Competitiveness of Smallholder Milk Production Systems in Uasin Gishu County of Kenya

Abstract

In Uasin Gishu County of Kenya the rapidly declining household land sizes are a pre-requisite to increased intensification in dairy production. Although various dairy production pathways are used by farmers in the County, it has not been established which one of them would be comparatively competitive to enhance commercialization process and lead to attractive returns to smallholders investing in milk production. The objective of this paper is to estimate competitiveness in the smallholder dairy production sector in Uasin Gishu County. Stratified sampling and proportional sampling followed by random sampling within the stratum were employed to select 246 smallholder dairy farmers. Zero grazing, semi-zero grazing and open grazing production systems are analyzed separately using the gross margin, net margin and return on investment. The results indicate that the gross margin and net margin in smallholder milk production (Kshs/liter) were significantly influenced by the intensification pathway adopted. The gross margin and profit per liter decreased with an increase in the level of intensification with free grazing system and zero grazing having mean profit of Kshs. 20.19 and Kshs. 8.25 respectively. The returns on investment for free grazing, semi–zero grazing and zero grazing milk production systems were 34.07%, 40.22%, 25.67% respectively. Intensive milk production is relatively more profitable, however profitability of milk production/liter however reduced with intensification due to the higher feed and labour costs in more intensive systems. In conclusion, smallholder dairy production was an economically viable enterprise in Uasin Gishu County. Milk producers need extension services and finance to improve on feed production and utilization technologies in order to increase their profitability. Suggested future works include determining the options of improving market access so that it’s positive contribution to dairy competitiveness is strengthened.

Keywords: Milk production; competitiveness, profit and intensification