This research explores how small-scale farmers in River Njoro Watershed in Kenya allocate resources to production of the main food crops in order to understand the underlying causes of enterprise productivity differentials. The River Njoro watershed stretches from the Mau forest to Lake Nakuru; it is part of the on-going research under the Sustainable Management of Watersheds (SUMAWA), Collaborative Research Support Programme (CRSP). The study was done in the five locations that fall within the watershed, namely: Nessuit, Njoro, Ngata, Baruti and Kaptembwa. A representative sample of 120 small scale farmers was studied. It was only possible to collect cross-sectional data during the study. The study basically used primary data, collected using a Schedule, which was administered to the sampled farmers using face-to-face interviews. A translog specification of production function and linear programming procedures were used to analyse the data. SAS and GAMS software‟s were used for the analysis. Results indicate that farmers in the study area allocated the biggest portion of their farms to Maize-bean intercrop and that Potatoes were not included in the optimal programme. The Allen and Morishima elasticities of substitution among pairs of inputs and price elasticities of factor demands were computed. The results indicate that all the three enterprises are substitutes except in the Maize-bean intercrop, which are in the inelastic range. In the three enterprises seeds are very sensitive to their own price changes while land in maize-bean intercrop and labour in potato and wheat enterprises are sensitive to the changes in the prices of other inputs but least sensitive to their own prices. The results further indicate that the increase in prices of seeds, labour and fertilizers used in the Maize-bean intercrop is not favourable since it will trigger more land use. Policies should thus dwell on the increment of output without the expansion of land under cultivation.

Background Information 
Agriculture is the backbone of Kenya‟s economy. It provides nearly all the food required by the population and directly or indirectly accounts for over half of the country‟s economic activities and generates nearly two thirds of the country‟s foreign exchange. It supports 80 percent of the population and contributes 21 per cent of the gross domestic product (GDP) (RoK, 2004b). Agricultural sector GDP growth rate decelerated from 2.7% in 2003 to 1.4% in 2004, (RoK, 2005a) this problem was made worse by the fact that farmers could not access credit facilities to purchase fertilizers and therefore crop yields were low. This has resulted in recurring food deficits in most parts of the country. 

As in many other developing countries, the small-scale farmers in Kenya encounter multiple constraints in their production process. These include inadequate capital, seasonal labour shortages, poor marketing infrastructure and uneconomically small farms; most of the farmers are poor and are not able to invest in further development, among other things. 

Nakuru district within which River Njoro watershed lies is a major producer of food and cash crops. For instance, in 2003 only 28 bags of maize, 30 bags of wheat, 7 bags of beans and  2.5 tons of potatoes were realized per hectare (RoK, 2004a). This compared poorly with the neighbouring Rongai division, which despite having almost similar climatical endowment recorded 35 bags of maize, 30bags of wheat and 12 bags of beans during the same year. However, the yields per hectare were far below the expected optimum levels, which were 40 bags for maize, 35 bags for wheat, 18 bags for beans and 3 tons for potatoes (RoK, 2004a). This could be attributed to poor resource use, and input combination by farmers. It was further pointed out that there was not enough food to last from one harvest to the next in the district. Also the cost of resources like land, labour, seeds and fertilizers was noted to be rather high. In all of the above cases poor use of resources was noted to be a major contributing factor to low yields (RoK, 2004a) 

In the River Njoro watershed, the highest land cover changes occurred after 1989, with rapid loss in plantation forests and the conversion of forested areas into small-scale (mixed) agriculture. Additionally, several larger agricultural areas were transformed into smallholdings. By 2003 the majority of plantation forests (these are exotic trees that are planted in a portion of the forest reserve for a specified duration of time after which they are harvested for commercial purposes, usually timber) were converted to small-scale agriculture (Kenya Forest Working Group, 2001). Large increases in smallholder agriculture are significant throughout the watershed, but are especially pronounced in the lower regions. In these areas both plantation forest and large-scale agriculture were converted into small farms as population pressure increased (Tracy et al., 2004). See Appendix 2 for land maps showing the land cover changes covering the period 1986-2003. 

Land constraints have increased in River Njoro Watershed which was formerly thought to be land abundant; population pressure density has risen, and fallow periods have decreased. Farm capital formation is expected to affect the productivity of land and labour, (i.e. technical efficiency of the farm), Increasing farm capital should also make farm labour and land allocation more flexible and responsive to changes in incentives and diverse land conditions (Savadogo et al., 1995). Hence one should expect farm capital formation to increase allocative efficiency as well. Although technical opportunities to increase food productivity in a sustainable manner are available, yield performance remains poor and current production systems exhaust natural resources at a rapid pace. 

Decisions on land use are basically made by agricultural households, taking into account their own objectives, availability of resources, institutional arrangements and access to markets. Household members supply the bulk of labour requirements, therefore the amount and quality of labour available to households depends on the numbers, age distribution of the family members among others. As the economy grows and income rises, the domestic demand for non-food goods and services rises faster than the demand for food, and the demand for fruits, vegetables, and animal products rises faster than the demand for grains and tubers. Of course, food consumption patterns are also affected by changes in relative prices, cultural factors, religious restrictions and demographic shifts, such as urbanization and diversification is driven by factors other than income growth, factors such as falling barriers to international trade, improvement in transportation infrastructure, and new agricultural technology. Nonetheless, income growth is probably the main factor affecting trends in food consumption and domestic demand is one of the most important drivers of income and crop diversification. 

It is worth noting that institutional arrangements within Kenya after independence spurred large-scale land cover changes, principally indigenous and exotic forest conversion to small-scale agriculture, in the once white occupied highlands region around the Nakuru district. Census records indicate that population in the Nakuru District nearly doubled (from 270,912 in 1979 to 413,698 in 1999). The greatest population increase occurred after the 1989 census. Between 1979 and 1989 the recorded population only increased by approximately 15,000 with additional population increases occurring between 1989 and 1999. 

