Economic coordination of urban milk value chain: the case of Tanga city

Masters Dissertation

This study was conducted to examine coordination of milk value chain in Tanga City. Specifically the study (i) characterizes the milk value chain in the Tanga City (ii) examines existing governance structures in the milk value chain in the Tanga City (iii) examines chain efficiency and competitiveness in Tanga City and (iv) carries out the institutional review of Tanga urban dairying. Cross-sectional research design was used to collect primary data from 80 dairy farmers, 30 milk traders and 15 consumers. The data were analyzed using SPSS and STATA. The findings show that the key players in the milk value chain in Tanga City were producers, cooperatives, processors, input suppliers, traders and retailers. Five major milk marketing channels were identified. Urban dairying was observed to be governed by institutional arrangements embedded in the national Urban Farming Regulation of 1992 (revision 2003) and City by-laws and regulations on livestock keeping. The analysis of chain governance structures indicated incidences of contract failure between primary dairy cooperatives and the Tanga Dairy Cooperative Union (TDCU) and between TDCU and the major processor Tanga Fresh Ltd. Basing on the Herfindahl-Hirschman Index, the dairy industry in Tanga City was found to be highly concentrated making it inefficient and uncompetitive. The Gini coefficient for market share between the actors was 75.43% indicating a high level of inequality. GM analysis indicates that producers in the formal channel are less profitable than those in the informal channel, though the difference is not statistically significant. It is recommended that the concerned governmental and non-governmental bodies review the price setting mechanisms in the industry to make ensure that offered producer price is cost-effective, an intervention that will also enhance competitiveness of milk marketing in the city and in other urban dairying centres countrywide.

Belgian Technical Cooperation (BTC)