Production and Marketing Efficiency of Dairy Farms in Highland of Ethiopia- an Economic Analysis

Ethiopia has the largest livestock population in Africa but the contribution of this resource to the economy is limited and yet the country is in poverty. Dairy development has a big role for the contribution of income generation and employment. Demand for dairy products seems to exceed supply in the country in general and the study area in particular. Hence, the situation of dairy production and marketing issues is needs to be discussed and analyzed. This paper is based on a research study among 168 dairy farms (85 cross breed and 83 local breed) in a town (Mekelle) of northern Ethiopia. A two stage stratified random sampling procedure was used to select the specific farm households. Farms owning 1-3, 4-10 and greater than 10 dairy cows were classified as small, medium and large farms, respectively and only small and medium size farms were considered for further data collection. In this study an attempt has been made to evaluate the efficiency of inputs use, assess profitability and analyze the efficiency differentials of modern (cross breed) and traditional (local breed) dairy farms. Cobb-Douglas production, cost-benefit and break-even ratios are employed to assess resource use efficiency, profitability and financial efficiency of both cross and local breed dairy farms. The resu l t s ind icate that the regression coefficients with respect to concentrate f or medium and small size cross breed farms a re positive and significant at 10% level. T h e coefficient of dry fodder f o r medium s ize cross breed and local breed are positive and significant at 10% level. The marginal value products (MVPs) and the ratio with price for concentrate were higher for medium size than small size cross breed farms. The MVP for dry fodder, the return i s h igher in medium size cross breed and local breed farms. There is difference between the present and optimum levels of inputs. The C:B results indicated that cross breed farms were profitable (1.0:3.02) than local breed farms (1.0:2.18). Both medium and small categories of cross breed farms were International Journal of Enterprise Computing and Business Systems ISSN (Online) : 2230-8849 http://www.ijecbs.com Vol. 1 Issue 2 July 2011 2 profitable (1.0:3.45 and 1.0:2.74). Among local breed, medium size farms are profitable (1.0:2.19). The ratio of break-even milk output for cross breed and local breed cows farms needed 13% and 18% additional milk production to cover fixed cost, respectively. To conclude, dairy cow's owners should be advised to use the optimum levels inputs and replace their indigenous cow with cross breed cow. Moreover, the herds should be medium size and feeding mainly depends on concentrate.