Emerging Markets after Liberalization: Evidence from the Raw Milk Market in Rural Kenya

This article examines how the raw milk marketing system in Kenya has evolved after the dairy sector liberalization in 1992 by using panel data of 874 rural households. From the 1998 to 2004, the proportion of rural households who sold milk increased from 37 to 51 percent. During the same period, the number of households who sold milk to traders tripled, while it has drastically declined for dairy cooperatives and a parastatal processing company. The price analysis indicates that the excess supply in localities does not affect the farm gate price received by milk producer in 1998, but not in 2004. This is because trading a perishable commodity, such as milk, over a long distance requires reliable market channels and it takes some time for such supporting market institutions to be established