Smallholder dairying under transactions costs in East Africa

Abstract

A subsequent draft has benefitted tremendously from the insightful comments of Marcel Fafchamps, Barbara Grosh, Bruce Johnston and William Steel. Remaining errors are the responsibility of the authors. ii It is argued that dairying is vital to future viability of many small farms in East Africa and that high transactions costs for dairy production and marketing limit participation by asset-and information-poor smallholders. Case studies from Kenya and Ethiopia illustrate the role of dairy cooperatives in reducing transactions costs. Analysis of the determinants of producer prices received by a sample of dairy producers near Addis Ababa suggests that different levels of access to infrastructure, assets, and information explain why different households contemporaneously accept widely different producer prices for fluid milk. MSSD Discussion

Effects of transaction costs on mushroom producers’ choice of marketing channels: implications for agricultural market access in Swaziland

“…Generally, it would be expected that the more producers become concerned about meeting buyers' quality requirements, the less of mushrooms they will supply to that particular channel. However, as observed by Staal et al (1997), it could be inferred that while producers were often uncertain about whether their mushrooms would meet the buyers' expectations for quality, the market reliability and comparatively better exchange price offered by the retail market seemed to outweigh the uncertainty about quality such that producers were willing to increase their supply in order to avoid the farm gate option, which relies mostly on unpredictable consumer turnout. …”

Kenyan Dairy Policy Change: Influence Pathways and Economic Impacts

“…Several studies have shown that market participation by resource-poor smallholders is hindered by high transaction costs (Staal et al 1997;Holloway et al 2000). Implementation of the revised Kenya dairy policy reduced transaction costs and hence, marketing margins.…”

The New Institutional Economics: Applications for Agricultural Policy Research in Developing Countries

“…Examples of these studies are Staal et al (1997), Frank & Henderson (1992), Key, Sadoulet & de Janvry (2000), Hobbs (1997) andLoader (1997). Very few empirical studies have actually measured transaction costs to-date, probably due to the difficulties associated with their measurement.…”