searching good quality and quantity of onion to retailers. District retailers are buying onion either from
wholesalers. The share of profit that goes to brokers farmers or wholesale traders. While central (urban)
varies from farmer to farmer and from trader to trader. retailers in major cities mostly they buy from wholesalers
The brokers sometimes go beyond facilitation of and sell to urban consumers. The supermarket and
transaction and tend to set prices and make extra shops are mainly in the major cities and commonly buy
benefits from the process. A few wholesalers go straight onion from wholesalers. During the market visit, it was
to farmers’ fields without using brokers to purchase the observed that retailers keep small amount of potatoes,
onion products from the farmers where they negotiate onion, tomato, and other vegetables. Consumers usually
prices. Brokers do not follow proper business conduct buy the product from retailers as they offer according to
and as a result they constrain the marketing system more requirement and purchasing power of the buyers.
than they facilitate. In case the producer is not sold
through broker, they forced to sell at the lower price Consumers
because of perishability of the product. The broker travel
to the rural areas and contact producers, they inspect the Consumers are final purchasers of onion products mostly
product quality, estimate output, set price and come back from retailers for consumption purpose. Onion consumers
to communicating with wholesalers to purchase and are individual households (rural and urban dwellers)
transport. The farmers have no idea of the price paid by hotels and institutions. The majority of sampled
the wholesalers and only receive what has been consumers preferred dry, large size and red color onions
bargained with the broker. followed by dry, medium size and clean onion.
Consumers think that if the chain becomes shorter and
Wholesalers shorter the price of onion will be reduced.

Wholesalers are traders that buy onion from rural Enablers and facilitators
collectors and also directly from farmers, usually those in
surplus areas for resale in deficit, to larger market centers In a value chain, enablers include all chain-specific actors
and retailers with better financial and information providing regular support services or representing the
capacity. Wholesalers are the major buyers of onion as common interest of the value chain actors. The
they buy at least a truck load of onion at a time from supporting function players for the onion value chain are
farmers. They mostly purchase from farmers and local those who are not directly related to the onion value
collectors. There are no wholesalers who have the chain but provide different supports to the value chain
license to do wholesale in the study district. But the actors. The support functions include different services
majority of wholesalers are located outside the districts (e.g. credit), research and development, infrastructure,
mainly in Addis Ababa (Atikilt Tera). Wholesalers mostly and information. Support service providers are essential
purchase in bulk from the districts, transport and sell the for value chain development and include sector specific
produce to the major towns like Assosa, Wollega and input and equipment providers, financial services,
Addis Ababa. Wholesalers buy onion from producers extension service, and market information access and
through brokers who represent them in onion buying dissemination, technology suppliers, advisory service,
activities. They have better storage, transport and etc. In the study areas, there are many institutions
communication access than other traders. supporting the onion value chain in one way or another.
The most common support providers are District
Processors Agriculture Office, District Irrigation and Development
Authority, District Trade and Market Development Office,
Processing of onion in the sense of preserving and value Cooperatives, Oromia Micro Finance Institutions, Banks
addition is not as such practiced in the study areas. and Private transporters. Some service providers extend
Onion is commonly consumed in the form of cooked services beyond one function and others are limited to a
meals in different traditional dishes or “wat‟. specific function.
District Irrigation and Development Authority and
Retailers Agricultural Development Office provide agricultural
extension services to producers through experts and
Retailers are key actors in onion value chain within and development agents. The office provides advisory
outside the study area. These are known for their limited service, facilitate access to inputs and provide technical
capacity of purchasing and handling products and low support in seed bed preparation, fertilizer application,
financial and information capacity. They are the last link crop protection and post-harvest handling. The key
Addisu et al. 519

Consumption Consumers: Individuals; Institutions

GO’s (Woreda Irrigation and Development Authority, WOTMD, Micro Finance

Institutions, Woreda Administration) and Bank/Private Credit Suppliers
Hotels;
Central
Processing Restaurants
Retailers

