FACTORS DETERMINING SUPPLY OF RICE:

A STUDY IN FOGERA DISTRICT OF ETHIOPIA

A THESIS SUBMITTED TO SCHOOL OF GRADUATE STUDIES OF

ALEMAYA UNIVERSITY

IN PARTIAL FULFILLMENT FOR THE REQUIREMENTS OF MASTER OF

SCIENCE DEGREE IN AGRICULTURAL ECONOMICS

BY WOLELAW SENDEKU

JANUARY, 2005
ALEMAYA UNIVERSITY

BIOGRAPHY

The author, Wolelaw Sendeku, was born in Bahir Dar town in 1970 and grown in the same place
till joining the primary school. After completing the primary and secondary school in Bahir Dar
he joined Alemaya University in 1987 and graduated in Agricultural Economics in 1990 with a
Bachelor of Science Degree.

From the year 1991 to year 1993 he worked as an expert of socio-economy in Planning and
Programming Department under the Ministry of Agriculture in southern Ethiopia. From the end
of year 1993 to year 1996 worked as an expert of Project Preparation in the Department of
Natural Resource and Environmental Protection under Ministry of Natural Resource
Development and Environmental Protection in Amhara National Regional State.

From the beginning of 1997 till he joined the same University for Post Graduate Study, in the
year 2003, he served as Rehabilitation Division Coordinator in an Organization for Rehabilitation
and Development in Amhara (ORDA), in Amhara National Regional State.

ACKNOWLEDGEMENTS
In the first case, I want to thank my major advisor, Dr. S. Senthilnathan, for his advice in
amending the title of research in short and reasonable form, and continuing the rest of the work
starting from proposal preparation up to submission. The same effort is also mentionable in time
of data collection, write up, and correction of some aspects of the document. His visit during data
collection is unforgettable in giving suggestions for some difficulties during this work.

The Fogera Woreda Agriculture Office workers made unreserved invaluable effort during data
collection in which other wise was not possible to collect appropriate and reliable information for
the research work. Every necessary data was collected through participation of those office
workers.

Great thank deserves to Organization for Rehabilitation and Development in Amhara (ORDA)
for facilities of computer, working room, and other necessary materials needed for that time.
Special gratitude is to be given to the secretary, w/t Aynadis Mekonnen, for her secretarial work
of what was required.

Alemaya University takes a considerable share of gratitude for the arrangement of the Graduate
Studies Program and giving me a chance to join this further education, and delivering the
facilities during my stay in the campus.

ii

Some sort of appreciation is extended to the Amhara Region Agricultural Research Institute
(ARARI) for funding of the research even it was not enough to accomplish all of the research
works as compared to the nature of the research.

My appreciation also goes to Ato Birhanie Gidey in Addis Ababa for his delighted cooperation in
delivering reference documents and literatures related to the title of my study. He was also
encouraging me for the started research work how to proceed in reference to the title.

Lastly, an equitable consideration is to be reserved to my sisters, and my fiance Rahel Sebsbie

for their courage in continuing my post graduate study in line with supporting me ideally as well
as delivering important materials for my study.

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ACRONYMS

AMC

Agricultural Marketing Corporation

ARP

Acreage Reduction Program

BFED

Bureau of Finance and Economic Development

EGTE

Ethiopian Grain Trading Enterprise

FAO

Food and Agriculture Organization

GATT

General Agreement on Trade and Tariff

GDP

Gross Domestic Product

GME

Grain Marketing Enterprise

GMRP

Grain Market Research Project

GPS

Guaranteed Price Scheme

IAR

Institute of Agricultural Research

MEDAC

Ministry of Economic Development And Cooperation

OLS

Ordinary Least Squares

PMB

Paddy Marketing Board

SPSS

Statistical Package for Social Sciences

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TABLE OF CONTENTS

Page

BIOGRAPHY ............................................................................................................................... i
ACKNOWLEDGEMENTS ..................................................................................................... ii
ACRONYMS .............................................................................................................................. iv
TABLE OF CONTENTS ......................................................................................................... v
LIST OF TABLES ................................................................................................................... vii
LIST OF FIGURES................................................................................................................. viii
ABSTRACT ................................................................................................................................ ix
CHAPTER I, INTRODUCTION............................................................................................ 1
1.1 Background................................................................................................................................ 1
1.2 Statement of the Problem .......................................................................................................... 4
1.3 Objectives of the Study ............................................................................................................. 6
1.4 The Significance of the Study ................................................................................................... 6
1.5 Scope of the Study..................................................................................................................... 7

CHAPTER II, REVIEW OF LITERATURE ...................................................................... 8

2.1 Definitions ................................................................................................................................. 8
2.2 Theoretical Aspects and Concepts........................................................................................... 10
2.3 Empirical Results..................................................................................................................... 17

CHAPTER III, DESCRIPTION OF THE STUDY AREA ........................................... 23

CHAPTER IV, METHODOLOGY OF THE STUDY ................................................... 31
4.1 Sampling Design ..................................................................................................................... 31
4.2 Data Collection ........................................................................................................................ 32
4.3 Method of Analysis ................................................................................................................. 33

CHAPTER V, RESULT AND DISCUSSION ................................................................. 38

5.1. Demographic Characteristics.................................................................................................. 38
5.2. Socioeconomic Characteristics............................................................................................... 41
5.3. General Pattern of Rice Production and Marketing................................................................ 44
5.4. Descriptive Analysis of Rice Production, Consumption and Marketing................................ 45
5.5. Determinants of Rice Supply.................................................................................................. 49
5.6. Marketing Efficiency.............................................................................................................. 54
5.7. Marketing Problems ............................................................................................................... 58

CHAPTER VI, SUMMARY AND CONCLUSIONS .................................................... 61

6.1. SUMMARY ........................................................................................................................... 61
6.2. CONCLUSIONS AND POLICY IMPLICATIONS.............................................................. 62

REFERENCES .......................................................................................................................... 65
APPENDICES ........................................................................................................................... 71

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LIST OF TABLES

Table 1: The number of household heads of each kebele for the Fogera District......................... 24
Table 2: Share of different crops in area coverage in Fogera District (2003/2004)...................... 27
Table 3: Wholesale and retail rice prices at nominal level for Woreta and Bahir Dar.................. 28
Table 4: Demographic characteristics of sample households........................................................ 39
Table 5: Socioeconomic characteristics of sample households..................................................... 41
Table 6: Cultivation area of rice in sample households by kebele (in ha)..................................... 45
Table 7: Total production of rice in sample households by kebele (qt/hh) ................................... 46
Table 8: Consumption of rice in sample households by kebele (in qtls/hh) ................................. 47
Table 9: Supply of rice by sample households by kebele (in qtls/hh)........................................... 47
Table 10: Summary of rice area, production, consumption, and supply averages per hh............. 48
Table 11: Current price of rice by kebele during the year (2003/2004) (in Birr/qtl) .................... 49
Table 12: Regression results of rice supply model........................................................................ 51
Table 13: Distribution of marketing efficiency (Index) ranges..................................................... 56
Table 14: Percentage analysis of marketing problems of rice producers ...................................... 59

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LIST OF FIGURES

Figure 1: Map of Fogera District with its Kebeles and Neighboring Districts.............................. 25
Figure 2: Wholesale price of rice at Woreta and Bahir Dar by year ............................................. 29
Figure 3: Retail price of rice at Woreta and Bahir Dar by year..................................................... 30
Figure 4: Frequency distribution of marketing efficiency ranges of rice producers ..................... 57

viii

FACTORS DETERMINING SUPPLY OF RICE:

A STUDY IN FOGERA DISTRICT OF ETHIOPIA
By Wolelaw Sendeku
Major Advisor: S. Senthilnathan (Ph.D)

ABSTRACT
To address the food insecurity problem of Ethiopia, production of alternative crops to teff, maize
and sorghum is being tested at various locations. The first rice-testing program was started in the
year 1967 in different parts of the country. The highest yield level achieved was about 80
qtls/ha.in Gambella; 50 qtls/ha.in Fogera; 56 qtls/ha.in Arbaminchand 63 qtls/ha.in Chefa. Rice
cultivation has been popularized in Fogera District for past 25 years. Between the years 1993
and 1998 rice production has multiplied several times in terms of households, area and
production. Research reports documented the possibility of cultivating rice in some other areas
also. Before expanding the area under the crop in the country it is imperative to analyze the
supply behavior of rice farmers in terms of market participation, marketing efficiency and to
address the problems faced by farmers and consumers/traders in rice marketing. A research was
carried out in Fogera District of Amhara National Regional State to investigate the productionmarketing linkages in rice. Specific objectives of the study were to analyze the factors
determining the supply of rice at farm level, to assess the marketing efficiency of rice farmers and
to identify the constraints if any in marketing of rice. Two stage sampling technique was followed
to select 120 rice farmers distributed over four among the eight kebeles of the district having the
same agro ecological features. Thirty sample farmers were selected randomly from the list of rice
farmers maintained in the District Agriculture Office. The primary data were collected during
months from November 2003 to February 2004.The results of the study indicated that among the
factors considered to determine the supply of rice, current price, total production in the farm,
quantity of rice consumption and weather had significant effect. Marketing efficiency of rice
farmers was estimated from the unit profit and unit marketing cost of rice using Shepherd
formula. Distribution of marketing efficiency of the sample rice farmers showed that about 53.3
percent were below mean level of efficiency, 42.5 percent above mean level and only 4.2 percent
concentrated around the mean level. The critical problems in marketing of rice as reported by the
sample farmers were, distress sale at the time of harvest, absence of adequate processing
facilities, poor transport facility and inability to improve the quality of rice. Rice processors and
traders reported improper drying, immature harvest of the crop and presence of dust, sand and
weed seeds as the major problems they face. Some policy implications like developing transport
infrastructure, continuing with the price support policy, emphasis on the quality of the rice
product by delivering improved variety and designing the needed extension method and
promotion of rice consumption were recommended.

ix

CHAPTER I, INTRODUCTION
Food crop production of a peasant household is allocated between home consumption and
market sales, although the former is obviously the primary concern. The allocation decision,
which is affected by various factors such as price and level of output, has been the focus of
numerous studies. According to some authors, subsistence peasants have a fixed demand for
money and therefore sell only as much production as is necessary to obtain the desired money
income. At higher prices the peasants sell less and at lower prices sell more to satisfy their fixed
cash demand. Some authors contend that the cash demand of peasants is unlimited and at higher
prices they sell more because their income elasticity of manufactured goods is elastic.
- Kilingo and Kariuki

The issue of supply is a paradox in case of food grains, to mean it is not easy to forecast the
interaction of different aspects, as there are varieties of food grains with different characteristics.
1.1 Background
Rice is cultivated over an area of about 145 million hectares with a production of about 380
million tons of paddy at global level. In terms of production and area coverage it is second to
wheat. Rice provides about 22 percent of the worlds supply of calories and 17 percent of the
proteins. Maximum area under rice is in Asia.

According to De Candolle and Watt (1886) southern India was the place where cultivated rice
originated. Vavilov (1926) suggested that India Burma should be regarded as the center of
cultivated rice (cited in Seyfu, 1993).

Rice is the staple food of more than 60 percent of the worlds population. About 90 percent of all
rice grown in the world is produced and consumed in the Asian region. Rice is primarily a high energy or high -calorie food with 64.7 % carbohydrate (Seyfu, 1993).

The byproducts of rice milling are used for a variety of purposes; rice bran is used as a cattle and
poultry feed, rice hulls can be used in manufacture of insulation materials, cement and card board
and are also used as litter in poultry keeping, rice straw can be used as a cattle feed.

Rice is grown under widely varying conditions of altitude and climate. It grows from sea level to
as high as 3000 meters and it needs a hot and humid climate. It is best suited to regions that have
high humidity prolonged sunshine and an assured supply of water. The average temperature
required through out the life period of the crop ranges from 210C to 370C. The temperature
required for blooming is in the range of 26.50C to 29.50C and at the time of ripening the
temperature should be between 200C and 260C (BFED, 2002).

