Urban and Peri-urban Milk Market Channel Choice Using Multivariate Probit Approach: Evidence from Arsi Highland of Ethiopia

Abstract This article aims at analyzing the factors that affect urban and peri-urban dairy farmers’ milk market channel choice in the Arsi Highland of Ethiopia. The reason for focusing on milk is because the product is a key dairy product that contributes to dairy households' economic development, employment creation, and a pathway out of poverty. Four milk marketing channels were thoroughly investigated: a) cooperative channel, b) cafeteria/restaurant channel, c) consumer channel, and d) assembler/trader channel. Primary data collected from 259 dairy farmers through a field survey were used to analyze the simultaneous selection of multiple milk marketing channels. A multivariate probit approach was used and showed that market distance, milk production, artificial insemination (AI), market satisfaction, contractual agreement, quality management, cooperative membership, average milk price, number of the dairy cow, and quantity of milk sold affected farmers milk marketing channel choice. The outcome suggests that policies aimed at strengthening the use of well-organized milk cooperative to access appropriate technology; enhancing milk quality management to ensure milk safety along the milk channel; introducing milk quality incentives; promoting vertical coordination through strengthening the existing informal contractual agreement; establishing advanced milk payment system and improving the volume of milk production could enhance the distribution channel of the study area milk marketing particularly, and developing nation generally.