Wholesalers District Retailers

Trading
Rural
Brokers Collectors

Production
Onion producers: Small holders and Private
investors

Input Fertilizer, Seed, Seedling, Chemicals and Farm

Supply implements Suppliers

BoA, Cooperatives/Union, Shops, Fellow farmers and

VC Private traders
Functions
VC Actors VC Enablers

Note: : Weak product flow; : Strong product and input flow;

: Information flow

Figure 2. Value chain map of onion in the study area

Source: Own sketch from survey result, 2015.

informant’s interview point out that the producers get NGOs and Banks are operating in providing technical
extension service on general agriculture and it is not service and offers credit support to the farmers. But the
sufficient to improve the technical skill of the farmers are not receiving sufficient service regarding
producers.The most common sources of loan are Oromia finance related issue in the study area. In the study
Micro Finance Institutions and relatives/friends, since areas, cooperatives do not support producers in the value
they do not require collateral. Moreover, it was found that chain of onion as expected, they supply only
 520 Afr. J. Agric. Econ. Rural Dev.

Producers (4083.75)

14.7% 8.3% 54.7% 22.3%

Rural District
Wholesalers 8.75%
Collectors Retailers

100% 13.7% 77.57%

Processors (Hotels Central Retailers

and Restaurants)
100% 100%
100% 100% 100%
Consumers

Figure 3. Onion market channel.

Source: Own sketch from survey result, 2015.

fertilizer and sugar/oil for producers. Figure 2 displays the Channel II: Producer-Rural collector-Wholesaler-Central
functions or processes in onion value chain map. retailer-Consumer

Marketing Channels and Marketing Margin Rural collectors are buying onion from producers in the
study area and they sell to wholesaler. It accounted for 8.3%
Onion marketing channels of total onion marketed (338.95quintals) during the survey
period.
Six main alternative channels were identified for onion
marketing. These marketing channels were identified Channel III: Producer-District retailers-Consumer
from the point of production until the product reaches the
final consumer through different intermediaries with Districts retailers in the production area buy without the
proportion of onion marketed as indicated in Figure 2. involvement of brokers depending on the volume of the
The amount of onion transacted in these market channels product and resale to consumer. It represented 22.3% of
was different. Out of total 4,083.75 quintals of onion total onion marketed 910.67quintals during the survey
marketed by sampled households during survey year period. The channel was found to be the second most
important marketing channel in terms of volume.
1,732.7quintals was marketed through channel IV and
910.67 quintals was through channel III which were found
Channel IV: Producer-Wholesaler-Central retailer-
to be dominant in terms of onion volume of transaction. Consumer
The survey results revealed that wholesalers and
retailers were the dominants receivers of onion with This is the largest and most important channel, accounting
percentage share of 54.7% and 22.3%, respectively in for approximately 42.4% of total marketed volume of onion
terms of volume of onion supply (Figure 3). 1,732.7quintals during survey year. Wholesalers buy potato
at the farm gate through brokers or directly from producers
Channel I: Producer-Consumer and sell it to retailers.

This channel is the shortest channel at which producers Channel V: Producer-Wholesaler-Processor-Consumer

directly sell to consumers at market day. It represented
14.7% of the total onion marketed which amounted The only difference between the channel IV and channel V
600.31quintals of onion during the survey period. is that the wholesaler buys from producer and sold to hotels,
Addisu et al. 521

Table 7. Onion average marketing cost for different marketing agents (Birr/qt).
Cost of marketing Actors
Producers Rural District Wholesalers Central
collectors retailers retailers
Sack 10.3 10 10.42 9 10
Load/unload 12 7 15 12.91 10
Labor for packing 5 5
Transport 30 25 35
Storage cost 12.5 15 10.45
Telephone cost 3 2 3
Wastage Loss 30.23 12.4 20.5 12.67 5.45
Personal expense 5
Brokerage 12
Tax 4 4 7.57 12 12
Others cost 6 10 15 10 10
Total cost 93.23 76.4 82.99 131.58 57.9
Source: Own computation from survey results, 2015.

