Effect of the formal milk market participation on the gross margin of dairy producers in Nyandarua County

Abstract

Dairy production is a critical value chain for Kenya's rural employment and household income. However, the sector experiences low production and informal marketing. As a result, the government has established several interventions to support farmers in rural areas, including encouraging the formation of formal markets. However, it is not clear whether farmers have utilised and benefited from joining the formal markets (dairy cooperative and processors). This study, therefore, estimates the effect of the formal milk market on the gross margin of dairy producers using an endogenous switching regression model. The data was collected using a semi-structured questionnaire from 384 households drawn from Nyandarua County. The finding indicates that formal milk market participation increased the gross margin by about 38%. Moreover, the results revealed that risk-taking, proactiveness, autonomy, education, experience, land size, herd size, and milk yield significantly influence the choice of the formal milk market. This study recommends initiatives that increase formal market participation for enhanced welfare among dairy farmers.