The first rice-testing program was started in 1968 in different parts of Ethiopia. The maximum
possible results of cultivation through years 1968 to 1988 were 80.85q/ha for Gambella and
Melka Worer, 50.55q/ha for Fogera of South Gondar, 56q/ha for Arbaminch, and 63q/ha for
Chefa of South Wollo. Based on the results of previous rice testing activities that have been
carried out from 1968 to 1992 the rice extension activities have been strongly initiated in Fogera
farmers cooperatives fields, and in Gambella and Pawe resettlement areas. However, because of
the liquidation of farmers producers' cooperatives and evacuation of rice producers from
settlement areas, this crop became out of production in Fogera District and some other areas
where the rice development activities were initiated (Seyfu, 1993).

The total area coverage of the Amhara region is estimated about 17million ha. Out of this area,
about 4.5million ha of land is non-erosion prone area, but this area remains idle during the main
rainy season due to water flooding. However, 166500 ha of Lake Tana belt, 29050 ha of MetemaQuara, 65476 ha of Metema-Armachiho, 18694 ha of Dangila-Jawi, 10500 ha of Bichena,
137326 ha of South Wollo, 201955 ha of North Shewa, 1580499 ha of other areas are suitable for
rice cultivation Since 1994, rice production has resumed, especially in Fogera and Mettema areas
of Amhara National Regional State. These rice development activities again achieved promising
results with in short period. During 1994, 256 households cultivated rice in an area of 65 ha and
produced 1265 quintals. After five years, in 1999 production period, as much as 16383
households cultivated rice in an area of 6775.5 ha and 313921 quintals was produced in the
region (BFED, 2002). This records a tremendous increase in the response from the part of
farmers to produce rice in Ethiopia. This supports the efforts of the government that with a view
to address the food insecurity problem in the country production of alternate crops to teff, maize,
and sorghum is being tested at various places in Ethiopia. Rice is one of the cereal food grain
crops cultivated in restricted areas in Ethiopia. Research efforts in the past documented the
possibility of cultivating this crop as an alternative crop in certain areas. Further research is
needed to analyze the supply behavior of rice farmers to continue with the policy of encouraging
this crop as substitute for teff, maize and sorghum, which are the staple crops in Ethiopia.

1.2 Statement of the Problem

For the past two decades, recognition of critical role of markets in economic development led to
sweeping market reforms across a number of developing countries. In spite of these reforms,
symptoms of poorly functioning markets in much of Sub Saharan Africa are evident in the
segmentation of markets, low investment in the market infrastructure, the persistence of high
margins and of the market thinness and the limited progression toward more complex
arrangements (Eleni, 2001).

Starting on its establishment, the Agricultural Marketing Corporation, since 1995 it is called
Ethiopian Grain Trading Enterprise (EGTE), has rapidly expanded its food grain purchase in the
surplus -producing Administrative Regions. The quantity purchased by the Enterprise increased
from 1.5 million quintals in 1978/79 to 4.6 million quintals in 1981/82.

The Grain Marketing Enterprise purchases grain from peasant associations, service cooperatives
and merchants. Its operation has been supported by measures, which weaken the private traders
and resulted in lower purchase prices that further discourage producers.

In the pre-liberalization period (before 1992) some of the steps taken include limitations and
controls of the private trading system, regional administrative controls on the movement of
cereals and delivery quotas imposed on peasant associations. In many areas traders are made to
deliver all their purchases to the AMC and they are not allowed to move grain from one district to
another.

In view of the increasing price of fertilizer, which is mostly imported from other countries and
consumer goods as well, the price paid by the AMC seems to be dictated by the objective of
supplying the urban areas with cheap food grains, which is against the interest of the peasant
sector.

Ethiopian Grain Trading Enterprise doesnt involve in the study area in rice trading and
marketing. However, some cooperatives purchase rice during harvesting time and sell to
consumers after processing; even these cooperatives are not well organized.

Agricultural marketing has become highly complex and difficult involving very large and long
marketing channels, a large number of middlemen, many types of physical, social, economic and
facilitating marketing functions and services. The majority of farmers are marginal, small,
scattered, illiterate and unorganized. They do not have sufficient time, knowledge and skills for
the scientific marketing of their produce. In the absence of well developed markets, marketing
facilities, and marketing efficiency, farmers are at disadvantage by selling their increased
marketable surplus to traders in the market as they get low prices (Thakur et al. 1997).

Whenever there are conditions as higher price of factors of production, lower expected price of
grains, more risks to produce grains, and longer procedures and higher costs to deliver the grains
to the market etc., the total market supply of food grains will be very less and this affects the
earnings of rice growers, the business of rice traders and the consumers as well. Present study is
an attempt towards analyzing the supply of rice at farm level that has its effect on the rice trade at
the regional level.

1.3 Objectives of the Study

After analyzing the production behavior of rice farmers in the study area and considering the
resource limitations with the researcher, the general and specific objectives were set as below.

General objective of the study was formulated as:

-To investigate the linkage of production and marketing of rice in relation to benefits of
producers and consumers.
Specific objectives were: 1. To analyze the factors determining the supply of rice at farm level,
2. To assess the local marketing efficiency in supply of rice, and
3. To identify the constraints, if any, in marketing of rice.

1.4 The Significance of the Study

The supply of food grains is the disposal of production by which either the excess of production
over consumption or all of the produced quantity (when plan of production is for market) is
delivered to non-producing consumers through market centers.

The importance of the study was then to identify the root causes affecting the continuous and
sustained supply of rice, which has emerged as a major food substitute for teff and income source
for producers.

The study is expected to suggest strategies for smooth integration among production, processing,
transportation and marketing by referring to root causes for supply and tackling these root causes.

1.5 Scope of the Study

Rice production in South Gondar Administrative Zone, Fogera District of Amhara Regional
State, is taking place in form of income generating activity. Area under rice in this District is
concentrated around the swampy parts that favor rice production. As a result, the study is to
consider these areas of rice production in order to obtain the necessary data. Results of the study
would help the development planners and policy makers in preparing the rice production and
supply plan as an alternative strategy for food security problem for the study area, taking into
consideration the local factors. Present study focuses on the supply side of the rice market with an
assumption that there exists sufficient demand in the market to absorb its supply. However, this
study will be a start point for further research in supply of food grains in the Ethiopian context.

CHAPTER II, REVIEW OF LITERATURE

In this chapter, definitions and explanations of the terms, concepts and theories related to supply
of food grains in general and that of rice in particular are presented. To understand the research
problem, results of the past studies in the subject were also reviewed and presented.

2.1 Definitions

2.1.1 Supply
The farm supply is a primary supply, and the retail supply is a joint product of the farm and
marketing economies. Again, the supply can change in either market as a result of changes in one
or more of the determinants. Supply at the farm level is more inelastic than at the retail level in
the short run. In general, the supply of agricultural commodities is very elastic whereas, the
demand for them is inelastic. This is really the reason behind the very importance of agricultural
policy. Under GATT agriculture is the core point of negotiation. When there are changes in
demand with no change in supply, prices fluctuate relatively more at the farm than at the retail
level (Harklow, 1984).

2.1.2 Marketable and Marketed Surplus

Marketable surplus is the quantity of the produce left out after meeting the farmers consumption
and utilization requirements for kind payments and other obligations such as gifts, donation,
charity, etc. Thus marketable surplus shows the quantity left out for sale in the market. The
marketed surplus shows the quantity actually sold after accounting for losses and retention by the
farmers, if any and adding the previous stock left out for sale. Thus marketed surplus may be
equal to marketable surplus, it may be less if the entire marketable surplus is not sold out and the

farmers retain some stock and if losses are incurred at the farm or during transit (Thakur et
al.1997).

The importance of marketed and marketable surplus has greatly increased owing to the recent
changes in agricultural technology as well as social pattern. In order to maintain the balance
between demand for and supply of food grains with rapid increase in demand due to higher
growth in population, urbanization, industrialization and over all economic development accurate
knowledge on marketed/marketable surplus is essential in the process of proper planning for the
procurement, distribution, export and import of agricultural products (Malik et al.1993).

2.1.3 Elasticity of supply

The degree to which production responds to price changes differs from one agricultural product
to another. There may be differences in elasticity of demand and supply in developed and
underdeveloped countries. There are some reports that the supply of agricultural commodities in
developing countries is inelastic due to the poor technological options. There are two types of
elasticity in terms of price. Elasticity with respect to price of the commodity itself is own price
elasticity while elasticity with respect to price of other commodity is cross price elasticity
(Branson and Norvell, 1983).

2.1.4 Market
A market is an institution with in which the forces of demand and supply operate; sellers, and
consumers are in constant communication, and there is change of title to goods and / or services.
Marketing is the process of bringing sellers and buyers together for the purpose of exchanging
title to goods and services (Kilingo and Kariuki, 2001).

As a basic definition, marketing is the process of satisfying human needs by bringing product to
people in the proper form and at the proper time and place. Marketing has economic value
because it gives form, time, and place utility to products and services. As product definition, it is
the process associated with the exchange of one product for another (Branson and Norvell, 1983).

2.1.5 Marketing efficiency

The concept of marketing efficiency seems simple, but it is complex to define and difficult to
apply. To state as simply as possible, marketing efficiency requires the existence of a marketing
system having a structure of stages and firms with in stages such that marketing costs are
minimized by (1) encouragement of physical innovations and (2) competitive pricing charges
equal costs plus a normal rate of profit. This definition has several aspects, which we shall now
consider in turn. For this Bain (1968) is credited with much of the initial thought about
efficiency. Since the beginning provided by Bain, seven aspects or criteria of marketing
efficiency have been identified as Technology, Organization, Pricing, Price discovery, Product
innovation, Stable growth, and Market coordination.

2.2 Theoretical Aspects and Concepts

2.2.1 Supply theory
Supply is limited by the costs of bringing goods to the market irrespective of how much can be
bought. Hence product markets develop with the support of transport, communication, and
infrastructure. The expansion becomes cumulative. The more the number of commodities the
more will be the income of the producer. Supply is predominantly determined by price of the
commodity in question especially when there are floor and ceiling prices imposed by the
government or any other responsible body. If the government imposes a maximum, or ceiling,

10

price on a good, the effect is to cause a shortage of that good and frequently creates a black
market that rations the quantity available (Maurice and Phillips, 1986).

2.2.2 Supply determinants

The most important factor which increases marketed surplus significantly is the increased
production or output followed by consumption and payments in kind which should be reduced to
keep up the quantity of marketed surplus of food grains (Thakur et al.1997).

The behavior of marketed surplus to change in prices and non-price factors like irrigation,
acreage and productivity is of critical importance in formulating agricultural policy (Chavan et
al.1999). According to Pan African Institute (1981), family size in terms of adult equivalent is the
other non-price factor (cited in Abebe, 2000).

In spite of the importance of basic grains both in agricultural production and in food
consumption, there is lack of knowledge as to how changes in prices and other factors affect their
production and consumption (Ramos and Lopez, 1997).

In fact, the production of most food and fiber crops is within the inelastic response sector of the
supply curve. But more than price affects farm output, as we can see in factors affecting the
supply of food grain (Friedmann, 1974).

2.2.3 Market demand and supply

Markets may grow through increases in real income of people in an area, which enable them to
buy more. Where countries are already active in international markets, the main means of

11

expanding demand are through taste changes and increases in domestic incomes. Under Ethiopian
condition, for commodities sold locally, markets grow because of improvements (that is, decrease
in cost) in transport and communication. The market is originally small. Demand for local
production is restricted by low incomes, the cost of getting goods out of the village, and
ignorance about whether they can be sold outside. Measures to increase production are
incomplete without steps to increase the market supply of a subsistence sector. Because, the cash
necessary to purchase off- farm inputs to increase production depends on the income earned from
grain sales. An increasing volume of food supply at the macro level must also be secured to
satisfy the demand of the fast growing market dependent population (Harklow, 1984). The total
market is in equilibrium if suppliers can sell what they want to sell at the going market price and
buyers can buy what they want at that price (Lundstorm and Lamont, 1976).

