The study was conducted in Rural and Urban dairy production systems of Nekemte town and around at east wollega Zone, Oromia National Regional state. The data were collected with the following objectives to Characterize Dairy Production System in the study area, to Identify Milk and Milk Product Marketing System in the study area and to identify the Constraints of Dairy Production and Marketing in the study area. A single visit multiple subject formal survey was used to collect data. The collected data was analyzed by using SPSS 21 version and the observation was analyzed by SAS software. A total sampled of the study area 158 households; from rural 90 and 68 from urban respondents were individuals. The overall average milk yield of rural local breed, urban local breed, urban cross breed and rural cross breed dairy cows per day in current study areas were 2.06 ±2.3, 3.4 ± 3.23, 8.1 ±4.33 and 6.1±2.83liters. During the survey period, the average means value of milk price; was18.35 ±4.9 and22.7 ±3.5) (ETB/liter), butter (187.5 ±4.9) and (190±8.4 ETB/kg in rural and urban study areas. Observation results of milk yield for local and cross breed cows in rural and urban study areas were 9.34±0.23, 7±0.2 and 4.7±0.2 liters/day/cow during the early, mid and late lactation stage (morning and evening) respectively. Observation results of milk yield for local and cross breed during the early, mid and late lactation stage (morning and evening) respectively.During morning, evening and total per day milk yield from observation data Revealed in rural dairy production system reported from local breed 1.6 ±0.012, 1±0.01and 2.55±0.02. observation results for cross breed cows in urban study areas were 17.7±0.54, 12.8±0.4 and 8.6±0.3 during the early, mid and late lactation stage (morning and evening) respectively. In both the survey and observation results, there was a difference of (p<0.001) between breeds and productions systems thus indicating that milk yields are significantly dependent on lactation stage, breeds and production systems. In rural study area an average prices of raw milk was 18.4 ±4.9 (ETB/liter), butter was (187.5 ±4.9) ETB/kg with a minimum and maximum price of 180.00 ETB/195.00 ETB/kg. The average price of milk in the urban area was (22.7 ±3.5) ETB/liter; butter was (190±8.4) ETB/kg with a minimum and maximum price of 180 ETB/200 ETB/kg. The overall average mean value of milk and butter (21.9 ± 4.1) ETB/liter and (189 ± 7.1) ETB/kg, respectively. Marketing of milk in the Nekemte town and around was mainly a traditional type. Milk production constraints in both study areas especially diseases were a major. Dairy in the study areas can be improved by solving major problems of small holder dairy producers through services related to feed supply, good marketing systems and through provisions of veterinary, artificial insemination (AI), credit, organizing by cooperatives, extension, and training services at reasonable time and cost.

Keywords: Marketing, milk production, constraints, rural and urban.