Oilseed is the third most important export item in Ethiopian foreign trade. It has
registered a high export growth rate over recent years both in terms of volume and value.
Besides its growing share in export, it is widely used for the extraction of edible oil and
oilcake that is supplied to the domestic market.
Although farmers are the primary producers of oilseeds, they are not able to benefit
from the growing market share of the product due to the fact that they find themselves at
the end of an extended market chain. As a result they only receive a very small proportion
of what the final buyers are paying for the oilseed products. In addition, there is not much
experience on the part of the farmers to process oilseeds, change it to edible oil and oilcake
and retain the value addition in the local economy.
This minithesis used the value chain approach to investigate the possibilities for the
primary producers to increase their income share form the selling of their products either by
directly selling to exporters or by processing oilseeds, producing edible oil and oilcake, and
retaining the value addition in the local economy.
The research found out that it is possible to increase the income of the primary
producers through establishing a modular relationship between international buyers,
exporters and farmers. It also argued that income could be upgraded through improving
quality, supplying organic products, improving the market information system and market
infrastructural facilities as well as through provision of micro credits to oilseeds farmers.
The research underscored that theoretically it is possible to increase the income of
the primary producers through locally processing oilseeds and selling edible oil and
oilcake. But the low demand of edible oil and oilcake, the high competition from imported
edible oils and the better economic position of local oil processing firms makes it difficult
to viably run a small rural oil processing plant at farmers level in the research location.
The research suggested that farmers need to organize themselves in a cooperative so
that they can be able to take a collective action to realize the intended income change. Such
cooperative needs to be organized in a corporate governance structure where elected
farmers are represented in the board while an independent management runs the day-to-day
activities of the cooperative.