Institute for Development Studies, University of Nairobi

This paper presents a brief summary of the major problems facing the smallholder dairy producers. Greater attention is given to the factors that determine the net price that the smallholder receives. The role of co-operatives in price determination is discussed. There appears to be great variability in their performance. While some are impressive in terms of their efficiency of operation, their low cost and quality of services to members others represent a source of inefficiency in marketing. Costs are high with concomitant low payouts to producers. The quality of milk does not appear to constitute a major problem. Many co-operatives maintain high quality of milk deliveries while KCC refuses to accept dairy produce that does not measure up to standard. Transportation appears to be a significant and costly problem.