AGE 218: FUNDAMENTALS OF COMMERCIALIZATION OF SMALLHOLDER AGRICULTURE

AGE 218: FUNDAMENTALS OF COMMERCIALIZATION OF SMALLHOLDER AGRICULTURE                             (3 UNITS)

COURSE OUTLINE:

1.     Agro-ecological zones and agricultural activities in Kenya

2.     Characteristics of large and small scale agriculture

3.     Commercial crops and livestock in Kenya

4.     Agricultural input and produce markets

5.     Analysis of gross margins and identification of high value enterprises

6.     Agricultural extension and credit as agents of commercialization

Purpose of the Course;

1)    To expose students to the concept of commercialization of Smallholder Agriculture in Kenya

2)    To understand input and produce markets and the role of credit and extension as agents of commercialization

3)    To equip students with tools and skills for identification of high value enterprises and gross margins

Expected Learning Outcomes;

At the end of the course students should be able to:

1)    Demonstrate a good understanding of agro-ecological zones, agricultural activities, typical farm enterprises, commercial crops and livestock in Kenya.

2)    Demonstrate a good understanding of input and produce markets and the role of credit and extension as agents of commercialization

3) Apply tools and skills for identification of high value enterprises and gross margins

Course content;

Agro-ecological zones and agricultural activities, extent of large and small scale agriculture, commercial crops and livestock, agricultural input and produce markets, gross margins of enterprises, identifying high value enterprises, agricultural extension and credit as agents of commercialization in Kenya.

Mode of Delivery;

Lectures, Tutorials, Case Studies, Group Discussions and Presentations

Course Assessment:

Type	Weighting
Continuous Assessment tests	30 %
Examination	70 %
Total	100 %

Core Reading materials for the course;

REFERENCES

Jolly, Vijay K. (1997): Commercializing New Technologies: Getting from Mind               to Market; Harvard Business School Press.

Kotler, P. et al. (1996): Principles of Marketing; Fourth European Edition              Prentice Hall; Harlow (UK).

Johnson, D.T. (1990):  A Guide to Farm Business Management in the Tropics.                 Macmillan Publishers Ltd, London. 2^nd Edition

Recommended Reference Materials;

Abbot, J. (ed.). 1993. Agricultural and food marketing in developing countries:   CAB

Kay, R.D., W.M. Edwards, and P.A. Duffy (2008):  Farm Management.   McGraw-Hill. 6^th Edition  

Lancaster, G. and Massingham, L. (1999): Essentials of Marketing; Third               Edition McGraw-Hill; London.

Muyanga, M. and T. S. Jayne, 2006: Agricultural Extension in Kenya: Practice             and Policy. Tegemeo Institute of Agricultural Policy and Development,             Egerton University, Nairobi

INTRODUCTION:

Agriculture and Rural Development

·        Agriculture in Kenya dominates Kenya's economy. 15–17 percent of Kenya's total land area has sufficient fertility and rainfall to be farmed, and 7–8 percent can be classified as first-class land. In 2006, almost 75 percent of working Kenyans made their living by farming, compared with 80 percent in 1980.  About one-half of Kenya's total agricultural output is non-marketed subsistence production.

·        Agriculture is also the largest contributor to Kenya’s gross domestic product, GDP,(about 24%) and about 18 % of wage employment and 50 % of revenue from exports.

·        In particular, horticulture sub-sector takes lead in the agriculture sector development reaching 10% annual growth in recent years.

·        More than 80% farmers in Kenya are smallholders with less than 1 ha of land, and production by smallholder farmers accounts for more than 60% of the horticulture subsector.

·        Support to smallholder farmers is vital for development of agriculture sector in Kenya.

·        Vision 2030 states that agriculture sector is one of the pillars for economic growth, and sets a goal of 7% annual economic growth.  It also identifies improvement of productivity and increase of land area under irrigation as important issues for the achievement of the goal, for example, the JICA Projects which are used to improve productivity of food crop and cash crop through technical assistance to horticulture and/or rice smallholder farmers and improvement of irrigation infrastructure.

JICA Projects include;

ü The Smallholder Horticulture Empowerment and Promotion Unit Project (SHEP UP)

ü Mwea Irrigation Development Project

ü Enhancing Community Resilience against Drought in Northern Kenya

ü The SATREPS Project on Rice Research

ü Rice-based and Market-oriented Agriculture Promotion Project (Rice MAPP)

Rationale for commercialization of Small holder farming

Farming is the most important economic sector in Kenya, although less than 8 percent of the land is used for crop and feed production, and less than 20 percent is suitable for cultivation. Kenya is a leading producer of tea and coffee, as well as the third-leading exporter of fresh produce, such as cabbages, onions and mangoes. Small farms grow most of the corn and also produce potatoes, bananas, beans and peas.

Smallholder farming (small-scale farming) is one of the top contributors to the GDP of Kenya. Over 75% of the population of Kenya relies heavily on subsistent farming. 52% of the entire workforce in Kenya directly practices small-scale farming including pastoral activities.

Smallholders in Kenya have traditionally made important contributions to food security by producing most of their own food. They are, however, resource poor and, therefore, produce below optimum. In addition, the challenges of globalisation and liberalisation increasingly require that producers compete in the markets, both local and international. This proposes commercialisation of agriculture, even in the small farms. The objective function of the commercial farmer is profit maximization while that of the subsistence farmer is producing food for the family. That of the semi-commercial farmer is profit maximization subject to withholding enough resources for use in subsistence production. Farmers are known to be supply responsive and are, therefore, expected to adopt commercial agriculture.

Challenges faced by smallholder farmers

• Lack of access to information on effective farming, farm inputs, financing and weather advisories.
• Lack of quality seeds, fertilizer, irrigation and other farm inputs.
• Crop diseases, pests, drought, and extreme precipitation.
• Degraded soil due to overuse.
• Lack of storage and transportation facilities.
• Lack of access to markets (knowledge, transportation and connectivity to market agents).
•  Effects of climate change – this is due to dependence on rain-fed agriculture. The changing and unpredictable raining seasons greatly affects the ability to plan farming activities.
• Limited access to extension services- The agricultural sector extension service plays a key role in disseminating knowledge, technologies and agricultural information, and in linking farmers with other actors in the economy. The extension service is one of the critical change agents required in transforming subsistence farming to a modern and commercial agriculture to promote household food security, improve income and reduce poverty.
• Use of outdated technology - Although Kenya has a well-developed agricultural research system, use of modern science and technology in agricultural production is still limited. Inadequate research–extension–farmer linkages to facilitate demand-driven research and increased use of improved technologies continue to constrain efforts to increase agricultural productivity as farmers continue to use outdated and ineffective technologies. This brings the need of extension services that can link research and the farmers.
• Poor infrastructure- Poor rural roads and other key physical infrastructure have led to high transportation costs for agricultural inputs and products. It also leads to spoilage of perishable commodities during transportation. This causes high losses to farmers.

TOPIC 1:

AGRO-ECOLOGICAL ZONES AND AGRICULTURAL ACTIVITIES IN KENYA

Definition:

ü Agro-ecological Zoning (AEZ) refers to the division of an area of       land into smaller units, which have similar characteristics related to land suitability, potential production and environmental impact.

ü An Agro-ecological Zone is a land resource mapping unit, defined in terms of climate, landform and soils, and/or land cover, and having a specific range of potentials and constraints for land use. (FAO 1996).

ü The essential elements in defining an agro-ecological zone are the growing period, temperature regime and soil mapping unit.

The agro-ecological climate of Kenya

ü Kenya has a total area of about 582'646 square kilometers of.           which 11'230 or about 1.9% is covered by water. The dry land mass is commonly divided into six agro-ecological zones as the table below indicates.

Table: Agro-ecological zones of Kenya

Agro-ecological zones:

Kenya can be divided into seven distinct ecological zones. These are:

·        Tropical Alpine,

·        Upper Highland,

·        Lower Highland,

·        Upper Midland,

·        Lower Midland,

·        Lowland

·        Coastal Lowlands.

Zone	Appr. Area (km2)	% Total
I. Agro-Alpine	800	0.1
II. High Potential	53,000	9.3
III. Medium Potential	53,000	9.3
IV. Semi-Arid	48,200	8.5
V. Arid	300,000	52.9
VI. Very Arid	112,000	19.8
VII. Rest (waters, etc.)	15600	2.6

ü 80% of the country lies in the semi-arid to very arid Zones (ASALs), which are predominantly inhabited by the pastoralists and agro-pastoralists.

ü The Kenya's ASALs support about seven million people and more.             than 50% of the country's livestock population. These areas, which are also classified as rangelands, are unsuitable for rain-fed cultivation due to physical limitations such as aridity and poor vegetation.

Zone I: Tropical Alpine (Agro-Alpine)

ü This zone has no direct importance in agricultural production other than being the source of rain and some rivers/streams.

ü It is confined to mountains and immediate surrounding such as Mt. Kenya and Mt Elgon.

Zone II:  Upper Highland (High Potential)

ü Restricted to the highlands of Kenya

ü Lies between 1980 and 2700 m and occurs as a forest or open grasslands.

ü Is found in the surrounding of Mt Kenya (parts of Meru, Embu, Kirinyaga and Nyeri), isolated parts of the Rift Valley around Mau and Abadares mountains (e.g around Kericho and Nyahururu respectively) and the surrounding of Mt Elgon (e.g around Kitale and Webuye).

ü The minimum rainfall is 1000mm.

ü The main grasses are Pennisetum clandistenum (Kikuyu grass), Themeda triandra (Red oats), Andropogon Chrysostachyus, Andropogon pralonsia, Exotheca abysinica, Digiteria scalaram, Eragrostis lascantha, Seteria sphacelata, Pennisetum catabasis and Sporobolus filipes. The legumes include Trifolium johnstoni, Medicago sativa (Alfalfa or Lucerne), Sesbania sesban and Leuceana leucusephala.

Zone III: Lower Highland (Medium Potential)

ü Occurs mainly at elevations between 900-1800 m 

ü Annual rainfall between 950 and 1500 mm.

ü Trees are numerous here and somewhat of shorter stature than in Zone II.

