Determination of economic competitiveness of dairy production in semi-arid areas: The case of smallholders in Kitui District

Abstract

This study was carried out in Kitui district in the year 2005 with the broad objective of determining the economic competitiveness of dairy production. In this study, the competitiveness of dairy production was assessed based on the contribution of the enterprise to total farm income and returns to land and capital resources. Data were collected from dairy farmers and categorized into small, medium and large farms based on farm sizes. Gross margin, linear programming model and descriptive methods were used to analyse the data. Results of descriptive analysis revealed that the average farm size in the small, medium and large farm categories was 1.80 hectares, 4.90 hectares and 10.00 hectares respectively. The small farm category had 88% of the farmers who keep one or two dairy cows besides growing maize, beans, and pigeon peas for subsistence and commercial purpose. These results indicate that majority of the farmers within the area surveyed are smallholder producers. Results of gross margin analysis showed that under the existing small, medium and farm plans, farmers earned Ksh 82,031 Ksh 91,844 and Ksh 109,075 respectively. The dairy enterprise contributes 61% to total farm income in the small farms while in the medium and large farms it contributes 71% and 59% respectively. The gross margins per hectare of the dairy enterprise in the small farms was estimated at Ksh 174,996 compared to Ksh 6,865 and Ksh 16,697 for maize/beans intercrop and beans respectively both produced during the short rain season. In the small farms, the return to operating capital from the dairy enterprise was Ksh 4.42 while it was Kshl.41 and Ksh 3.54 for maize/beans intercrop and beans respectively. On the basis of enterprise contribution to total farm income, returns to land and capital it can be concluded that dairy production in Kitui district is profitable and competitive compared to crop production Linear programming model was used to develop optimal farm plans with and without a subsistence constraint and to identify limiting resources to agricultural production. Results of linear programming analysis revealed that the optimal farm plans had few crop enterprises compared to the existing farm plans. The dairy enterprise was included in the optimal plans of the small and medium farms while it was excluded from the optimal plan ofthe large farm. The optimal plans developed from a linear programming model without subsistence constraints suggests that farmers with small, medium and large farms could earn Ksh 108,498, Ksh 107,004 and Ksh 158,807 respectively. Results of the linear programming model with subsistence constraints established that farmers with small, medium and large farms could earn Ksh 72,437, Ksh 69,978 and Ksh 137,253 respectively. The results show that farm plans developed from a linear programming model without subsistence constraints have higher income compared to the plans developed with the subsistence constraint. Land and operating capital were found to be the most limiting resources in the small and medium farm categories. Labour was found to be a non- limiting resource in all the farm categories. Since land is a limiting resource farmers could improve farm income by producing few profitable crop enterprises (beans, maize and maize/pigeon peas intercrop) and keep one or two dairy cows under zero grazing production system.