Effects of farm size and greenleaf marketing arrangements on smallholder tea production efficiency in selected counties in Kenya
Ateka, Josiah Mwangi
MetadataShow full item record
The smallholder tea sub-sector makes an important contribution in the Kenyan economy. Although the subsector has enjoyed relative growth in terms of acreage, output and number of growers, productivity has remained low. The subsector is characterized by huge differentials between actual and potential yields, which imply existence of production inefficiencies. Studies on efficiency in the sector have focused on the regional differences in efficiency, but have not explicitly considered the effects of farm size on efficiency; despite rising concerns from stakeholders about subdivision of tea farms. Moreover, the influences of the alternative tea market channels (ATMCs) which are outcome of the tea market reforms have also not been accounted for in previous studies. This study estimated the level of technical efficiency (TE) and analysed the effects of farm size and marketing arrangements on efficiency in the smallholder tea subsector in Kenya. Using the multistage random sampling approach, data for the study was collected from a cross sectional survey of 525 tea farming households. The level of TE was estimated using the variable returns to scale DEA model, while the analysis of farm size effects was explored using the Fractional Regression (FR) model which accounts for the fractional nature of efficiency scores. The study further applied the Endogenous Switching Regression (ESR) and Propensity Score Matching (PSM) model to investigate the effect of marketing arrangements on TE. The study found that smallholder tea farms were technically inefficient and were operating below their optimal scale. The estimated mean of TE was 0.46 which implies that tea farmers can achieve their current tea output using only 46 percent of their inputs. The study further found that tea farmers in Nyamira County were technically less efficient than their counterparts in Bomet County. The effect of farm size on TE was found to be nonlinear with TE first falling and then rising with increase in farm size. Apart from contributing to literature on the relationship between farm size and efficiency, the study demonstrates that there exists a threshold of farm size (3.93 acres) beyond which increase in farm size leads to an increase TE. The other factors that were found to influence TE were participation in the Farmer Field School (FFS) extension program, the share of family labour applied in tea farming, the age of the farm and the education level of the household head. With regard to tea marketing, it was found that the ATMCs were used by 36.4 percent of the smallholders in the study area. From the ESR and PSM models the study found a consistent result that ATMC participation increases TE in tea production. The study recommends that Agriculture and Food Authority (AFA) and the respective county governments enact regulations that restrict farm subdivisions and implement policies that encourage consolidation of tea farms, support tea replanting to replace aging tea gardens and deepen market reforms in order to increase the farmers‟ access to ATMC. In addition, efforts should be directed towards promotion of the FFS extension, addressing labour market imperfections and ensuring that the policy formulation process in the tea sector accounts for regional specific heterogeneities that may impact on efficiency.