ü Most significant for agricultural cultivation

ü Several legume fodders are found here in crop-livestock systems.

ü Most resettled by human.

ü It occurs in the vast parts of Nyanza, Western and Central provinces, good proportion of Central Rift-Valley (Nandi, Nakuru, Bomet, Eldoret, and Kitale) and a small strip at the Coast province.

ü The major grasses are Hyperenia and Cymbopogon, Themeeda triandra, Panicum maximum, Seteria Sphacelata, Sporobolus pyramidalis, Bracharia brizantha (Congo signal), Bricharia siluta, Chloris gayana (Rhodes grass) and Cynodon dactylon (Star grass).

Zone IV: Upper Midland (Semi-Arid)

ü Occupies more or less the same elevation (900-1800 m) as the previous or may be at times lower.

ü However, it has lower rainfall of about 500-1000 mm.

ü E.g. surroundings of Naivasha, vast parts of Laikipia and Machakos districts, vast parts of central and southern Coast Province.

ü Home of most Acacia trees and shrubs including Acacia seyal, Acasia Senegal,Acacia brevispica, Acacia drepanolobium and Acacia gerrardii. Euphobia trees occur in some drier parts of this zone. Combretum and Terchonanthus spp. are also common here.

ü Grasses found include Themeda triandra, Pennisetum mezianum, Pennisetum straminium, Pennisetum massaiense, Eragrostis spp., Hyperenia spp. Seteria spp., Digiteria spp., Bothriochloa insculpta, Cenchrus ciliaris. Rare grasses include Chloris spp. and Cynodon spp. Besides acacia, other important legume include Indigoferra and Crotolaria.

Zone V: Lower Midland (Arid)

ü Much drier than Zone IV

ü Occurs at lower elevations.

ü Annual rainfall is 300-600mm.

ü This Zone is prevalent in northern Baringo, Turkana, lower Makueni and vast parts of North Eastern Province.

ü Low trees and shrubs found here include Acacia mellifera, Acacia tortilis, Acacia horrida, Acacia reficiens, Acacia nubica, Acaia paslii, Acacia Zanzibarica, Adansonia digitata, Terminalia prunioides, Dobea spp., Dioppspyros spp. and Commiphora spp.

ü Common grasses are Eragrostis superba, Cenchrus ciliaris,   Cymbopogon spp., Bothriochloa spp. and Heteropogon contortus.

Zone VI: Lowland (Very Arid)

ü Is considered as semi desert and is the driest part of Kenya.

ü Annual rainfall is 200-400 mm and is quite unreliable.

ü The zone is found in Marsabit, Turkana, Mandera and Wajir Districts.

ü Dominant in this zone are Acacia and Commiphora shrubs with scattered taller trees of Delonix elata, Acacia tortilis and Adansonia digitata. Balanites eagyptica, Boscia coriacea, Salvadora persica, Acacia mellifera and Acacia reficiens are important shrubs or low tree species.

ü The very common and important dwarf shrubs are Indigofera spinosa and Sansevieria spp. Other important shrubs are Sericocomopsis, Barberia and Duosperma eromophylum.

ü Being the most delicate zone both annual and perennial grasses are important here. Important grasses include Aristida adoensis, Stipagrostis hirtigluma are very characteristic and may occur as annuals or perennials. Other grasses also found here are Aristida mutabilis, Chrysopogon aucheri, Tetrapogon spp, Enneapogon cenchroides, Chloris roxburghiana.

Zone VII: Coastal Lowland

ü Represented by Chalbi desert in Marsabit district.

ü The Chalbi is a salt desert with very sparse salt bushes as the only vegetation found.

ü It is of beautiful scenery.

ü Pastoralists use it as a source of mineral lick for livestock, particularly during the rainy season.

Agro-Ecological Zones Classification

Based on length of available growing period (LGP), which is defined as the period (in days) during the year when rainfed available soil moisture supply is greater than half potential evapotranspiration (PET). 

It includes the period required for evapotranspiration of up to 100 mm of available soil moisture stored in the soil profile. It excludes any time interval with daily mean temperatures less than 5° C.

• Arid: LGP less than 75 days
• Semi-arid: LGP in the range 75 - 180 days
• Sub humid: LGP in the range 180 - 270 days
• Humid: LGP greater than 270 days

          Highland tropical areas and temperate regions are defined by their mean monthly temperature.

• Temperate: One or more months with monthly mean temperature, corrected to sea level, below 5° C.
• Tropical highlands: Tropical areas with daily mean temperature during the growing period 5 -20° C.

Some areas of the LGP map appear to indicate available growing period of zero. In some of these areas livestock can be kept through the use of artificial water sources, e.g. boreholes, supplementing the rainfall based LGP. Examples of such areas include the Horn of Africa, parts of southern Africa, central Australia and parts of the Sahel zone.

Arid zones	·        The areas where the growing period is less than 75 days, too short for reliable rainfed agriculture. The coefficient of variation of the annual rainfalls is high, up to 30%. Abiotic factors, especially rainfall, determine the state of the vegetation. ·         The main systems found in these zones are the mobile systems on communal lands. Some cases of ranching are present.
Semi-arid zones:	·        The growing period of plants is between 75 and 180 days. Progressively, biotic factors such human pressure and the resulting land-use define the state of the natural resources. ·         Agricultural areas compete with pastoral lands. The livestock systems are diverse: transhumant and semi-transhumant pastoralism, agro-pastoralism, as well as ranching.
Sub-humid and  humid zones:	·        Environmental interactions of livestock with environment being more or less similar, these two zones have been analysed as a whole. ·        Sub-humid zones: the growing period of plants is between 180 and 270 days. The limitation of stock farming is more the quality than the quantity of pasture available. The systems are also transhumant and semi-transhumant pastoralism, sedentary grassland farming and ranching. ·         Humid zones: with the growing season exceeding 270 days, the natural vegetation is mostly the rainforest. Livestock and grasslands can compete with forest. A part of agriculture is based on tree crop plantations. Agro-pastoralism, ranching and grassland farming are practised.
Temperate and  tropical highlands:	·        Temperate zones: one or more months with monthly mean temperature (corrected to sea level) below 5°C.i8oo It includes cold countries as the asiatic steppe areas and the alpine grasslands. ·         Tropical highlands: tropical areas with daily mean temperature during the growing period in the range 5 - 20°C. Temperature is a seasonal limitation to plant growth more than rainfall. All systems ca be found in these zones.

These zones exhibit ecological constraints which set limits to nomadic pastoralism and settled agriculture. These constraints include:

• rainfall patterns that are inherently erratic;
• rains which fall mostly as heavy showers and are lost to run-off;
• a high rate of potential evapotranspiration further reducing yields;
• weeds growing more vigorously than cultivated crops and competing for scarce reserves of moisture;
• low organic matter levels, except for short periods after harvesting or manure applications; and
• highly variable responses to fertilizer.

Indigenous peoples of these areas have lived within these constraints for centuries. They have existed on the productivity provided locally and have used their knowledge to devise coping and adaptive strategies.

The semi-arid and arid rangelands

·        These areas cover about 80% of the land surface and are occupied by about 20% of Kenya's population. 

·        They are in agro-climatic zones IV, V, VI and have an average rainfall ranging from 300-800 mm per year.

·        Rangelands are further characterized by poor vegetation cover, fragile soils, high temperatures and frequent wind storms.  

·        Crop production is very limited but the rangeland supports cattle, sheep, goats and camels.  It is also estimated that about 50% of wildlife outside the national parks is found in these range areas.

·        Pasture resources can be developed in a number of ways including;

v Improving the distribution of water points

v Reducing overgrazing;

v Increasing primary production by intensifying land use, reseeding denuded rangeland and conserving forage; and

v By balancing the livestock population and the available feed resources. 

v These areas include the marginal areas of west Pokot, parts of Marakwet, Keiyo, Baringo, and Kajiado.

TOPIC 2: CHARACTERISTICS OF LARGE AND SMALL SCALE AGRICULTURE

Classification of Farming Systems- According to size of farm

1. Collective Farming:

It includes the direct collection of plant products from non-arable lands. It may include either regular or irregular harvesting of uncultivated plants; honeying and fishing usually go hand in hand with collection. Actual cultivation is not needed. The natural products like honey, gum, flower etc are collected. Such plant product may be collected from forestry area.

2. Cultivation Farming:

In this system, farming community cultivates the land for growing crops for obtaining maximum production per unit area. This includes small-scale and large-scale farming.

a)    Small-scale farming

·        Kenya’s agriculture is predominantly small-scale farming, mainly in the high potential areas.

·        Farming is done on small size of holding and other factors of production are small in quantity and scale of production is also small.

·        Production is carried out on farms averaging 0.2 - 3 hectares mostly on commercial basis. This small-scale production accounts for 75 % of the total agricultural output and 70 % of marketed agricultural produce.

·        Small-scale farmers produce over 70 % of maize, 65 % of coffee, 50 % of tea, 80 % of milk, 85 % of fish and 70 % of beef and related products.

·        Adoption of improved inputs such as hybrid seed, concentrate feeds, fertilizers and pesticides or machinery by small-scale farmers is relatively low. Therefore, there is huge potential for increasing productivity for these farmers with adoption of modern farming practices.

·        In the rangelands, the small-scale livestock production system features mainly pastoralists.

·         Livestock herd sizes are considerably large because of communal grazing with low use of purchased inputs like feed, drugs and artificial insemination (A.I.). Production is mainly subsistence rather than market-oriented. Disease and nutrition are major constraints to increased livestock productivity in this system.

·        Small scale farmers typically sell their produce via the farmer's market.

·        Farmers' markets are also a good source for obtaining local food and knowledge about local farming productions. As well as promoting localization of food, farmers markets are a central gathering place for community interaction.

Advantages of Small-Scale Farming:

       i.            Intensive cultivation is possible.

     ii.            Labour problem do not affect the production.

  iii.            It is easy to manage the farm.

  iv.            There is less loss due to natural calamities like frost, heavy rainfall, and diseases.

     v.            Per unit output increases.

Disadvantages of Small-Scale Farming:

       i.            Cost of production per unit is more.

     ii.            Mechanization of agriculture is not possible.

  iii.            Farmer does not get employment round the year.

b)    Medium-scale farming

·        Medium-scale farms range from 3 to 49 ha.

