Choice of Marketing Channels and Transaction Costs: The Case of Maize Marketing in Bura Borama, Shashemene Area

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The objective of this study is to identify the transaction cost factors and household characteristics that influence the decision of marketing channel choice by maize farmers in rural kebele of Bura Borama, district of shashemene. The main hypothesis of the study is that farmers' choice of marketing channel is influenced by transaction costs (e.g information, transport, negotiation and monitoring costs) and household characteristics (e.g. age, education). Households facing higher transaction costs are excluded from using certain marketing channel. A multinomial logit model is used for empirical estimation using data from a survey of 103 maize farmers from Bura Borama. Empirical findings of this study reveal that the most important factors that explain farmers' decision of marketing channel choice are farmers' age, years of education, farm size, access to transportation, access to information, time spent to accomplish a one time sales and a possible delay in payment up on transaction. This suggests that government and/or other concerned institutions policy intervention should focus of reducing some of these transaction costs by providing institutional support to smallholder maize farmers in the study area. These supports could be in the form of improving access to market information, establishing producers' organization and improving the rural road networks which link production areas to markets



Bura Borama, maize, marketing channel choice, Multinomial logit, smallholder farmers, Transaction costs