Abstract:
The dairy sub-sector in Kenya is of particular importance as it provides vital employment, income and nutrition, in an environment where job opportunities are scarce. The subsector markets about 55 percent of the total milk produced but the informal sector accounting for more than 75 percent of all the marketed milk. Large milk quantities are marketed through the informal sector raising questions over the safety and quality of milk products. In spite of the growth of value added milk chains in Kenya, unprocessed milk chains are still dominant. The major milk processors in the country face a challenge of low capacity utilization during dry seasons while during the rainy seasons milk is wasted due to limited capacity. This has led to the growth of small scale milk processors and milk handlers in the country. This study compared marketing margins along unprocessed and processed dairy chains and examined factors that influenced actors’ decisions to upgrade processes, products as well as functions along selected dairy chains. The study employed Probit and Tobit econometric models as well as principle component analysis to answer the objectives. Using a sample of 273 respondents and farmer-based self-help groups, the results of the probit analysis showed that smallholder dairy farmers were more likely to add value to milk if they had value addition skills and if they were members in a value addition group. The results of Tobit analysis showed that participation by smallholder farmers in either the unprocessed or processed milk channel was significantly influenced by distance to the market, the herd size, total farm revenue as well as awareness of standard regulations. In the quest to upgrade the quality of milk, there is therefore need to improve on value addition skills through training and encouragement of participation in collective action. Furthermore, infrastructure in the form of roads, communication and electricity need to be improved to facilitate improvement in the quality of milk.