·        Farmers in this category are receptive to technology, practise commercial agriculture by investment in inputs, marketing of produce and borrowing credit for farm development.

c)     Large scale farming

·        Here, farming is done on large size holding with large amount of capital, large labour force, large organization and large risk.

·        In India 40 to 50 hectares land holding may be said large scale farming but in countries like America, Canada and Australia even 100 ha.

·        In Kenya, large-scale farming is practised on farms averaging about 50 hectares and 30,000 hectares for crops and livestock ranches respectively.

·        The large-scale farming sub-sector accounts for 30 percent of marketed agricultural produce mainly involving the growing of crops such as tea, coffee, maize and wheat in addition to keeping livestock for commercial purposes.

·        There is use of improved technologies and better farm management that result in increase of productivity per land unit in all categories of farming.

Advantages of Large-Scale Farming:

       i.            Production of large scale farming is more economical. The cost of production per unit is less.

     ii.            Per unit production is increased.

  iii.            Better marketing of agricultural products is possible. Processing, transportation, storage, packaging of produce is economical.

  iv.            Costly machine like tractor, combined harvester can be maintained on the farm.

     v.            Proper utilization of factors of production is possible.

  vi.             Research work is possible.

vii.            It increases bargaining power of people.

Disadvantages of Large-Scale Farming:

       i.            If demand of produce decreases and production exceeds the market demand there will be more loss to the large farm.

     ii.            In case of labour strike there will be more loss on the farm.

  iii.            Due to natural calamities like frost, drought, flood, insects and diseases the large farm will suffer a lot.

  iv.            It is difficult to manage large scale farm.

Six key factors affecting Large-Scale/Commercial agriculture:

1. Location

·        Commercial farms must move their products to market.

·        Farms need to be located near transportation systems.

·        Trucks, ships, planes, and trains are several ways that products can be moved from where they are grown or made to where customers can buy them.

2. Climate

·        A farm's soil, as well as the climate of the region in which it is located, determine what crops will grow there or whether the land can support livestock.

·        The temperature and rainfall can also determine the type of crop grown. For example, oranges must be grown in a hot climate. They will not grow if the temperature is too cold

3. Raw Materials

·        A commercial farm depends on raw materials. For example, a farmer will plant grain to get wheat; a farmer will have dairy cows to produce milk.

·        Seeds and animals are two examples of raw materials used in commercial agriculture.

4. Market Forces

·        Supply and demand are important for selling agricultural products. If there is a high demand for a product and low supply, the price will be increased.

5. Labour

·        People who work on farms provide different types of labour.

·        Labour is needed to plant crops, as well as to harvest them. This is important because some produce, such as grapes, need to be hand harvested.

6. Transportation

·        Movement of agricultural products to market depends on transportation systems. For example, produce is shipped by rail in special refrigerated cars, and then shipped across the ocean.

·        Some crops such as fruit must get to the market quickly, or else they will rot; crops like these are often shipped shorter distances or are sold in the regions where they are grown.

TOPIC 3

COMMERCIAL CROPS AND LIVESTOCK IN KENYA

MAIN CASH CROPS IN KENYA

Kenya’s agricultural economy comprises a well-developed commercial sector and a predominantly subsistence-oriented sector in rural areas.

Agricultural activities range from intensive crop production and mixed farming in areas that receive heavy rainfall to cattle ranching in the dry parts of the country.

·        Major agricultural products are tea, coffee, horticulture, maize, wheat, sugarcane, daily products, cotton, sisal, pyrethrum and cashew nuts.

·         Cash crops contribute 50 % of export earnings with horticulture, coffee, tea, tobacco, cotton, sisal, pyrethrum, and cashew nuts leading the way. Fruits and vegetables are other key exports.

·        The primary food crops are maize, beans, cassava, potatoes and sorghum. Commercial agriculture contributes about 2.5 per cent of GDP and about 8 per cent to formal employment.

·        Key crops are

ü Tea,

ü Coffee,

ü Horticulture,

ü Maize,

ü Sugar,

ü Wheat and

ü Pyrethrum.

Tea farming in Kenya

ü Kenya is Africa’s leading tea producer and fourth in the world behind India, China and Sri Lanka. Black tea is the country’s leading agricultural foreign exchange earner.

ü Kenya is a major producer of the best tea in the world. It has more than 110,000 hectares of land under tea.

ü Tea is grown in the highlands where there is adequate rainfall and low temperatures.

ü The tea industry is divided between small farms and large estates.

ü The small – scale sector, comprises of more than 260,000 small scale tea farmers who are the shareholders and also supply leaf. It is controlled by the Kenya Tea Development Agency (KTDA).

ü The estates, consisting of 60-75 private companies, operate their own factories.

ü Tea is now the country’s leading foreign exchange earner. Tea output accounts for about 11 % of agriculture’s share of Kenya’s Gross Domestic Product (GDP).

ü The industry supports directly and indirectly approximately five million people, making it one of the leading sources of livelihoods in Kenya.

ü Kenya tea is free of pests or diseases, so the farms are not sprayed with any chemical except fertiliser application to replenish soil nutrients.

ü Tea growing areas receive 12 hours of sunlight daily and between 1,200-1,400 mm of rainfall spread throughout the year. This ensures that the supply of tea, both in quality and quantity, is consistent throughout the year.

ü There are about 50 varieties of tea in Kenya, which are developed to suit the seven growing regions. With each new variety developed, chemical properties are enhanced, making tea to be associated with health attributes.

ü Over 90 % of Kenya’s tea is hand picked. Only the finest top two leaves and a bud are used for tea production and this contributes to the excellent aroma in the tea cup.

ü Kenya’s tea factories are certified with the internationally acclaimed standards (ISO 22000; HACCP; Rain Forest Alliance, Fair Trade GMP). This has made Kenyan tea competitive in the World market.

ü Tea auction takes place in Mombasa. Mombasa is the largest CTC auction centre in the world, offering up to 9.5 million kilograms a week and sometimes more during peak period.

Challenges facing the industry

v High cost of production,

v Poor infrastructure,

v Low level of value addition

v Product diversification

v The political crisis in the key export markets (e.g. Egypt and Syria),

v Stronger shilling 

v Higher tea supply in the international market, depresses the prices.

Tea Growing Areas in Kenya

·        The actual areas of tea growing can be divided into the highlands on the east and west of the Rift Valley.

·        The western highlands growing areas include: Kericho, Nandi, Kakamega and Cherangani Hills.

·        The eastern highlands growing areas include; Nyambene Hills in Nyambene, Nyeri, Murang’a, Kiambu, Thika and Maragua.

Conditions Necessary for Tea Growing in Kenya

The geographical conditions suitable for tea growing include;

1.     Climate – The areas experience cool to warm temperatures averaging 21°C during the growing season of not less than eight months. The annual rainfall received is over 1,500 mm well distributed throughout the year. The warm and wet conditions permit rapid leaf production and increase the number of annual pickings.

2.     Highlands Conditions – The areas are favourable as they lie at high altitudes of 1000 m to 1700 m above sea level. The highlands and hill slopes have offered good natural drainage ideal for tea farming.

3.     Soils – The soils are deep well drained and slightly acidic. Most of these areas are volcanic highlands where volcanic rocks have been weathered to form deep fertile soils e.g. Cherangani and Nyambene Hills.

4.     Shade – Tea does well in areas which are shielded from strong sunlight and violent winds. In the tea growing areas of Kenya there are many isolated trees on the plantation, while some plantations are on the margins of forests. This offers protection not only to the tea but also to the pickers.

5.     Labour – Tea cultivation and processing are basically labour intensive. Field preparation, weeding, pruning and picking goes on throughout the year. Female labour is preferable for picking since it requires tenderness, skill and patience.

6.     Processing Factories – Tea leaves are highly perishable. Consequently tea factories must be located within the growing area for quick processing.

7.     Transport Infrastructure – Tea growing areas need to have good passable roads. This is to ensure that picked leaves reach the factory fast before the quality deteriorates. .

8.     Availability of Capital – Tea growing is capital intensive. A large capital outlay is required in picking and for the cultivation.

Tea Cultivation in Kenya

ü Cultivation is either on small holdings or plantations.

ü The land is first cleared.

ü Tea seedlings or cuttings are raised for about 18 months in a nursery and when they attain a height of 3’0 cm, they are transplanted.

ü Tea is usually planted in contoured rows 1.5 m apart.

ü Weeding, manuring and pruning are carried out at regular intervals.

ü The first picking occurs between 2-4 years after planting the crop, but full bearing is reached after 5 years.

ü Picking is carried out fortnightly for approximately a century before being uprooted and new plants grown.

Tea Processing in Kenya

1.     When the bushes are ready only the two top leaves and a bud (flush) are picked.

2.     The green leaves are transported in airy baskets to a collecting centre for sorting out and weighing.

3.     The weighed leaves are transported by lorries fitted with bags to the processing factories where they are weighed again.

4.     The tea leaves are then spread out on long wire trays.

5.     The leaves are then dried by blasting of warm air from underneath the trays. The leaves are then passed through a set of rollers to chop them.

6.     The leaves are then placed in containers for fermenting, reducing tannic acid and changing the colour to grey brown.

7.     The leaves are then passed through a conveyor belt which takes them to a tunnel which is at a temperature of 100°C for roasting (drying) after which they turn black.

8.     The leaves are sifted, graded and tasted for classification.

9.     The graded tea is packed in tea chests for export and small packages for local market.

Tea Marketing in Kenya

ü Some of the tea is consumed locally

ü Ahuge amount is sold on the international market.

ü The leading consumers of Kenyan tea are countries that make up the European Union such as Britain, France, Germany, and Netherlands. Another major destination is the Middle East in countries such as Afghanistan, Iran and Saudi Arabia. Some exports are also made to African countries especially COMESA members such as Egypt and Sudan.

ü Marketing of tea is done by the Kenya Tea Development Authority (KTDA) which was founded in 1964. Apart from marketing tea it also promotes production of tea among small scale farmers and sensitises them on high quality production of tea.

