MINIMUM ECONOMIC FARM SIZE A CASE STUDY OF THE SMALLHOLDER TEA SUB-SECTOR IN KENYA

Abstract

The average area under tea in the smallholder sub-sector is approximately 0.27 ha. The population pressure in the tea growing districts is quite high compared to the neighbouring districts without the enterprise. The robust population growth in tea graving zones translates into continued subdivision of tea firms to school leavers who cannot get alternative employment in other sectors of the economy. This scenario is a potential threat to the future of the smallholder tea production in Kenya. The problem of continued subdivision of ten farms has degenerated into what has been termed as “uneconomic tea firm sizes”. The objective of this study was to determine the optimal economic number of bushes a tea farm should have below which it would be referred to as “uneconomic tea farm size.” A profit function model was fitted on 259 smallholder farms. It is concluded that all ten farms in these subsets are more successful in responding to the set of prices they face (Price efficiency) and/or because they haw higher quantities of fixed factors of production, including entrepreneurship (technical efficiency).