An economic analysis of the factors influencing the choice of smallholder Milk Market channel in Keiyo District, Kenya
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Dairy farming in Keiyo district in Kenya is an important economic activity since 58% of the households in the district engage in this economic activity. Milk as a source of food and income has the capacity to address the twin objective of reducing hunger and poverty among farm households. In trying to address these objectives, dairy farmers have to make a decision either to market their milk through the formal or informal market channels. However, the factors influencing the choice of milk market channel are not well understood. This study provides empirical evidence on the factors affecting smallholder dairy farmers' adoption of various milk marketing channels. This is essential if the country is to achieve its long term development goals as stated in the vision 2030. The theoretical foundation for this study was based on random utility maximization. The main source of data for this study was the 2005/06 Kenya Integrated Household Budget survey. This survey had a sample size of 170 farm households in Keiyo district. This was complemented by data obtained from the Ministry of Livestock and Fisheries Department annual reports and various issues of Economic Survey and Statistical Abstracts. Descriptive statistics were used in this study to characterize the milk marketing channels in Keiyo district, Kenya. The data was analyzed using a logit model. Using this model, a "best fitting" equation was obtained using the maximum likelihood method. Ten explanatory variables were included in the logit model. They arc: Price paid for milk, Volume of milk sold, Number of cows, Age in years of the household head, Education level of the household head, Land size, Value of credit, Household size, Expenditure on livestock inputs per year, and Location (Rural/urban). According to the results of the study, the informal milk market channel was the dominant milk outlet since 51% of the farmers in Keiyo district moved their milk through this channel. The results also revealed that the principal determinants of the choice of milk market channel included age of the household head, education of the household head, household size and number of cows owned. The odds in favour of joining the formal milk market channel given a unit increase in education of the household head or number of cows size increased by 18.5% and 17.6% respectively. The odds in favour of joining the formal milk market channel given a unit increase in age of the household head or household size decreased by 6.1 % and 21.0<% respectively. The study recommends promotion of dairy production among the youth in Keiyo district as a way of promoting formal milk market participation. In addition, efforts should be made to encourage farmers to channel milk through the formal channel by providing information on the benefits of the formal channel such as employment and value addition of the milk produce. This is bound to address the multiple problems of youth unemployment, food security and protein related malnutrition, as well as poverty in Keiyo district.