Achievements of KTDA

1.     The KTDA accounts for over two thirds of the total leaf production in the country. The authority is responsible for a good percentage of foreign exchange earnings from tea.

2.     The KTDA has finance many tea manufacturing industries. These are spread out in the tea growing districts of Kisii, Nyamira, Vihiga, Kericho, Nandi, Trans Nzoia, Nyeri and Embu.

3.     The KTDA assists in marketing the tea. The farmers have a good bargaining base through the authority.

4.     The authority has aimed at high quality yields. This has ensured handsome prices for the farmers.

5.     They provide inputs to tea farmers e.g. fertilisers and seedlings.

Problems Facing Tea Farmers in Kenya

1.     Poor roads – The poor feeder roads in the tea growing areas lead to delays in collection and delivery of the green leaf hence causing wastage. This is worsened by the fact that tea is highly perishable and needs quick transportation to the processing factories.

2.     Delayed payments – In some instances, farmer payment for tea delivered is delayed. This coupled with mismanagement of funds lowers the farmers’ morale.

3.     Climate Hazards - Climatic hazards, for example, prolonged droughts, hailstorms, lead to destruction of the crop. This lowers the quality and quantity of the yields.

4.     Pests and diseases – Pests and diseases such as the black tea thrip, red spider mites, weevils and beetles destroys crops hence reducing the farmer’s yields.

5.     Fluctuation in world Prices – This makes it difficult for them to plan ahead. High cost of farm input hence production cost of tea is high. This is evident through the high prices of farm inputs which reduces the farmer’s profit margin. It also leads to low yields as some farmers cannot afford.

Significance of Tea Farming

Tea fanning has led to a number of benefits to the economy of Kenya. These are:

1.     Foreign Exchange – Through the export of tea the country earns foreign exchange. Currently it is the country’s leading export crop.

2.     Creation of employment  - Many people are employed in the tea industry either in the factories or in the farms.

3.     Development of industries – Tea growing has contributed to industrial growth through the establishment of processing factories and packaging industries.

4.     Development of infrastructure – Transport lines have been constructed and existing ones improved to link the farms to the factories. This has led to improved infrastructure.

Coffee farming in Kenya

ü   

Coffee plants are planted in a nursery regularly watered and shaded where they germinate and stay for about six months.

1.     Lines of holes 3metres apart are dug in the main field. Manures/fertilisers are added and regularly watered.

2.     The seedlings are transplanted into the holes in the main field.

3.     The seedlings are sheltered from strong sunlight either by trees or artificially made shades.

4.     Dry leaves are laid around the stem of the seedling to provide mulching/conserve moisture.

5.     From then to the fifth year, the plant is pruned, weeded, sprayed and manured regularly.

6.     By around the third to the fifth year the plant attains maturity and the berries are harvested.

7.      Harvesting involves manual picking of the red berries leaving the green ones to ripen.

Processing of Coffee in Kenya

1.     The ripe berries are transported to the factory where they are weighed.

2.     They are then taken through a machine which removes the outer covering pulp.

3.     The berries are fermented for a while before curing by drying in the sun for one week.

4.     After curing, machines peel off two layers of inner husks before the berries are winnowed and graded.

5.     The berries are then sorted out according to size and quality.

6.     After this they are roasted at temperatures of about 100°C before being ground into powder.

Marketing of Coffee in Kenya

Kenya has two coffee marketing systems:

v Central auction system (Nairobi Coffee Exchange)

v Direct sale (‘Second Window’)

Central auction system: It is a market where licensed dealers buy coffee through competitive bidding. Coffee auctions are conducted every Tuesday. The coffee exchange is under the management of the Kenya Coffee Producers and Traders Association.

A direct sale: requires a marketing agent to directly negotiate with a buyer outside the country and a sales contract is signed and registered with the coffee board. The board registers the contracts after inspecting and analysing the coffee for quality and value. There are two categories of marketing agents: Commercial Marketing agents who offer services for commercial purposes and grower marketers who are growers licensed to market their own coffee.

Role of Kenya Government in Promoting Coffee Growing

1.     Research on new species of coffee and methods of controlling pests and diseases.

2.     Construction of new roads and improving existing ones in the growing areas to enhance the transportation of coffee.

3.     Through the Ministry of Agriculture the government has provided extension workers to advice the farmers on better methods of coffee farming.

4.     Through the KPCU and other financial institutions, the government has advanced loans to farmers to assist them to improve on their farming.

5.     Through Coffee Board of Kenya, the government helps farmers to market their coffee.

Problems Facing Coffee Farmers in Kenya

1.     Soil exhaustion: Soils have been exhausted since coffee places a high demand on soil nutrients.

2.     Climatic hazards: Inadequate and unreliable rainfall lowers the quality and quantity of the yield.

3.     Price fluctuations: Fluctuation of prices in the world markets discourages the farmers.

4.     Pests and diseases: Pests and diseases like leaf rust, coffee berry disease, root rot destroy the crops reducing the yields.

5.     Expensive farm inputs: High prices of farm inputs reduce the farmers’ profit margins.

6.     Limited land for expansion: The available land is facing competition from other well paying crops offered by the horticultural sector. Coffee farmers therefore may not expand quite easily.

7.     Delayed payments: Delayed payments to farmers for the crop delivered. This lowers their morale in coffee production.

8.     Shortage of labour: At times there is shortage of labour. This occurs mainly during the harvesting period, and the situation has been worsened by the HIV (AIDS) pandemic.

9.     Competition in the world market: Despite the setting of annual export quotas by the International Coffee Organisation, Kenya’s coffee industry still faces competition in the world market due to flooding occasioned by over production.

10.                        Mismanagement: Coffee co-operative societies have been mismanaged leading to embezzlement of funds. This has led to low income for the farmers.

11.                        Poor roads: Some of the feeder roads in the growing areas are poorly maintained and impassable during the rainy season. This has made it difficult for the farmers to deliver their produce on time to the processing factories.

Importance of Coffee Growing in Kenya

Foreign exchange – Through the export of coffee, the country earns foreign exchange. For many years, it was the leading foreign exchange earner before the sector was mismanaged. However, it still earns some revenue which has been used in the country’s development.

Employment – Coffee growing has offered employment to many Kenyans. This has been directly e.g. through the picking of coffee and indirectly through the related industries.

Development of industries - Coffee growing has contributed to the development of coffee related industries e. g coffee processing factories. This has helped in industrialisation of the country.

High standards of living – Through the direct sale of their crops, farmers have earned income from coffee. This has raised their standard of living.

Development of infrastructure – Due to coffee growing, roads have been constructed to link the growing areas to the factories. Others have been graded and improved. This has led to improvement of infrastructure in the country.

Saves foreign exchange – Coffee growing has provided high quality coffee for local consumption. This saves the country foreign exchange by reducing the need to import coffee.

Horticulture Farming in Kenya

ü Horticulture farming in Kenya refers to an intensive cultivation of vegetables, fruits and flowers for sale.

ü Horticultural crops in Kenya include flowers, fruits, vegetables and potatoes.

ü Currently the horticulture industry is the fastest growing agricultural sub- sector and is ranked third in terms of foreign exchange earnings from exports after tourism and tea.

ü Grown for both domestic and export markets.

ü Kenya’s ideal tropical and temperate climatic condition makes it favourable for horticulture production and development.

ü About two million are employed in the sub-sector, most of them small-scale growers who constitute 80 per cent of producers.  This alleviates poverty and provides higher incomes to small scale farmers.

Main Features of Horticulture

1.     The activity is scientifically oriented as advanced methods of crop production are employed. Such methods include, use of high yielding seeds, regular spraying to control pests and diseases and heavy application of fertilisers. All these ensure high yields.

2.     The practice is capital intensive (a lot of farm inputs are required) and labour intensive (farm work is done using human labour).

3.     Land is intensively used. This is mainly because horticulture is practiced in areas with land scarcity, hence farm sizes are small.

4.     Most of the products are perishable hence the need for production close to the markets. It is mainly practiced close to the urban centres.

5.      Due to the perishability of the products, it mainly involves quick and expensive modes of trasport e. g., the aeroplanes.

6.     The products are grown for export, due to their increasing demand.

Conditions Favouring horticultural farming in Kenya

1.     Climate: The hot and wet climate favours the growth of tropical crops, while the cool and wet conditions prevailing in Kenya Highlands especially in areas like Limuru favours the growth of temperate crops like plums, pears, apples and grapes.

2.     Soil: The fertile soils of volcanic origin favour growth of a variety of crops. This fertility is sustained by the liberal application of fertilisers.

3.     Market: The high demand for the products both locally and internationally has led to the rapid development of the industry. The sprawling and mushrooming of old and new urban centres provide ready markets for horticultural products locally. The temperate lands in Western Europe offer good market for Kenyan horticultural products, especially in winter when tropical vegetables, fruits and flowers are in high demand.

4.     Capital: Investment by large companies has led to the development of horticulture especially growing of fruits and vegetables. For instance,

v Del Monte Company of Thika has large farms and exports most of canned products to Europe and Middle East.

v Wide range of vegetables and flowers are cultivated under irrigation around Lake Naivasha managed by the Pan African Foods Company and the Danish Chrysanthemum Company respectively.

v The Kabazi Canners Company finances the vegetables and fruit farming in Bahati Division of Nakuru District.

v Sulmac Ltd. and Oserian Development Company handles flower industry in Lake Naivasha area.

5.     Research: Available technical and financial assistance from friendly countries. Kenya Government engaged the German Agricultural Team (GAT) to assist in the promotion of agricultural development with effect from 1965. Since then the crop production of the Ministry of Agriculture supported by advisors of GAT, has carried out horticultural development in three ways:

v The Horticultural Crop Branch which is charged with the National Development of Horticultural Extension Training Scheme is charged with a responsibility of carrying out research. This division has established a Horticultural Research Station at Thika. They also conduct in -service courses for horticultural farmers at training institutions.

v GAT assists in the National Horticultural Development Programme with a focus on Westem Kenya, the Coast and the Taita Hills. This programme also includes the establishment of wholesale markets in Nairobi, Kisumu and Mombasa.

v GAT assists the Ministry of Agriculture in the propagation of improved planting material and establishment of observation adaptation trials and commercial orchards. The activities are being carried out in several ecological zones.

