Determinants of Smallholder Pulse Producers Market Orientation in Southern Ethiopia

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1 Asan Journal of Busness Management 6(2): , 2014 ISSN: ; e-issn: Maxwell Scentfc Organzaton, 2014 Submtted: November 20, 2013 Accepted: December 17, 2013 Publshed: May 15, 2014 Determnants of Smallholder Pulse Producers Market Orentaton n Southern Ethopa Tewodros Tefera School of Envronment, Gender and Development Studes, College of Agrculture, Hawassa Unversty, P.O. Box 05, Ethopa Abstract: Pulse crops producton and factors nfluencng the ntensty market orentaton were conducted n selected dstrcts of southern Ethopa. A total of 183 farmers were selected randomly and ntervewed usng structured schedule. The fndng reveals that 73% of households produce harcot beans n the study areas on about 17.2% of total cultvated land. Out of the total produce of harcot bean close to 56% were sold. Next to harcot bean, chckpea s mportant pulse crop and s produced by 26.8% of the households. About 69.5% of total chckpea produce was sold ndcatng that chckpea s an even more mportant cash crop. The average level of market orentaton ndex for harcot bean was 0.4 whle that of chckpea 0.53, ndcatng moderate level of households market orentaton. The Tobt estmaton result show that household head educaton level, access to credt and land per capta postvely nfluenced chckpea market orentaton whle beng male head of a household and accesses to credt ncreased the predcted value of harcot bean market orentaton. The key mplcaton of ths study s that nterventons amed at promotng market orentaton of pulse crops should promote smallholder access to credt, human captal development and women empowerment. Keywords: Market orentaton, pulses, smallholders, tobt INTRODUCTION Pulse crops are mportant components of crop producton n developng countres and a vtal crop for achevng food, nutrtonal and ncome securty of smallholders. The mportant and dverse role played by pulses n the farmng systems and n dets of poor people, makes them deal crops for achevng the developng countres government goals of reducng poverty and hunger, mprovng human health and nutrton and enhancng ecosystem reslence. On average, pulses contrbute about 3% of total calores consumed n developng countres, rangng from 4% n Sub Saharan Afrca (SSA) to less than 1% n Central Asa (Stou and Mywsh, 2011). Food pulses s (faba bean, feld pea, chckpea, harcot bean and lentl, also called legumes) occupy about 13% of the croplands n Ethopa and they are the second most mportant element n the natonal det, provdng a prncpal proten source. They are also an mportant detary supplement to cereal consumpton. Pulses are used prmarly for makng an Ethopan stew known as wot, whch s sometmes served as a man dsh to be eaten wth njera. Faba bean, feld pea, chckpea and lentl wdely grow n the hghlands whle harcot bean s grown n the low and ntermedate alttudes. Pulses recently have reganed sgnfcance as export commodtes. Although pulses have many desrable characterstcs n terms of hgh value crops, rch n nutrton and able to harness envronmental benefts, n most parts of Ethopa they are consdered secondary crops. As a secondary crop category, pulses do not receve nvestment resources and polcy attenton as do the cereal crops, whch are often, consdered food securty crops. Studes have shown that pulses on an average contrbute 15% of total proten ntake, account for 13% of the cultvated land and 8.5% of the total crop producton n Ethopa (Chlot et al., 2010). In recent years the pulse sector shows a steady ncrease n productvty and total volume of producton. Recently the government of Ethopa made strdes to transform the subsstence smallholder agrculture to commercal orented one. To ths effect pulses are consdered as the crtcal pathway for transformng the subsstence agrculture nto commercal orented agrculture. In spte of the polcy decson, there s a dearth of nformaton on the commercalzaton process and marketng behavor of smallholder 1 pulse crop producers n Ethopa. Accordng to Sheppared (2011) market orentaton s defned as a sequence of nformaton based behavors and a culture of customer and compettor orentatons and nter-functonal co-ordnaton. It states that market orentaton requres full knowledge of the market concept and practces, understandng the behavor and possble actons of rvals and commtment to serve the need and the wants of customers. The market orentaton of smallholders s dvergent from what s establshed to examne market orentaton of frms. Tradtonally smallholder farmers prmarly produce for ther substance need and sell whatever s surplus. Such 97

