Understanding market participation among Kenyan dairy farmers

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Photo credit: 
Courtesy of ILRI

A new statistical model developed by Stanford researcher Bill Burke helps identify barriers that keep farmers in Kenya from participating in the dairy industry. Results published in the American Journal of Agricultural Economics suggest that better technology, infrastructure, and access to markets may lead more people to take up dairy farming, which could improve rural food security and livelihoods.
 

Growing the dairy sector

Kenya’s dairy farms house 3.4 million cows, about 85 percent of all dairy cattle in East Africa. Yet within Kenya, the popularity of dairy products has risen steadily in recent years, and in 2006 the country became a net importer as demand outpaced supply.

Small family farms contribute the majority of Kenya’s dairy output, in addition to providing many rural jobs. The government of Kenya has targeted small-scale dairy operations as a key sector for boosting both domestic food supply and rural incomes.

 

 

“A new government policy could aim to do three things,” said lead author Dr. Bill Burke, a research scholar at the Center on Food Security and the Environment at Stanford. “First, to increase the number of farmers who produce dairy, second, increase the number of those producers that participate in the dairy market, and third, to increase each farmer’s productivity and sellable surplus. And to design a good policy, you need good data and good analysis.”

 

Previous studies fall short

Previous studies of the Kenyan dairy market rely on a “double hurdle” model, a type of statistical analysis that measures two things: why producers become net buyers versus net sellers of a certain product, and how much of that product they ultimately buy or sell.

But these models assume that all farmers produce the same product, which is not the case in the dairy sector, said Burke.

 

 

Dairy farming is labor intensive and has high overhead costs. Farmers without access to cold storage facilities, or without a nearby place to sell their produce, risk losing their inventory to spoilage. Even more risk comes from the fact that the weather and the price of cattle feed can both change suddenly.

“Dairy farming isn’t like growing rice or corn. It is expensive, specialized and risky, so not all farmers do it,” said Burke. “If we really want to understand how to grow the Kenyan dairy sector, we need to understand why some farmers choose to produce dairy in the first place, and why others don’t.”

 

A new level of analysis 

To better understand why some farmers participate in the dairy market, Burke and his co-authors, Robert Myers and Thom Jayne from Michigan State University, used data from 1,275 farming households collected by staff at the Tegemeo Institute of Agricultural Policy and Development, who visited each home four times between 1997 and 2007.

The team then designed a model to analyze market participation among farmers. They developed a new “triple hurdle” model, adding a new level of analysis to the double hurdle model that allowed them to identify the factors that influence some farmers and not others to produce dairy.  

 

To produce or not produce?

The team’s triple hurdle model offered a clear advantage over previous studies. “The new model results are significantly different than if we had used a double hurdle approach, and the magnitude of our estimates are a statistically better fit to the data,” said Burke. “It provided us with a more nuanced understanding of how policy can influence dairy supply.”

Burke’s team found that farmers were more likely to be dairy producers the wealthier they were in terms of land, household assets and credit. Farmers were also more likely to join the dairy sector when they had access to improved technology such as specially-bred “grade” dairy cows and “zero grazing” systems for cattle feeding. Another important factor was the presence of commercial dairy processors and informal traders, because they provided farmers with more certainty that their produce would reach buyers.

 

 

These same factors – wealth, technology, and marketing channels - helped determine the market position of a dairy producer: whether they were net sellers or net buyers of dairy. Infrastructure also played an important role. Producers were more likely to be net sellers when they had a formal education and nearby access to electricity and drivable roads.

“These data, and the new insights from our triple hurdle model, suggest that market channels are important incentives for farmers to participate in dairy production,” said Burke. “But we also see a clear case for increasing government investments in infrastructure like roads, rural electrification, and education. We hope our research will inform the government of Kenya as they design a new policy approach to increase dairy farmer participation and productivity.”

 

CONTACT

Dr. Bill Burke: burkewi2@stanford.edu, (650) 724-1290

Laura Seaman, Communications Manager: (650) 723-4920