The number of buyers and sellers largely determines size of the market and quantity of
transaction. The seller decides on the place to sell after considering alternate locations into which
they can move the product. The increase in elacticities of supply and demand that accompanies
market expansion is vital to the effective working of the price system. The situation is especially
acute when local production is zero to begin with. An increase in price, more over, does not
stimulate increased consumption: existing buyers do not demand more, and new buyers are not
added to their number. Only structural changes changes in the composition of output and in the
distribution of income seem capable of producing changes on the needed scale (Kindleberger
and Herrick, 1977).

12

2.2.4 Market structure

To be able to undertake a comprehensive structure- conduct- performance appraisal of a market it
is necessary to study the market chain for a given commodity from production to final
consumption. Markets can be categorized by the number of sellers and the number of buyers of a
commodity. The theoretical extremes are perfect competition (many buyers and many sellers so
that a single buyer or seller cannot influence the price of commodity) and monopsony/monopoly.
Between these extremes are the degrees of imperfect competition, such as oligopoly in which
there are two or more but at most only a few sellers or in the case of oligopsony in which there
are two or more but at most only a few buyers (Kilingo and Kariuki 2001)

2.2.5 Market conduct

The governance structures with in a marketing channel depend largely on three variables: the
frequency of interaction among channel members, the degree of uncertainty facing both actors
(i.e. the sellers and the buyers) and the extent to which channel members have incurred
transaction specific expenses to do business with one another. The more frequent the interaction,
the more uncertain the environment, the more transaction specific investments are required, the
more rapidly channels will move towards tighter and more comprehensive forms of governance
(Herman and Lutz, 1994).

Prices of agricultural commodities should be viewed in their broader perspective. If peasants are
positively responding to prices of especially the food crop, failure to take account of the
disincentive effect of fixing prices at low levels may have a damaging effect on production. It
must be understood that the need to provide food at low prices to the urban residents and the need
to give price incentive to the producers may not lead to a conflict particularly in the long- run.

13

Price incentives may encourage the adoption of new technologies and thereby increase
production to bring down prices. Low price of grains, on the other hand, may frustrate the
diffusion of innovations; promote subsistence production and aggregate food shortage in the
urban areas (Stanton, 1978).

2.2.6 Market performance

In competitive market with free flow of information, the price differences between any two
regions (or markets) will be equal to or less than transportation costs between the two markets.
Price differentials for a particular commodity arising from place, time and form differences
would correspond closely to the costs incurred in providing the respective transportation, storage
and processing facilities. The market will perform efficiently and there will be no scope for
traders to make excessive profits. The pricing system would facilitate exchange and fully reflect
the underlying supply and demand conditions (Kilingo and Kariuki, 2001).

Farm income is subjected to both yield and price uncertainties. The yield uncertainty may be due
to unpredictable weather and the incidence of pests and diseases. On the other hand, the noncompetitive structure of the agricultural sector may also result in considerable price uncertainties.
For example, lack of market information will result in greater price uncertainties and
subsequently, excessive price difference will occur among regional markets. This implies that
farmers are unaware of the opportunities for making profit by exploiting the price differential.
Incomplete information may result in an inadequate flow of goods and hence in the price
differentials that are greater than the cost of transfer (Baharushah and Habibullah, 1994).

14

2.2.7 Market information

In order for the farmers to maximize their returns, they should adjust their type of crop to
cultivate based on market information and choose the most advantageous market in time and
space when they market their product. Further more, the close relationship between farmers and
traders in a small market will enable farmers to keep track on the activities of these traders. As
such, the traders cannot continuously enjoy an advantage on price account over an informed
clientele. Thus the availability of market information could in the long run result in the most
profitable allocation of resources, and in the immediate instance it would help in reducing undue
variations in prices, both regional and seasonal (Baharushah and Habibullah, 1994).

2.2.8 Food grain market

Food grain markets in less developed countries (LDCs) are seasonal and highly unstable. These
features are primarily responsible for market failures in physical and economic access to food.
However, physical access has improved with investment in market infrastructure, market
regulation and adoption of new seed- fertilizer technology since the mid- 1960s. Nevertheless
mass poverty, frequent droughts with temporal fluctuations in prices and production, and regional
differences in food grain production have affected economic access to food in LDCs.
Inaccessibility to food is the main reason for government interventions of varying nature and
degree in food grain markets (Dagnew, 2001).

2.2.9 Rice cultivation and marketing in SriLanka

To expand paddy cultivation in Sri Lanka, successive governments provided subsidized material
inputs such as fertilizer, agro-chemicals, tractors, and seeds of high yielding varieties to
producers, together with extension services, a research network, credit, crop insurance, and a

15

marketing infrastructure with guaranteed minimum prices. Governments were also involved in
the importation of some inputs like chemical fertilizers, insecticides, herbicides and tractors
necessary to expand domestic paddy cultivation. Steps were taken to rehabilitate and develop an
extensive irrigation network with a land resettlement programme centered on paddy farming,
mainly in the northern, north central and eastern provinces of the country. From the 1940s the
government purchased paddy from domestic producers at a guaranteed minimum price. The
paddy so purchased, after processing, was sold as rice together with imported rice, under the
public food distribution system (Gunawardana and Quilkey, 1993).

Expectations about future price changes also have a strong influence on agricultural production.
Most economic tests of supply behavior find that of the previous year price influences greatly the
current price and to lesser degree farmers expectations about future prices. For some products,
the supply response can lag considerably (Branson and Norvell, 1983).

2.2.10 Government intervention in rice marketing

Since 1978 the marketing of paddy and rice in SriLanka has been considerably deregulated. In
1981 the government replaced the guaranteed price for paddy with a floor price; and initiated a
system of tenders to purchase paddy from private traders to supplement decreasing purchases
from the farmers by the co-operatives and the Paddy Marketing Board (PMB). The function of
the PMB since 1978 has been to assist the farmers by purchasing paddy at the floor price when
the prices paid to the farmers by private traders fell below the floor price, particularly during the
harvests. The purchases made by the PMB from the farmers and traders, together with imported
rice, were supposed to function as a buffer stock and sold in the domestic open market in times of

16

rising prices and could also be supplied for sale under the food stamp scheme (Gunawardana and
Quilkey, 1993).

The free market school argues that government interventions cause large-scale inefficiency in
resource use as reflected by international prices. The structural school rejects this view on the
grounds that international prices are subject to serious distortions generated by developed
countries (DCs) such that they do not reflect opportunity cost. Accordingly, domestic prices
should be set to favor income distribution objectives (Mannur, 1983).

2.3 Empirical Results

2.3.1 Studies at Global Level
In case of paddy, volume of production, wages in kind and total consumption were found to be
most important factors affecting the marketed surplus of paddy on an average farm as well as on
different categories of farms. The volume of production exhibited positive relation ship with
marketed surplus of paddy. Family size and price do not display any statistically significant
relationship. The irrigated area under paddy also turns out to be statistically non-significant, that
was mainly due to the inadequate and untimely availability of water (Lal et al, 1996)

Bogahawatte (1983) concluded that the governments demand for paddy from domestic farmers
in SiriLanka was positively related to total domestic rice consumption and production. From
1967 to 1969 and from 1971 to 1979, when the government issued rationed rice free of charge to
all or some consumers, the level of paddy purchases by the government was higher than the level
of purchases in the period when the government charged all consumers a price for rationed rice.

17

The result of the study by Gunawardana and Quilkey (1993) concerning determinants of paddy
sales by farmers in SriLanka showed the following fact. The signs of the estimated regression
coefficients were consistent with the expectation that higher guaranteed prices, larger quantities
of domestic paddy output and higher levels of purchases of rice in the concessional market
account for increased paddy sales to the government. Elasticity estimates indicated that the
supply of paddy to the government by the farmers with respect guaranteed price was almost
unitary elastic (0.99). The results of the analysis demonstrated that the guaranteed price of paddy
and the sales of rice in the concessional market were the key policy variables that can be
manipulated to influence the farmer supply of paddy in the official market. The degree of
necessary manipulation of these key policy variables would depend on the targeted size of the
buffer stock of rice and the projected volume of sales of rice in the concessional market.

The implied long run elasticity of supply for rice with respect to price was found to be 0.296 for
Central America (Sullivan etal, 1989).

The price elasticity of supply with respect to the expected price is in the range of previous
estimates (one year lagged price) for many countries. For rice, Ramos and Lopez (1997), found a
short run price elasticity of 0.222.

An imperfect competition model for the Japanese rice market was developed by Suzuki and
Kaiser (1998) to examine the impact of the current supply control policy used in Japan. The
model simulated farm revenues with and without the Acreage Reduction Program (ARP). The
results indicated that the ARP enhanced farmers revenue by 600 to 1000 billion yen compared
with the no supply control policy. Consequently, contrary to popular negative opinion regarding

18

the ARP, rice farmers were benefiting from the ARP. The results indicated that if farmers
marketing organizations have some market power to restrict sales through diverting sales to the
government, then a loan rate system would result in a relatively high price for farmers
accompanied by modest government costs.

Ponseka (1963) reported that from 1948 to 1954 the proportion of Guaranteed Price Scheme
(GPS) purchases in SriLanka never exceeded 5 per cent of annual production. Higher and
increasing proportions of total paddy output were purchased under the GPS from 1954 to 1967
and were attributed to improvements effected to the government marketing mechanism.

Peterson (1979) concluded that with more favorable farm prices, agricultural output could have
been 40 to 80 percent greater than its actual level in his sample of 27 developing countries.
Insufficient price incentive was also considered to be an important factor behind the
disappointing growth of the African Agriculture.

As to the World Bank and the United Nations (1981), most of the empirical studies made relate to
producers response to change in the price of a single agricultural commodity. The results
generally indicated that relative improvement in the price of a given crop significantly altered the
composition of agricultural out put in favor of that particular crop. A typical example is the
substitution of food crops by cash crops whose price is relatively more attractive.

It is also held that traditional peasants are more responsive because of the greater flexibility of
capital and management know- how than commercial farmers. However, it should be noted that
an acreage shift from lower to higher valued crops results in an increase in the value of aggregate

19

production. The effect of government intervention in the marketing of agricultural products has
increasingly attracted a number of researchers and international organizations. In General, the
studies made indicate that measures intended to keep prices of food products at low levels are
inconsistent with the badly needed increase in production (World Bank and United Nations,
1981).

It is indicated that as production increased by one quintal per hectare, the marketed surplus of
paddy increased by 0.58 quintal. Also, as area under paddy increases by one hectare, the
marketed surplus increases by 4.57 quintals significantly. Further, the regression coefficient for
home consumption and size of family were negative and significant. This indicated that as home
consumption increased by one quintal, the marketed surplus decreased by 0.42 qtl and as family
size increases by one, the marketed surplus decreases by 0.69 qtl (Chavan et al.1999).

In food grain marketing 53 per cent of the farmers suffered more due to low prices, lack of
procurement, lack of co-operative marketing, monopoly of few traders in the market, no premium
given for graded produce and malpractices in the market. The most serious problem faced by 82
per cent of the farmers is the high cost of transportation, followed by the lack of functioning of
regulated markets in the production area, which was reported by 72 per cent of farmers (Thakur
et al.1997).

Marketing efficiency of marketing system for poovan variety of banana in India was evaluated in
the three channels (producers to consumers, producers-wholesalers-consumers, and producerswholesalers-retailers-consumers) identified using Shepherds formula. As a result the marketing

20

efficiencies for the three channels were 4.46, 5.77, and 5.98 respectively (Senthilnathan and
Srinivasan, 1994).

2.3.2 Studies in Ethiopia

In spite of its considerable share in the GDP, researches pertaining to the subsistence sector are
limited in Ethiopia. Particularly studies on the response of peasants to economic incentives are
highly limited. Some indirectly related works that may be worth mentioning are summarized
below.

The study by Mulat (1984) showed that the principal determinant of market supply of teff was
the level of output. Its coefficient was positive and highly significant. An increase of teff
output by 1 quintal (per adult unit) resulted in an increase of market supply by about 0.57 quintal.
Income from alternative sources influenced market supply negatively.

