Market chain analysis of chickpea in Northwest Ethiopia

The purpose of the paper is to explain the organization, behaviours and output of smallholder farmers of chickpea market and to analyse the structure–conduct–performance (S‐C‐P) of chickpea in the study area. The study was supported by a recent empirical study and used primary and secondary data from 122 respondents, as well as published and unpublished documents, to better understand how market structure and seller behaviour affect market performance. The study was conducted using the S‐C‐P model analytical approach. Weak oligopoly dominates the chickpea market in the research area (concentrated in the hands of few traders). The goal of the study was to fill the knowledge gap that existed on the topic, contribute to a proper understanding of the difficulties and enhance market development strategies for the benefit of producers, traders and other market participants. According to the research of the market structure, the district market has an oligopolistic market structure with a concentration ratio of 43.35%. In addition, the market is restricted by entry‐level obstacles such as a lack of funding, licensing requirements, the issue of constant supply and a lack of prior expertise in chickpea trading activities. The oligopolistic market structure has also led to chickpea market behaviours that is distinguished by a market strategy where the traders have the upper hand in determining the chickpea price. The study focuses on raising farmers' educational levels, enhancing extension and finance services, building transportation facilities to provide producers more negotiating leverage and accessing improved production techniques as a way to choose the best marketing outlet. Government agencies and relevant parties must step in to address the issues by disseminating current market data on the chickpea industry, enhancing market connectivity and supplying the market with their goods at competitive prices.


| INTRODUCTION
The primary driving force behind economic growth and agricultural marketing directs and suggests changes to the production and distribution of agricultural goods (Tewodros, 2014).Particularly for the traditional rural economies, the agricultural marketing system assumes increasing significance.Following Agriculture Development Led Industrialization (ADLI) as its overarching policy to transform its economy, focusing on the industrial sector as the driver to achieve a vision of becoming a middle-income country, Ethiopia has implemented a number of development policies, strategies and programs (Mulu, 2013).
Market access is a crucial tool for implementing the sustainable development goals (SDGs).The influence on the SDGs, however, is dependent on a number of external and endogenous factors, such as country size, location, import and export mix, connectivity to important markets, availability of natural resources, degree of development and institutional strength (United Nation Conference on Trade and Development [UNCTAD], 2015).Bekele et al. (2007) claim that insufficient access to timely and accurate information about prices, quality-price relationships and demand patterns by market participants, along with high transaction costs, force smallholder farmers to sell their small market surpluses at lower prices at the farm gate, which in turn encourages highly speculative behaviours and extreme unpredictability in the chickpea markets.Lack of trustworthy weights and measurements by traders is another aspect of Ethiopia's chickpea marketing system to note.This demonstrates how the combined effects of market constraints result in a low level of competition in the chickpea marketing.Chickpea output is rising, and it is one of the food sources in Este Woreda, according to (Este Woreda Office of Agriculture [EWOA], 2019).However, producers do not offer their goods in a competitive market or sell them in an organized manner in the Estie district.Therefore, this was necessary to fill the knowledge gap that exists on the topic, contribute to a proper understanding of the difficulties and enhance market development strategies for the benefit of producers, traders and other market participants.

| Description of the study area
Este woreda is located 114 km east of Amhara Region capital city, Bahir Dar, and 653 km north of Addis Ababa.It is bounded in the west by Andabet and Dera, in northwest by Fogera, in the northeast by Lay Gayint, in east by Simada and in the north by Farta.In the district, there are 46 rural and 4 urban Keble administrations.Among those 46 Keble administrations, 11 Kebles are potential in chickpea production.Map of the study area is shown in Figure 1.

| Type, source and method of data collection
The data used for this study were both qualitative and quantitative and collected from primary and secondary sources.The primary data were collected from sampled respondents: sampled households, district retailers, collectors and wholesalers.Focus group discussion, field observation and semi-structured questionnaires were undertaken during the primary data collection in the district.By using checklist, data were collected from farmers and extension agents through interview and focus group discussion.The secondary data were collected from a woreda agricultural office, a survey report and in published and unpublished documents.

| Sampling techniques and sample size
In this study, two-stage sampling procedures were used.In the first stage, among 11 chickpea-producing Kebles, four Kebles were selected by using simple random sampling.Second, in the four selected four Kebles, 122 sampled households were selected by a simple random sampling.The target population of the study was the smallholder chickpea producers and traders.

| S-C-P model analysis
The structure-conduct-performance analytical approach was used to study how the market structure and the selling behaviour of different products and services affect the market performance and subsequently the country welfares (Kizoto, 2008).This approach F I G U R E 1 Map of the study area.Source: Own survey 2019.
studies the causal relationship between the structure, conduct and performance frequently referred to as S-C-P model.

