ANALYSIS OF PRODUCTION EFFICIENCY IN IRISH POTATO PRODUCTION IN KENYA: THE CASE OF NYANDARUA NORTH DISTRICT

ABSTRACT 
During the past two decades, agricultural scientists in Kenya in collaboration with International Potato Centre have released numerous new varieties, developed improved Irish potato management practices, and actively worked with government agencies, NGOs and farmer groups to ensure that these improved technologies are widely available to farmers. However data on national Irish potato production in Kenya fail to demonstrate that these efforts have had an impact on national mean yields. Trends in national Irish production show that in the last twenty years there has been no significant increase in average national yields and hence productivity. Using farm-level data collected from 127 farmers through multi-stage sampling technique, this study employed a stochastic parametric decomposition and neoclassical duality model to estimate the technical, allocative and economic efficiency of a sample of Irish potato producers in Nyandarua North district. To elicit information on these aspects, a Cobb-Douglas production frontier was specified and estimated by using Maximum Likelihood techniques. The estimated production frontier was used to derive the dual cost frontier. These two frontiers were used to derive farm-level efficiency measures. In addition a two-limit Tobit analysis was used to determine socio-economic and institutional factors that influence economic efficiency of Irish potato producers in the study area. Results reveal that smallholder Irish potato farmers are inefficient; the average efficiency scores are 66.7 percent, 57.3 percent and 38.1 percent for technical, allocative and economic efficiency respectively. The two-limit Tobit results indicate that education level of the household head (number of years of formal schooling), contact with extension, use of credit in Irish potato production, and membership in a farmers’ association are significant factors for improving the level of efficiency. There is need to expand farmer education complimented by quality and effective extension service on improved agronomic and management practices. Innovative ways need to be devised that will ensure that farmers are enabled to access credit at a reasonable cost.

CHAPTER ONE 
INTRODUCTION 
Background 
Meeting the ever-growing demand for food remains a major challenge for world agriculture (Bhasin, 2002). Sub-Saharan Africa (SSA) is the only region of the world where per capita food production has steadily declined over the past two decades and where agricultural output has grown annually by an average of less than 1.5%, with food production increasing at a slower rate than the population growth (FAO, 2000). This greatly undermines the food security situation of the sub-region. 

To address the world food challenges the adoption of new technologies designed to enhance farm output and income has continued to receive particular attention as a means to accelerating economic development (Hayami and Rutan, 1985). The focus of researchers and policy makers has mainly been on the impact of adoption of new technologies on farm productivity and income. However, output growth is not only determined by technological innovations alone but also by efficiency with which available technologies are used. In the last decade major technological gains have been largely reduced across the developing world and specifically in Africa because of lack of complementary inputs such as fertilizers, irrigation and pesticides (Bagaba, 2007). This suggests attention to productivity gains arising from efficient use of existing technologies is justified. 

The need to increase agricultural productivity and employment in sub-Saharan African countries has received widespread attention in the literature on economic development and poverty alleviation (Abdulai and Huffman, 2000). An effective economic development strategy depends critically on promoting productivity and output growth in the agricultural sector, particularly in the smallholder subsector (Bravo-Ureta and Pinheiro, 1997). With persistent population growth, a dwindling supply of arable land per capita, and the relatively high income elasticity for food demand in developing countries, there is a growing need for food supply increases that originate from growth in productivity rather than expansion in inputs (Alauddin et al., 2005). According to Bhasin (2002) expected increases in agricultural demand associated with population growth and rising per capita incomes will require continuing increases in agricultural productivity. Moreover if farmers are not making efficient use of the existing technology then efforts designed to improve efficiency would be more cost effective than introducing new technologies as a means of increasing agricultural output (Belbase and Grabowski, 1985). This implies that increased productivity would require the effective use of available technology. 

Obwona (2000) observes that the importance of the efficient use of available technology is seldom realized by policy makers as they erroneously assume that farm-owners can operate the existing technology efficiently, but cannot make a rational choice among the various technologies. Thus unless the potential of an existing technology is completely exploited, benefits from new technologies may not be fully realized. The thrust of most agricultural development agents has been in trying to identify and suggest ways to eliminate the constraints on the adoption of new technologies. From a long-run policy viewpoint, it is imperative to examine how effectively and efficiently farmers, given the current technology, apply the technology at farm level. 

Efficiency in production may be defined as how effectively a firm uses variable resources for the purpose of profit maximization given the best production technology available. The efficiency of a firm or production unit can be measured in terms of technical and allocative efficiency. Technical efficiency refers to the maximum attainable level of output for a given level of production inputs while, allocative efficiency refers to the ability of a farm to use inputs in optimal proportions given their respective prices (Battese, 1992). 