Goaring (1974), reported negative price elacticities of supply for horse bean and chickpea. In
contrast, Bisrat (1976) showed that the subsistence sector responded positively to price incentives
in terms of supply. He maintained that at higher prices peasants increase their fertilizer
consumption, provided that the risk factor and inaccessibility to extension agents were not
limiting factors.

A mission from the Food and Agriculture Organization (FAO) and the World Bank (1982) had
also reported that inadequate price incentive was among the major factors behind the sluggish

21

performance of the Ethiopian Agriculture. The report was based on the assumption that peasants
response to price is positive.

The effect of seasonality on the price levels of the grains was considered significant for most of
markets. Based on household- level information on farmer grain selling patterns, most of the
farmers in Ethiopia disposed their grain to the market just after harvest due to distress sales when
the prices were not favorable. A preliminary report from GMRP household survey indicated that
about 85% of the grain sale transactions by the farmers occurred between October and March.
Most farmers were not in a position to take advantage of seasonal price differences because of
limited income to cover their financial commitments, which in most cases have to be settled soon
after harvest, and possibly because the returns to storage were not high under prevailing
smallholder conditions (Legesse and Asfaw, 1989).

The effect of seasonality on marketing margins between different markets was not significant in
most cases. Most of the factors affecting seasonal price rises were comparable in magnitude
across markets, hence the price spread between them has little seasonal pattern. This implies a
fairly constant margin being charged by private traders throughout the marketing season. This
result might suggest that there is limited incentive for private temporal arbitrage. However, a
survey of 219 private grain traders throughout Ethiopia in 1996 indicated that over half stored
grain for an average of over two months (Gebremeskel, 1997).

22

CHAPTER III, DESCRIPTION OF THE STUDY AREA

3.1 Location
The study district is one of nine districts of South Gondar Zone, which is one of the 11 Zones of
Amhara National Regional State. The total population of the South Gondar Zone is 2006059
(1019561 M and 986498 F), with population density of 140 per km2 and road density of 61.98
(per 1000km2). The study area is situated at a distance of 55 km north of Bahir Dar, Amhara
National Regional State Capital. The district is Fogera district with 25 kebeles (lower
administrative units) and its center being Woreta town. This study area, Fogera district, is with an
area of 1124.14km2.

3.2 Topography and population details

Topography of the study area is stated as 76% plain, 13% gentle slope and 11% mountainous.
The average rainfall is 1284.2mm per year and this is assumed to be normal in 95% of the study
area. Climate of the district or the study area is almost medium highland while the average
temperature ranges from 10.30C to 27.2 0C.

Population of Fogera district is 217048 (111156 M and 105892 F) based on projection of 1994
census (BFED, 2002).

As is indicated in Table 1, the total number of household heads is 44601. The highest number of
households is 2876 for Hagereselam kebele while the least number of household heads is 1200
for Addis Gubta kebele.

23

Table 1: The number of household heads of each kebele for the Fogera District

Kebeles

Households

Kebeles

Household Heads

Woreta Zuria

2868

Bebokis

1345

Hagereselam

2876

Kuhar Abo

1508

Wajerba Anba

1487

Abakiros

2297

Diba Sifana

1553

Tuluavi

1316

Wagetera

1548

Meneguzer

1786

Addis Gubta

1200

Shega Mariam

1208

Ashena Libara

1644

Gajgen

1556

Kidist Hana

1704

Kuntimer

1791

Kuhar Michahel

1564

Amed Ber Zuria

2309

Aba Gundaba

1879

Chalmanad

1695

Nabega

2036

Zeng

1853

Rib Gebreal

1265

Wotanba

2537

Shana

1776

Total households

44601

Source: The Fogera District Agriculture Office

Geographical map of Fogera District with the constituent kebeles is presented in fig.1

24

Figure 1: Map of Fogera District with its Kebeles and Neighboring Districts

25

3.3 Infrastructure
As to the social services, the district has 1 high school, 1 health center, 9 human clinics, 34 junior
secondary school, 5 veterinary post, 36 Development Agent offices and Development Agent
houses.

3.4 Rice cultivation

The number of rice producing peasant associations is 8 in the district, namely Woreta Zuria,
Wagetera, Shana, Shaga, KidisteHana, Kuhar Abo, Tuluavi and Nabega. In 1999 production
period number of households, rice area cultivated, and rice production were 16383, 6775.5 ha and
313921 quintals respectively. Under the current policy of diversification and specialization of the
region, Fogera district is selected for specific crops specialization including rice.

The average area under rice in the research area (Fogera District) was about 4000ha and the
average production was about 116000qt for the production year of 2003/2004. This shows that
the average land productivity for this production year is 29qt per hectare.

3.5 Land use pattern

Based on facts of the district location, land use pattern was calculated as follows in relation to
different activities and features for the year 2002/2003.
Area (ha)
1.
2.
3.
4.
5.

Percent

Cultivable land --------------------------43396 ----------- 39

Grazing land -----------------------------26999------------ 24
Forest and bush land ---------------------2190------------ 2
Land covered by water------------------16146----------- 14
Uncultivable land ------------------------23683----------- 21
Total land ----------------------------- 112414 ------- 100

26

3.6 Crop production and cropping pattern

The largest area of cultivation is covered by teff (22.4%) and secondly covered by millet (20.5%).
The yield column for each crop was obtained by taking the average of three years including
2003/2004-production season according to Fogera district agriculture office. In addition, the area
that is suitable for rice production in 8 rice producing kebeles is estimated to be about 10,000 ha.

Table 2: Share of different crops in area coverage in Fogera District (2003/2004)

Yield (qt/ha)

Crop

Area (ha)

Percentage of area (%)

Teff

9700

6.15

22.4

Millet

8910

10.52

20.5

Maize

7163

13.84

16.5

Niger Seed

5720

13.2

Vetch

4930

10.1

11.4

Rice

3981

31.5

9.2

Barley

2992

10.25

6.8

Total

43396

100

Source: The Fogera District Agriculture Office

3.7 Prices in markets

As stated in Table 3, for Woreta town, the lowest wholesale price was in the year 1998(165birr)
while the lowest retail price (208 birr) was in the year 1997. In case of Bahir Dar town the lowest
wholesale price (190 birr) was in year 1998 while the lowest retail price (241 birr) was in the year
1998. The highest wholesale and retail prices are recorded in the year 2004 for both towns.

27

Table 3: Wholesale and retail rice prices at nominal level for Woreta and Bahir Dar
markets in birr/qt.
Years

Wholesale price

Wholesale price

Retail price

Retail price

At Woreta

at Bahir Dar

At Woreta

at Bahir Dar

1997

170

203

208

243

1998

165

190

212

241

1999

185

205

220

260

2000

180

195

217

258

2001

185

210

228

271

2002

188

208

225

265

2003

185

210

229

270

2004

190

212

235

272

Source: Fogera District Agriculture Office.

Wholesale Market
This is the market type where buyers and sellers interact with each other to exchange products
whose price and quantity are predetermined. The quantity is always is always sold in bulk mostly
to other wholesalers or retailers. Fig.2 describes the trend of wholesale price for both Woreta and
Bahir Dar towns.

28

Figure 2: Wholesale price of rice at Woreta and Bahir Dar by year

250

Price Level Br/Qt

200

150

at Woreta

100

at Bahir Dar
50

0
1997 1998 1999 2000 2001 2002 2003 2004
Years

29

Retail Market
This is the market type by which buyers and sellers interact at a situation the product is measured
and packed according to need of buyers in terms of quantity.

Figure 3: Retail price of rice at Woreta and Bahir Dar by year

300

200
at Woreta
at Bahir Dar

150
100
50
0

19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04

Price Level Br/Qt

250

Years

30

CHAPTER IV, METHODOLOGY OF THE STUDY

Study on factors determining supply of rice needs careful selection of respondents viz the rice
farmers, and marketing intermediaries. Further the statistical methods for analyzing the data
collected have to be decided. In this chapter, sampling method followed for the study and the
statistical methods and tools of analyses adopted are described.

4.1 Sampling Design

The degree of precision desired, method of analysis, objective of research, cost, and time
determine the type of sampling design to be adopted.

A two stage random sampling technique with kebeles at first stage and farmers at the second
stage was followed for the study. First, 8 rice producing kebeles out of the total kebeles of the
district were selected purposively. Among the 8 rice growing Kebeles of the Fogera District; four
kebeles, with the same agro ecological features, were selected at random.

After deciding the sample area and sampling design it was important to fix the sample size, as it
is to contribute to the cost and reliability of the study. From the list of farmers who cultivated
rice, 30 farm households were selected at random from each of the selected Kebele. Here, the
original list of rice producing households prepared for the year 2002/03 and maintained in the
Woreda Agriculture Office was referred as a source document. Thus, sample size was made as
120 rice-producing farmers considering the time, finance and other resource constraints of the
researcher.

31

In addition, to collect necessary data concerning price, processing cost, transportation cost etc.,
representatives of wholesalers, millers, and traders at about 20% of their number around the
nearest market were considered as respondents. In this case, 4 wholesalers/millers were
interviewed to get the above information. Informal discussions were also conducted to obtain first
hand information on rice marketing.

4.2 Data Collection

In order to obtain the reliable data, purpose of the survey had been explained to the sample
respondents before the actual interview.

Informing the responsible bodies like peasant association heads and the line offices was another
important concern in the early stage of data collection. This made the data collection very smooth
and easy. The primary data were collected during months from November 2003 to February
2004.

Enumerators six in number who were capable of speaking the local language as well as English
to explain the prepared questionnaire in the local language were hired to collect data. Training
was given to these enumerators for about 5 days, concerning the subject matter of the
questionnaire and the procedures to make surveying.

In addition to the above way of collecting cross- sectional data from primary source, data were
collected from secondary source for general description and to verify the cross-sectional data.

32

4.3 Method of Analysis

General characteristics of the sample households, cropping pattern, status of farming, marketing
practice of rice, and others were analyzed by descriptive statistics. Processing methods, cost
involved and other expenses were analyzed by percentage analysis.
4.3.1 Regression Analysis
For agricultural commodity markets, relatively simple generalized 'theory' models have been
found to have wide applicability. One typical example, applied to the markets for cocoa, coffee,
tea, wool, cotton, sugar, wheat and rice, involves basic relationships to describe the determination
of quantities supplied (Engle and Yoo, 1987, Branson and Norvell, 1983, and Hallam, 1990). Lal
et al (1996) identified volume of production, wages paid in kind and total consumption as most
important factors affecting marketed surplus of paddy. Thakur et al (1997) concluded that
volume of production, price received, volume of consumption, and wages in kind significantly
influenced marketed surplus of paddy in India. Adapting from those, the following model was
specified to analyze the factors determining the supply of rice.
SUP = f (PRC, PRCt-1, PRCOTH, AREA, FACEXP, PROD, CONS, DM, WEATH)
Where;
SUP - Quantity of rice marketed in qtl/HH
PRC - Price of rice supplied in Birr/qtl
PRCt-1- One year lagged price of rice in Birr/qtl
PRCOTH Price of other crops produced in the farm in Birr/qtl
AREA Total acreage of rice cultivated in ha
FACEXP - Expenditure on factors of production in Birr
PROD - Total production of rice in qtl/HH
CONS - Quantity of rice consumption in the HH in qtl/year

33

DM - Distance from market in km

WEATH Weather =1 for favorable, 0 for unfavorable

As to total production, it was decided to take the predicted value to avoid its endogeniety with
volume of consumption. To predict total production, the appropriate function is Cobb Douglas
function and then by transforming to log linear function the variable could be used in the supply
model.
That is, Y =ALb1Kb2Cb3e, Where,
Y=Total Production of rice
A=Constant
L=Area under rice cultivation in ha
K=Labor used in rice production in man days
C= Variable expenses incurred in rice production in Birr
b1,b2,b3 =Coefficients to be estimated
e=error term
The linear form of the above equation is:
LnY=LnA+Ln b1L+Ln b2K+Ln b3C+Lne

34

4.3.2 Variable Definition and Working Hypothesis

Real world situation in the study area showed that except one determinant- the expenditure on
factor of production, other determinants were measurable. Because, producers of rice in that area
were not in the practice of applying fertilizer, improved seeds, pesticides, and others that require
an outlay to influence the marketed supply of rice during harvesting time. This is because
producers use local variety of rice, and as to fertilizer, the nature of the land was not found
suitable for its application.

