A study was conducted in eight selected areas of Ethiopian central highlands to analyze smallholder butter value chain, and identify the factors involved and their roles in butter production and marketing. A total of 320 smallholder farmers, 8 dairy cooperatives, 80 open market butter traders and 40 dairy product shops were interviewed using a semi-structured questionnaire. The key value chain actors involved in the butter value chain were: input suppliers, producers, traders, processors and consumers. On-farm produced and purchased feed sources were the major inputs to dairy cattle. Butter is predominately produced from crossbred cows. Women were highly engaged in butter making and marketing. Smallholder farmers used on average, 9 L of milk collected for up to 3 days to produce 0.6 kg of butter. The time spent to complete the churning process was estimated to be 96 min. Smallholder farmers represent sole supplier of butter for traders and retail shops. The average butter consumed per household per month during fasting and non-fasting seasons were estimated to be 0.5 and 0.75 kg, respectively. Majority of the sample respondents (88%) processed milk into butter but only about 40% of them supplied butter to market. Butter fetched higher price during non-fasting periods (164 Ethiopia Birr (ETB)/kg) than fasting seasons (143 ETB/kg). In a kg of butter, on average, about 14 and 19 ETB financial advantages were reported for butter traders and shops over smallholder farmers, respectively. Public transportation (72%) was the dominate means used to transport butter to market places. Seasonal butter demand (76%), adulteration (11%) and low butter price (7%) were the major problems identified related to butter market. Therefore, input provision, training and linking smallholder farmers with potential markets is necessary to enhance their incomes and increase productivity.

Keywords: Butter, smallholder, value chain