6.     Marketing systems: The farmers operate under well organized marketing systems managed by Horticultural Co-operative Union and Horticultural Development Authority (HCDA). HCDA helps the fanners to export their products.

7.     Transport: Most growing areas are accessible to the markets through roads and air transport.

8.     Government policy:  The Government through its export promotion drive is encouraging the diversification of export crops with a view to broadening the country’s export base.

Types of Crops Grown and their Distribution

Vegetables

There are five types of vegetables namely: 

1.     The starchy tubers: These are vegetables which have stems which swell and ripen underground e.g., cassava, yams and sweet potatoes. They are mainly for local consumption.

2.     The root crops: These are types of vegetables which store food in swollen roots, for example, carrots, turnips, parsnips, beet and swedes.

3.     Pulses: These are leguminous vegetables which include plants such as peas, beans, lentils, soya beans and groundnuts.

4.     Green vegetables: These include cabbages, cauliflower, broccoli, Brussels sprouts, green grams, spinach, spruce, kales (sukuma wiki), strawberries and brassicas.

5.     Miscellaneous vegetables: These include onions, tomatoes, chillies and mushrooms.

Fruits

Most of the fruits grown in Kenya are for local consumption. A few are exported. Generally fruits grown in Kenya include:

1.     Citrus fruits:  Grapes, oranges, lemons and tangcrines.

2.     Deciduous fruits: Apples, pears, peaches, plums and apricots. They are also called temperate fruits.

3.     Tropical fruits: Bananas, loquat, dates, pawpaws, pineapple and avocadoes.

Flowers 

The flowers grown in Kenya include;

v Roses,

v Orchids,

v Camations

v Gladioli.

Floriculture (growing of flowers) is concentrated in Central, Eastern and parts of Rift Valley Provinces.

The major growing areas are Limuru, Naivasha, parts of Embu, Kirinyaga, Murang’ a, Nyeri, and Kericho Districts. In Kericho, the flowers are grown by the African Highlands Produce Company.

Cut-flowers for export are mainly from Kiambu. However, Naivasha is the leading flower producer followed by Limuru and Kirinyaga,

Marketing of Horticultural Products

ü Most of the products are consumed locally, especially by the urban population.

ü Only a small percentage is exported.

ü  From the farm gate, the products are carried by people, donkeys and pick-ups to the concentration centres (grading sheds) located by the roadside. They are then graded.

ü The graded products are collected by the exporters and middlemen, who transport them in Lorries or pick-ups to the airport.

ü Some of the vehicles used are fitted with refrigerated facilities especially the ones carrying highly perishable commodities like flowers and strawberry.

ü The two receiving airports are Jomo Kenyatta International Airport (Nairobi) and Moi International Airport (Mombasa).

ü Horticultural products from Kenya are exported mainly to European markets by air.

ü The French beans (the most marketable vegetable) is classified into three categories, namely:

v Extra-fine French beans -mainly exported to France.

v Fine English French beans - mainly to Britain, Belgium, Germany, Holland and Denmark.

v Baby French beans -mainly to Britain and Belgium.

ü Cauliflowers are mainly exported to the Netherlands, Germany, Norway and England. They are auctioned in Belgium to other world markets like Japan and USA.

ü Fruits are exported mainly to Europe, but a small percentage (20 – 30%) is exported to the Middle East countries.

ü Farmers are paid in cash by middlemen but exporters pay them in cheques after some period of delivery on weekly or fortnight basis. At times, exporters advance to them credit facilities such as farm inputs, for example fertilisers, which are later deducted from final payments.

Problems Facing Horticultural Farming in Kenya

1.     Seasonal roads get muddy during rainy seasons and this limits accessibility between farms and collecting centres.

2.     Inadequate refrigeration facilities may lead to reduction of quality since most products are highly perishable.

3.     The marketing system lacks proper organisation. At times some farmers’ produce rot in the farms.

4.     Freight charges are very high and this leads to marginal profit.

5.     The production cost is very high due to hiked input prices.

6.     There is stiff competition on the international market by producers such as the Netherlands and Israel.

7.     Pests and diseases often destroy crops such as tomatoes.

Importance of horticulture to the Economy

Horticulture has contributed significantly to Kenya’s economy in the following ways:

1.     It is a foreign exchange earner.

2.     It is a major source of employment.

3.     It has led to the expansion and development of transport infrastructure.

4.     It has ensured the effective use of land, for example, swampy areas in Central Province are being reclaimed for production of vegetables.

5.     It is a major source of raw materials for local industries like fruit canning and manufacture of vegetable oils.

6.     It has provided a source of income to farmers hence raising their standards of living.

LIVESTOCK FARMING IN KENYA

ü Livestock farming is the rearing of cattle, sheep, goats, horses, and poultry.

ü Contributes 4% of GDP

ü  Comprises mainly dairy and meat production, eggs, hides, skins and wool from cows, sheep, goats and poultry.

ü The Government has stepped up plans to increase livestock production through investment in genetic improvement.

ü The Ministry of Agriculture, Livestock and Fisheries creates more forums where farmers can access information on cattle breeds, feed production and animal husbandry practices to increase the contribution of livestock to the national GDP.

ü Players in the industry, including Brookside Dairies, have been promoting modern breeding methods like embryo transfer through agricultural shows.

ü Two types of livestock farming include;

1.     Traditional or pastoral farming

2.     Commercial farming

1.     Pastoral Farming in Kenya

ü Also referred to as subsistence livestock farming or nomadic pastoralism.

ü It refers to extensive grazing on natural pasture involving constant or seasonal migration of nomads and their livestock.

Main Areas of Livestock farming in Kenya

ü The practice is confined to the arid and semi-arid districts of Kenya such as Turkana,Wajir, Garissa, Kajiado, Narok and Marsabit among others.

ü It is practiced by the Nilo-Hamitic groups like the Maasai, Turkana, Pokot, Borana, Rendille and Somali.

ü The maasai, for example, practice nomadism in the southern part of Kenya and the northern part of Tanzania. During the rains, they go down the Athi- Kapiti Plains upto Kajiado and Namanga. When the rains are over and the streams dry up, they move up the hills around Ngong, Naivasha and Narok areas.

Characteristics of Livestock farming in Kenya

Nomadic herding in Kenya is distinguished by the following main features:

1.     Cattle are kept as a sign of wealth, reared for the purpose of paying bride price and for slaughter during cultural festivities.

2.     There is uncontrolled breeding

3.     Large herds

4.     Lack of organised land tenure i.e. land is communally owned resulting in overgrazing and serious incidents of soil erosion.

5.     Disease incidences are common. Both human and animals are exposed to tropical diseases.

6.     The animals are poor, weakened by disease, unhealthy and of low value.

7.     Inefficient marketing systems i.e. the attitude of the nomads is such that animals are a source of pride and not income.

8.     There is seasonal movement whereby people spend the dry season in one place and the wet season in another. This movement is known as transhumance.

9.     Many kinds of animals are grazed e. g. cattle, goats, sheep and camels.

Problems Facing Pastoralism in Kenya

1.     Climatic hazards –receive low and unreliable rainfall. At times they experience prolonged drought which leads to lack of water and sufficient pasture for the animals.

2.     Pests and diseases – Pests such as ticks and the tsetsefly, and diseases e.g. rinderpest, anthrax, east coast fever etc. are common in the pastoral areas. This has contributed to the death of large herds of animals.

3.     Overstocking – In most instances the pastoralists keep large herds far exceeding the land carrying capacity. This has led to soil erosion and environment degradation.

4.     Poor pastures – Most of the pastoral areas are underlain by poor soil that cannot support quality pastures. Most areas are thus covered by poor pastures consisting of taft grasses and bare land.

5.     Cattle rustling – always leads to loss of life and destruction of property.

6.     Inadequate transport network – The pastoral areas are inaccessible. Farmers are therefore not able to get their animals to the market.

7.     Inadequate veterinary services – Extension services in the pastoral areas are inadequate hence it is difficult to treat or improve the animals. It is difficult to provide these services due to insecurity and given that the pastoralists are always on the move.

Improvements in Pastoral Areas in Kenya

In Kenya the Government is employing the following measures to assist the nomadic pastoralists to improve the quality of their livestock:

1.     The government has established demonstration ranches to sensitise the pastoralists on better methods of animal husbandry.

2.     The government is encouraging cross-breeding of indigenous breeds with hybrid breeds to improve the quality of livestock.

3.     Cattle dips have been constructed to control pests.

4.     Extension services have been provided to give advice to the pastoralists and offer drugs and treatment to the animals.

5.     Boreholes have been sunk and dams constructed in pastoral areas to provide water for the livestock hence minimize movement due to inadequate water.

6.     Through formal education, pastoralists are learning something about the advantages of keeping manageable sizes of herds.

7.     The Government is also encouraging group ranching to enable the pastoralists to view livestock keeping as a commercial undertaking.

8.     Efforts are being made to encourage bee keeping along the river valleys of Tana River Basin, Ewaso Nyiro Basin and Dawa River Basin where there are luxuriant vegetation growth.

Livestock market in Kenya

ü The market for livestock supplies is increasingly expanding locally and regionally.

ü Nearly all cattle bought at Moyale and some cattle and goats purchased at Mandera originate from the Borana and Somali regions of Ethiopia. Small numbers of cattle from South Sudan and the south-western part of Ethiopia are routed to Eldoret and Nairobi through Lokichogio and Lodwar.

ü A significant proportion in the Garissa market comes from Somalia. Similarly, livestock from Tanzania is routed through Kuria and Migori and to markets in Nairobi.

ü To boost the income of farmers, the government of Kenya establish satellite slaughterhouses and camel slaughter slabs in Garissa and Isiolo, establish a mini-dairy at Garissa to promote camel milk marketing and support national livestock marketing information systems.

ü Also rehabilitate market infrastructure, improve livestock off take and creation of disease free zones in coast province, train pastoralists in marketing, product processing and value addition and conduct studies on camel meat and milk products.

2.     Commercial Livestock Farming

The major types of commercial livestock farming include dairy farming and beef farming.

a)    Beef Farming in Kenya

·        Beef farming in Kenya is a type of livestock keeping which involves rearing of cattle for production of meat.