Agriculture remains an important sector for the Kenyan economy. The primary agricultural sector generates approximately 75% of rural employment, accounts for 25% of total GDP and represents 60% of the value of the country’s exports (MoA, 2007). Furthermore, agriculture and its related economic activities are particularly critical for the development of Kenya’s rural economy. Agriculture contributes to the achievement of national food security; about 80% of the Kenyan population live in the rural areas and derive their daily livelihoods largely from agricultural related activities (Alila and Atieno, 2006). 

During the 1963-1983 period, the agricultural sector grew steadily recording some of the most impressive growth rates in Sub-Saharan Africa (SSA) at an average growth rate of 6% per annum (MoA, 2004). However over the 1996-2000 period, the performance of the agricultural sector registered a declining trend with growth declining from 4.4% in 1996, to 1.5% in 1999 and to an all time low of negative 2.4% in 2000 (MoA, 2006). Agriculture, which is the driver of the economy grew significantly from negative 3% in 2003 to 5.4% in 2006 (GoK, 2008). 

According to the Strategy for Revitalizing Agriculture (SRA) (MoA, 2004), declining performance of the sector in terms of growth has been one of the major concerns facing policy makers. As a sector that engages about 75% of the country’s labour force, such a decline implies lower levels of employment, incomes and more importantly food security for a vast majority of rural Kenyans. It is recognized that low land productivity, is among the main sources of high unit production costs in agriculture in Kenya (Alila and Atieno, 2006). The overriding goal of SRA is to achieve a progressive reduction in unemployment and poverty, the two major challenges that Kenya continues to face (MoA, 2006). The role of Irish potato sub-sector in the matrix of challenges cannot be overemphasized. 

Irish potato is the second most important food crop after maize because of its ability to grow in high altitude areas where maize does not do well and its high nutritive value. Being labour intensive, the crop generates employment in production, marketing and processing sectors (Gildemacher et al., 2006; MoA, 2004). In addition, it is an important food crop for many Kenyan smallholder farmers; it plays a major role in national food security and its demand has continued to increase over the years especially by urban consumers (MoA, 2007). The crop is therefore important to agricultural policy decisions, food security, and overall development of the agricultural sector and the economy. 

Irish potatoes in Kenya are cultivated in intensive, small-scale agriculture in the highlands of the country, which are characterized by cool temperatures with high rainfall of at least 800mm per annum at altitudes ranging between 1500 and 3500mm above sea level (Kinyae et al., 1996). These areas include the slopes of Mt. Kenya (Meru , Embu, Kirinyaga, parts of Laikipia, Nyeri); both sides of the Aberdare range covering parts of Nyeri, Murang’a, Maragua, Thika, Kiambu and Nyandarua North and South districts; the Mau Escarpment (Narok, Nakuru, Molo, Bomet, Uasin Gishu, Koibatek districts); Nandi South and North districts; and parts of Trans Nzoia, Mt Elgon, Keiyo and Marakwet districts. Small acreages are cultivated in Kericho, Kisii and Taita Taveta districts (MoA, 2004). In some of these areas Irish potato ensures food security and provides income to many households through sales. 

There are approximately 500,000 growers cultivating over 100,000 hectares with an annual production of about 1 million tonnes in two growing seasons (MoA, 2006). The Irish potato sector indirectly employs about 2.5 million people as transporters, processors, vendors and retailers (MoA, 2004). Per capita consumption is at 40kg/person (Lung’aho et al., 2006). 

Over the years, Irish potato production in Central province has averaged 412,700 tonnes per year from an average of 57,650 hectares. It is the leading producer both in acreage and volume in the country and it accounts for about 51.5% of national Irish potato production in Kenya. Rift Valley province follows with an annual average production of 228,230 tonnes from 27,138 hectares while average production from Eastern province is 160,725 tonnes from 22,315 hectares (MoA, 2004). 

Kenya produces 0.3% of the world’s total production and 6.5% of Africa’s production (MoA, 2004). Trends in production and area planted to Irish potatoes in Kenya are shown in Figure 

1. The area and total production has been increasing over the year but no significant increase in Irish potato yield over the 1961-2005 period was realized.

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Item Type: Kenyan Postgraduate Material  |  Attribute: 79 pages  |  Chapters: 1-5
Format: MS Word  |  Price: KSh900  |  Delivery: Within 30Mins.
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