Theoretically, it is proved that when the price of the product is promising, producers are
interested to take their product to the market. This makes the supply to be directly related to the
current market price.

Lagged price is mostly observable price for not more than two years for producers to account it in
their plan of production and supply of their products. But it is not that much difficult for
producers to remember the price of product one year back. Hence, one year lagged price was
considered. In any case it has an impact on quantity of supply to the market in the coming year.
Producers compare the current price of the product with lagged price of the product. If there is
disparity between the two prices they will be in dilemma to sell the product, especially when the
lagged price is greater than the current price. In other words, lagged price has direct relation to
the supply of the product i.e. rice to the market in the current year.

35

Prices of other crops produced in the farm are expected to influence the rice supply negatively.
Price data about other crops collected from the sample farms suffered from statistical
inconsistency and hence this variable was dropped in the final model used for estimation.

Area under rice in the farm is expected to influence the quantity of rice supplied to the market
positively. This is because when there is possibility to expand the area with given level of yield
production of rice will increase.

It is stated before that rice is one of the main staple crops for producers themselves. This makes
things real that as consumption of rice by the family increases there will not be extra amount to
take to the market and sell. Generally, it is true that when consumption of rice produced by
farmers increases quantity of supply to the market decreases. This leads to a conclusion that
consumption influences supply negatively.

Total production is the quantity of paddy harvested from the entire area applying different factors
of production. For this total production, the predicted value is used in order to avoid the
endogeniety problem with amount of consumption. It is expected that there will be a positive
change in the amount of supply of the rice when total production increases.

Producers most of the time bother about weather since it determines to supply or not to supply
their product to market. Their decision will be positive when the weather is favorable. Weather
can comprise many aspects like rainfall, frost, humidity, and other limiting factors for production.
Consequently, weather has a direct influence to amount of rice supplied or sold in that bad
weather is to decrease supply while favorable weather is to increase supply of rice to market.

36

Estimable form of the proposed rice supply model is:

SUP = o + 1 PRC + 2 PRCt-1+ 3 PRCOTH +4AREA + 5 FACEXP + + 6 PROD + 7 CONS
+ 8 DM+ 9WEATH + U,
Where, o - 9 are the coefficients to be estimated,
U is the random error term.
Note: Scatter plot analysis of the independent variables with the dependent variable showed near
linear relationship and hence the above model was estimated on the linear form.

To estimate the specified model OLS method was used and significance of the influence of the
selected variables was assessed using t statistics. SPSS Software package was used for
analyzing the data.

4.3.3 Marketing Efficiency Analysis

The second objective of the study viz., assessing the marketing efficiency was satisfied by the
following formula proposed by Shepherd (1986).
E=

V
1
I

Where, E Marketing Efficiency (Index)

V Value of Marketed Rice
I Total Cost Incurred in the Marketing of Rice
It has to be noted that, with respect to value of marketed rice unit profit was taken by deducting
production cost in this case but in the other way taking the unit value of the produce was possible.

37

To identify the constraints in marketing of rice, which is the third objective, descriptive statistics
and percentage analysis were used.

CHAPTER V, RESULT AND DISCUSSION

The Fogera district is known to have some unique aspects different from other parts of the region
because of its location in a plateau, which is suitable to conserve rain water that is much needed
to grow crops like paddy (rice), teff, barley, local vetch, and millet. To understand the farming
conditions and practices, first general characteristics of the sample households are described in
this chapter.
5.1. Demographic Characteristics
The way people interact with each other is reflected in their social norms and their cultural
applications throughout their life span. Location characteristics and resources available in the
area explain these social and cultural aspects.

The same truth is practiced by the Fogera district of Amhara National Regional State of Ethiopia,
in that social interaction is shown as they assemble themselves at time of celebrating monthly
get-together ceremony in thinking of God (locally called mahiber), meeting in self-help
organization, funeral ceremony and other interaction factors. Traditional labor pooling systems
like Edir, Ekub, Debo, Wonfel etc.are existing in agricultural production activities.

As to culture, people of Fogera district, like other people in the region, display their culture in the
way as feeding habit, wedding ceremony, being out of work during holidays, and wearing style
they follow.

38

The demographic characteristics are mostly linked to the religion of the study area that is almost
100 percent Orthodox Christian, the production activity, and the crops grown in the area. Social
and cultural norms like respecting the elders and considering the lower aged member are
practiced based on different events of the study area.

Table 4: Demographic characteristics of sample households

Description

Number of HH/members

Percentage

Male

118

98

Female

Married

118

98

Unmarried

Below 30

12

10

30-40

54

45

41-50

36

30

51-60

13

10.8

Above 60

4.2

Illiterate

34

28.3

Able to Read & Write

52

43.3

1-4 grades

26

21.7

5-8 grades

9-12 grades

1.7

Orthodox Christian

119

99

Moslem

Gender

Marital status

Age group

Education level

Religion

39

Ethnicity
Amhara

120

100

Adult Male

169

25.8

Adult Female

161

24.6

Children

308

47.1

Elder Persons

16

2.5

Family size composition

Gender and marital status of the households were analyzed and presented in Table 4. It showed
that there were only two female-headed households in the sample and these females were
unmarried but they shouldered the responsibility for the livelihood of the households.

It could be observed from the table that, most of the sample households (54%) were concentrated
in the age group of 30 to 40, which was considered as relatively more productive and efficient.
The average age of the household heads was about 40 years.

As indicated in the table, considering education status of sample household heads, 43.3 percent of
them could read and write. This was better status as compared to the percentage of those who
were illiterate. Almost all the household heads are Orthodox Christian in religion, and are
Amhara in ethnicity.
It is indicated in the table that, total household number of the whole sample is 654 with more
number of males than females. In respect to the work force status, more than half of the total
household members in the sample were in the productive workforce.

40

5.2. Socioeconomic Characteristics

These characteristics are to express the economic status of the household with respect to the
capacity of individual to do farming and to lead a decent level of living in the society. Such
characteristics as type of living house, staple crops cultivated, rice utilization pattern, livestock
owned, land use pattern, sources of income for the farm household were analyzed and presented
in Table 5.
Table 5: Socioeconomic characteristics of sample households
Description

Number of HH

Percentage

Grass thatched

76

63.4

Corrugated iron sheet

40

33.3

Both

3.3

Total

120

100

Rice

120

100

Teff

90

75

Vetch

72

60

Niger seed

60

50

Sorghum

46

38

Lentil

30

25

Chickpea

20

17

Millet

20

17

Others

12

10

Cereals

114

95

Pulses

29

24

Oil seeds

18

15

Others

Type of House

Staple Crops

Cropping pattern

41

Utilization of Rice
Bread

115

96

Injera

72

60

Local alcohol

72

60

Porridge

28

23

Others

18

15

Ox

108

90

Cow and heifers

96

80

Pack animals

43

36

Sheep

20

17

Goat

48

Others

28

23

Land use pattern

Hectare

Productive land

118

68.9

Grazing land

12.25

7.2

Fallow land

4.5

2.6

Rented out land

2.5

1.5

Rented in land

34

19.8

Total private land

137.25

80.14

Total land

171.25

100

Annual off-farm income

Amount earned

Casual labor

57.00

72.6

Sale of local alcohol

10.50

13.4

Sale of fire wood

7.00

8.9

Handicraft

4.00

5.1

Total

78.50

100

Livestock holding

42

It could be seen from the table that, most of the sample households (63.4%) were living in house
thatched with grass and very few (3.3%) had both corrugated iron sheet and grass as their roof
top.

It is explained in the table that, majority of sample rice farmers considered teff as their staple
crop along with rice. Other staple crops in the study area were vetch, niger seed, and sorghum in
that order.

Many producers (95%) grew cereals while others cultivated like pulses (24%), oil seeds (15%),
and tuber crops and vegetables (6%) as indicated in the table. Cereals included rice, teff, millet,
and sorghum; pulses covered chickpea, bean, and pea.

In case of utilization pattern of rice, it was consumed in the form of bread by majority of
producers (96%) while other forms of consumption were injera (60%) and local alcohol
(60%). Injera from rice is made by mixing rice with teff at fixed proportion and subsequent
fermentation.

As indicated in the table, 90% of the sample households were holding one or more than one ox;
80% of them were having cow and heifers, followed by pack animals (36%).

The average land holding, as per the table, is 1.144ha (171.25 ha owned by 120 farmers). Total
private land didnt include leased in land and average number of fragments per farm was 2.37.
Out of total land area of 131.25 ha in the study area, about 69% was productive land; 7% was
grazing land and 2.6% was kept as fallow land.

43

There is enormous demand for cash to cover household expenses as education, clothing, social
contributions, tax, purchasing of ox and cow, health service, and other emergency situations. To
spend for these expenses, the households need additional income. It is possible only when the
household member contribute family labor to earn income from off farm sources. Average offfarm income obtained by the sample household was 4 birr from handicraft, 57 birr from casual
labor, 10.5 birr from sale of local alcohol, and 7 birr from sale of firewood while the total amount
earned from all types of income sources was 78.5 birr.

Household members engaged in off farm activities when they were free of farm activity. The
second source of income was from sale of local alcohol, which was prepared and sold by the
female members.

5.3. General Pattern of Rice Production and Marketing

Relatively, area under rice cultivation has increased over the earlier years. The main reasons for
the change, as revealed by the rice producers, are improvement in yield and development of
market. Besides availability of land on lease and surplus labour in the household facilitated rice
cultivation. Low land area with red or black soil was recommended by most of rice producers
because it retains irrigation water at times the field is irrigated with less water.

Rice producers mostly used local resources including oxen to thresh their rice product, because it
was not easy to get the processing machines like husker. On the other hand, to polish the rice
product suitable for consumption and sales, they hired the services of grain mill match, and
polishing machine. Major post harvest operations were, drying and grinding (polishing).

44

Rice producers sold their produce as grains directly to consumers, traders, or to processors or as a
seed to other producers. Most of the processors/traders considered that the quality of rice supplied
by the sample farmers was medium and of lower quality than that of imported rice. Moreover,
producers had to transport rice to a distance of about 5 kms (75%) to 10 kms (25%).

As rice needs more water, the late receipt and early withdrawal of monsoon rain, that too with
uneven distribution and in lower than needed amount for the crop calendar that the producers
follow, affects the total production of rice in the area. In the study year the average decrement in
total production as guessed by producers was about 2%, as compared to the normal out put.

5.4. Descriptive Analysis of Rice Production, Consumption and Marketing

In the process of production two main things are to be recognized, as in the first case production
is expected to make the growers self sufficient in food grains like rice. The other case is the
surplus amount over consumption is marketed.

Concerning Table 6, Shana kebele was to dominate the other kebeles in terms of rice cultivation
area (44%). It is also possible to relate the cultivation area with that of total production of rice for
this kebele.

Table 6: Cultivation area of rice in sample households by kebele (in ha)

Total
Kebele

Min

Max

Area

Percentage

Mean

Shana

0.5

2.25

36.75

44

1.23

45

Tuluavi

0.06

1.25

16.06

19.2

0.54

Kidistehana

0.13

15.58

18.6

0.52

Woreta Zuria

0.25

0.75

15.25

18.2

0.51

83.64

100

0.69

All kebeles

5.4.1 Rice Production Patterns

The same is true for Shana kebele to dominate in terms of total production (42%) over other
kebeles as described in Table 7. Average production of rice is almost the same in other three
kebeles at 15 qtls.

