Economic analysis of beef ranching: the case of Laikipia District Kenya

Abstract

The principal objectives of this study were to evaluate beef ranch income by comparing gross returns from sale of livestock with costs of production. Using net income as an indicat6r of ranch profitability, the study determined factors that influence this level of profitability from beef ranching in Laikipia. Data used in this study were collected through a survey of a sample of ranches. Two types of data were used. These were cross-section and time-series data from the sample. Single year cross-section data were used to determine beef ranch profitability while crosssec~ ion and time-series data were pooled for the analysis of factors that determine the profitability and offtake rates. Two distributed lag models were fitted to the pooled data and regressions were run to determine the factors. Explanatory variables included beef price, offtake, income, rainfall, range condition, stocking rates, and time. The results of the analysis show that net income from beef ranching is about Kshs.60/= per hectare per year. Statistically, this figure is low and is not significantly different from zero. The net returns on investment are approximately one per cent per annum and are also statistically insignificant. The analysis of factors that influence net income from beef ranching indicates that the most important factors are beef price, offtake, and stocking rates. Offtake was itself shown to be determined by price, income. stocking rate, rainfall total, and rainfall distribution. These are the factors that can be manipulated to increase beef ranch income and offtake. It is expected that with high income, ranchero will have an incentive to produco more beef. This would then alleviate the problem of beef insufficiency in the country.