Does value addition at oilseed production and/ or spreading the gain from export of oilseed products increase the income of primary producers?

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 research used the global 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 infrastructure 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 concludes 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.