Skip to main content

Emerging Markets in the Post-liberalization Period: Evidence from the Raw Milk Market in Rural Kenya

  • Chapter
  • First Online:
Emerging Development of Agriculture in East Africa


This chapter examines how the raw milk market in western and central Kenya has developed after the dairy sector liberalization in 1992 by using panel data of 862 rural households. From the late 1990s to 2004, the proportion of households that sold milk to traders more than doubled, while it declined from 29% to 12% for those who sold milk to dairy cooperatives. To examine this change in the milk market, we use the price differentials between the farm gate and retail prices as a proxy for the functioning of the market. Our empirical analyses clearly show that the functioning of the market improved between the late 1990s and 2004.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
USD 84.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 109.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 109.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Similar content being viewed by others


  1. 1.

     Please find a detailed description of the market liberalization of the dairy market in Kenya in the next chapter (Chap. 6).

  2. 2.

     We define the “retail price” as the price that a milk producer receives at a retail shop after transporting the milk to the shop and the “farm-gate price” as the price that a milk producer receives at his or her farm gate. The “retail price” in an area should be uniform if the milk is sold at shops in a well-integrated market at the same time. However, our respondents sold milk at different dates even within a given season (rainy or dry season) and at different retail shops that may be located in different market centers. In addition, the price offered by the potential buyers could be different across milk producers because of negotiation skills and quantity supplied (Baltenweck and Staal 2007). Therefore, it is possible for the price variable to have subscript i. The transportation costs and other marketing costs are not included in the “farm-gate price.”

  3. 3.

     The RePEAT Project is a collaborative research project of Foundation for Advanced Studies on International Development, National Graduate Research Institute for Policy Studies, the World Agroforestry Center, and Tegemeo Institute in Kenya. More details on RePEAT are available in Yamano et al. (2005).

  4. 4.

     Out of the 1,000 targeted households, 914 households were successfully identified and 874 households were interviewed in 2004. The rest (40 households) were successfully found but not available for interview due to several reasons: noncontact (27 cases), moved away (6 cases), refusal (5 cases), nonavailable (1 case), and households dissolved (1 case). Among the 874 households, we do not use 12 households since some of the variables used in the analyses are missing.

  5. 5.

     All price levels are adjusted to the 2004 price level with the price index in the Statistical Bulletin (Central Bank of Kenya, June 2002, 2004, and 2005).

  6. 6.

     One of the reviewers argued that the disappearance of the formal distribution system resulted in lower “marketing costs” due to the deterioration of the quality of milk in the market since formal processors test for quality and take a higher margin. To our knowledge, however, many informal traders also test milk by using lactometers. A study by SDP (2004) shows that there is no significant difference in the quality of milk sold by formal and informal traders.


  • Badiane O, Shively G (1998) Spatial integration, transport costs, and the response of local prices to policy changes in Ghana. J Dev Econ 56:411–431

    Article  Google Scholar 

  • Baltenweck I, Staal S (2007) Beyond one-size-fits-all: differentiating market access measures for commodity systems in the Kenyan highlands. J Agric Econ 58(3):536–548

    Article  Google Scholar 

  • Barrett C (1997) Food marketing liberalization and trader entry: evidence from Madagascar. World Dev 25:763–777

    Article  Google Scholar 

  • Central Bank of Kenya (2002, 2004, 2005) Statistical Bulletin, June. Table 6.1. Available at,,

  • Dollar D, Svensson J (2000) What explains the success or failure of structural adjustment programmes? Econ J 110:894–917

    Article  Google Scholar 

  • Fafchamps M (2004) Market institutions in Sub-Saharan Africa: theory and evidence. MIT Press, Cambridge

    Google Scholar 

  • Jayne TS, Govereh J, Mwanaumo A, Nyoro JK, Chapoto A (2002) False promise or false premise? The experience of food and input market reform in Eastern and Southern Africa. World Dev 28:293–316

    Google Scholar 

  • Kherallah M, Delgado C, Gabre-Madhin E, Minot N, Johnson M (2000) The road half-traveled: agricultural market reform in Sub-Saharan Africa. International Food Policy Research Institute, Washington, DC (Food Policy Report)

    Google Scholar 

  • Lutz C, Kuiper WE, van Tilburg A (2006) Maize market liberalization in Benin: a case of hysteresis. J Afr Econ 16:102–133

    Article  Google Scholar 

  • Negassa A, Myers R, Gabre-Madhin E (2004) Grain marketing policy changes and spatial efficiency of maize and wheat markets in Ethiopia. MTID Discussion Paper 66, International Food Policy Research Institute, Washington, DC

    Google Scholar 

  • Poulton C, Dorward A, Kydd J (1998) The revival of smallholder cash crops in Africa: public and private roles in the provision of finance. J Int Dev 10:85–103

    Article  Google Scholar 

  • Smallholder Dairy Project (SDP) (2004) Public health issues in Kenyan milk markets. SDP Policy Brief 4. Available from

  • Staal SJ, Delgado C, Nicholson C (1997) Smallholder dairying under transactions costs in East Africa. World Dev 25:779–794

    Article  Google Scholar 

  • Staal SJ, Owango M, Muriuki H, Kenyanjui M, Lukuyu B, Njoroge L, Njubi D, Baltenweck I, Musembi F, Bwana O, Nuriuki K, Gichungu G, Omore A, Thorpe W (2001) Dairy systems cauterization of greater Nairobi milk shed. SDP Collaborative Research Report, Smallholder Dairy (R&D) Project, Nairobi

    Google Scholar 

  • Waithaka MM, Nyangaga JN, Staal SJ, Wokabi AW, Njubi D, Muriuki KG, Njoroge LN, Wanjohi PN (2002) Characterization of dairy systems in the Western Kenya region. SDP Collaborative Research Report, Smallholder Dairy (R&D) Project, Nairobi

    Google Scholar 

  • Yamano T, Otsuka K, Place F, Kijima Y, Nyoro J (2005) The 2004 REPEAT survey in Kenya (First wave): results. GRIPS Development Database 1, National Graduate Institute of Policy Studies, Tokyo

    Google Scholar 

Download references


Financial support was provided by the twenty-first Century Center of Excellence project at National Graduate Institute for Policy Studies for the collection of the data used in this paper. We would like to thank Tetsushi Sonobe, Keijiro Otsuka, Yasuyuki Sawada, Takashi Kurosaki, and the editor, Augustin Fosu, and two reviewers of the Journal for helpful comments, and Paul Kandasamy for editorial assistance.

Author information

Authors and Affiliations


Corresponding author

Correspondence to Yoko Kijima .

Editor information

Editors and Affiliations

Rights and permissions

Reprints and permissions

Copyright information

© 2011 Springer Science+Business Media B.V.

About this chapter

Cite this chapter

Kijima, Y., Yamano, T., Baltenweck, I. (2011). Emerging Markets in the Post-liberalization Period: Evidence from the Raw Milk Market in Rural Kenya. In: Yamano, T., Otsuka, K., Place, F. (eds) Emerging Development of Agriculture in East Africa. Springer, Dordrecht.

Download citation

Publish with us

Policies and ethics