Marketing Costs and their Influence on Farm-Gate and Consumer Prices

Abstract

Kenya’s agricultural based economy is currently faced with challenges related to the salability of it’s agricultural produce and products. These challenges are will shape investments in agriculture, returns to these investments and ultimately the country’s economic growth. It is not just enough to produce, today these commodities must compete to find a market internationally, in the region and even at home. This simply means that Kenya has to shift away from it’s traditional supply-driven strategies and policies to a more demand driven sector. While providing incentives to producers remains an important strategy for the sector growth, it is equally important to cater for the consumer side. Consumers who form the larger majority must be protected not only from food of poorer quality but also policies that avail food that is costlier than world prices. The rules in the market place have changed and have become very dynamic. Consumer preferences are increasingly more complex than they were in the past. They are also the more important players in the market, getting what they want, from any supplier who is able to meet their requirements for timeliness, quality and even growing practices. There is increased competition due to the lifting of preferential treatment, lowering and harmonization of tariff barriers and the institution of new technical barriers. Farmers also are increasingly demanding a bigger role in marketing of their produce than has been traditional in the past, and in setting the legislative and regulatory environment necessary to keep them competitive in the New World marketplace. Challenges facing the agricultural sector may be summarized as; · Increasing, or maintaining access to both local and international markets · Redefining marketing channels · Post-farm costs and efficiency in marketing · value addition to raw produce · the financing of marketing activities This paper uses one or two commodities to illustrate each of these issues and areas that may need intervention. The paper begins with a discussion of marketing costs and their influence s on farm level as well as retail prices of commodities and inputs. Horticulture and fertilizer marketing are used as examples. The next section discusses issues of market access and market concentration where beef and horticulture are used to highlight this challenge. Challenges brought about by globalisation ang regionalisation are also discussed here. The following section uses coffee, dairy and pyrethrum examples to illustrate why it may be necessary to explore alternative marketing channels. The role of farmer organisations in marketing is also discussed here. Challenges in processing and value addition form the following section where dairy and cotton are used as illustrations. The later sections of the paper discuss issues on legislation and regulation and how they impact on the agricultural sector’s growth.