Trade, value chain-technology, and prices: Evidence from dairy in East Africa

Abstract

Differences in world market participation and access to value-chain technologies have resulted in uneven experiences across countries. In this paper, we explore their impact on prices in the value chain, using the examples of Ethiopia and Uganda. We first develop a conceptual framework, and then validate the model using primary price data collected at several levels in the dairy value chains in both countries. We find that prices are lower in Uganda than in Ethiopia, reflecting their respective net trade status. Moreover, despite shorter value chains, we find much more significant effects of distance from the capital on milk prices in Ethiopia than in Uganda. This is linked to the presence of milk chilling centers in Uganda. While such technology is important for milk quality, we find here that it also has the added benefit to reduce the impact of farmers' remoteness on prices and allows for more geographically extended value chains.