ABSTRACT
Kenyan dairy sub-sector has been undergoing many changes since the collapse of Kenya Cooperative Creameries (KCC) in 1992. There have been developments in establishment of milk cooling plants which are thought to reduce milk losses and benefit the smallholder dairy farmers besides bulking milk at one point for the processing firms. However, there is evidence of underutilization of the cooling plants and the reasons that inform farmers’ decision to use the cooling plants as milk marketing outlet have not been clearly established. Hence, there seems to be reluctance by farmers to deliver their raw milk through the cooling plants. To bridge this gap, the current study sought to evaluate factors influencing smallholder dairy farmer’s decision to deliver milk to cooling plants in Sotik Sub-County. Multi-stage sampling procedure was employed to select 150 smallholder farmers. Data was collected using structured questionnaires administered by enumerators and analyzed using both descriptive and inferential statistical techniques. Multivariate probit results indicated that; age, gender, education level, household size, price, distance, access to credit, extension service and group membership significantly influence the choice decision of the farmer to deliver milk to cooling plants. Farmers delivering to cooling plants had higher gross margin of KES 10.84 per litre compared to KES 8.15 and KES 7.27 per litre for cooperatives and vendors/neighbors, respectively. The observed difference was due to the costs incurred in selling milk to the different marketing outlets. It was also found that delivering milk to cooling plants positively and significantly increases the income of dairy farmers by KES 16,680 more than their counterparts per lactation period. This is an indication that a cooling plant is economically viable and an important tool in increasing smallholder dairy farmer’s income. The study therefore, recommended policy interventions in increasing market awareness through creation of strategies that would improve socio-economic conditions of smallholder. Furthermore, the government and non-governmental organizations in the dairy sector ought to expand the modern channels by establishing more milk cooling centers since they are more rewarding to the farmers.
CHAPTER ONE
INTRODUCTION
Background information
Milk production is one of the most important investment enterprises in the world where small scale farmers earn a regular income, employment and contributing to the household food security on a daily basis throughout the year (Omore et al., 2004). In Africa, Kenya is the only country, after South Africa that produces sufficient milk for both domestic consumption and export. It is the single largest agricultural sub sector larger than even tea and is estimated to contribute about 14 percent of the agricultural GDP and approximately 4.5 percent of the national GDP (Mutua-Kiio and Muriuki, 2013; FAO, 2014). The milk production trend has been increasing in Kenya due to an increase in demand for milk and its products. It is currently approximated that 4.2 billion litres is produced per day with smallholder farmers accounting for over 70 percent of the total production (MoLD, 2010). The sub sector is also providing a means of livelihood to more than 2 million Kenyan households and employs more than 600,000 smallholder dairy farmers (Muriuki et al., 2007; Techno Serve, 2008).
Before liberalization of the Kenyan dairy industry, the main challenges were mainly addressed through the Kenya Cooperative Creameries (KCC). This was a farmer’s private organization that received high profile and heavily depended on government support (Staal et al., 2008). With the liberalization of the dairy sector in 1992, new institutional and economic arrangements in the dairy sector that include milk collection, processing and marketing outlets emerged (Karanja, 2003). However, only a few of the smallholder dairy farmers, community based organizations and cooperatives expanded their enterprises to include establishment of other milk marketing outlets (Mburu et al., 2009). Smallholder dairy farmers could therefore enhance their growth and profitability by being involved in production and marketing activities by delivering their milk to these outlets.
Marketing of milk to final consumers in Kenya is undertaken through formal and informal channels. The formal channel is made of licensed operators who include more than 25 processors, 59 mini dairies, 68 cottage industries and 1172 milk bars (KDB, 2014). Important players in informal marketing system include: neighbors, local shops, restaurants, hotels and milk vendors or middlemen. The informal markets are unstable and are exploitative, particularly during the glut production season. Prices are determined arbitrarily, and under-pricing is common during this season (Omore et al., 2004). Farmers may also sell milk to more than one outlet perhaps for different purposes.
Since most of the small scale dairy farmers live in remote areas characterized by poor roads and lack of electricity, their major concern in selling milk is the development of the best marketing outlet that minimizes losses and maximizes their profits. There has been great emphasis on the organization of smallholder milk producers into groups such as self-help group, cooperatives, and companies in order to enhance efficiency in marketing of raw milk through bulking and cooling. However, there is an apprehension by smallholder dairy producers on whether to take advantage of the emerging opportunities of these modern marketing outlets (Wambugu et al., 2009). One of the important conditions for the dairy farmers to reap their economic benefits from the dairy sector is the establishment of assured marketing outlets which are sufficient and remunerative to them (Omore et al., 2004). However, there are limitations in harnessing these opportunities by smallholder producers to access the markets.
The government of Kenya through the Ministry of Agriculture with the support of other private sectors in the dairy sector has established milk cooling plants project which serves to help in collection of milk in places that were not easily accessible during the rainy seasons and also to capture the afternoon milk produced by the farmers which more often is not collected by the New KCC (MoLD, 2010). These cooling plants are left to the farmer organization and the community to own and run them. The project is thought to reduce the farmers’ transaction costs as well as milk losses therefore, boosting the dairy industry by enhancing milk supply at competitive prices (Karanja, 2003; KDB, 2014). Notwithstanding the dominance of informal milk marketing outlets, cooling plant is seen as an important and more income generating marketing outlet for many rural smallholder dairy farmers (Wambugu et al., 2009). However, the decision on where to sell milk has remained with the milk producer. This decision have a direct effect on the rest of the farmer`s marketing activities and once it is established, it is difficult to change particularly in the short run. Although this may be less true for smallholder farmers, what influence a farmer to deliver milk or not to a certain marketing outlet still remains to be a challenge.
Statement of the Problem
Dairy farming has been practiced in Kenya by many generations both for household consumption as well as generating income. There has been an increase in milk production which has necessitated the government and other private companies in the dairy sector to support the establishment of milk cooling plants. Their main aim is to catalyze the rural economic development, reduce milk losses and benefit the smallholder dairy farmers. Despite the support and high profile given to these cooling plants, many farmers are still reluctant to deliver their milk through them. Little information is known on whether the benefits accrued from cooling plants differ from those of other marketing outlets. This research therefore endeavors to address this gap based on factors influencing farmers’ decision to deliver milk to cooling plant. Identifying these factors is crucial in terms of pinpointing the possible areas of interventions that may lead to capacity utilization of the cooling plants and also helping dairy farmers to maximize benefits out of their dairy production.
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Item Type: Kenyan Topic | Size: 56 pages | Chapters: 1-5
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