Table 7: Total production of rice in sample households by kebele (qt/hh)

Kebele

Min

Max

Total Production

Percentage

Mean

Shana

15

49

989

42

32.97

Tuluavi

29

471

20

15.1

Kidistehana

29

470.5

19.9

15.68

Woreta Zuria

25

426

18.1

14.2

2356.5

100

19.64

All kebeles

5.4.2 Rice Consumption Patterns

It was stated before that utilization of rice, was in the form of bread by majority of producers
(96%) while the second forms of consumption were injera (60%) and local alcohol (60%).

46

As indicated in Table 8, the highest consumption per household (37.5%) was in Shana kebele and
the least consumption (16.6%) in Tuluavi kebele.

Table 8: Consumption of rice in sample households by kebele (in qtls/hh)

Kebele

Min

Max

Consumption

Percentage

Mean

Shana

18

396

37.5

13.2

Kidistehana

15

251.5

23.8

8.38

Woreta Zuria

15

233

22.1

7.77

Tuluavi

0.5

12

175

16.6

5.83

1055.5

100

8.79

All kebeles

5.4.3 Rice Marketing

Quantity of rice marketed by sample households, as presented in Table 9 was the highest
(49.5%) in Shana kebele. On the other hand, Woreta Zuria kebele supplied the least amount on
average (13.9%).

Table 9: Supply of rice by sample households by kebele (in qtls/hh)

Total
Kebele

Min

Max

Quantity

Percentage

Mean

Shana

22

387

49.5

12.9

Tuluavi

15

173

22.1

5.77

Kidistehana

113.5

14.5

3.78

Woreta Zuria

15

109

13.9

3.63

782.5

100

6.52

All kebeles

47

In order to estimate the marketed surplus of rice, summary of area, production, consumption and
quantity marketed are presented in Table 10.

It is indicated in the table that Shana kebele dominated in terms of rice area, production,
consumption, and supply. Out of total average production, 33.2% is supplied to market while
44.76% is consumed and the rest is used for other purpose in the household/farm. Marketed
surplus of rice was the highest in Tuluavi and Shana kebeles (38.21 percent and 39.13 percent
respectively). It was the least in Woreta Zuria (25.56 percent) and in Kidistehana kebele (24.11
percent).

Table 10: Summary of rice area, production, consumption, and supply averages per hh.
Average rice

Average production

Average

Average

Kebele

area (ha)

(qt)

consumption (qt)

supply (qt)

Shana

1.23

32.97(100)

13.2(40.04)

12.90(39.13)

Tuluavi

0.54

15.10(100)

5.83(38.6)

5.77(38.21)

Kidistehana

0.52

15.68(100)

7.77(49.55)

3.78(24.11)

Woreta Zuria

0.51

14.20(100)

8.38(59.01)

3.63(25.56)

All kebeles

0.69

19.64(100)

8.79(44.76)

6.52(33.20)

Figures in parentheses are percentages of average consumption, and average supply out of total
production with respect to sample kebeles.

Prices received by the sample farmers for the rice supplied during the year 2003/04 are tabulated
in Table 11. Average price received for the whole sample was Birr 193.42/qtl. Highest price Birr

48

215/qtl was received by farmers in Shana kebele followed by Kidistehana (Birr 204.93/qtl),
Tuluavi (Birr 184.30/qtl) and Woreta Zuria (Birr 169.43/qtl).

Table 11: Current price of rice by kebele during the year (2003/2004) (in Birr/qtl)
Kebele

Min

Max

Mean

Shana

190

240

215

Kidistehana

190

228

204.93

Tuluavi

165

215

184.30

Woreta Zuria

140

200

169.43

Total

193.42

5.5. Determinants of Rice Supply

Production and consumption are known to influence supply of rice because each of these
determinants has its own contribution to supply of rice by producers to the market. Because every
thing produced is either to be consumed or supplied to the market or to be stored for future time.

Hence, a regression model was constructed to study the relationships between the determining
factor of supply and the marketed surplus of rice. The factors considered to influence the supply
of rice were: the current price, one year lagged price, actual consumption in the household, total
production of rice in the farm, distance to the market, and weather. Results of the regression
analysis are presented in Table 12 and the inferences drawn from the result are discussed below.

49

Second order test for the regression estimates

In the coefficient table presented in the appendices, the collinearity statistics indicates that there
is no multicollinearity problem among the independent variables discussed elsewhere. Looking at
Tolerance and VIF (Variance Inflation Factor) columns, it is possible to check this. Tolerance for
all variables is less than one while VIF for each variable is not more than 10 as a threshold value
for multicollinearity. A variable, Total Acreage for Rice Production, is checked for the presence
of multicollinearity with total production using correlation diagnosis and by considering
Tolerance and VIF.

Since the cross section data were used to estimate the model, problem of autocorrelation was not
expected to affect the statistical properties of the coefficients. This Was Further Proven from the
DW statistics (1.279).

50

Table 12: Regression results of rice supply model

Variables

Coefficients
Elasticities
______________________________________________

Current Price (PRC)

0.04983**
(2.712)

1.478

Lagged Price (PRCt-1)

0.05200**
(2.417)

1.548

Predicted Production (PROD)

0.359***
(5.703)

1.054

Consumption (CONS)

-0.401***
(-3.758)

-0.54

Distance from Market (DM)

0.111
(0.866)

Weather (WEATH)

1.824*
(2.893)

Constant

-18.926
(-5.564)

R2

0.608

Sample size
120
______________________________________________________________________________
Note: Dependent Variable Marketed surplus of rice in quintals.
: Figures in parentheses are t-values
*** - Significant at 1% level of significance
** - Significant at 5% level of significance
* - Significant at 10% level of significance

51

Inferences from the model estimation

The summary of the regression result showed that the goodness of fit of the model was at more
than 60%, which was sufficient to explain the interaction of the variables on dependent variable.

Current and Lagged Prices

In this study, the coefficient of current price of rice, which is 0.04983, shows a positive relation
to rice sold or supplied to market. Here, producers checked the price of rice for their best benefit
and this led the determinant to be significant at 5% level. The same is true for lagged price as
indicated in the table.

Supply of rice with respect to current price is elastic at 1.478. This means, with one percent
change in price of rice product there is more than one percent change in the quantity of rice
product supplied by producers from their respective mean levels, ceteris paribus. In other words,
the supply is sensitive to price offered by buyers. In case of study by Ramos and Lopez (1997), a
short run price elasticity of rice for many countries was found 0.222 while in case of study by
Gunawardana and Quilkey (1993) in SriLanka, elasticity estimate with respect to guaranteed
price was almost unitary (0.99).
The above result is obtained by using the formula:

E=

Q / Q
Q
=
.
/
Q

, Where P and Q are average price and marketed surplus of

rice respectively

52

Production
As it was expected, total production influenced the supply of rice to market significantly. Its
determination power was explained by a coefficient 0.359. It was also highly significant at 1%
level with a t statistics of 5.703. Hence, the elasticity of quantity supplied to production was
1.054 showing that with every percentage change of additional production, the farmers sold 1.054
percentage. This result supports the study by Gunawardana and Quilkey (1993), where, elasticity
estimates indicated that the supply of paddy to the government by the farmers with respect to
paddy output was more than unitary (1.16)

Consumption
Consumption was negatively correlated with rice supply explaining when consumption has
increased the rice quantity sold decreased. This is obvious to conclude that consuming more of
what is produced resulted in less quantity supplied.

To mention the result of analysis of this study, the coefficient of consumption is -0.401, its
significance being 0.000 and with t statistics of -3.753. This shows consumption is significant
to explain the quantity supplied of rice. The elasticity of supply of rice with respect to
consumption is -0.54, which is inelastic.
Weather
In the study weather played a significant role on rice supplied to the market. Its coefficient was
1.824 and with significance of 0.005 and t statistics of 2.893. This indicated that weather was
powerful to influence the supply of rice. From the value of coefficient it could be realized that
good weather could increase the rice supply by 1.824 qtls.

53

5.6. Marketing Efficiency

Marketing efficiency (Index) was calculated based on different costs incurred in marketing the
product, and in reference to the value of the product marketed. On cost side, a producer was
expected to cover the costs of processing, transport, opportunity cost of labour for number of
days and persons participated, and storage (if any). Then the total amount of rice delivered to the
market and sold was multiplied by the unit cost.

From side of value of the rice product, the total amount of rice delivered to the market was
multiplied by price of one quintal of rice. In this case the unit price used to multiply one quintal
of rice was price offered by the buyer when the producer sold the rice during harvest.

Therefore, for individual producer the efficiency was calculated as indicated below, the overall
efficiency was obtained as 7.82 while the lowest and the highest indices were 4.15 and 14.07
respectively. It is to be noted that efficiency is relative according to the price per unit and the cost
incurred.

Titles of marketing cost:

Mc1= Transport charges paid in Birr per quintal
Mc2= Value of time to transport and sell the rice product
= Number of man days spent * 6 birr/day * number of man equivalent engaged
Mc3= Costs incurred in processing to make the rice product ready for sale
Total cost of marketing was calculated by adding up all the above costs.

54

Titles of production cost:

-Costs for land preparation, sowing, weeding, harvesting, and threshing
-Cost for seeds
-Land tax

To arrive at costs for land preparation, sowing, weeding, harvesting, and threshing, first the
labour used was transformed to man-days and an opportunity cost of 6 birr per day was
considered. Marketing Efficiency (Index) was computed using the Shepherds formula,

E=

V
1
I

Where, E Marketing Efficiency (Index)

V Value of Marketed Rice (in this case net return is taken as value)
I Total Cost Incurred in the Marketing of Rice

The marketing efficiency index ranges are presented in Table 13.

Distribution of sample rice farmers based on marketing efficiency showed that 53.3 percent of the
rice producers were below mean level of efficiency while 42.5 percent of the rice producers were
above the mean (the overall efficiency is 7.8). The rest 4.2 percent of the producers were
concentrated on or around the mean efficiency (7.81 7.89). This showed that many producers
failed either to minimize their marketing cost or to maximize the quantity supplied to make use
the favorable price. Likewise, some of the producers comparatively succeeded in either to
minimize their marketing cost or to maximize the quantity supplied.

55

Distribution statistics of marketing efficiency (Index)

Description

Value

Mean

7.8178

Mode

4.15

Variance

4.0801

Minimum

4.15

Maximum

14.07

The value of marketing efficiency can differ from commodity to commodity, as there will be
disparity in marketing cost and price among the commodities. Hence, we should bear in mind that
value of marketing efficiency is not absolute but relative.

Table 13: Distribution of marketing efficiency (Index) ranges

M.E

Frequency

Percent

Valid Percent Cumulative Percent

1.00

25

20.8

20.8

20.8

2.00

47

39.2

39.2

60.0

3.00

33

27.5

27.5

87.5

4.00

10

8.3

8.3

95.8

5.00

3.3

3.3

99.2

6.00

.8

.8

100.0

Total

120

100.0

100.0

M.E = Marketing efficiency ranges were grouped using from 1 to 6 as follows

56

From 4 to 6 designated as 1
6 to 8 designated as 2
8 to 10 designated as 3
10 to 12 designated as 4
12 to 14 designated as 5
14 to 16 designated as 6

Figure 4: Frequency distribution of marketing efficiency ranges of rice producers

50

40

30

20

Count

10

0
1.00

2.00

3.00

4.00

5.00

6.00

M.E ranges

57

5.7. Marketing Problems

Problems in marketing are to affect the rational interaction between buyers and sellers with
respect to price, quality of the product, time of delivery, and other activities designed to prepare
the product to the market.

To come to specific product, which is rice, number of problems is sought from the producers
themselves, traders, and consumers. The major problems faced by producers are cited as follows,
and their order of importance was analyzed further and the result is presented in Table 14.

1. Shortage or absence of processing machine

2. Flooding of the production area more than required important for rice production
3. No more rice to supply to the market over consumption
4. Lack of family labor to cultivate rice together with other crops
5. Unavailability of transport means together with low infrastructure
6. Low quality of rice product to get higher price
7. Lack of rain water in terms of duration especially in time of maturity
8. Supply of almost all rice product to the market with the existing price just after the
harvesting time to cover other costs for that time

The above marketing problems are to decrease or discourage the producers to take their product
to the market at desirable time and possible benefit. These problems are directly or indirectly
linked to either of the determinants of rice supply to the market.

