Estimation of Cost Efficiency of Dairy Farms in Kenya’s Eastern Central Highlands
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Date
2014
Authors
Mugambi David Kimenchu
Wambugu, S.K.
Mwangi, M.
Gitunu Antony Macharia
Journal Title
Journal ISSN
Volume Title
Publisher
GLOBEEDU Group
Abstract
The objective of this study was to determine the cost efficiency of dairy cow farms in the Eastern Central highlands of Kenya. The
data was collected through a cross-sectional survey from 135 farms in the study region. The sample size was determined using
the Fischer’s formula. A stochastic frontier cost function was estimated using the maximum likelihood estimation technique. The
MLE results revealed that the costs of roughages and labour were the major determinants of dairy farming cost. The farms
operated at low economies of scale, mainly because the land size owned averaged only two acres; where mixed crop-livestock
farming was practiced. It was revealed that roughages could substitute with either mineral supplements or labour to reduce
farming costs. The mean farms cost efficiency index was 4.4% above the frontier cost. Most farms did not make profits. The
average cost per farm was Ksh. 551 while the milk revenue was Ksh.365. It was concluded that farmer-cost inefficiency was not
the main cause of the high milk production cost. The cost of feeds coupled with the relatively small land sizes owned and the cost
of labour were the main challenges facing dairy farming in the study region. It was recommended that policy makers come up
with necessary laws and regulations to ensure that the continued land sub-division is reversed and that the cost of dairy farming
inputs is reduced. Researchers require establishing the least-cost combination ratio for roughage and labour
Description
Keywords
Cost efficiency, milk production cost, stochastic frontier
Citation
International Journal of Innovative Research and Development August, 2014 Vol 3 Issue 8