Milk production and marketing channel decisions of smallholder farmers in the Zambian milk value chain

Abstract

Dairy farming is a source of livelihood and a major income source for many of the rural Zambian farmers. The importance of the dairy sector cannot be overemphasised as its development has capacity to increase job creation and wealth generation. The sector makes insurmountable contributions to the nutrition status of the country and to the financial gains to the various value chain stakeholders. In an attempt to further develop these financial gains, several initiatives have been developed to encourage smallholder farmers’ participation in the sector, and more so, for women and the youth. Nonetheless, there is still low participation by these interest groups. This study aims to understand the factors that influence smallholder farmers’ decisions to participate in the Zambian dairy value chain, and particularly in terms of milk production and the selection of different marketing channels. The objectives of the study are therefore to: (i) determine the factors that influence smallholder farmers’ decisions to participate in milk production and the factors that influence milk volumes or milk production in Zambia, (ii) identify the factors influencing the choice of milk marketing channels among smallholder farmers in the Zambian milk value chain, and (iii) examine the characteristics of the youth and women in the milk production, as they compare with the characteristics of the control groups (non-youths and men). To address the study objectives, quantitative cross-section secondary household data collected in 2015 by the Indaba for Agricultural Policy Research Institute (IAPRI) in the Rural Agricultural Livelihoods Survey (RALS) was used. “The RALS was implemented to provide policy-relevant information that is not practical to collect annually from the government’s agricultural surveys” (IAPRI, 2016). The study used data from the RALS from five key milk producing provinces of Zambia, namely the Central, Southern, Eastern, Lusaka and Western provinces. These constituted a total sample of 3574 randomly selected farming households. The study made use of both descriptive statistics and econometric modelling to analyse the data and present the findings. Specifically, the Heckman selection model (HSM), multinomial logit models, and an independent t-test were utilised. The HSM was run on 2477 valid observations to address the first objective: to determine the factors that influence smallholder farmers’ decisions to participate in milk production and the factors that influence milk production in Zambia. The HSM is used in order to account for potential biases in the sample selection of milk producers. The model results show that demographic factors, age, gender and education level of the household head, and the household size, affect the participation of farmers in milk production. Other variables were found to influence participation in milk production, such as landholding size, off-farm income, value of productive assets, access to market information, access to extension services, distance to markets and veterinary centres, mobile phone access, and geographical location. Similarly, herd size, education level and access to extension services, grazing system used, and geographical location were found to be significant predictors of milk production. Results show that these factors have a positive impact on the amount of milk produced by farmers, except for landholding which has a negative influence on milk production. To investigate the factors that influence the choice of a marketing channel among smallholder farmers, a multinomial logit model is used. Three milk marketing channels were identified, namely direct milk sales, and traditional and modern marketing channels. The valid sample for this model comprised 172 households, being households that both produced milk and participated in milk marketing. According to the multinomial logit model results, choice to participate in the traditional market is positively influenced by gender of the household head and milk yield. Off-farm income and distance to the nearest established market, however, have a negative influence on the selection of the traditional market. Gender of household head has a negative impact on participation in the modern marketing channel, yet education level, distance to major markets and amount of milk yield have a positive influence on choosing a modern marketing channel. Finally, independent t-tests are used to test whether or not there were statistically significant differences between the characteristics of the women and the youth, against those of other participants in milk production. The sample of milk-producing households comprised 742 households. The study concluded that there are statistically significant differences between the attributes of women and youth farmers, relative to the reference groups (male and non-youth farmers) in the study. This implies that men and/or older farmers have an overarching advantage and capacity to produce milk over women and youth groups. The study makes a significant contribution to the knowledge base of the Zambian dairy sector. The sector has limited literature to aid in informing policy. Based on the findings, there is a need for government intervention in the form of policy changes and value chain investments to improve milk production and participation in the modern marketing channel or more formal milk marketing channels. To encourage women and youth participation in the dairy sector, there is a need to increase accessibility to market information, support services and transparency in the dairy chain. There is a great need for affirmative action to be implemented towards achieving gender appreciation and empowerment to encourage involvement of women in milk production. For continuity and future development of the sector to materialise, there is need for widespread youth empowerment in areas of milk production.