café or institutions. It accounted for 7.49% of total onion and the lowest market profit share was taken by central
marketed (306.12quintals) during the survey period. retailers which is 25.5 birr/qt in channel II and IV.
As indicated in Table 8, total gross marketing margin
Channel VI: Producer-Wholesaler-District retailer- (TGMM) is highest in channel II and IV which was
Consumer 32.75% and 32.05, respectively and lowest in channel V
which was 27.16%. The survey results also showed that
Wholesalers are buying vegetable from onion producers the maximum producer’s share (GMMp) is highest in
in the study area and they distribute to district retailers. It channel V which was 72.84% from the total consumers’
accounted for 4.77% of total onion marketed 195quintals price and lowest in channel II and IV which was 67.45%
during the survey period. and 67.95%, respectively. From traders, district retailers’
obtain maximum gross margin, which is 29.02% of the
consumers’ price in channel III and followed by
Onion marketing cost and margin analysis wholesalers’ which accounts, 27.16% and 25.33% in
channel V and IV, respectively. The lowest gross
Table 7 indicates different types of marketing cost related marketing margin was taken by central retailers’ and rural
to the transaction of onion by producers, rural collectors, collectors in channel II which is 6.72% and 9.1%,
district retailers, wholesalers, and urban retailers. The respectively.
different average transaction costs associated with the
marketing process of a single quintal till it reached the Challenges and opportunities of actors along onion
next dealer was assessed. The highest marketing cost is value chain
incurred by thewholesaler which was 131.58 birr/qt while
central retailers incurred the lowest market cost which The major challenge and opportunities of onion value
was (46.9 birr/qt).Average marketing cost of producers chain are summarized in Table 9.
was 93.23 birr/qt when they sell to consumers and district
retailers while 63.23 birr/qt when they sell to collectors. SUMMARY, CONCLUSION AND
The difference between the total income from onion RECOMMENDATIONS
trading and the costs incurred in the process of onion
Onion is considered as one of the most important vegetable
trading gives the marketing profit of traders. As depicted
crops produced on large scale in Ethiopia. The area under
in the Table 8, producers marketing profit share was
onion is increasing from time to time mainly due to its high
highest 606.5 birr/qt when they directly sell to profitability per unit area and ease of production, and the
wholesalers in channel IV, V and VI followed when they increases in small scale irrigation areas. The major actors
sell to consumers which accounts 569.52 birr/qt in involved in potato and onion value chain include input
channel I while took lowest profit when they direct sell to suppliers, producers, rural collectors, wholesalers, retailers,
district retailers and collectors which accounts, 507.02 processors and consumers. Most producers sell their
birr/qt and 537.02 birr/qt in channel III and II, respectively. products to the traders while some of them sale for
From traders the highest marketing profit was taken by consumers. However, it is also found that wholesalers,
district retailer 259.51 birr/qt in channel III followed by retailers and collectors directly purchase the vegetables from
wholesalers which is 182.97 birr/qt in channel IV and V the farmers.About six different market channels of onion are
 522 Afr. J. Agric. Econ. Rural Dev.

Tables 8.Onion marketing margin for different channels (Birr/qt).

Agents Onion Marketing Channels
I II III IV V VI

Producers Purchase price

Production cost 237.25 237.25 237.25 237.25 237.25 237.25

Marketing cost 93.23 63.23 93.23
Selling price 900 837.5 837.5 843.75 843.75 843.75
Market profit 569.52 537.02 507.02 606.5 606.5 606.5
GMMP (%) 100 67.45 70.98 67.95 72.84 70.32
Rural Purchase price 837.5
collectors
Production cost
Marketing cost 76.4
Selling price 950
Market profit 36.1
GMMRC (%) 9.1
District Purchase price 837.5 1000
retailers Production cost
Marketing cost 82.99 82.99
Selling price 1180 1200
Market profit 259.51 117.01
GMMDR (%) 29.02 16.67
Wholesalers Purchase price 950 843.75 843.75 843.75
Production cost
Marketing cost 131.58 131.58 131.58 89.58
Selling price 1158.3 1158.3 1158.3 1000
Market profit 76.72 182.97 182.97 66.67
GMMW (%) 16.78 25.33 27.16 13.02
Central Purchase price 1158.3 1158.3
retailers Production cost
Marketing cost 57.9 57.9
Selling price 1241.7 1241.7
Market profit 25.5 25.5
GMMCR (%) 6.72 6.72
TGMM (%) 0 32.55 29.02 32.05 27.16 29.68
Source: Own computation from survey results, 2015.