Market structure analysis
Barrier to entry, Hirschman-Herfindahl Index (HHI) and concentration ratio were the most widely used methods in the empirical literature of market structure; however, due to its wide applicability in many researchers, the concentration ratio and barrier to entry were used in this study.The market structures of chickpea was evaluated by the nature of degree of integration in an industry (perfectly competitive, oligopolistic or monopolistic), degree of buyers concentration, degree of product differentiation as well as by condition of entry and exit.
Concentration of market.It is defined as the number and size distribution of sellers and buyers in the market.The greater degree of concentration is the main reason of non-competitive market behaviors existing in the market.To be efficient, there should be enough numbers of firms.It analyzes chickpea market structure based on the results of concentration ratio that Kohls and Uhl (1985) suggest that, as a rule of thumb, the concentration ratio of four firms that is 50% or more is indicative of strongly oligopoly, 33%-50% is weak oligopoly and less than 33% is an unconcentrated firm.The concentration ratio formula that was used to calculate the concentration ratio of chickpea market was expressed below: where C is concentration ratio, Si is market share of the ith firm and r is the number of largest firms for which the ratio is going to be calculated.
where Si is the market share of trader i, Vi is the amount of product handled by firm i and εvi is the total amount of product supplied in the market.Kohls and Uhl (1985) convey into play that, as a rule of the thumb, in the four largest firms, a concentration ratio of 50% or more is an indication of a strong oligopolistic firm, 33%-50% is weak oligopoly and less than 33% is nonconcentrated firm.Even if CR, HHI and Ginie coefficient are methods that are used to measure market structure, CR was used to analyse the relative degree of chickpea market structure of the sampled chickpea traders.
Barriers to entry.Fee et al. (2004) reviewed that the potential participants who can participate in various activities were commonly used as ways of supporting the degree of competition in the firms.The researcher also suggests about the four points that can create barriers to entry, legal barriers (franchise and patents), economies of scale, superior resources and pace of entry.The modes of entry into trade, means of building capital, acquiring marketing skills and contacts, periods of apprenticeship, trader's perceptions of barriers, the origins and levels of initial capital required for traders of different sizes (functions or commodities) and the degree of mobility between functions and commodities can be used as centre of data to see the barriers to entry (Timmer, 2009).
Market conduct analysis.It refers to the behaviour of producers or the policy used by the firms in buying, selling and pricing strategies.Meijer (1994) said that, 'conduct is pattern of behavior which enterprises follow in adopting or adjusting to the market in which they sell or buy', in other words, the strategies of the actors operating in the market.For example, in an environment where there are many buyers and sellers, the market tends to determine the price.If one trader tries to increase his/her price, he/she sells nothing.For this research, the following few points were taken into consideration to systematically detect indicators of unfair marketing practices.The numbers of buyer and sellers (one or many), price setting strategy (trader, market and negotiation), bargaining power and the impact of physical location of the market on prices and marketing arrangements were taken for evaluating the conduct of chickpea market.
Analysis of market performance.Marketing efficiency is essentially for the degree of market performance.It is defined as having the following two major components: (i) the effectiveness with which a marketing service would be performed and (ii) the cause on the costs and the technique of performing the service on production and consumption.These are the most important because the satisfaction of the consumer at the lowest possible cost must go hand in hand with the maintenance of a high volume of farm output (Ramakumar, 2001).There are two approaches that used to measure marketing performance: the marketing cost and marketing margin.
Marketing margin expresses the difference between what the consumer buys and the farmers receive for their product.Calculating the total gross margin is always related to the end price or price paid by the end consumer and expressed in percentage (Mendoza, 1995).
where TGMM is the total gross margin, Pc is the consumer price and Pp is the producer price.
From the above formula, producer margin is calculated as where GMMp is the share of producers in consumer price.
NMM ¼ Gross margin À marketing cost Â 100 end buyer price , where NMM is the net market margin.

| RESULTS AND DISICUSSION
3.1 | Market structure, conduct and performance in chickpea market

| Market structure of chickpea
In this study, market structure of chickpea was evaluated using market concentration, barrier to entry (procedure of licensing, seasonal supply and lack of capital) and degree of transparency (timeliness and reliability of market information).