·        Beef cattle therefore refer to cattle raised for meat rather than milk.

·        90% of beef cattle in Kenya are in the hands of subsistence farmers and pastoralists.

·        It is estimated that over 6 million head of cattle go to slaughter houses every year and provide beef for local and export market.

·        The distribution of beef cattle in Kenya is controlled by the rainfall pattern. Most animals are kept in ranches in Rift Valley Province like in Laikipia, Nakuru, Trans Nzoia and Kajiado Districts. Large ranches are also found in parts of Kilifi and Kwale Districts in Coast Province.

·        Small scale beef farming is carried out in almost all parts of Kenya.

·        The small scale farmers sell their traditional breeds to the nearest open air markets to traders, who in turn sell them to the butchers.

·        The butchers slaughter them at their respective abattoirs and in turn sell their beef at their respective butcheries to the customers in the locality.

·        Before the meat is sold, it must be inspected by a Veterinary Extension Officer, who declares it either fit or unfit for human consumption.

·        The canned and frozen beef is mainly exported to some African and other overseas countries. The marketing of beef and related products is dominated by Kenya Meat Commission (KMC).

·        The major world exporters of beef are Argentina, Australia and New Zealand. United States of America and Europe have considerable production of beef for their high local demand.

Limitations of Beef Farming in Kenya

1.     High temperatures – In most parts of the country temperatures are high. This makes it hard to rare cattle of high quality.

2.     Unreliable rainfall- In most parts of the country rainfall is unreliable leading to inadequate pasture in some times of the year. This affects the general growth and weight of the livestock.

3.     Poor soils – The hard ancient rock that underlie Kenya produce poor soils prone to erosion. Natural grass is poor and not good for quality animals.

4.     Overstocking – The pastoral tribes care for quantity rather than quality. As a result large herds of poor animals are steadily ruining pastureland.

5.     Pest and diseases – Some regions of the country are infested by the tsetse fly whose control has been difficult. The environment also encourages the spread of diseases e.g. nagana, rinderpest, foot and mouth, east coast fever etc. Controling the diseases is quite difficult since these diseases are constantly spread by andering herds of wild animals.

6.     Competition from other land use activities – Wildlife poses a significant land use challenge in the utilisation of rangeland pastures e.g., the conflict between the Maasai pastoralists and the National Parks.

7.     Poor quality animals – The animals kept are of poor quality due to the poor pastures. These fetch low prices.

8.     Inadequate capital – There is insufficient capital for the development of the beef industry. There are inadequate funds for the establishment of processing and storage facilities.

Significance of Beef Farming in Kenya

1.     Provision of beef for local consumption – The industry has produced beef which is consumed locally. This has saved the country the foreign exchange that could have been used in beef importation. This has also served as a cheap source of protein.

2.     Foreign exchange – Through the exportation of beef products and livestock, the country has earned foreign exchange.

3.     Employment – Beef farming is a source of employment to many people e.g., in the beef farms and processing plants.

4.     High standard of living – Through sale of livestock the farmers are able to earn some income. This has raised their standards of living.

Efforts to improve beef farming in Kenya include:

1.     Introduction of pedigree British cattle in some suitable districts or cross-breeding them with indigenous breeds.

2.     Teaching and encouraging farmers to adopt modern methods of rearing and breeding beef cattle.

3.     Providing water by building dams and reservoirs.

4.     Ploughing and re-sowing pastureland with special drought resistant or more nourish,

5.     Funding research in animal disease control and management, educational programmes and drug supply.

6.     Providing extension officers to give the farmers the necessary advice.

7.     Decontrolling the price of meat products. This has resulted in an increase in the variety of prices offered to beef farmers.

b)    Dairy Farming in Kenya

·        Dairying is a type of livestock farming whereby cattle are kept for milk production with sole purpose of selling the milk to the consumer.

·        Kenya is one of the largest producers of milk in Africa.

·        Large scale dairy farming accounts for 20 per cent of national milk production and small scale farming 80 per cent.

·        There are two types of dairy farming in Kenya, namely; Commercial and Domestic dairy farming.

·        Commercial dairy farming in Kenya is practiced in both small and large scale farms. It is further sub-divided into: Highland and Lowland commercial dairy farming.

·        Highland commercial dairy farming is practiced in the Kenya highlands while Lowland Commercial Farming is carried out in some parts of the Coast Province. Lowland dairy farms are at Marakwet and Kikambala in Kilifi and Matuga in Kwale produce high dairy yields.

·        Domestic Dairy Farming is a traditional practice which involves keeping traditional cattle for domestic milk. The milk is consumed by the members of the family. However, several changes have taken place recently. Many domestic cattle keepers in Kenya are now selling their milk to the local markets.

Types of Dairy Cattle Kept in Kenya

       i.            Friesian Cow: This is a black and white dairy cow which originated from the Netherlands, where it is also known as Holstein. It has soft and fine hair. It accounts for most of the dairy cattle in Kenya.

     ii.            The Channel Island Cows: These are from Western Europe around the English Channel and are found in several breeds. The main breeds include the Jersey, Guernsey and Alderney. They are commonly referred to as the Channel Island cows because their origin is around the English Channel in Western Europe.

  iii.            Jersey: The Jersey cow has colours ranging from white to dark brown. It has a “mealy” ring of light hair on the muzzle. It is an exotic breed which came from Jersey and South England in Britain. The animal is more adaptable to extremes of heat and cold. Jersey are therefore the most numerous and widespread dairy breed in the world.

  iv.            Guernsey: A Guernsey is brown in colour with white dots or pale patches. It is an exotic breed from France. The cow is very docile and gives a good yield of rich creamy milk. As a result, the breed has become very popular.

     v.            Ayrshire Cow: This is an exotic breed from Scotland. It has white and brown patches and smaller than Friesian in size. It can fit in a wide range of climates. The breed gives high milk yields.

  vi.            The Sahiwal Cow: This is the most suitable breed in the tropical land. It originated from India. It is common in the Government farm in Naivasha. Sahiwal bulls are useful in cross-breeding with traditional cattle.

Conditions Favouring Dairy Farming in the Kenya Highlands

       i.            Low temperatures - The region experiences low temperatures averaging 18°C. This is ideal for the survival of exotic breeds.

     ii.            High rainfall –This ensures that there is abundant supply of water for the animals and adequate natural pasture throughout the year.

  iii.            Fertile soils - The fertile volcanic soils in the highlands have ensured that there is high quality nutritious cover of grass. This implies high quality pasture throughout the year.

  iv.            Infrastructure - e.g. roads which enhances the quick transportation of milk from the field to the processing plants.

     v.            Ready market - The high population in the highlands has offered a ready market for the dairy products.

Problems Facing Dairy Farming in Kenya

       i.            Small scale dairy farms like those in Central Province face stiff competition from other cash crops like tea, coffee, pyrethrum, passion fruits and vegetables.

     ii.            Farm inputs are very expensive. This has minimised mechanisation of dairy fanning in the country.

  iii.            Roads become muddy and impassable during the rainy season in some major dairy farming areas like Nyandarua District.

  iv.            Extensive and abrupt droughts lower production. This at times leads to temporary milk shortage.

     v.            Dairy cattle face the risk of cattle diseases. This has restricted dairy farming to Kenya highlands.

  vi.            Poor management of dairy co-operatives at the grassroots results to delayed payments. This kills the farmers’ initiative and morale.

Steps Taken by the Kenya Government to Improving Dairy Farming

       i.            Improving extension services - to update the farmers on ways of improving their stock.

     ii.            Extending credit facilities to farmers through co-operatives.

  iii.            Holding agricultural shows at sub-county and county levels as well as the Nairobi International Show as a means of educating citizens on the importance of good dairy farm management.

  iv.            Investing in availing training opportunities.

     v.            Setting up demonstration projects such as those that breed high quality bulls to be released to the farmers.

Significance of Dairy Farming in Kenya

1.     Employment - The dairy sector has offered employment to many Kenyans. This is in the dairy farms in various parts of the country, milk processing plants, and the dairy related industries.

2.     High standards of living – Through selling of milk, the farmers are able to generate income. This has helped them to raise their standard of living.

3.     Promotion of industries - The dairy sector has aided the development of industries dealing in the manufacture of inputs such as animal feeds, milking cans, pesticides etc.

4.     Foreign exchange - Some of the products from the dairy industry e. g. cheese, butter and powdered milk have been exported to other countries. This has earned the country foreign exchange.

5.     Provision of Proteins – Dairy products are rich in proteins, fat and vitamins which are essential for human health. They thus contribute towards a healthy nation.

TOPIC 4

AGRICULTURAL INPUT AND PRODUCE MARKETS

Agriculture Inputs in Kenya

·        Smallholder farmers continue to dominate the agricultural sector in sub-Saharan Africa.

·        Agricultural inputs such as seeds and fertilisers are very significant in improving agricultural yield.

·        Smallholder farmers should be able to achieve higher yields and margins if they adopt good agricultural practices and have access to inputs.

·        Kenya has made significant strides in improving agricultural productivity through;

ü Increasing access to credit

ü Market information systems

ü Strong agro-dealer networks and

ü Use of inputs

·        Currently, about 70% of farmers use fertilizer and 30% use certified seeds (AGRA).

·        However, there is still room for improvement since a large number of the country’s 3.5 million smallholder farmers still work without basic agricultural inputs.

·        In addition, many farmers do not have adequate information on how to use the inputs that they have access to.

Challenges in Access to Agricultural inputs

Some of the challenges experienced by smallholder farmers in accessing agricultural inputs include:

• Lack of information on the right type of farm inputs to use and the appropriate time of application.
• High cost of key inputs such as seed, pesticides, fertilizer, drugs and vaccines.
• Inadequate research, extension and training in relation to use of inputs.
• Poor quality of inputs.

Intervention of KMT in Agricultural inputs

·        Due to a survey that identified access to inputs and lack of information as the major challenge affecting agricultural productivity among smallholder farmers, KMT, in 2012, began to look at agricultural inputs as an independent sector. 

·        Agro-vets (shops selling agricultural inputs) which are the main points of contact for farmers requiring inputs sometimes adopt transactional business practices only focused on profit.

