Regional Markets

Regional Markets for Local Development
at pricing and accessibility of maize for consumers, the import duty (partially lifted in
2009) and some non-tariff barriers have prevented the inflow of maize from neighbouring
countries into Kenya at times when local production has faltered (Ariga et al. 2010).
Dairy value chain
Smallholders—numbering more than one million households—are the dominant producers
in the dairy chain, counting for more than 70% of marketed milk output. The
Rift Valley contributes around half of the total 3.8 billion litres of yearly milk production
in Kenya. Less than 30% of the cattle population is grade cattle, but it still provides
around 70% of total milk production and almost all of the milk in the formal marketing
chain. Most small-scale farmers hold between 2 and 5 heads of cattle. Smallholder cattle
are usually reared on natural foraging, cultivated fodder and crop by-products. Most
small-scale farmers cannot afford to buy additional feed, and farm animals in Kenya
are generally underfed, which results in lower yields per animal. Estimates from various
studies indicate that about 85% of marketed milk is sold raw (Kenyans have a strong
preference for consuming raw milk). Smallholders consume almost half of their milk
within the household and market roughly 55% (23% directly to local consumers and
31% through informal channels and cooperatives (FAO 2011)).
The key actors in the Kenyan dairy sector include regulators, farmers and associated
organisations, traders, input suppliers, service providers, marketing agents, research
institutes, NGOs and others. The Kenya Dairy Board (KDB) is the main regulator,
responsible for issuing licenses and packaging standards. With the Structural
Revitalization of Agriculture programmes, the KDB has started to organise stakeholder
forums with farmers organisations. Thanks to the 2005 policy changes, more and more
private processors and retailers—especially small-scale vendors—are entering the market.
There are 30 licensed milk processors, and the two largest, new-Kenya Cooperative
Creameries and Brookside, account for 60% of all processed milk.
Before the early 1990s and the uncontrolled market liberalisation, there was an organised
milk collection and bulking system. With the liberalisation of the formal market and the
collapse of KCC, also the collection and transport system collapsed. Today, it is an intricate
web of complex systems involving many different intermediaries, milk sheds, various road
networks and other stakeholders. Major processors run their own collection points. In
some areas traders have a powerful position, which can lead to depressed producer prices
and complicated traceability, which can increase the risk of contamination (FAO 2011).
There are several challenges in the ongoing reform of dairy policy in Kenya. The lack
of reliable and easily accessible marketing information is a major hurdle. Even for basic
statistics, such as the number of heads of cattle in the country, there is a wide disparity
between official numbers and various surveys administered by research institutes and
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