Degree of market concentration
The concentration ratio is expressed in terms of CR4 that stands for the percentage of the market sector controlled by the biggest four firms as shown in Table 1.The four firms' CR is used to measure concentration ratio for judging the market structure in the district.
Since the number of traders in the district market level was few, therefore, the analysis of the degree of market concentration ratio were carried out for all traders to analyse the type of markets that prevailed in the district.It was calculated by taking the annual quantity of chickpea purchased during the survey period.First, the sum of the annual quantity of chickpea purchased by all traders was computed.Then, the market share of the four leading traders was calculated by dividing their respective quantity of annual chickpea purchased by the sum of quantity of annual chickpea purchased by all traders.Then after, concentration ratio of four leading traders was computed by adding their market during the survey period.The result in Table 1 indicates the concentration ratio of the sampled chickpea traders CR4 was 43.35%.This value of chickpea market concentration ratio in the district indicates weak oligopoly market structure.It implies that there is a market imperfection since a few traders seem to have oligopolies chickpea market.

Degree of market transparency
It refers to the timely and reliable market information that the traders have for their marketing decision.Accessing timely market information on the price of a product and the demand of the consumers play a crucial role in increasing their revenue and in reducing the financial loss of both producers and traders.Due to the lack of market access, lack of reliable market information and the long distance of the district market, farmers are unable to negotiate on the price of produce and are paid low prices.This is similar to Jemberu (2017) who stated that the low income returned from agricultural production to small farmers is related to lack of market access and marketing information.According to the results of the survey, 72% of the sampled merchants obtained price information over the phone, while the remaining 24% obtained the price information from other merchants in the market.Although media such as television and radio play an important role in handling product market information in a short period of time, its impact on the consumer is very limited in the study area.There is no organized market information distribution system in the district; Commerce and Transport Office distributes market information, but it is not applicable to the chickpea production.
Barriers to entry into the chickpea market.Lack of continuous supply.According to the survey result, lack of continuous supply in chickpea throughout the year was one of the entry barriers in the study area.About 20% of the sampled traders reported that lack of continuous supply throughout the year discourages them.
Lack of trading experience.About 20% of the respondents had no trading experiences (Table 2).The result showed that new traders who are joining in chickpea trade lack trade experience and it was an entry barrier for new traders.Generally, due to market entry barriers, lack of transparency and weak oligopoly market structure, the chickpea market in Este district is out of the competitive market structure.

Market conduct
Market conduct of producers.In this section, the conduct of chickpea trading was analysed in terms of the producer's and trader's price setting, purchasing and selling strategies.The result of the study shown in Table 3 shows that 95.8% of market participants of farmers had market information before they sell but they got this information by informal methods.Among those who had market information, about 64.8% of the household get them from personal observations, the remaining 25.4% from other farmers and 9.8% from the telephone.In terms of price-setting strategy, about 81.15% of sampled respondents reported that traders or buyers set the market price.In addition to this, 13.9% sampled farmers reported that the price was set by the market (by demand and supply) and the remaining 4.9% was set by negotiation.All the respondents confirmed that it is the price that determines the price, which influences who will sell to the buyer.
Thus, there was no competitive pricing system indicating that the market deviated from the competitive market standards.In addition, respondents pointed out that some dealers cheat on the scale by adjusting the installation of the equipment.
Market conduct of traders.Traders purchased chickpea from the nearest village market and from urban markets.Regarding price determination, 48% of traders stated that purchase price is determined by the sellers, 24% by the market or the demand and supply and 28% by negotiation.On the other hand, the results of the survey shown in Table 4 show that 36% of traders responded that the selling price is determined by negotiating with the buyers of the products they offer.
The remaining 24% and 40% of the respondents said that the selling price is determined by the buyer and the market, respectively, whereas traders get market information from different sources.The survey result indicate that about 32% get price information from Tv/radio, and the remaining 48% and 20% were from telephone and personal observations, respectively.
T A B L E 2 Barriers to entry in the chickpea market.Set by market (demand and supply) 13.9 Negotiation 4.9 Source: Own survey result, 2019.
T A B L E 4 Selling and buying strategies followed by traders.

