Determining smallholder milk marketing channel choices for enhanced competitiveness in the dairy supply chain in Kenya: A case study of Nyandarua County

Abstract

The dairy industry in Kenya has faced and continues to face challenges in the inefficiency of linkages among supply chain actors. Despite this, the industry still plays an important nutrition and economic role in the lives of many people ranging from farmers to milk hawkers, consumers and processors. Since liberalization of the sector in 1992, a vast array of dairy marketing channels has sprung up, presenting smallholder farmers with multiple marketing channel options. Any choice of the marketing channel options is likely to be entwined to key farm, farmer and market channel characteristics that vary between farmers. However it is unclear how access to these multiple marketing channels influence farm household income and dairy technology choices. The overall objective of this study therefore, was to contribute to the enhancement of competitiveness in the dairy supply chain in Nyandarua County. This was achieved through the determination of the factors that influences the choice of a milk marketing channel, and the evaluation of the effect of these channel choice factors on the net dairy income and technology of smallholder farmers. In addition, the dominant milk marketing channel amongst the existing channels was established. A random sample of 184 dairy households from Mutanga and Ndaragwa divisions in Nyandarua County was used. Data were analysed using Multinomial Logit (MNL) and Two Stage Least Squares (2SLS). A Cumulative density function (CDF) was used to compare the likely effects of different marketing channels on net returns. MNL results showed that, number of cows owned by the household and membership of the household head to an agricultural group/organization significantly influenced the type of channel chosen (at a p-value of 0.01 for cooperative, and 0.1 and 0.05, respectively for the private channel). The 2SLS results showed that the household head’s gender, occupation and age plus distance from major market and number of cows owned by the household had significant effects on both technology and income across all channels. CDF estimation results showed that, the private channel’s net returns dominated over the traditional and cooperative channels (at 0.5, 0.6, 0.7 and 0.9 probability levels). Based on these results there is need for private channel players to focus on tapping the production potential of farmers with small herd sizes by encouraging group formation and joining already established groups to have collective bargaining power and increase their social capital.