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Identifying dairy value chain map, examining performance of actors in the chain and analyzing the determinants of milk market participation decision and level of milk marketed in the study area was the those specific objectives . The primary data for this study were collected by three stage sampling technique. In the first stage from 55 kebeles, eleven kebeles were selected purposively based on production potential. In the second stage out of those selected kebeles 4 of them were selected randomly and third stage 121 producers were randomly selected from list of dairy producer kebeles. Meanwhile, 46 traders from different markets and 28 consumers in Dire Dawa, Harar and Meta towns were selected and interviewed. Heckman two stage models were applied to identify determinants of milk market participation and volume of milk supply to the market. The cost margin indicates that the highest share profit margin profit was obtained by cafes 6.57 Birr/litre and the lowest profit goes to retailers(1.85 Birr/litre) next to producers (1.86 Birr/litre). Results of Heckman two stage selection model shows among those 14 explanatory variables hypothesized to affect milk market participation decision, distance to the nearest market, nonfarm income, crop income, land size and age of household were found negatively and significantly affecting participation decision. Supplementary feed, hybrid dairy cows, livestock size (TLU) were significantly and positively influencing the value of milk marketed. Mill’s ratio was significant at outcome equation and it indicates that there were selectivity bias between those sample dairy producer households and heckman two-stage model was appropriate for the collected data. The value chain analysis revealed that the major value chain actors are input suppliers, producers, collectors, rural wholesalers, urban wholesalers, retailers, cafes and consumers. Value chain supporters are Meta Agricultural Office and Haramaya University. It is also found that milk passes through several intermediaries with value added products (boiled milk and yoghurt) before reaching the ultimate users. Therefore, policies aiming at increasing producer’s provision of modern inputs, number of dairy cows and improving livestock production of dairy cows and change of their attitudes towards dairy production and participating to dairy market were recommended to accelerate diary value chains development in the study area. Keywords : Dairy value chain, Heckman two-stage, market participation, value chain actors.

Dairy Value Chain Analysis in Meta District, Eastern Ethiopia