·        Therefore, KMT works with select agro-vets to facilitate a shift from this trader-based approach focused on profit to a more customer-oriented approach.  

·        Longer-term functioning relationships between the agro-vets and smallholder farmers should be encouraged through the following ways:

ü Increasing the adoption of modern business management practices by agro-vets: KMT is encouraging agro-vets to practice more customer focused retailing through strengthening their marketing and promotions strategies.

ü Facilitating development of service-based sales models: KMT is promoting bundling of key services such as soil testing and spraying through agro-vets.

ü Supporting the establishment of linkages between the agro-dealers, ICT and media markets: KMT is working with ICT firms to develop customised ICT solutions for agro-dealers

Factors that contribute to low productivity level in the agricultural sector

                               i.            High cost of inputs (fertilizers, pesticides, veterinary drugs, animal feeds and seeds/planting materials),

                             ii.            Poor husbandry practices,

                          iii.            Outdated extension approaches,

                          iv.            Over-dependence on rain-fed agriculture,

                             v.            Lack of markets,

                          vi.            Limited application of agricultural technology and innovation.

Marketing of agricultural inputs 

·        Marketing presents a major challenge to the agricultural sector.

·        Productivity of the sector is constrained by inefficiencies in the supply chain.

·        Supply-side inefficiencies result from limited storage capacity, lack of post-harvest services and poor access to input markets.

·        Exploitation by middlemen also creates distortions in the market.

·        Many primary marketing cooperatives have, therefore, lost business due to;

ü Weak internal marketing capacity,

ü Weak capital base,

ü Loss of monopoly,

ü Protection previously enjoyed by some societies,

ü Inadequate trained personnel to deal with modern ways of marketing,

ü Limited value addition initiatives and

ü Delayed payments for delivered produce.

Cooperative societies’ measures in addressing the constraints related to accessing various agricultural inputs

       i.            The cooperative societies have traditionally been useful in facilitating aggregation of members’ input requirements and then purchasing centrally in order to create economies of scale and save costs to individual members

     ii.            Cooperative institutions have extensive supply stores throughout the country that could be useful in improving access to fertilizer and other inputs by the producers

  iii.            Encourage franchising, networking with manufacturers and wholesalers on bulk purchasing and stocking

  iv.            Long-term opportunities for domestic production

     v.            Cooperative institutions perform roles of input marketing

  vi.            Cooperatives play a critical role not only in the supply of major farm inputs, but also in influencing competitive pricing.

vii.            Distribution of inputs in rural areas through existing cooperatives such as commodity marketing, merchandise and inputs supply societies.

viii.            Access to agricultural credit: The main focus of Savings and Credit Cooperatives (SACCOs) is, first, to offer affordable financial services on a cost-effective basis to cover a large number of the cooperative membership. Secondly, they provide an alternative system for securing credit instead of utilizing the formal collateral system. This leads to empowerment of the farmers. The promotion of savings and credit societies among the salaried, wage earners and farmers will be encouraged in order to improve members’ access to credit and other financial services.

Agricultural Produce Markets

·        In Kenya, smallholders produce most of their own food and also contribute about 70% of all marketed agricultural produce making them an important group for the country’s GDP as well as food security.

Value addition

·        A characteristic feature of Kenya’s agriculture is the dominance of primary production.

·        There is very little on-farm and off-farm processing of agricultural produce.

·        A large number of cooperatives handle mainly raw produce from members which is delivered to processors for value addition and marketing. This often translates to low prices, less job opportunities and eventually low income for farmers and members.

·        In addition, within the commodity marketing cooperatives, minimal effort has been made to improve on the quality and shelf-life of their produce.

·        Cooperatives still engage in the raw production thereby marketing their produce in crude or semi-processed form.

·        Again, this makes members lose a substantial part of their income to middlemen and processors, making the situation become even more hopeless when dealing with perishable produce such as milk and horticultural products. Vision 2030 has identified value addition as key in driving economic growth.

Compelling reasons for encouraging agro-processing:

ü It improves rural incomes by adding value to produce, thereby saving on transport costs by delivering high-value/low volume products and creating opportunities for the use of by-products as inputs in other farm operations such as animal feeds, manure and fuel.

ü It provides an opportunity for reducing farm losses through the conversion of perishable commodities into more durable products.

ü It helps create jobs in the rural areas, thereby contributing to the reduction of both poverty and rural-urban migration.

·        In this connection, the Government will strengthen the complementarities and inter-dependence of the agricultural sector with the agribusiness by promoting forward and backward linkages and prioritizing rural industrialization.

Input and Output Market Inefficiencies

Problems with infrastructure and supply chains make it costly for farmers to access markets.

Infrastructure and Diffusion of Technology

·        Farmers who would benefit from technology adoption may be unable to access or pay for the technology due to inadequate infrastructure, missing supply chains or unprofitably high prices.

·        Infrastructure, such as roads and irrigation, plays a key role in facilitating technology adoption, but infrastructure investment is typically left to governments and donors, because it is hard for private actors to profit from the development of public infrastructure.

·        Cross-country evidence on the effect of infrastructure on agricultural productivity shows a positive relationship between productivity and the development of roads and irrigation. Improved transportation is also associated with diffusion of technology, better use of inputs and better prices for farmers.

Poor Infrastructure and Market Power

In many places, a lack of infrastructure drives a wedge between the prices that farmers receive for their output and the market price, lowering the profits associated with certain technology adoption. Landlocked countries in particular face high costs associated with the import and export of agricultural products. Transportation can account for half of the cost of agricultural output marketing—a considerable fraction of the value of the product.

Transport and other infrastructure challenges are thought to reduce competition among input suppliers and among middlemen. This leaves individual farmers with little room to bargain, because input suppliers and output buyers face little competition. In these cases, much of the profit from improved agricultural technologies may be captured by market actors other than the farmer. By raising the fixed cost of distribution, poor infrastructure increases the market power of intermediaries. This can lead to a vicious cycle, with low take-up resulting in a few market actors holding a great deal of market power, which lowers profits for farmers and can further depress the take-up of new technologies.

Private vs. Public Sector Distribution

Private sector distribution networks may turn out to be more efficient than public sector distribution, as the private sector is motivated by profits, which provides an incentive to be reliable and to meet farmers’ needs. Related evidence on absenteeism among public sector employees highlights these incentive problems. However, some inputs are not amenable to private sector distribution. For example, the distribution of technical expertise, such as information that can be freely shared, may require public sector support due to the lack of profit opportunity for the private sector.

An agricultural extension service is a leading example of the challenges associated with public sector distribution. These workers must cover large areas with poor infrastructure and widely varying microclimates. In addition, their work is difficult to monitor and they are rarely held accountable for outcomes. Consequently, they may have little direct incentive to show up for work or complete their duties. Of course, extension workers may be otherwise motivated; however, further research is needed on how to improve agricultural extension services.

TOPIC 5

ANALYSIS OF GROSS MARGINS AND IDENTIFICATION OF HIGH VALUE ENTERPRISES

Gross margins for field crops

A gross margin is the difference between the gross income and variable costs of growing a crop. Variable costs include those associated with crop operations, harvesting and marketing.

Gross margins do not include overhead costs such as rates, electricity, insurance, living costs and interest that must be met regardless of whether or not a crop is grown. For this reason, gross margins are not a measure of the profit of an enterprise.

When estimating whole-farm profit, you should consider these overhead costs as well as enterprise gross margins. Table 1 lists the typical variable and overhead costs for cropping farms.

Gross margins are generally quoted per unit of the most limiting resource, e.g. land, irrigation water, capital and labour.

To calculate the gross margin for your proposed enterprise, use the blank sheet for calculating gross margins .

Use of gross margins

Gross margins enable you to compare the relative profitability of alternative cropping options that have similar land, machinery and equipment requirements. They indicate the costs of production of alternative enterprises, which helps you make farm management decisions. You can also use them to analyse the performance of individual enterprises and discover areas where you can possibly make improvements.

Limitations of gross margins

Gross margins may be a reasonable measure of the relative profitability of enterprises that make similar demands on farm resources. However, if you are considering major changes in enterprise mix, you will require more comprehensive budgeting techniques to indicate the real profitability situation.

When comparing relative gross margins of different enterprises, keep in mind the resources used by them. For example, don't only compare enterprises on a gross margin per hectare basis but also consider gross margin per unit of permanent labour or per $100 capital.

The following are further precautions to consider before using gross margins as a basis for planning:

• investigate the technical efficiency of present practices before using gross margins as a basis for change. If your crop gross margin is less than that for the best crops in the district, check for the cause before changing to one with an apparently higher gross margin
• try to improve the gross margin of your current crop activity by adopting improved management practices, such as better using fertilisers and pesticides, and paying greater attention to performing operations on time
• exercise caution when comparing gross margins between farms or a farm to district average results. Carefully check the individual cost items in each gross margin. For example, with cropping gross margins, one farmer may use contract harvesting and another their own header. This can lead to quite different budgetary results
• avoid growing a crop with the highest gross margin if the necessary quantity and quality of labour to handle it is unavailable or capital is limited. If capital is limited, consider both the gross margin and the capital investment needed before growing the new crop.

When considering growing a new crop, also consider the different management requirements you may need. Seek advice from other farmers, agribusinesses and DEEDI to avoid potential hazards.

TOPIC 6

AGRICULTURAL EXTENSION AND CREDIT AS AGENTS OF COMMERCIALIZATION

AGRICULTURAL EXTENSION

Definition:

·        Agricultural extension is a general term meaning the application of scientific research and new knowledge to agricultural practices through farmer education.

·        The field of 'extension' now encompasses a wider range of communication and learning activities organized for rural people by educators from different disciplines, including agriculture, agricultural marketing, health, and business studies.

·        Agricultural extension agencies in developing countries have received large amounts of support from international development organizations such as the World Bank and the Food and Agriculture Organization (FAO) of the United Nations.

Four paradigms of agricultural extension

·        Any particular extension system can be described in terms of both how communication takes place and why it takes place.

·        There are four possible combinations, each of which represents a different extension paradigm:

1.     Technology Transfer (persuasive + paternalistic): Technology transfer involves a top-down approach that delivers specific recommendations to farmers about the practices they should adopt.

