An evaluation of the economic performance of the national dairy development project: the case of Meru rural dairy processing plant
Abstract
This study was undertak en to evaluate the Economic
Performance of the Meru Rural Dairy Development Project.
The main objectives of this study were:
(i) to evaluate the capacity utilization rates by Meru
Rural Dairy Plant and determine the cost-output
behaviour of the plant and the optimal plant capacity
(ii) to assess the producer prices for milk paid by the
Meru Union and compare these prices with the KCC
producer prices, and
(i i i ) to determ in e the pricing efficiency of the Meru Rural
Dairy Plant.
Both primary and seconnary data were collected from
relevant sources and used in this study. Econometric
techniques and statistical methods were used to determine
the cost-output behaviour and capacity utilization rates of
the dairy plant. Producer price comparisons between those
paid by the KCC and those paid by the Meru Union were done
and the milk marketing problems experienced by the sample
farmers were also analysed.
The results of the study showed that the Hern Dairy
plant having been operating at excess capacity between 1983
and 19QO, the averaqe capac i t y utilization rate being
41.51%. The prices paid to the Project farmers by the Meru
Central Farmers Cooperative Union (MCFCU) were found to be
competitive to those paid by the Kenya Cooperative Creameries
Limited (Kee) to farmers at the national Level. The
pricing efficiency of the dairy plant was found to be low.
The plant was found to be operating at a constant marginal
cost curve and at an average cost curve which was
continuously declining but reaching the marginal cost
curve. It was thus Hot possible to determine the
theoretical optimal capacity of the plant. This study
concludes that the management of the MCFCU dairy plant,
should address itself to the serious problems that face the
plant, i .e. low capacity utiIization and pricing
inefficiency, and those that face the farmers in an effort
to improve marketing services. The study thus recommends
an improvement of the capacity utilization rate by the Meru
dairy plant so that more of the farmers' milk is processed
and the output of the plant enhanced.
Citation
Master of Science in Agricultural EconomicsPublisher
University of Nairobi Department of Agricultural Economics