58

Table 14: Percentage analysis of marketing problems of rice producers

Number of

Percentage

S.N

Description

Respondents

(%)

Supply of almost all rice product to the market with the

112

93.3

existing price just after the harvesting time to cover

other costs for that time
2

Shortage or absence of processing machine

106

88.3

Unavailability of transport means together with low

87

73

infrastructure
4

Low quality of rice product to get higher price

65

54.2

Lack of family labor to cultivate rice together with

54

45

32

26.7

26

21.7

18

15

other crops
6

Lack of rain water in terms of duration especially in

time of maturity

Flooding of the production area more than required

important for rice production

No more rice to supply to the market over consumption

From the above data, the critical problems are those stated by No.1, No.2, No.3, and No.4 with
their decreasing order of importance. The other problems are also experienced in order of their
importance as indicated in the table.

59

From side of processors/traders, the major problems according to their decreasing order of
importance are listed below and the type of traders are both whole sellers and retailers.

1. The product is not properly dried by the producers because of lack of know-how (100% of
the interviewees)
2. Early harvesting of rice (75% of the interviewees)
3. Quality problem of rice, presence of materials like dust particles, sand and other seeds
(50% of the interviewees)
4. Fluctuation of price even during harvesting time (50% of the interviewees)

5. Slow uptake by the consumers (25% of the interviewees) during harvesting

60

CHAPTER VI, SUMMARY AND CONCLUSIONS

6.1. SUMMARY
Rice is the staple food for more than 60 percent of the worlds population. About 90 percent of all
rice grown in the world is produced and consumed in the Asian region. Rice is primarily a high energy or high -calorie food with 64.7 % carbohydrate. The byproducts of rice milling are used
for a variety of purposes, rice bran is used as a cattle and poultry feed, rice hulls can be used in
manufacture of insulation materials, cement and card board and are also used as litter in poultry
keeping, rice straw can be used as a cattle feed.

The specific objectives of this study were, to analyze the factors determining the supply of rice at
farm level, to assess the local marketing efficiency in supply of rice, and to identify the
constraints, if any, in marketing of rice.

Rice producers sold their produce directly to consumers, or to traders, processors or as a seed to
other producers. Most of the processors/traders considered that the quality of rice supplied by the
sample farmers was medium and of lower quality than that of imported rice. Moreover, producers
had to transport rice to a distance of about 5 kms (75%) to 10 kms (25%).

Among the factors considered to determine supply of rice, current price, lagged price, total
production, consumption, and weather became significant. Their relation was as such, current
price, lagged price, production, and weather had positive relation to quantity of supply while
consumption had negative relation to amount supplied. Supply of rice with respect to current
price, lagged price and production resulted elastic supply of rice with respect to them. This

61

showed these determinants brought high sensitivity to the amount of rice supplied than other
determinants, which are not elastic and significant.

The local marketing efficiency of rice producers was described in terms of current price and unit
cost of marketing of the rice product that determine the total value and total marketing cost of the
product to reach at marketing efficiency. As a result, 53.3 percent of rice producers were below
mean, 42.5 percent of rice producers were above mean, and the rest 4.2 percent were
concentrated around the mean.

Marketing problems are to decrease or discourage the producers to take their product to the
market at desirable time and to possible benefit, because these problems are directly or indirectly
linked to either of the determinants of rice supply to the market. The critical problems of rice
producers to deliver their product to the market are supply of almost all marketable surplus of
rice product to the market with the existing price just after the harvesting time to cover other
costs for that time, shortage or absence of processing machine, low quality of rice product to get
higher price, and shortage of rain water especially in time of maturity.

6.2. CONCLUSIONS AND POLICY IMPLICATIONS

Supply of agricultural commodities is characterized by many factors, which are linked to both
natural and manmade events. This makes difference for the agricultural commodities than nonagricultural commodities to entertain the natural and artificial happenings. The consequence of
the interaction of the above events determines supply of the commodity to the market by
producers. In analyzing supply of agricultural commodities including rice to market it is
necessary to consider the events from production of these commodities up to arrival to market.

62

Each step is further confronted with its own influencing factor. This leads to emerging of the
main determining factors of supply of the agricultural commodities to the market.

As to this study, based on the results obtained through analysis and observed features, it is
possible to conclude that the supply of rice was most of the time linked to the current price,
lagged price, total production and consumption. Weather was also affecting the situation of
supply besides the above determinants. Hence, each producer has to be aware of these conditions
before deciding to produce and supply rice. Concerning efficiency of marketing and marketing
problems, producers should minimize their cost of marketing or maximize the value of a
commodity.

From side of producers, many aspects have been justified how to produce and make ready an
agricultural commodity especially food grain based on analysis of the realistic data obtained. But
it is not by itself an end to sustain the status for long time. Therefore there should be some
measures that have to be taken either by the producers themselves or the responsible body (from
side of the government) to make production and marketing smooth.

In accordance with the analysis made, the nature of the sector, the status of the producers, and
problems faced in production and marketing of rice, generally, the following measures are
recommended to be taken by the concerned policy makers.

1. Results of the regression analysis showed that rice production had a significant influence in the
supply of rice. Hence, efforts must be taken to increase the production level by delivering
improved variety of rice to producers.

63

2. The study also provided that current price as well as lagged price had significant effect on the
quantity of rice supplied. Hence, there is a need to consider the price support policy for rice to
boost the quantity of rice marketed by the rice producers. Moreover, developing a market
information system about grain markets in general and about rice market in particular would help
the rice producers in making marketing decisions.

3. Significant influence of consumption on the marketed surplus is an indication for the

caution needed in policy decision regarding intervention in rice marketing. Thus, results
reveal the substance nature of rice farming in the study area for extra consumption not to
hinder to increase the market supply of rice.
4. Weather is another factor to that influences the marketed surplus of rice. Hence necessary
steps must be taken to educate rice farmers on timely cultivation of rice by predicting
possible weather parameters.
5.

Majority of sample farmers reported unavailability of sufficient processing facility and

distress sale of rice immediately after harvest were the other major problems. To solve
these, feasibility of constructing storage godowns in rural areas with necessary processing
facilities for rice could be assessed.

6. Yet another problem expressed by rice farmers was transportation. Hence, with the
general interest of the public, transport infrastructure in the study area has to be improved
which is also expected to benefit the rice farmers in moving their produce.
7. Rice traders reported that there is problem of quality. Hence, training the rice farmers in
enhancing and maintaining the quality of rice would serve as double purposes of raising
the income of producers through high value of the product and increasing the nutritional
value of the food consumed by the non producers.

64

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70

APPENDICES
APPENDIX 1. ANOVA Table and coefficients of determinants of rice supply.

Descriptive statistics of determining variables

Mean

Std. Deviation N

Marketed Surplus

6.521

5.185

120

Current Price

193.4167

22.1362

120

Lagged price

194.1417

22.0150

120

Distance from Market

9.1833

2.6544

120

Weather

.57

.50

120

Predicted Production

19.1398

8.6952

120

Consumption

8.7958

4.2439

120

Dependent variable: Marketed Surplus

ANOVA Table of the determinant variables

Model
1

Sum of Squares df Mean Square

Regression

1945.246

324.208

Residual

1254.452

113

11.101

Total

3199.698

119

Sig.

29.204 .000

Dependent variable: Marketed Surplus

Model summary of the multiple regression equation

Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson
1
.780 .608
.587
3.332
1.279

71

Coefficients of determining variables

Unstandardi
Standardize
t
Sig. Collineari
zed
d
ty
Coefficients
Coefficients
Statistics
Model
B
Std. Error
Beta
Tolerance VIF
1
(Constant)
-18.629
3.348
-5.564 .000
Current Price 4.983E-02
.018
.213
2.712 .008
.564
1.774
Lagged price 5.200E-02
.022
.221
2.417 .017
.416
2.405
Distance from
.111
.128
-.057
.866 .388
.805
1.242
Market
Weather
1.824
.630
.175
2.893 .005
.952
1.088
Predicted
.359
.063
.602
5.703 .000
.311
3.213
Production
Consumption
-.401
.100
-.340
-3.758 .000
.423
2.364

72

APPENDIX 2. Questionnaire of the study

Questionnaire for research in Factors Determining Supply of Rice in Fogera District of Ethiopia

PART A (For Primary Data)

I. Personal Information of the Household

1. Is the household head male or female?

1. Male
2. Female
2. Is he/she single or married?
1. Single
2. Married
3. How old is the household head? _________
4. What is the religion of the household head?
1. Orthodox Christian
2. Catholic
3. Muslim
4. Protestant
5. Others, specify _______

5. What is the ethnic group of the household head?

1. Amhara
2. Oromo
3. Tigre
4. Others, specify ______
6. Mark level of education of the household head
1. Illiterate
2. Read and write
3. First cycle (1-4 grades)
4. Second cycle (5-8 grades)

73

5. High school (9-12 grades)

7. How many you are in household number according to sex including wife
and husband? __________
1. Male in number______
2. Female in number______
8. Can you estimate the age strata of your household members?
1. From 0 to 14 years old in number __________
2. From 15 to 55 years old in number _________
3. 56 and above years old in number __________
9. Type of house living in
1. Grass roofed
2. Corrugated tin roofed
3. Both
10. What are your staple crops or foods for your family?
1. _____________
2. _____________
3. _____________
4. _____________
11. If you are to use rice as a staple food, in what form you use rice?
1. _____________
2. _____________
3. _____________
4. _____________
12. Do you have your own livestock and farming tools?
1. Yes 2. No
13. If Yes, list the number and type?
Present value (Birr)
1. Number of oxen __________

______________

2. Number of pack animals ______

______________

3. Number of sheep ____________

______________

4. Number of goats ____________

______________

74

5. Others, specify _____________

______________

6. Types of farming tools _______

______________

14. If No, how you get the services of livestock and farming tools?
1. Oxen ________________
2. Pack animals __________
3. Sheep ________________
4. Goats _________________
5. Others, specify __________and_________________
6. Types of farming tools ________________________
15. Land use patterns of the individual household in local measurement.
Total private land owned ___________
1. Cultivable area _____________
2. Private grazing land _________
3. Fallow land _________
4. Homestead __________
5. Land rented in _______
6. Land rented out ______
7. Others, specify __________
8. Number of fragmented land __________

II. Products and their purpose

1. What are the major products you delivered to the market this year?
1. _________________
2. _________________
3. _________________
4. __________________

2. Can you estimate the amount in quintal you sold for each crop type?
1. __________________
2. __________________
3. __________________

75

4. __________________
3. When did you start growing rice? , Year__________
4. For what purpose do you cultivate rice (paddy)?
1. Consumption, amount in kg per month __________
2. Fore sale
3. Animal feed, amount in kg per month __________
4. Soil fertility maintenance/amelioration
5. Other (specify)
5. In what form do you consume rice?
1. _______________
2. _______________
3. _______________
4. _______________
6. Do you store rice?
1. Yes 2. No
7. If Yes, what is the reason to store rice?
1. _________________
2. _________________
8. For how long do you store rice? _____________
9. Can you tell the area of rice cultivation in your farm for last and this year?
1. Last years area ___________ha
2. This years area ___________ha
10. Since you started producing rice, what is the trend for area allocated to
rice in your farm?
1. Increased
2. Decreased
3. No change
11. What is the reason for the change?
1. _____________
2. _____________
3. _____________

76

4. _____________
12. On which type of field you normally plant rice?
1. Low land (wet land)
2. Upland (dry land)
3. Irrigable land
13. Why do you grow rice on this type of field?
1. ________________
2. ________________
3. ________________
4. ________________
14. Which soil type is the most preferred for rice production?
1. Black soil (Cambisol)
2. Red soil (Vertisol)
3. Brown soil (Notosol)
15. How about last years amount of rice supplied to the market in quintal?
__________
16. For how much you sold a quintal of rice last year? ___________
17. How many quintals of rice you produced this years production period?
___________
18. Out of the total production of rice, how many quintals you delivered to
the market?
______________
19. For how much you sold the delivered product of rice to the market this
year? ______Birr/qt
20. For what purpose you use the cash you got from selling of rice product?
1. ____________
2. ____________
3. ____________
4. ____________
21. Is your rice quality accepted by the customers/traders?
1. Yes

