Kenya like most countries in Sub-Saharan Africa will continue to depend largely on agriculture in the foreseeable future. Agricultural activities have however been shown to create problems such as soil erosion, soil nutrient depletion and fuel wood and timber shortages. These problems can be mitigated through planting of trees but this is hindered by lack of availability and accessibility of tree seedlings to farmers. To identify the sources of this marketing inefficiency, this study sought to investigate the influence of the existing market environment on the performance and organization of the tree seedlings market. This study was undertaken in the Kisumu and Nairobi districts of Kenya. Structured questionnaires and interview schedules were used to collect both primary and secondary data from a total sample size of sixty tree nurseries and nine organizations involved in the tree nursery development process. Data analysis was done within the Structure Conduct and Performance (SCP) modelling framework for performance and an Ordered Probit Model for organization. The study revealed that the tree seedlings market has a monopolistically competitive market structure comprising of several or many nursery operators/managers each producing similar but slightly differentiated tree seedling species. Each nursery manager/operator can set tree seedling prices on the basis of cost, demand and market without affecting the tree seedlings market as a whole. However the market has tendencies towards perfect competition in Kisumu and oligopolistic competition in Nairobi where central nurseries control most of the output and utilize non price competition (product development and advertising) and low prices. Cost plus pricing mechanism is utilised by all nursery operators and managers although there is no market leader for price leadership. Both markets comprise of a high proportion of decentralized nurseries managed by men aged between 30- 50 years with primary and secondary education. The market offers 10-30 species comprising of exotic, medicinal and indigenous species in three sizes (Transplanting, medium and landscaping). Decentralized nurseries offer all three sizes with landscaping services while central nursery managers offer transplanting and medium sized tree seedlings with extension services. Hard support is provided through collaboration, contracting and use of local materials while soft support is provided through interactive extension and media. Main barrier to entry is access to capital. The overall market efficiency of the tree seedlings market is 54% and is influenced by both production and market aspects while the organization of themarket is influenced by prices and infrastructure. Production (sourcing of soil, manure, seeds, polytubes and implements) and management constraints (pest and disease control and funding shortages) still continue to plague the production of tree seedlings. These issues can be addressed through formulation of policies to ensure the provision of security, infrastructure, market information, credit and capacity building opportunities for entrepreneurs to ensure a sustainable supply of tree seedlings to farmers.

Background to the study 
Kenya has great topographical, climatic and ecological variations that contribute to the diversity and distribution of her natural resources. Agriculture is the backbone of the national economy and contributes to over 50% of the real Gross Domestic Product. It also supports over 80% of the population and employs over 70% of the country’s labour force of over 10 million compared to only 3million employed by the formal sector. It generates 80% of the export earnings and supplies over 70 % of raw materials for the agro based industries and overall this sector contributes to over 45% of government revenue (Kosura, 1995). Only 18% of the total land area is considered arable and the remaining 82% is Arid and Semi Arid Land (ASAL) characterised by low erratic rainfall, high temperatures and fragile ecosystems. The main economic activities in high and medium potential areas are agriculture and intensive livestock husbandry while ASALs support pastoral ranching, wildlife based systems and some dry land farming (Mwichabe, 1996). 

Although agricultural activities are central to the well being of the people in Kenya, they also create problems such as soil erosion, soil nutrient depletion, fuel wood and timber shortages (Ngugi and Brabley, 1986). These problems are also accentuated by high population densities, intensive cultivation methods, a preponderance of smallholdings because of repeated subdivision of family lands and a rapid decrease in land available for farming (Ministry of Planning and National Development, 1988). Studies have shown that farmers have been protecting useful natural resources on their farms for ages while actively planting trees by either transplanting naturally occurring volunteer seedlings or obtaining seedlings from whatever source they could access (Guggenberger et al., 1989; Dewees, 1995a, b; Aalbaek, 2001). In addition the wealth of information on farmers’ use and their valuation of trees on farms, indicates that trees have an important role to play in enhancing farm productivity, diversification, food security, household incomes and ecosystem services (Dewees, 1995b; Place and Dewees, 1999; Place and Otsuka, 2001). 