Character Frequency Percent
Selling price setting strategy Set by market 6 24 Source: Own survey result, 2019.

| Market performance of chickpea
The performance of the chickpea market has been evaluated based on the market growth rate and transaction value of major market players.

Chickpea marketing cost and margin analysis
Marketing margin was employed to analyse the performance of market channels.Therefore, to evaluate the performance of the chickpea market chain, it is important to consider market related cost, marketing margin and share of producers as well as intermediary from consumer price of products.Marketing margin was calculated for the main actors in those five major channels:

Marketing margin
Marketing leverage analysis refers to the share of the final selling price held by a particular agent in the marketing chain and is always related to the final price or price paid by the final consumer.Table 6 shows that the difference between the total income from chickpea marketing and the cost incurred during the chickpea marketing results in the marketing profit of each actor.The main actors in chickpea marketing include producer-collectors or farmer traders, wholesalers, retailers and consumers in the study area.It is analysed based on the average selling price of various market agents in the marketing channel of manufacturers, collectors, retailers and wholesalers.From Table 6, gross profit of consumer price was found be high along channels 1, 3 and 5, which is 1377.78birr/Qt in channel 1, whereas 1342.79 birr/Qt in channels 3 and 5.This reflects that channels 1, 3 and 5 provide producers with better share of value created.However, producers earn a lower gross profit when selling to collectors or agro-dealers at channel 4, which is 1152.04birr/Qt.In channel 1, there was no excessive intervention of intermediaries that could increase transaction costs, which would reduce the share of producers.This theory supports that as the number of market participants increases, the producer's market share decreases because the more intermediaries are involved in the market channel, the more profit they retain for their services.On the other hand, wholesalers buy chickpea from the producer at a reasonable price so that the producer can get a higher market profit.Therefore, the producers can maximize their profit margin when selling to consumers and wholesalers.
In terms of total gross marketing margin (TGMM), a result indicates channel 4 was the highest, which is 44.09%.However, the lowest TGMMs were observed in channels 3 and 5, which were 19.32.Gross marketing margin of producers (GMMp) was highest in channel 3 and 5 which is 80.68 from the total consumer price and lowest in channel 4 which is 55.91%.In addition, from traders, the maximum marketing margin (31.73%) of the consumer price was taken by the wholesaler in channel 4 followed by the retailers, which was (25.78%) in channel 2, and the minimum marketing margin of 12.36% was taken by the collector in channel 4. Therefore, producers can maximize their share of profit when they sold to get high gross profit.

| Market channels of chickpea
The analysis of marketing channels is proposed to provide information about the tracking of goods and services from their producers to the final consumer.Chickpea producers in the study area used different channels to distribute and sell their products.Based on the results of the survey, five marketing channels were identified for the chickpea market chain in the study area.This channel comparison is based on an audio pass through.Both wholesalers and retailers were the major buyers of chickpeas from producers in the study area.From the time of production of the product to the end user through different intermediaries, the main marketing channels were as follows: T A B L E 5 Chickpea marketing cost in different marketing agent (birr/Qt).Abbreviations: GMMc, gross marketing margin of collectors; GMMp, gross marketing margin of producers; GMMr, gross marketing margin of retail consumers; GMMw, gross marketing margin of wholesalers; TGMM, total gross marketing margin.
As shown in the Figure 2, the producers sells their product to wholesaler, retailer, collector and consumer in 61.84%, 18.2%, 10.55% and 9.41%, respectively.Accordingly, the highest and lowest amount of chickpeas available in the market was passed through channels 5 and 1.The flow of chickpeas in the district was concentrated more on retailers and wholesalers and less on collectors and consumers.