2. No

77

22. If No, what is the reason that is not accepted?

23. Do you know that for what purposes the customers/traders use the rice product you sold?
1. Yes

2.No

24. If yes, list the main purposes.

1. _________________
2. _________________
3. _________________
4. _________________

25. Among the above purposes, which one is frequently and highly applied?
Purpose

Rank

1. ________________

_______________

2. ________________

_______________

3. ________________

_______________

4. ________________

_______________

III. Alternative Commodities Production

1. Do you produce other farm products for market instead of rice?

1. Yes

2. No

2. If yes, state them with their price.

Type of product

Price per quintal

1. ____________

________________

2. ____________

________________

3. ____________

________________

4. ____________

________________

5. ____________

________________

3. Which product is the most important in terms of price, simplicity of production, and
acceptance by the customers?
1. In terms of price ________________

78

2. Simplicity of production_______________
3. Acceptance by the customers ___________
4. Have you supplied all of the produce to the market?
1. Yes

2. No

5. If Yes, what are the reasons that forced you to do so?

1. ____________
2. ____________
3. ____________
6. If No, state part of the total amount you delivered to the market?
Amount in quintal

Price per quintal

1. _____________

______________

2. _____________

______________

3. _____________

______________

4. _____________

______________

7. Which products are preferred to replace the rice product in case you are not to deliver to the
market?
Rank

Product
1. ____________

____________

2. ____________

____________

3. ____________

____________

8. Do you know the reasons why the above products are preferred than Rice?
Reasons

Rank

1. _________________

___________

2. _________________

___________

3. _________________

___________

9. Are you to use separate land or part of land assigned for rice product to produce these
alternative products?
1. Separate land, a) Yes b) No
2. Part of land assigned for rice production, a) Yes

b) No

10. If you are to produce these alternative products together with rice

79

product, can you mention some problems due to this combination?

1. _______________
2. _______________
3. _______________

IV. Factors of Production used

1. Did you use factors of production in your production of rice?

1. Yes 2. No
2. If Yes, list them except your own farm land
Factors of production

Amount per acre

Price per unit

1. _______________

_____________

___________

2. _______________

_____________

___________

3. _______________

_____________

___________

4. _______________

_____________

___________

3. Which ones are very important for your rice production?

Rank
1. _________

___________

2. _________

___________

3. _________

___________

4. _________

___________

4. Where do you get these production factors?

1. Nearby your residence
2. Very far from your residence
5. If you get them going very far from your residence, how long you take
for this purpose? __________hr
6. In what form you get these production factors?
1. In the form of credit

80

2. In the form of cash

7. If on credit, what are the organizations or institutions to get production factors inform of
cash?
Rank
1. Government Banks_____________

_______

2. Private Banks_____________

_______

3. Credit Institutions__________

_______

4. Informal creditors___________

_______

5. Relatives____________

_______

6. Others______________

_______

8. If on credit, what is the interest you pay for 100birr per year? _______
9. If the credit is to be paid in kind, what is the amount paid per unit?

______________

10. If on cash, where you get this cash?

1. Own cash
2. From relatives with no interest
3. From informal creditors with interest
11. If from informal creditors, what is the interest you pay for 100birr per year?
_________________
12. If the payment is in kind, what is the amount paid per unit? ________

V. Marketing Processes of Rice

1. Where did you supply your rice product for sale?

Season
1. Nearby market place; about 3kms

__________

2. Far market place; 4 6kms

__________

3. Very far market place; 7- 15kms

__________

2. To whom did you sell your rice product this year?

1. Consumers
2. Traders
3. Processors

81

4. Others, specify _____________

3. Do you think that you received fair price for the rice product sold?
1. Yes 2. No
4. Did you buy rice last year?
1. Yes 2. No
5. If Yes, what was the amount of rice you have bought? ________Kg
6. What was the purpose of buying rice?
1. Seed
2. Consumption
3. Trade
4. Others, specify____________
7. Did you or your family earned income from off-farm through out last
year?
1.Yes 2. No
8. If Yes, what was the amount of off-farm income obtained during last year?
1.

Handicraft, amount per month in Birr ___________

2. Casual labor, amount per month in Birr ___________

3. Local beverage, amount per month in Birr ___________
4. Selling fire wood, amount per month in Birr ___________
5. Others, specify______ and amount per month in Birr ___________
9. What are the transport meanses to transport your rice (paddy) product?
1. Pack animals
2. Vehicle (car)
3. Head load
4. Cart
10. How much you pay to transport your paddy product to reach to the
market? _______________
11. How many days you take to transport and sell your rice product?
_______________
12. How many persons participate in transporting and selling of paddy
product? _______________

82

13. What are the activities in preparing the paddy product for sale?
Hours

Persons

1. Drying

_______

_________

2. Grinding

_______

_________

3. Packing

________

__________

4. Others; _________

________

__________

14. How do you thresh your paddy?

1. By hand using local material
2. By using processing machine (Husker and Polisher)
3. Others, specify ____________
15. How do you process your rice?
1. Using local material
2. Using grain milling mach
3. Using rice husker and polishing machine
4. Others, specify
16. What are the costs incurred in drying, grinding and packing?
1. ___________
2. ___________
3. ___________
17. Which season is convenient to deliver the rice product related to
processing and making ready for market?
1. Harvesting time, a) Yes b) No
2. Seasons other than harvesting time a) Yes b) No
18. If it is convenient in harvesting time what are the reasons to do so?
1. __________
2. __________
3. __________
4. __________
19. If it is convenient other than harvesting time what are the reasons?
1. _________

83

2. _________
3. _________
4. _________
20. What are the major problems in marketing processes of rice as a whole?
1. _____________________
2. _____________________
3. _____________________
4. _____________________
5. _____________________

VI. Production Technology and Weather

1. Did you use production increment methods (technology packages)?
1. Yes 2. No
2. If Yes, what are these production increment methods?
1. Fertilizer use, a) Yes b) No
2. Pesticide use, a) Yes b) No
3. Line sowing, a) Yes b) No
4. Drainage system, a) Yes b) No
3. Which ones of the above methods are very important and frequently used?
Rank
1. ___________

__________

2. ___________

__________

3. ___________

__________

4. ___________

__________

4. In this production year, were there convenient weather aspects?

1. Yes 2.No
5. If Yes, what are these convenient weather conditions?
1. ____________
2. ____________
3. ____________
4. ____________

84

6. If No, what are these inconvenient weather conditions?

1. _____________
2. _____________
3. _____________
4. _____________
7. Among the inconvenient weather conditions faced, which ones are very
serious and more affecting the production?
Percentage reduction in yield
1. _____________

_________________

2. _____________

_________________

3. _____________

_________________

4. _____________

_________________

8. Do you use crop rotation including rice production?

1. Yes 2. No
9. Can you tell the most suitable rainfall condition for rice production
from your experience in terms of:
1. Distribution______________
2. Duration ________________
3. Intensity ________________
10. Did you practice water-harvesting techniques for rice production?
1. Yes 2. No
11. If Yes, at what stage of the crop? _______________
12. What kind of water harvesting system you used? _____________
13. Have you ever been consulted with a development agent?
1. Yes 2. No
14. For how many days you are visited by an extension agent with in a
month especially during cropping season? ____________________
15. Which institution was your first source of information about rice?
1. DA (BoA)

4. Research center

2. NGOs

5. Others, specify__________

3. Other farmers

85

PART B (For Secondary Data)

Research in Factors Determining Supply of Rice in Fogera District of Ethiopia.

1. Topography of the Amhara National Regional State and Fogera District in

percentage.
Region

District

1. Plain

_____

______

2. Gentle slope

_____

______

3. Mountainous

_____

______

2. Rainfall distribution of the area in mm and percentage

Region

District

1. High

_______, ______

______, ______

2. Medium

_______, ______

______, ______

3. Low

_______, ______

______, ______

3. Climate of the Region and District in percentage.

Region

District

1. Highland

______

______

2. Medium highland

______

______

3. Lowland

______

______

4. Temperature of the Region and District in

Region

C distribution and percentage.

District

1.

_____, _____

_____, ______

2.

_____, _____

_____, ______

3.

_____, _____

_____, ______

5. Land use pattern of the Region and District in ha.

Region
1. Cultivable land

________

District
_________

86

2. Grazing land

________

__________

3. Forest and bush land

________

__________

4. Land covered by water ________

__________

5. Uncultivable land

__________

________

6. Number of households of the Fogera District by kebeles.

1. _______ 9. _______ 15. __________21. __________
2. _______ 10. _______ 16. __________22. __________
3. _______ 11. _______17. __________23. __________
4. _______ 12. _______18. __________24. __________
5. _______ 13. _______ 19. __________25. __________
6. _______ 14. _______ 20. __________26. __________

7. Average Price of rice in birr/quintal at wholesale and retail level in

different years at the district center.
Wholesale

Retail

1. 2004

________

_______

2. 2003

________

_______

3. 2002

________

_______

4. 2001

________

_______

5. 2000

________

_______

6. 1999

________

_______

7. 1998

________

_______

8. 1997

________

_______

8. Average Price of rice in birr/quintal at wholesale and retail level in

different years at the neighboring town, e.g. BahirDar.
Wholesale

Retail

1. 2004

________

________

2. 2003

________

________

3. 2002

________

________

4. 2001

________

________

87

5. 2000

________

________

6. 1999

________

________

7. 1998

________

________

8. 1997

________

________

9. Average productivity of land in quintal per hectare of major crops in the district.
Crop Type

Quintal per hectare

1. __________

_______________

2. __________

_______________

3. __________

_______________

4. __________

_______________

5. __________

_______________

6. __________

_______________

8. __________

_______________

10. Percentage of income source of the district by occupation.

1. _________, ________
2. _________, ________
3. _________, ________
4. _________, ________
5. _________, ________
11. Number and type of social services in the district.
1. __________, _______
2. __________, _______
3. __________, _______
4. __________, _______
5. __________, _______
6. __________, _______
7. __________, _______
12. Share of different crops of the District in terms of area coverage in

hectare and percentage

during the year 1995/96 E.C.

Crop type
1. ______

Area
_______

Percentage
_________

88

2. ______

_______

_________

3. ______

_______

_________

4. ______

_______

_________

5. ______

_______

_________

6. ______

_______

_________

7. ______

_______

_________

13. Type and number of livestock in the Region as well as in the District.
Region

District

1. ______, ________

______, ________

2. ______, ________

______, ________

3. ______, ________

______, ________

4. ______, ________

______, ________

5. ______, ________

______, ________

6. ______, ________

______, ________

7. ______, ________

______, ________

14. Cropping season of the Region and District by duration and percentage.
Region

District

1. ______, ________

______, ________

2. ______, ________

______, ________

3. ______, ________

______, ________

89

PART C (For Secondary Data from Processors and Traders)

1. Can you state about the quality of paddy (rice) product supplied by
farmers to you for further processing or sale.
1. High
2. Medium
3. Low
4. I cant Judge
2. Is the quality of the rice supplied by the farmers comparable to that of rice
imported and supplied to the market?
1. Yes
2. Not comparable
3. I cant compare
3. If not comparable, what are the reasons that make the rice produced and
supplied by the farmers and rice imported so?
1. --------------------2. --------------------3. -------------------4. -------------------4. How much is the processing cost per quintal of paddy (rice), which is
produced and offered by farmers?
1. Last year-----------------Birr
2. This year-----------------Birr
5. Can you estimate the price of one quintal of processed rice?
1. Last year-----------------Birr
2. This year-----------------Birr
6. Can you tell main problems in purchasing, processing, and marketing of
rice?
1. ----------------------------2. ----------------------------3. ----------------------------4. -----------------------------

90