2.     Advisory work (persuasive + participatory): Where government organizations or private consulting companies respond to farmers' inquiries with technical prescriptions. It also takes the form of projects managed by donor agencies and NGOs that use participatory approaches to promote predetermined packages of technology.

3.     Human resource development (educational + paternalistic): Here, universities give training to rural people who are too poor to attend full-time courses. Top-down teaching methods are employed, but students are expected to make their own decisions about how to use the knowledge they acquire.

4.     Facilitation for empowerment (educational + participatory): This paradigm involves methods such as experiential learning and farmer-to-farmer exchanges. Knowledge is gained through interactive processes and the participants are encouraged to make their own decisions. The best known examples (in Asia) are projects that use Farmer Field Schools (FFS) or participatory technology development (PTD).

The purpose of Agricultural Extension

       i.            It helps farmers to change their mode of production on a voluntary basis

     ii.            It creates and shares new knowledge

  iii.            It motivates, enables, and provides insights

  iv.            It helps to form opinions and, therefore, better decision-making 

     v.            It assists with mutual and reciprocal learning

   vi.            It creates and shares new agricultural technologies

vii.            It brings the world to farmers and farmers to the world

viii.            It helps farmers achieve a better quality of life, therefore, direct and indirect positive effects on national and regional economies.

Different Approaches of Commercialization of Agricultural Extension

There are a number of extension approaches that can be listed:

·        Public cost recovery approach

ü Charging fees by the governments for some extension services they provide to the rural sector. The degree to which these cost recovery programs have been pursued has varied across countries.

·        Decentralization

ü Refers to gradual transfer of responsibility for extension from the public to the private sector.

ü It involves the transfer of planning, decision making, management, from the central government and its agencies to field organizations, subordinate units of government, semi-autonomous public organizations, regional organizations, chambers of commerce, and even non-governmental organizations.

·        Totally private extension delivery approach

ü Delivery of extension services is mainly transferred to the private sector. Several types of private firms currently undertake agricultural extension activities. These include agro-processing firms, input suppliers and consulting firms.

·        Contracting of extension services

ü There are two types of extension contracting i.e. “contracting out” and “contracting in”.

ü Contracting out - means public sector or state provides financing and private sector delivers the extension service for the financing authority.

ü Contracting in - means private organization or an NGO provides funds and public sector organization delivers the extension service.

·        Farmer taxation

ü Farmers are taxed for the services provided to them directly or indirectly. E.g. tea small holders are taxed indirectly for the extension services provided to them through Tea Small Holders Development Authority which is a semi government body.

·        Pluralism

ü Pluralism or pluralistic extension system means using both public and non-public institutions for delivering extension services to farmers. E.g. in many developing countries, various NGOs, private input supplying companies, semi governmental organizations, deliver extension services parallel with the public sector extension services.

Role of extension

The role of extension in commercial agriculture can be summarized as follows:

       i.            Should provide information and advice not only on cultivation practices, but also in farm planning and management, post harvest practices and management, marketing and alternative income generating sources and technologies.

     ii.            Information and knowledge delivered by the extension service should be cost effective. Else, the sustainability of the service would be in danger.

  iii.            Should identify alternative strategies not to marginalize resource-poor farmers in the community.

  iv.            Should provide a number of alternative recommendations rather than a package. Then farmers can select the best solution or recommendation out of the alternatives.

Challenges faced by Agricultural Extension today in Commercial Agriculture

·        Agriculture is no more just farming. It is a business. Today agriculture includes not only production but also post harvest activities, processing, marketing, advertising and market promotions, information communication technology, etc. In commercialized farming, new and improved technology becomes an inevitable input which is a major factor in high productivity.

·        Agricultural extension in most of the countries both in the developing and developed world faces a number of challenges today due to rapid commercialization of agriculture.

Challenges

       i.            Agricultural information including marketing and planning becomes excludable in the short term due to differences in speed of information dissemination.

     ii.            Due to the nature of face-to-face contacts (person oriented and advisory type) poor and resource-less farmers will be ousted from the mainstream of extension. There will be greater chances of overlooking poor.

  iii.            Farmers will be more dependent on extension service because it would involve input such as fertilizer, chemicals, machinery, etc. This over dependency would reduce the creativity of farmers.

  iv.            Extension service in commercial agriculture is a business rather than a service. Therefore, competitive companies may disseminate contradictory messages through advertisements. These publicity techniques may lead to unnecessary confusion. Commercial advertisements tend to be deceptive, rather than informative in areas like sale of seeds, chemicals, fertilizer, machinery and other equipment.

     v.            Profit oriented commercialized extension services will not deal effectively with poor farmers. Resource-poor or small-scale farmers will be neglected by these extension services. They will consider only rich and large or medium scale farmers who can afford their services. Poor farmers who cannot pay for the extension service will be eliminated automatically from the system.

  vi.            This negligence of resource-poor farmers may lead to crucial socioeconomic problems. They may leave farming and increase rural-urban migration. While low industrial development of these developing countries cannot satisfy the needs of these migrants, urban unemployment will increase rapidly.

vii.            These commercial organizations do not pay sufficient attention to the environmental issues. Their main attention is to satisfy clients’ needs by introducing most economical ways and methods. They do not care whether it is environmental-friendly or not. So, environmental degradation will be increased due to unsustainable and harmful technologies.

AGRICULTURAL CREDIT

 Introduction

·        Several credit vehicles are used to finance agricultural transactions, including loans, notes, bills of exchange and banker’s acceptances.

·        These types of financing are adapted to the specific financial needs of farmers, which are determined by planting, harvesting and marketing cycles.

CONCEPT AND NEED FOR AGRICULTURE CREDIT

·        The Credit which is provided to meet the needs of agri. sector or the funds which are provided for the development of agri. sector are called Agriculture Loans or Agriculture Credit.

Need for Agricultural Credit to Farmers

1.     Subsistence Farming: 75% of the population of Kenya relies heavily on subsistent farming. Since cultivable land is consisted of uneconomic holdings, the incomes and savings of the farmers remain very low. Consequently, most of the farmers are needy, and therefore, they depend upon loans to meet their developmental as well as needs relating to consumption, marketing and litigation

2.     Payment of Debts of Forefathers: Some farmers are born in debt, grow in debt and dies in debt. In such situation the poor farmers have to pay even those debts which were borrowed by their forefathers. And in most of the cases they have to go for additional loans to make the payment of their ancestral loans.

3.     Loans for Agri. Needs: to purchase the cattle, ploughs, fertilizers, seeds and other agriculture implements. Moreover, they have to make expenditures during the interim period of sowing and harvesting. Thus depend upon agriculture loans to meet such expenses.

4.     Uncertainty Element: Due to big uncertainty in the agriculture sector, e.g. recurring floods and droughts, the farmers are not sure of their crops and incomes, hence dependent on loans.

5.     Unorganized Agriculture Markets: Due to shortage of ware-houses, poor transport system, communication and existence of many intermediaries in agri. Markets, farmers fail to get fair prices for their goods receive low income and thus, remain poor. Therefore, they have to borrow from village shop-keepers, commission agents, friends, relatives and money lenders.

6.     Modern Technology: When agri. sector moves from subsistence farming to mixed and commercial farming the changes have to be brought in the pattern of cultivation. They have to purchase seeds, technology, tractors, threshers and fertilizers etc. As their resources are limited, so they have to ask for loans.

7.     Agri. Development: As a result of commercialization of small-holder agriculture, farmers have to perform so many developmental works like land re­clamation, drainage system, storage and ware-houses and the buildings on the farms. Therefore, they need loans and finance.

CLASSIFICATION OF AGRIC. CREDIT

Agric. credit can be classified into: short term, medium & long term credit as follows:

1.     Short Term Credit:

ü Repayment period of less or equal to 1 year. Such borrowing is made to meet the routine and day to day needs of the farmers e.g. to purchase seeds, fertilizers, pesticides, ploughs, bullocks, sheds, implements, harvesting.

2.      Medium Term Credit

ü Repayment period lasts for 1 to 5 years. Such loans are raised in order to purchase the livestock, machinery, equipment, for construction or improvement of water courses.

ü Lending institutions or banks require security for loans taken e.g. the farmers have to pledge using movable or immovable property.

3.      Long Term Credit

ü Repayment period lasts for more than 5 years.

ü Such loans are used for long-lasting improvements in the farms. Also for purchase of additional land, for repayment of old and outstanding loans, to purchase the tractors, harvesters and agriculture machinery and to install agro-based industries.

SOURCES OF AGRIC. CREDIT

The farmers have two main sources of credit: Non institutional sources of credit and Institutional sources of credit

Non– Institutional Sources of Agriculture Credit help the farmers to meet the routine expenses e.g. borrowing from relatives, friends, money lenders, and commission-agents. Such loans are readily available to the farmers at their farm gates and they do not have to undergo the cumbersome and tedious procedures of lending by banking institutions. However, the problems associated with this include:

ü sources do not have standardized interest rates and regulations, and the conditions attached to the loans are subject to bargaining;

ü Also most of such loans are utilized in unproductive fields thus, they aggravate the problem of indebtedness of the farmers;

ü Availability of such loans is not guaranteed;

ü the borrowers are weaker, hence they are bound to act as according to the wishes of the lenders

Institutional source of Agriculture Credit includes commercial banks; micro-finances, cooperative banks, etc.

PROBLEMS FACING THE SUPPLY OF AGRICULTURE CREDIT

1.      Uncertainty element in Agriculture e.g. agric. production is faced by natural calamities like droughts, floods, pests & diseases, etc. Therefore most financial institutions are reluctant to lend to farmers.

2.      Lack of Securities: In order to get loan the farmers have to use their lands as security. But since rural society land is like the mother of the farmer, they are not prepared to be separated from it.

3.      Non-Institutional Credit: are advanced in lesser amounts hence may not be adequate for advancing agric. production.

4.      Improper use of Agriculture Credits:  will be least beneficial if they fail to increase the agriculture output.

5.      Complicated Procedure and Strict Conditions for borrowing e.g. high levels of interest rates which may not be affordable to farmers.