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Working paper 43 - Productivity trends and performance of dairy farming in Kenya

Author(s):  Stella Wambugu, Lilian Kirimi and Joseph Opiyo


Kenya’s dairy industry is dynamic and plays an important economic and nutrition role in the lives of many people ranging from farmers to milk hawkers, processors, and consumers. Kenya has one of the largest dairy industries in sub-Saharan Africa. Though the last livestock census was conducted in 1966, the current official cattle population statistics come from the Ministry of Livestock and Development, through its field reports compiled by extension officials. The official statistics place the number of milking cattle at 3.8 million (Government of Kenya, 2008).

A survey conducted by Smallholder Dairy Project (SDP) asserts that there are approximately 6.7 million dairy cattle in Kenya (SDP, 2005). The Food Agricultural Organization (FAO) on the other hand estimates a figure of 5.5 million milking animals (TechnoServe, 2008). In Africa, Kenya is the only country, after South Africa that produces enough milk for both domestic consumption and export.

Sudan on the other hand is the largest producer of milk in the Common Market for Eastern and Southern Africa (COMESA), but it does not produce enough to satisfy both domestic and export markets. The dairy industry is the single largest agricultural sub-sector in Kenya, larger even than tea (Muriuki et al. 2004). It contributes 14 percent of agricultural GDP and 3.5 percent of total GDP (Government of Kenya, 2008).

The industry has grown tremendously since its liberalization in 1992. Liberalization led to a rapid growth of the informal milk trade that mainly consists of small-scale operators dealing in marketing of raw milk. At that time, there was an emergence of new institutional arrangements in milk collection, processing and marketing, which included hawkers, brokers, self-help groups, neighbours and business establishments like hotels (Karanja, 2003). The informal milk market controls an estimated 70 percent of the total milk marketed in Kenya (KDB 2009; Government of Kenya 2006). This sector is important and is driven by among other factors the traditional preferences for fresh raw milk and its relatively lower cost.

Raw milk markets offer both higher prices to producers and lower prices to consumers but with several challenges relating to quality control and standards, and the associated health and safety concerns. The informal milk market has in the past faced several challenges. This was because prior to policy change in 2004, informal vendors, including mobile milk traders and bar vendors, and milk transporters, were not officially recognised under the old dairy policy.

As a result, they were frequently harassed as powerful dairy market players sought to protect their interests and increase market share. There were also concerns over food safety and quality of milk sold by the informal sector players. The dairy policy at the time focused on promoting value addition and increasing the market share of pasteurized milk while attempting to address potential public health risks of consuming raw milk.

However, since 2004, there has been a major change in policy and practice towards the informal milk market (Leksmono, al 2006). The Dairy Policy now clearly acknowledges the role of small scale milk vendors (SSMVs) and contains specific measures to support them. These include: development of low-cost appropriate technologies, training on safe milk handling, provision of incentives for improved milk collection and handling systems, and establishment of a supportive certification system.

While the Dairy Policy is still in progress, awaiting approval by parliament, there has been a proactive engagement by the Kenya Dairy Board in training and certification of SSMVs, in order to safeguard public health and assure quality of the raw milk (Leksmono, C. et al 2006). This study examined the Kenya dairy sector through a synopsis of the trends in milk productivity over time, and the performance of the dairy enterprises at the farm level.

Using both crosssectional (2010) and panel data (2000-2010) collected from small scale farms in selected districts in Kenya. Findings from the study were presented using descriptive statistics and gross margin analysis of the dairy enterprise. The gross margin analysis sought to establish the economic viability of smallholder dairy production units. The specific objectives of the study were to examine milk productivity trends; assess variable costs of production and gross margin at the farm level for different grazing systems; highlight the constraints in the dairy industry; and, outline policy implications in relation to the socio-economic issues in milk production and marketing.

Section 2 of the paper provides a brief review of literature on the Kenyan dairy sector. Section 3 describes data and methods, while results are discussed in section 4. Summary and conclusions are presented in section 5, and policy recommendations are outlined in section 6.

Productivity Trends and Performance of Dairy Farming in Kenya



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