also identified in the study area. Producers marketing interest in promoting onion production and marketing for
profit share was highest (606.5 birr/qt) when they directly equal benefits among value chain actors. It is highly
sell to wholesalers in channel IV, V and VI and lowest recommended to improve the input supply system so that
when they directly sell to district retailers which was farmers receive the right type of production inputs,
about (507.02) birr/qt in channel III. From traders the quantity and quality needed at the right time. Improving
highest onion marketing profit was taken by district system will protect farmers from purchasing low quality
retailer which was about (262.01 birr/qt) followed by inputs by high inputs cost. The role of research institutes
wholesalers which was about (191.72 birr/qt). The total and universities are crucial in identifying high yielding and
gross marketing margin was maximum (32.55%) in disease resistant varieties to improve production and
channel II and the minimum (27.16) in Channel V. Total productivity of onion. In order to overcome irrigation water
gross marketing margin (TGMM) was highest in channel shortage government should give attention to scaled up
II and IV which accounts, 32.75% and 32.05, respectively underground water and other water sources to expand
and lowest in Channel V which was 27.16%. The onion production and productivity. Improving the business
maximum producer’s share (GMMp) is highest (72.84%) planning skills of smallholders’ to produce diversified
from the total consumers’ price in channel V and lowest vegetables which can be targeted both for national and
(67.45%) in channel II. international markets is priority issues. Due to the lack of
The findings of this study enabled us to make the business knowledge and marketing system ,
following recommendations for policy makers, farmers are unable to take farming as business.
developments actors and researchers who have strong Therefore, there is a need to
 Addisu et al. 523

Table 9. Summary of constraints and opportunities along onion value chain.

Stage of value Constraints Opportunities Intervention needed
chain

Inputs supply -Shortage of good quality seed, -High demand for purchase -Government support for easy
herbicides/pesticides, farm implements quality seed, chemicals and farm access to inputs
-High cost of inputs implements -Strengthen linkage between input
-Demand for compost application suppliers and farmers

Production -Reduction of irrigation water availability -Availability of underground water -Concerned bodies should give
-Limited knowledge on recommended -Availability of daily laborer and attention to underground water
agronomic practice and post-harvest human resource development -Conduct trainings to farmers for
handling --Favorable climatic conditions improved quality production and
-Low irrigation facility and fertile land for vegetables post-harvest handling
-Diseases and pest attacks production -Training to smallholders on
-Lack of storage and high post-harvest -Enabling policy environment and disease/pest control method
loss support from public organization --Strengthen credits service
and NGOs providers institutions and improve
storage facility

Marketing/Trading -Poor transport facility -Government investment on -Strengthen functions of farmers

-Price setting problem infrastructure development cooperatives
-Product quality problem -Establishment of cooperatives -Control unlicensed traders
-Presence of unlicensed traders -High market demand for -Increase credibility and market
-Low price for the products and vegetables product linkages of vegetables value chain
perishability of the product -Establishments of credit actors
--Limited function of cooperatives providers --Domestic market and export
--Limited market research and credit -Closeness of study areas to market promotion
service Addis Ababa city --Improving farmers bargaining
-Government encourage research power by supporting farmers
cooperatives
Processing -Lack of processing facility -Active involvement of private -Encourage private to invest on the
sector in the industry sector

Consumers -Income shortage -High consumption preference -Improve consumers awareness on

-Lack of consumers cooperatives consumption habits of vegetables

Source: Own survey results, 2015.

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