2 marketng practces of smallholders fall short of the market orentaton concept. For many years research on market orentaton has shaped marketng thnkng and busness operatons of frms (Helfert et al., 2001). Many studes llustrate the predomnant vew that developng a market orentaton s postvely assocated wth superor performance for the frm (Krca et al., 2005). Emprcal research fndngs show that market orentaton s postvely related to: proftablty (Narver and Slater, 1990); new product development and success (Atuahene-Gma, 1995); sales growth (Greenley, 1995); ncreased sales revenue and hgher levels of employee satsfacton, commtment and trust (Jaworsk and Kohl, 1993); and, customer servce and retenton (Narver and Slater, 1993). The overwhelmng volume of lterature on market orentaton has dealt wth the manufacturng sector (Narver and Slater, 1993; Helfert et al., 2001). However, research examnng the mportance of a market orentaton wthn food ndustry and retalng chans has recently shown up (Harrs and Percy, 1999). It s somewhat surprsng that wthn the food value chan, the mportance of a market orentaton has been examned for all other segments except producers (farmers). More recently lterature s emergng on market orentaton of smallholdng farmers (Gebremedhn and Jaleta, 2012; Wolday, 1994). Accordng to Gebremedhn and Jaleta (2012) household subsstence requrements, market access and producton factors (land, labor and captal) affect market orentaton of smallholder farmers n Ethopa. An earler study from Ethopa reported that landholdng sze and land slope, rrgaton use, number of oxen owned and membershp n extenson package program have postve and sgnfcant assocatons wth market orentaton and commercalzaton (Gotom, 2009). These researches are manly focusng on cereals and there s a gap n knowledge n the determnants of pulse crops market orentaton. Ths study attempts to contrbute to redressng ths gap of knowledge for the major pulse crops of harcot bean and chckpea. Data for the study were collected from Canadan Internatonal Food Securty Research Fund CIFSRF project dstrcts where these crops are mportant market orented commodtes and promoted through the project. Analyss of the varaton n market orentaton of households n these crops n areas where the crops are mportant source of cash ncome offers a unque opportunty to gan nsght nto the determnants of market orentaton. Multstage samplng procedures were employed to select vllage and farmers. In the frst stage, project stes were selected purposvely and from each ste three pulse growng vllages were selected. In the second stage from the selected three vllages per project ste between 56 to 65 farmers were selected randomly. Fnally, a total of 183 farmers were selected for personal ntervew. The survey questonnare was admnstered by traned and qualfed enumerators after they learned the content of the questonnare and survey admnstraton (Fg. 1). Emprcal procedure: Market Orentaton Index (MOI): Smallholder market orentaton s conceptualzed from the pont of market partcpaton (sellng marketable surplus) and the extent of product sale (volume of sales). Accordng to Gebremedhn and Jaleta (2010) a smallholder s market orented f ts producton plan follows market sgnals and produce commodtes that are more demanded by market actors. Ths means the producers address the three basc economcs questons: what to produce, how much to produce and for whom to produce. Ths entals a shft from subsstence to market orented producton systems. Under a subsstence orentaton, where producton, consumpton and marketng decsons are nseparable, all crops produced by a household may not be marketable n the same proporton. Ths s because the prme objectve of subsstence producers s to fulfll subsstence requrements and producton decsons are made based on agro-ecologcal feasblty and subsstence needs. In ths case, producers attempt to sell whatever surplus they mght have upon fulfllment of subsstence needs. Ths study adopted the methodology developed by Gebremedhn and Jaleta (2010), to examne smallholder market orentaton n Ethopa. Frst the crop specfc ndex was calculated and usng ths ndex as a proxy for the farmng system, household specfc market orentaton s calculated for crops whch are the nterest of ths study. Hence, a crop specfc marketablty ndex (ϕ k ) s computed for each crop produced at farmng system level as follows Eq. (1): N s 1 k N Q 1 k k (1) MATERIALS AND METHODS Study area and samplng procedure: The present survey was conducted from early July to end of August, 2012 n three project stes namely Huletegna Choroko, Taba and Jole Andegna (see Map of the study area). 98 where, ϕ k s the proporton of crop k sold (S k ) to the total amount produced (Q k ) aggregated over the total sample households n a farmng system. ϕ k takes a value between 0 and 1, nclusve. Crops manly produced for markets usually have ϕ k values closer to 1.

