Empirical Methods

The study entailed review of literature together with collection and analysis of secondary data.

The secondary data comprised of aggregate data on national export from Tanzania bureau of statistics, level of production obtained from DALDO‟s office and other published sources on the major pigeonpea producing areas in Tanzania.

Information from these secondary sources was augmented with collection and analysis of two primary data sets: farm – level production and post farm level marketing data. The farm – level data was comprised of production data from 613 randomly sampled households from 24 different villages in Kondoa, Babati, Karatu and Arumeru conducted in 2008 and covered the year 2007/2008 cropping season. The post farm–level data include information from a rapid market survey for both green and dry pigeonpea conducted on 42 respondents in Babati District, Arusha town and Dar es Salaam city in 2009 for the year 2007/2008. These intermediaries included rural assemblers, rural wholesalers, urban wholesalers, urban open air retailers, and urban exporters. The rural market intermediaries (primary respondents were

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sampled from Babati district while the urban market intermediaries (tertiary respondents) in Arusha and Dar es Salaam were generated from the secondary respondent) in Babati district.

Marketing costs were taken to include both transaction costs and standard marketing costs (transport, assembly, grading/sorting). Measured transaction costs included the reported costs of finding a buyer/seller, costs of monitoring/inspecting the quality of grain being traded, and costs of negotiating prices. While exchange is through contractual arrangement, the costs of reaching an agreement and monitoring and enforcing the term of the contract all constitute transaction costs. The standard marketing costs considered in this study included the costs of assembling the produce, grading/sorting, transportation, and storage, among others,

The standard marketing costs included transport costs incurred during both buying and selling activities, i.e., transport from seller to store and from store to buyer. In addition, marketing costs included costs paid for labor to clean the grain, storage costs, loading and offloading costs, security/watchman costs, council charges, shelling costs (for vegetable pigeonpea), processing costs, packaging costs, custom clearing costs for exporters, and bank charges.

Most of these costs have associated indirect implicit costs in completing transactions. For instance, the costs of assembling produce in the rural areas are a standard marketing cost.

However, it entails searching for a seller, negotiating the price, and inspecting the quality of the produce offered for sale, which are all components of transaction costs. Likewise, transportation costs (which is standard marketing cost) often encompasses costs of inspecting that the consignment received has same weight, volume, and content as the one dispatched (which are transaction costs). Despite the difficulties in disentangling these costs, an attempt was made to elicit the direct cash outlays as well as the indirect costs in terms of time used and phone calls made to acquire information, find buyers/sellers, negotiate, and conduct transactions (Shiferaw, et al., 2007).

According to Shiferaw, et al, cost is the factor that influences the price in the market value chain. In competitive market, price is one of the factors that need to be taken into consideration. Apart from basing on the cost aspect in the value chain, a study also looks at price as an important factor. Despite of other factors (such as sex of respondent, access to

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information, access to transport, frequency of transaction, market type, quality, seasonality of transaction, buyer type, education level, years of experience in the business and quantity), cost can influence the price of a commodity in the market and this can reduce the margin of a participant. Once the margin becomes low, output reduces in the coming years and the level of poverty increases among producers.

Based on the theory of transaction cost, production and marketing of pigeonpea is associated with both variable and fixed costs. Total variable costs of marketing pigeonpea include marketing costs, and transaction costs. According to the new institutional economics, fixed costs include the costs of identifying, negotiating, and concluding an exchange (Williamson 1985; Nabli and Nugent, 1989).

In order to analyze the marketing chain, cost and net marketing margin model have been used.

The actors in a marketing chain of pigeonpea are facing two different types of cost at it is shown in the diagram below. In order for smallholder farmers to improve productivity and face global market competition, the chains costs need to be minimized so as the price of the produce can be competitive, since we know that price is one of the factors that can make firm to be competitive. According to the concept of logistics, cost should not be minimized at the experience of quality. There is a need to look at how to reduce costs in a chain by looking at all the costs associated with the marketing value chain of pigeonpea. This can increase the farmer's margin in a chain, they will produce at a lower cost and sell at a reasonable price which covers all the expenses spent in production.

46 Figure 4.3 Agricultural Marketing Chain Model

Source: Own Construct (2010)

Total cost refers to marketing costs (which involves payments to agent, transport cost, loading and offloading charges, cleaning cost, storage cost, tax charges, cost of buying bags) and transaction cost (which involves seller search cost and weight loss after cleaning).

Net marketing margin refers to marketing margin (which is the difference between selling price and buying price) less total cost.

Chain actors

Transaction cost

Price Marketing

cost

Total cost Profit/Margin Productivity

47 CHAPTER 5

RESEARCH METHODOLOGY 5.0 Introduction

The chapter presents research methodology for the study. In particular, the chapter explains the research design and the selected procedures for testing the variables. It also describes location of the study area and the determination of sampling framework from the population.

In addition to that the chapter explains the instrument used to collect data and data collection techniques and problems faced in data collection.