Problem Statement 
This study investigated the problem of resource allocation among small-scale farmers in River Njoro watershed as this could be the reason for the decline in yields. Low yields per unit area of land in the study region have been hypothesized to be due to insufficient input usage and poor management of resources by farmers. For instance in Njoro Division in the year 2004 the target yield/ha for maize was 40 bags of which only 28 bags were achieved, wheat target yield/ha was 35 bags out of which 30 bags were achieved, beans target yield/ha was 18 bags of which only 7 bags were achieved and Irish potatoes target yield/ha was 3 tons of which only 2.5 tons were achieved. The declining trend in yields had also been noted in the previous years. The prevalence of small-scale farming systems in the River Njoro watershed makes them a major driving force of agricultural development in the watershed. 

Overall Objective 
To evaluate the allocation and demand for factors of production by small-scale farmers in the River Njoro watershed. 

Specific objective 
i. To determine the demand for factors of production used by small-scale farmers in the River Njoro watershed under natural rain fed conditions. 
ii. To determine the levels of resource use in the production of main food crops by small- scale farmers in the River Njoro watershed. 

Research Questions 
i. What determines the demand for factors of production used by small-scale farmers in the River Njoro watershed and why? 
ii. At what levels of resource use do small-scale farmers in River Njoro watershed operate in the production of main food crops, and why? 

Justification of the Study 
Since smallholder farmers in Kenya contribute nearly 72 per cent to total sales, improved resource allocation could lead to higher output and thus improved welfare of the small-scale farmers. In the River Njoro watershed the major economic activity is agriculture, this study intends to show the importance of understanding how small-scale farmers allocate the meagre resources at their disposal to different enterprises in the production process. It is intended that the results of this study would enable small-scale farmers allocate their limited resources more efficiently. 

River Njoro watershed has been selected due to the fact that it has been experiencing the problem of low yields and poor resource usage and this has had subsequent effects on the standards of living of the farmers. This has drawn a lot of concern from various Non- governmental organisations (NGOs) and institutions nearby. It is hoped that the results of this study will lead to increased production and productivity; idle resources will be put into more efficient use and also identification of slack and high demand periods for efficient farm planning. Agricultural extension staff charged with the role of advising farmers will use the information as decision support to formulate guidelines that improve production under varying conditions. The results of this study will also be generalised to other areas with similar characteristics. A clear understanding of how small-scale farmers in the river Njoro watershed allocate resources to the main enterprises and also the factor demands by small-scale farmers is required for technological and developmental interventions to be targeted appropriately. This is the information gap that this study intends to fill. 

The information generated would assist planners, researchers and policy makers in formulating appropriate strategies for promoting small scale food crop production in River Njoro watershed and Kenya in general. The study findings will therefore add to the existing body of knowledge in agricultural economics 

Scope of the Study 
The study was done within the River Njoro watershed that stretches from the Mau forest to Lake Nakuru; it is part of the on-going research under the Sustainable Management of Watersheds (SUMAWA), Collaborative Research Support Programme (CRSP). It focused on optimal levels of resource use in smallholder crop production, the crops that were addressed were: maize, wheat, potatoes and beans. The study was done in the five locations that fall within the watershed, namely: Nessuit, Njoro, Ngata, Baruti and Kaptembwa. Due to time and money constraints, a representative sample of 120 small scale farmers was studied. It was only possible to collect cross-sectional data during the study. It is envisaged that this formed a representative sample from which results could be generalized to cover the whole of the study area. 

Limitations of the Study 
During the field data collection exercise some of the respondents were absent during the scheduled time with the enumerators, this necessitated call backs which led to time wastage. Some respondents especially in the upper watershed were not willing to divulge the full information about the farm as they considered this a male domain. 

Definition of terms 
Catchment: Refers to an area with common drainage, Area is usually forested or covered with natural vegetation. 

Economic optimum: Level of input occurs when the marginal value of product of that input is equal to the price of the input. 

Fixed Input: Are those inputs that do not vary as output change, they are incurred even when production is not undertaken 

Household: Comprises of a person or group of persons who are generally bound together by ties or kinship or joint financial decision, who live together under a single roof or compound and are answerable to one person as the head and share the same eating arrangements. 

Large scale farm household: Refers to the household who own land of more than five acres. 

The land ownership can either be leasehold, private or communal. 

Linear programming: Is an operational method for studying the allocation of resources between enterprises when inputs are limited in their total amounts or are otherwise constrained. 

Marginal physical product: The increase in output that occurs when one more input is applied 

Marginal revenue product: The change in the farm‟s total revenue brought about by the employment of one extra unit of a resource. 

Marginal revenue: is the change in the farm‟s total revenue per unit of output. 

Off farm income: Income generated outside farming activities accruing to an individual. 

Partial budget: A partial budget is a technique for assessing the benefits and costs of a practice relative to not using the practice. 

Risk: Is restricted to situations where probabilities can be attached to the occurrence of events which influence the outcome of a decision making process. 

Smallholder farm household: Refers to the household who own land and farm of up to a maximum of five acres. The land ownership can either be leasehold, private or communal. 

Sustainability: Concept captures the idea that the living standards of future generations should not be compromised through environmental depletion by the current generation. 

Technical efficiency: Is the maximum attainable level of output for a given level of production inputs. 

Variable Input: Inputs whose quantity used varies as the amount of output from the production process changes. 

Watershed: Refers to an area through which water flows to a common point.

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Item Type: Kenyan Topic  |  Size: 79 pages  |  Chapters: 1-5
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