| Cost of chickpea production in Este district
In conducting profitability analysis of chickpea, market price for purchased input and other important services used in chickpea production were considered.The household used different kinds of inputs to produce chickpeas, such as family labor, exchange labor and their own animal draft power.Without these inputs, the chickpea production would not have been as successful.In capturing such costs opportunity, costs of the inputs were used.Price of chickpea differs per marketing channel, per quantity sold and changes over time.
Therefore, the weighted average price was used in analysing the profitability of the chickpea production and marketing for farmers.
As shown in In the study area, sampled households did not used DAP and urea for the chickpea production.Therefore, the cost of DAP and urea was not incorporated in cost of chickpea production.The marketing value of chickpea seed or average price was 16.82 birr/kg.Accordingly, the total average cost of chickpea production was 5406.74 birr/ha and the yield of chickpea was 13.75 Qt/ha as reported by sample chickpea producers.

| Marketing cost and gross profitability of chickpea producers
Transaction costs are estimated to calculate the profit share held by key players in the market chain.The highest transaction cost incurred by the producer is transportation cost, which is 21.65 birr/Qt as shown in Table 8.This is due to lack of supply and the farmers paying more than normal.
The total income from chickpea production is multiplied by the price (Qp) of the crop year.A sample farmer's total income from chickpea production was 1682 quintals.By deducting the average cost of production and marketing cost of 425.21 from the total income, chickpea makes a positive profit of 1256.79 per quintal.

| CONCLUSION AND RECOMMENDATION
Market concentration ratios show how many different businesses control a certain amount of a product or service.In this case, the market concentration ratio for chickpea was 43.35%.This means that 43.35% of the chickpea in the district was handled by four large traders.These showed that the chickpea market structure in this district market was characterized as oligopoly market type.
Furthermore, barriers to entry in the chickpea business such as shortage of capital, bureaucratic licensing procedures, lack of continuous supply and lack of trading experience are the constraints that make the market to be more imperfect.
The chickpea market in the study area is characterized by a weak oligopoly (concentrated in the hands of a few traders), lack of clear market information to disseminate to all actors, low bargaining power,  entry barriers (lack of capital and the need for a license to operate the business) and high price differentials between producers and consumers, which make the chickpea market imperfect.Therefore, responsible government bodies and stakeholders are expected to intervene to improve the challenges by disseminating current chickpea market information, providing improved market linkages and credit services, linking producers to the market, providing information their products to consumers.
Own survey result, 2019.T A B L E 3 Market information access, market information source and price setting of farmers.

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I G U R E 2 Chickpea marketing channel.Source: Own survey result, 2019.T A B L E 7 Cost of production incurred by chickpea producers in the study area per hectare.
Licensing process.Licensing is a major problem in many business activities.According to the results of the survey, a trader who has a business license in a business is not allowed to do any business other than the licensed business.According to Table2, 16% of the traders indicated that it is a problem to enter the chickpea market.Traders explained that informal rural collectors (unlicensed) are buying and selling chickpeas, especially during peak production season and high demand.At Keble level and small towns in the district, there is no strong regulatory action to control unlicensed market participants.
Barriers to entry represent the constraints on competition between existing traders and potential entrants.If entry barriers are low, new traders can easily enter the chickpea market and compete with established traders.T A B L E 1 Chickpea trader's concentration ratio in Este district.Source: Own survey result, 2019.Lack of Capital.Capital is essential for all market actors to carry out any business, although the extent of its importance varies among different actors.To handle a reasonable amount of chickpeas, traders need enough cash to help their business run in a healthy manner.As the table shows, 40% of traders have capital as a barrier to entry because they are the only ones who can get the money to enter the market.In general, lack of capital prevents chickpea traders from entering the chickpea business.
T A B L E 6

Table 7
, the average production cost of chickpea was 393.094 birr/Qt.The classification cost into different activities indicated that land preparation costs were 51.21 birr/Qt, labour cost for sowing and chickpea management was 16.73 birr/Qt and seed cost was 114.52 birr/Qt.The result indicated that out of the total chickpea production cost, seed and land value cover the largest cost.
Cost structures and profitability of sample farmers.
T A B L E 8Source: Own survey result, 2019.