An economic analysis of the constraints in the production and marketing of milk in Kilifi District of the Coast province of Kenya

Abstract

This study investigates the milk production and marketing system in Kilifi District. The purpose is to examine the causes of high producer price in the informal sector and the decline in milk production in Kilifi District. The study is based on primary data obtained by interviewing 102 dairy farmers and 76 institutional milk consumers in Kilifi District. The data collected were analysed using descriptive statistics and regression analysis. The results of the study indicate that: i) The genetic potential of dairy animals is one of the limitations to increased milk production; ii) Use of credit to finance the dairy enterprise is low due to lack of collateral required by financial institutions. Access to existing credit facilities for investments and the initial capital requirement is a barrier to entry into dairy farming by the smallholders; iii) Informal milk marketing channels are predominant in Kilifi District. Informal market outlets are also more remunerative to producers than formaL market outlets. The PRODUCER - CONSUMER milk marketing channel is the most efficient one, based on the criterion chosen, and yields a net price of Kshs. 7.00 per litre; Iv) The daily industry in Coast Province is faced with numerous problems, both at production and consumption levels. Cattle diseases, inadequate credit facilities, inadequate transportation and poor transport infrastructure, lack of organized milk marketing system and seasonally low milk prices are some of the factors contributing to low performance at farm level; v) The number of lactating animals and market producer price for milk are the most important determinants of the quantity of milk marketed. The following recommendations arise from the results of this study: i) Access to credit by rural smallholder farmers should be improved in order to boost milk production; ii) A competent veterinary service and a prophylactic drug supply system should be started if the disease problem is to be controlled. This is in view of the endemic cattle diseases in the area. In addition, genetic improvement of indigenous stock should be done. This can be achieved by upgrading dairy cattle through the use of artificial insemination or direct purchase of improved stock; iii) The milk marketing system should be reorganized.for example, through the formation of the farmers cooperative societies, in order to streamline the marketing of milk by providing a suitable network of marketing channels that are close to the farmers. This may create incentives for an expanded output; iv) Locational and seasonal price discrimination should be instituted in order to exploit the supply potential in different producing areas. Alternatively, prices should be decontrolled altogether. The decontrol of the producer price would ensure that quality and quantity signals from the market are reflected back to the producers. The decontrol of the consumer price~ would aLso ensure market competition for efficient resource allocation.