Agroforestry has the potential of intensifying land use while maintaining the productivity of the natural resource base at a sustainable level, providing farmers with additional profitable and sustainable production to current farming practices. However, sustained adoption of Agroforestry has been hampered by various factors, the principal one being lack of availability of and accessibility to tree seedlings by farmers (Guggenberger et al., 1989; Francis, 1995; Bohringer et al., 1999; Place and Dewees, 1999; Aalbaek, 2001). This availability and accessibility to tree seedlings by farmers falls under the preserve of the market environment comprising of the organization and support components. The organization component concerns the approaches to tree nursery development while the support component involves the other stakeholders involved in the development process. 

Tree nurseries as basic production units for tree seedlings fall under either the centralized or decentralized development approach on the basis of their function, nursery organization and management. The centralized approach comprises of central nurseries, which, belong to private or public bodies such as companies, schools, colleges, churches, NGOs or research organizations. An appointed manager usually manages them and they often specialize in species relevant to the organization such as firewood species for tobacco companies, timber species for wood carving centres or the Forest Department. The decentralized approach on the other hand comprises of group and individual nurseries. Group nurseries are those owned by a group and are usually managed by a leader with the assistance of other group members. Usually members have developed duty rotas for the common activities such as sowing, watering, and weeding. In most cases they are self-help activities which produce seedlings for the group members, but sometimes the surplus is sold. While individual nurseries are those run by a family or individuals for their own needs or for sale (Jaenicke, 2001). Tree nurseries therefore range from those that supply millions of seedlings every planting season, to those that produce fewer than ten seedlings raised by a farmer in a clay pot or tin can in a backyard. Consequently, these approaches differ on aspects concerning the distribution of benefits and planting material, production aspects (quantity and quality) and capital investment aspects (Shanks and Carter, 1994). 

Many stakeholders including governmental and non–governmental organizations like the World Agroforestry Centre (ICRAF), Kenya Forestry Research Institute (KEFRI) and Forestry Department (FD), have been involved in attempts to raise the standard of tree nursery technology to boost production of tree seedlings. These stakeholders involved in the tree nursery development process have different objectives, pursue different strategies and focus in different parts of the country providing different support functions (Jaenicke, 2001). Consequently their activities have been shown to affect the nursery operator’s production decisions and therefore the amount of tree seedlings available both in quantitative and qualitative terms (species diversity). 

To help meet the farmer’s needs for diverse tree species there was need to focus on the tree nurseries marketing activities. Through the marketing mix involved in the marketing of tree seedlings that is the product (tree species diversity); price of tree seedlings; promotion (activities undertaken to communicate and promote tree seedlings to farmers) and place (activities undertaken to make seedlings available and accessible to farmers like location of the tree nursery). The tree nurseries market performance indicator subject to the marketing mix would be the market efficiency expressed as the percentage of output of tree seedlings sold or delivered to farmers. Furthermore, the tree seedlings market just like any other market is subject to entry and exit of nursery operators which not only affects the organization of the market but also the supply of tree seedlings. In addition investment decisions facing nursery operators like when to invest or expand the capacity of their tree nurseries involve large sunk costs of investment and uncertainty about prices, demand, costs or competition. Thus most entrepreneurs have the opportunity to delay their entry decisions to learn more about prices, costs and other market conditions before making investment expenditures that are at least partially irreversible. Hence the need for a critical look at the effect of the market environment on both existing nurseries and potential entrants into the tree seedlings market to enhance the establishment of a sustainable tree seedling supply system that would lead to the sustained adoption of Agroforestry. 

To critically examine the tree seedlings market we need an analytical framework that takes into consideration the effect of the organization and support components of the market environment on the performance of tree nurseries. The structure conduct-performance model provides such a framework. In addition the effect of the same market components on the entry and exit decisions of individual entrepreneurs can be captured by the ordered probit model since the choices available to them can be placed on a continuum (individual, group and central nursery levels).

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Item Type: Kenyan Topic  |  Size: 136 pages  |  Chapters: 1-5
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