Effect of Transaction Costs on Current Milk Marketing Structure in Uasin Gishu and Nandi North Districts in Kenya

The improvement of milk production is a key issue in Kenya since the country relies heavily on agriculture for economic growth. However, there is inadequate empirical evidence on the extent to which transaction costs constraint or prevent access to information and markets, especially for small-scale dairy farmers. This paper highlights the factors determining the milk marketing structure based on a study to assess marketing constraints faced by small-scale dairy farmers in Nandi North and Uasin Gishu districts. A combination of multi-stage, simple random and systematic random sampling methods was used to select the study district and small scale dairy farmers, where 270 respondents were interviewed using structured questionnaires and interview guides. An analysis of the milk marketing structure in the area showed that farmers facing considerable transactions costs were likely to sell surplus milk to their neighbours and hawkers rather than to milk processors, milk bars and farmer cooperatives. The study concluded that accessibility to formal market outlets is limited by considerable farm-to-market distance, poor infrastructure, inadequate transportation, and constraints of acquiring knowledge about milk prices, searching for buyers, negotiating, bargaining and monitoring milk contracts. It is recommended that due consideration be given to the development of a better physical and institutional infrastructure which would effectively link these producer areas to markets and improve market knowledge by providing relevant market information and farming skills Keywords: Effect, Transaction Costs, Current Milk Marketing Structure, Uasin Gishu District, Nandi North District, Keny