Abstract
The dairy industry in Kenya is an important source of livelihood among the smallholder farmers who supply over 70% of the total milk. However, there is a growing concern on rising costs of milk production among farmers. The study assessed profit efficiency of smallholder dairying in the Rift Valley and Central Provinces of Kenya using stochastic frontier analysis for estimating farm level profit efficiency and identifying the specific determinants of efficiency. The results showed that the farmers are fairly profit efficient with an average of about 68%. Cost of fodder produced on farm significantly improved profit efficiency among farmers. However dairy profit efficiency can be enhanced if fodder production is embraced, as well as other supplemental feed technologies that are commensurate with local conditions. Institutional policy reforms on smallholder dairying will help protect the industry and its sustainability for smallholders. Key words: Dairy, profit efficiency, stochastic frontier, smallholder farmer.
Highlights
Kenya is the second largest dairy producer and consumer in sub-Sahara Africa and is relatively selfreliant (USAID, 2010)
This study proposed to assess profit efficiency of smallholder dairy production and identify its determinants among farmers in the Rift Valley and Central Provinces using Stochastic Frontier approach (SFA)
Profit efficiency is a wider concept than cost efficiency since it takes into account the effects of the choice of a certain vector of production both on costs and on revenues, offering complementary information useful for the analysis of dairy farm efficiency
Summary
Kenya is the second largest dairy producer and consumer in sub-Sahara Africa and is relatively selfreliant (USAID, 2010). About 60% of the total milk production in Kenya is produced by farmers in the Rift. Previous studies have identified that smallholder farmers supply over 70% of the total milk, mainly from cattle, but some little quantities from camels and goats (USAID, 2008; Muriuki, 2003). It is anticipated that the demand for milk is likely to double due to the growing world population. Farmers and stakeholders have increasingly expressed concern over the growing costs of milk production which result in diminishing milk profits in Kenya. This study proposed to assess profit efficiency of smallholder dairy production and identify its determinants among farmers in the Rift Valley and Central Provinces using Stochastic Frontier approach (SFA). Profit efficiency is a wider concept than cost efficiency since it takes into account the effects of the choice of a certain vector of production both on costs and on revenues, offering complementary information useful for the analysis of dairy farm efficiency
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