3 Fg. 1: Map of the study area Once the crop specfc marketablty ndex s computed, household s Market Orentaton Index (MOI ) s computed from the land allocaton pattern of the household weghted by the marketablty ndex of each crop (ϕ k ) derved from Eq. (2) as follows: MOI N k L T L 1 k (2) where, MOI s market orentaton ndex of household ; L k s amount of land allocated to crop k and L T s the total crop land operated by household. The hgher proporton of land a household allocates to the more marketable crops, the more the household s market orented. Econometrc model: Followng Maddala (1992), the Tobt model for the contnuous varable market orentaton ndex was employed. Unlke logt and probt whch s used when dependent varables of nterest take only two values (a dchotomous varable), denotng an event or non-event, tobt model handle lmted response dependent varable lke market orentaton whch range 99 between 0 and 1. The tobt model used n ths study s defned as: * y o x * y 0 y f x o (3) 0f 0 o x where, y = Market orentaton ndex for th farmer * y = The latent varable and the soluton to utlty maxmzaton problem of ntensty of market orentaton subjected to a set of constrants per household and condtonal on beng above certan lmt x = Vector of factors affectng ntensty or level of market orentaton β = Vector of unknown parameters μ = The error term whch s normally dstrbuted wth mean 0 and varance σ The model parameters are estmated by maxmzng the Tobt lkelhood functon of the followng form (Maddala, 1997; Amemya, 1985):

4 L = σ β σ AI *.>0 AI *.0 F Asan J. Bus. Manage., 6(2): , 2014 β σ (4) where, ƒ and F are, respectvely, the densty functon and cumulatve dstrbuton functon of Y *. means the product over those for whch Y 0 and whch Y * 0 Y *.>0 means the product over those for whch Y *>0. Econometrc software STATA was employed to run the Tobt model. Accordng to Johnston and Dnardo (1997), t may not be accurate to nterpret the coeffcents of a Tobt n the same way as one nterprets coeffcents n an uncensored lnear model. Hence, one has to compute the dervatves of the estmated Tobt model to predct the effects of changes n the explanatory varables. Before runnng the Tobt model all the hypotheszed explanatory varables were checked for the exstence of multcollnearty problem. There are two measures that are often suggested to test the exstence of multcollnearty. These are: Varance Inflaton Factor (VIF) for assocaton among the contnuous explanatory varables and contngency coeffcents for dummy varables. In ths study, Varance Inflaton Factor (VIF) and contngency coeffcents were used to test multcollnearty problem for contnuous and dummy varables respectvely. RESULTS AND DISCUSSION Pulse crop producton and contrbuton to household ncome: Harcot bean s an mportant component of the farmng system n project stes. About 73% of households produced harcot beans n the study areas on about 17.2% of total cultvated land. A household allocated about a quarter of a hectare of land for harcot bean producton. About 56% of harcot bean producton was sold, suggestng that harcot bean was also an mportant component of the household cash generaton. On average a household sold about 185 kg of harcot bean for a sales value of about 1022 brr 2. The proporton of harcot bean sold was more unevenly dstrbuted by the proporton of households sellng. About 33% of households sold only 26-50% of ther produce, whle about 32% sold % of ther produce. The rest 35% of the households sold less than 25% of harcot bean. In the project stes, chckpea was produced by about 26.8% of the households, on about 16.8% of the total cultvated area (Table 1). On average a household allocated about 0.26 ha of land for chckpea. A household also sold about 242 kg of chckpea, about 69.5% of total chckpea produce for total revenue of brr. The mode n the 100 Table 1: Harcot bean and chckpea producton and ncome contrbuton n the study area farmng Pulse crops Harcot bean and