Determinants of Profit Efficiency of Camel Milk Traders in Five Counties in Northern Kenya

Abstract

Camel milk is a major source of both revenue and nutrition for pastoral communities in Northern Kenya. However, despite the existence of significant trade in camel milk in the region, the estimation of traders’ profit efficiency has received little attention, perhaps in furtherance of the longstanding historical neglect of socio-economic research on camel milk. To address this gap, this study used a cross-sectional dataset of 933 camel milk traders collected in Garissa, Isiolo, Marsabit, Turkana, and Wajir counties in Northern Kenya to assess their profit efficiency and identify its drivers using a stochastic translog profit frontier, and to determine spatial profit efficiency gap across the five counties using the meta-frontier framework. The study found that women dominated the camel milk trade in Northern Kenya at a ratio of 4.6:1. In addition none of the five counties was fully profit efficient; in fact, the average profit efficiency was only 43% suggesting that 57% of the profit was lost to technical inefficiencies in the marketing system and traders’ idiosyncracies. Nevertheless, Isiolo and Wajir counties emerged as the best, with 78% and 71% profit efficiency scores, respectively. Being female, traders’ milk selling experience, participation in milk handling training, and value addition significantly reduced the profit inefficiency, while the distance to markets had the opposite effect. Accordingly, the study recommends increased investment in value addition in camel milk, the establishment of trader milk handling safety and hygiene training programs, and the development of road and market infrastructure to improve the profit efficiency of camel milk traders in Northern Kenya for enhanced welfare. Keywords: Profit efficiency. Camel milk traders. Stochastic translog profit frontier