| dc.description.abstract | Coffee is Kenya's major export crop and an important
source of the foreign exchange needed for planned
economic development. Also, coffee is a major domestic
industry.. Kenya has signed the International Coffee
Agreement and. now faces a limit on the amount of coffee
which she may export to traditional markets, but production
is Likely to exceed export quotas and domestic demand
in the foreseeable future. Therefore, coffee output will
have to be reduced. But, any reduction in output must be
based on an ability to identify" the higher cost producers
within the industry,
This study describes the present structure of the
industry and the historical reasons for the development
of the two separate production sectors, the estates and
the smallholdings. The determinants of the cost of production
are examined, and the results of two extensive
sample surveys are incorporated. The samples and the
method used to obtain opportunity cost estimates are discussed,
the cost-output relation is examined, and it is
concluded that there are decreasing average costs as the
size of production increases in both sectors. Also,
it is found that a number of the producers in both sectors
are already operating at a loss if their full opportunity
costs are taken into account. Alternative possible
explanations for the findings are discussed, and it is
argued that direct comparisons of the cost of production
between sectors must be treated with care.
It is recommended that a system of loans and innovation
insurance be operated through existing institutions
to induce a number of the smaller producers in each sector
to shift to another crop, and that general diversification
funds be used to develop the infrastructure of the present
coffee areas in order to create a greater range of alternatives
to coffee Also, it is recommended that .the distribution
of rights to sell coffee on ,the export quota
market be introduced as a means to ensure that the best
quality coffee from T.he lowest cost producers will be sold
where it will fetch the highest prices; the residual would
then be disposed of on the non-quota and domestic markets
on a competitive basis6
It is further recommended that greater efforts be
made to induce the coffee drinking habit in the domestic
market where coffee is not price competitive with other
beverages. To this end, it is suggested that greater
flexibility be allowed in the processing and distribution
of coffee for the domestic market. The sample survey
questionnaires and the resulting data and information are
presented, together with other material, in a set of
appendixes. | en |
