ASSESSING THE ECONOMIC EFFICIENCY OF MILK PRODUCTION AMONG SMALL-SCALE DAIRY FARMERS IN MUKURWEINI SUB-COUNTY, NYERI COUNTY, KENYA

Kenya boasts of having the best dairy sector in the region. The sector is the best performing in the agricultural sector, contributing 17% to the agricultural gross domestic product (GDP) annually. It is dominated by small-scale farmers who account for the highest amounts of milk produced in the country especially in the Central and Rift Valley regions. These areas are most vigilant in dairy farming in Kenya and share ecological conditions and the same breed of animals, however, some areas produce the expected 20 litres per cow per day while others produce below that at about 5 litres per cow per day. Mukurweini sub-county in Nyeri County of Central region of Kenya is an area with intensive dairy farming but producing low amounts of milk, thus, the reason for selecting it for this study. Cross-sectional data on socio-economic factors and milk production in the past one month were collected from the 91 small-scale dairy farmers sampled in 2017, using semi-structured questionnaires. The study used the Stochastic Frontier model to analyze the technical, allocative and economic efficiency of milk production, while Tobit model was used to assess the factors associated with economic efficiency. The results indicated that the farmers had a mean of 68.7% in technical efficiency, 91.3% in allocative efficiency and 62.6% in economic efficiency. The results showed that the economic inefficiency among the farmers is mostly caused by low technical efficiency since the farmers indicated high levels of allocative efficiency. From the findings, there were considerable production inefficiencies and thus there was room for increasing productivity through the use of available inputs and reducing costs. Farmers having increasing returns to scale (IRS) showed that enhanced utilization of the available resources would yield a proportionate increase in the milk output. Increasing herd sizes, feeding animals with enough concentrates and ensuring the animals’ health care costs are met were found to be some of the solutions to the low milk v productivity among the small-scale farmers. At the same time, older farmers were found to be responsible for technical inefficiencies in milk production. The cost of concentrates and other feeds was found to be the major component of the total cost of dairy production. However, the allocative efficiency level among the farmers was quite high, an indication that the farmers in the study area, though resource-poor, were efficient at minimizing costs. The study indicated that age, household size, having dairy farming as the main source of income, hired labour and monthly cost of concentrates were the significant factors associated with economic efficiency among small-scale dairy farmers in Mukurweini. Price subsidies on dairy inputs, especially concentrates, as well as better milk prices, are some of the interventions that will see an increase in efficiency resulting in an increase in milk productivity.