chckpea producton and contrbuton to household ncome Harcot bean Chckpea Proporton of households producng 72.70% 26.20% crop (%) Proporton of area covered by crop (%) 17.20% 16.80% /average holdng Area allocated (ha/household) 0.27 ha 0.26 ha Proporton of produce sold (%) 56% 69.50% /household Amount sold (qt) Average revenue/household (ETB) Own survey (2012) Table 2: Harcot bean and chckpea market orentaton Degree of market orentaton Harcot bean Chckpea % 18% % 30% % 28% > % 24% Average market orentaton 0.40 (0.59) 0.53 (0.49) (Mean, CV) Own survey (2012) proporton of chckpea produce sold ranged between 33 and 100%. Market orentaton of harcot bean and chckpea: The nvestgaton of the degree of market orentaton of the two major pulse crops n the study area revealed that the households degree of market orentaton was less to harcot bean than chckpea. The average level of market orentaton ndex for harcot bean was 0.4 whle that of chckpea 0.53, ndcatng moderate level of households market orentaton (Table 2). The coeffcent of varaton 59% for harcot bean and 49% for chckpea ndcates that there s huge varaton among smallholders n ther market orentaton. Close to 31.5% of harcot bean producers had nsuffcent gudance of the market compared to only 18% chckpea producers. Those who had good and greater market orentaton had accounted for 26% of harcot bean producers whle the proporton was rased to 52% for chckpea producers. Descrptve statstcs of varables used n the tobt regresson analyss: Determnants of market orentaton used n ths study can be categorzed as human captal (age, sex, educaton, household head) resource endowment (labor supply, land TLU, expense for fertlzer), access to market nformaton and access to nsttutonal factors (credt and market nformaton). Studes done on market orentaton of dfferent agrcultural commodtes n Ethopa had used smlar varables (Gebremedhn and Jaleta, 2012; Gotom, 2009). But n ths study natural factors such as ranfall and agro-ecology were omtted because of data lmtaton. About 15% of households n the sample were female headed. The prevalng educaton of household head was basc lteracy and elementary level educaton.

5 Table 3: Descrptve statstcs of varables used n the model Varable Obs. Mean S.D. Mn. Max. Sex of household head (1 = male, 0 = female) Educaton of household head Market nformaton (1 = yes, 0 = no) Famly sze (no.) Access to credt (1 = yes, 0 = no) Age of household head (year) Fertlzer expense (brr) Tropcal lvestock unt (no.) Landholdng sze (ha.) Land per capta (ha) Own survey (2012) The average household sze was about 6.9, wth famly labour supply of 4.3 persons/household, fgures whch are close to the natonal average. The average age of typcal household n ths study was 41 years. Whle the overwhelmng majorty of the respondents confrmed ther access to market nformaton (82%), only 20% acknowledged havng access to credt servce. A household on average operated about 1.47 ha, wth an average per capta landholdng of 0.23 ha. The average fertlzer value used for annual harcot bean and chckpea producton was brr, whch ndcates low level of fertlzer applcaton (Table 3). Determnates of market orentaton: Chckpea: Table 3 shows the estmaton results of the Tobt model. Seven varables were sgnfcant n explanng the market orentaton of chckpea n the project area. The χ 2 was hghly sgnfcant at 1% level of probablty ndcatng goodness of ft. The coeffcents of household head educaton level, access to credt and land per capta were postve and sgnfcant at 10% level of probablty. Ths mples that ncreases n these varables wll lead to ncreases n the level of chckpea market orentaton. On the other hand household head sex and fertlzer expense were negatve and sgnfcant at 10 and 5% level of probablty, respectvely. Ths fndng ndcates that female head of households have, by a reducton n the chckpea market orentaton compared to ther male head of a household counterpart, whle ncreases n fertlzer expense by a brr reduces the chckpea market orentaton (Table 4). In other words farmers who use fertlzer are less nterested to cultvate chckpea. The predcted value of chckpea market orentaton s ponts hgher for Taba chckpea producers than for chckpea producers n Huletegna Choroko. Smlarly the coeffcent 1.1 ndcates that market orentaton of chckpea n Jole Andegna s 1.1 ponts hgher than Huletegna Choroko. The fndng ndcates that chckpea producers n Taba and Jole Andegna are sgnfcantly market orented than Huletegna Choroko chckpea producers and the dfference s statstcally dfferent at less than 1% level. Harcot bean: The Tobt estmaton ndcates that beng male head of a household and access to credt 101 Table 4: Tobt model estmates of factors affectng chckpea market orentaton Chckpea market orentaton ndex Coef. S.E. t Household head sex * Household head educaton level * Market nformaton Access to credt * Household head age Land per capta * Fertlzer expense ** Tropcal lvestock unt Taba *** Jole andegna *** _cons *** χ *** Log lkelhood Total sample 180 Own survey (2012); Hultegna Choroko s base project ste; ***, **, * are sgnfcant at 1%, 5% and 10% respectvely Table 5: Tobt model estmaton of harcot bean market orentaton Harcot bean market orentaton ndex Coef. S.E. t Household head sex *** Household head educaton level Market nformaton Famly sze Access to credt *** Household head age * Landholdng sze * Fertlzer expense * TLU * Taba *** Jole andegna *** _cons *** χ *** Log lkelhood Total sample 135 Own survey; Hultegna Choroko s base project ste; ***, **, * are sgnfcant at 1%, 5% and 10% respectvely ncreased the predcted value of harcot bean market orentaton by a factor of and 0.207, respectvely and the result was statstcally sgnfcant at less than 1% probablty level. Land holdng, TLU and age of the respondents were negatvely related wth harcot bean market orentaton. The fndng mples that one year ncrease n age of respondent, a unt ncrease n TLU and an ncrease n land holdng by a hectare decrease the predcted value of market orentaton by 0.01, 0.08 and 0.07, respectvely. A one brr ncrease n fertlzer

6 expense ncreased the market orentaton of harcot bean by (Table 5). The predcted value of harcot bean market orentaton was ponts lower for Taba respondents than for respondents n Huletegna Choroko. Smlarly the coeffcent ndcates that market orentaton of harcot bean n Jole Andegna was 0.58 ponts lower than Huletegna Choroko. Ths mples that that harcot bean producer n Taba and Jole Andegna were sgnfcantly less market orented than Huletegna Choroko respondents and the dfference was statstcally sgnfcant at 1% probablty level. CONCLUSION promotng market orentaton of pulse crops should promote smallholder access to credt, human captal development and women empowerment and create awareness on the nutrton value of pulse crops. ACKNOWLEDGMENT The author s grateful to the fnancal support he receved form CIFSRF project. He also would lke to thank Dr. Sheleme Beyene, Dr. Carol Hennery, Dr. Pascal, Dr. Susan and Dr. Atul for ther support and encouragement. REFERENCES Harcot bean and chckpea are mportant marketorented commodtes n project stes. About 73% of households produce harcot beans n the study areas on about 17.2% of total cultvated land. Close to 56% of harcot bean produced s sold, suggestng that harcot bean s an mportant component of the household cash source. About 33% of households sold only 26-50% of ther produce, whle about 32% sold % of ther produce. Chckpea s a hgh value crop produced by 26.8% of the households on about 16.8% of the total cultvated area. On average a household allocates about 0.26 ha of land for chckpea. A household also sold about 242 kg of chckpea for total revenue of brr. The proporton of chckpea produce sold ranged between 33 and 100%. The average level of market orentaton ndex for harcot bean was 0.4 whle that of chckpea 0.53, ndcatng moderate level of households market orentaton. The coeffcent of varaton ndcates that there s huge varaton among smallholders n ther market orentaton. Close to 31.5% of harcot bean producers had nsuffcent gudance of the market compared to only 18% chckpea producers. The Tobt estmaton result shows that household head educaton level, access to credt and land per capta postvely nfluenced chckpea market orentaton. On the other hand household head sex and fertlzer expense were negatvely assocated. The fndng ndcates that female headed households are more lkely to engage n chckpea producton. The Tobt estmaton of harcot bean ndcates that beng male head of a household and access to credt ncrease the predcted value of harcot bean market orentaton by a factor of and 0.207, respectvely. Land holdng, TLU and age of the respondents are negatvely related wth harcot bean market orentaton. There s need to focus attenton on mprovng harcot bean and chckpea market orentaton among rural households. Ths s because close to 56% of harcot bean and 69.5% of total chckpea producton s sold, suggestng that both pulse crops are an mportant component of the household cash source. The key mplcaton of ths study s that nterventons amed at 102 Amemya, T., Advanced Econometrcs. T.J. Press, Pad Stow Ltd., Great Brtan. Atuahene-Gma, K., An exploratory analyss of the mpact of market orentaton on new product performance: A contngency approach. J. Prod. Innovat. Manag., 12: Chlot, Y., R. Shahdur, B. Befekadu and L. Solomon Pulses value chan potental n Ethopa: Constrants and opportuntes for enhancng exports. Internatonal Food Polcy Research Insttute (IFPRI). Gebremedhn, B. and M. Jaleta, Commercalzaton of smallholders: Is market partcpaton enough? Proceedng of AAAE 3rd Conference/AEASA 48th Conference. Cape Town, South Afrca, September 19-23, Gebremedhn, B. and M. Jaleta, Market orentaton and market partcpaton of smallholders n Ethopa: Implcatons for commercal transformaton. Proceedng of Internatonal Assocaton of Agrcultural Economsts (IAAE) Trennal Conference. Foz do lguacu, Brazl. Gotom, A., Commercalzaton of smallholder farmng, determnants and welfare outcomes: A cross-sectonal study n Enderta Dstrct, Tgra, Ethopa. M.A. Thess, The Unversty of Agder, Krstansand, Norway. Greenley, G.E., Market orentaton and company performance: Emprcal evdence from UK companes. Brt. J. Manage., 6: Harrs, L.C. and N.F. Percy, Management behavor and barrers to market orentaton n retalng companes. J. Serv. Mark., 13(2): Helfert, G., T. Rtter and A. Walter, How does market orentaton affect busness relatonshps? Proceedng of the 17th IMP Conference, Oslo, September 9-11, pp: Jaworsk, B.J. and A.K. Kohl, Market orentaton: Antecedents and consequences. J. Marketng, 57:

7 Johnston, J. and J. Dnardo, Econometrc Methods. 4th Edn., Mac Graw-Hll, New York. Krca, A.H., S. Jayachandran and W.O. Bearden, Market orentaton: A meta-analytc revew and assessment of ts antecedents and mpact on performance. J. Marketng, 69: Maddala, G.S., Econometrcs. Mcgrow-Hll Book Co., Sngapore. Maddala, G.S., Introducton to Econometrcs. 2nd Edn., Macmllan Publshng Co., New York. Narver, J.C. and S.F. Slater, The effect of marketng orentaton on busness proftablty. J. Marketng, 4(1): Narver, J. and S. Slater, Market orentaton and customer servce: The mplcatons for busness performance. Eur. Adv. Consum. Res., 1: Sheppared, R., The evoluton and conceptualzaton of market orentaton: What managers ought to know? J. Manage. Polcy Pract., 12(6): Stou, A. and M. Mywsh, Global and regonal trends n producton. Trade and Consumpton of Food Legume Crops. Report Submtted to SPIA, March 27, Wolday, A., Food gran marketng development n Ethopa after the market reform 1990: A case study of Alaba Sraro Dstrct. Ph.D. Thess, Verlag Köster, Berln. Endnotes: 1: Smallholder s the one wth lmted land avalablty, poor-resource endowments, subsstence-orented and hghly vulnerable to rsk. 2: Brr s the unt of currency n Ethopa and 1 US Dollar = Ethopan Brr n October,