Crop Production/Industries, Downloads July 2008 - July 2009: 23,

Jayne, Thomas S.

Karanja, Daniel David

Nyoro, James K.

Strasberg, Paul J.

Strauss, John

Yamano, Takashi

English

Research Papers in Economics

Page 1
Global Bureau, Office
of
Agriculture and
Food Security
Office of Sustainable
Development
POLICY SYNTHESIS
for USAID - Africa Bureau
Office of Sustainable Development
          Number 41              February 1999
EFFECTS OF AGRICULTURAL COMMERCIALIZATION ON FOOD
CROP INPUT USE AND PRODUCTIVITY IN KENYA
By
Paul J. Strasberg, T. S. Jayne, Takashi Yamano, 
James Nyoro, Daniel Karanja, and John Strauss
Food Security II Cooperative Agreement between U.S. Agency for International Development, Global Bureau, Economic Growth Center, Office of
Agriculture and Food Security and Department of Agricultural Economics, Michigan State University
BACKGROUND:  It is commonly argued that
productivity growth in African agriculture will
require a transformation out of the semi-subsistence,
low-input, low-productivity agriculture that
characterizes most of rural Africa.  Given population
growth and the limits of area expansion as a means
to increase crop production, productivity growth
will increasingly entail yield growth and/or shifts to
higher-return activities, involving more intensive use
of productivity enhancing inputs and more market
oriented patterns of crop production.
High-valued cash crops represent one potential
avenue of crop intensification. The promotion of
cash crop commercialization and its effects on
smallholder welfare have been debated for decades.
Commercialization schemes featuring non-food
cash crops have frequently been criticized in
African contexts as having a negative effect on
food production and food security.  W i t h o u t
reliable and efficient food markets, commercialized
cropping patterns may expose smallholder
households to major risks of food insecurity.  
However, studies from a range of African
countries also demonstrate potential synergies
between cash crop investment and food crop
production.  These studies found that the presence
of commercially viable cash crops such as cotton and
groundnuts had positive spillover benefits for
smallholder food production in selected regions.
These spillover benefits included increased adoption
of fertilizer on food crops made possible by cash
crop input delivery channels, and increased
availability of farm credit through cash crop
schemes with which to hire additional labor and
finance investments in productive assets such as
draft oxen and traction equipment.  These studies
raise the possibility that the promotion of cash crop
production may, if suitably implemented, have
important positive spillover effects on food crop
intensification and productivity.
OBJECTIVES AND METHODS:  The objective
of this report is to analyze the effects of smallholder
commercialization on food crop input use and
productivity in rural Kenya.  
The main research objectives are:  
1. To examine the determinants of smallholder
fertilizer use on food crops, with a focus on the
effects of household and regional agricultural
commercialization;
2. To examine the determinants of food crop
productivity, again with a focus on the effects of
commercialization; and  
FS II Policy Synthesis No. 41 
Page 2
3. To discuss the implications of the findings for
policy and additional research necessary to
improve the contribution of cash cropping to
rural food productivity growth and food security.
For purposes of measuring the effects of crop
commercialization, we defined the household
commercialization index (HCI) as:
HCI = [ gross value of all crop sales hh i, year j / gross
value of all crop production hh i, year j ] * 100
This index measures the extent to which household
crop production is oriented toward the market.  A
value of zero would signify a totally subsistence
oriented household; the closer the index is to 100,
the higher the degree of commercialization.
Analysis is based on a national rural household
survey of 1,540 rural households implemented under
the Kenya Agricultural Monitoring and Policy
Analysis Project (KAMPAP), a joint collaboration
between Tegemeo Institute/Egerton University,
Michigan State University, and Kenya Agricultural
Research Institute.  
Results are derived from two econometric models
that determine the effects of commercialization at
both the household and district levels on food crop
fertilizer use and productivity.  With respect to the
fertilizer model, because 44 percent of sampled
households applied no fertilizer to food crops, the
distribution of this variable is censored and we
therefore use a Tobit estimation technique.  With
respect to the productivity model, we find that both
key purchased input variables -- fertilizer and hybrid
maize seed -- are endogenous to the determination
of productivity.  As such, an instrumental variables
approach is used for this model.
A main premise of the paper is that the effects of
commercialization are not uniform and cannot
be generalized.  The effects are hypothesized to
differ according to differences in the
institutional/contractual arrangements between firms
and smallholders, management decisions, and the
level of credit and extension support provided to
smallholders by the various private and parastatal
firms involved in promoting smallholder cash crops.
FINDINGS: The principle findings of the study
are:
1. The degree of smallholder commercialization
differs widely across zones in Kenya.  Even
within a particular zone,  households differ
significantly in the degree of crop
commercialization (see Table 1);
2. Crop commercialization is not uniformly
correlated with landholding or area cultivated
among the households surveyed;
3. Household agricultural commercialization,
ceteris paribus, generally has a significant and
positive effect on food crop fertilizer use and
productivity.  The results indicate that a 10
percent increase in HCI from the mean level of
39 percent would, on average, result in an
additional 8 kgs/acre of fertilizer used on food
crops, and an additional 670 Ksh/acre  boost in
food crop productivity (a 7 percent  increase in
the mean), ceteris paribus;
4. While the general effect of commercialization on
food crop input use and productivity was
positive, the magnitude and direction of the
effects differed  by region and by crop.  This
finding indicated there are certain variable
features of commercialization schemes that
influence performance outcomes.  Hence the
impact of agricultural commercialization cannot
be generalized;
5. As expected, smallholder adoption of hybrid
maize seed, frequently in combination with
fertilizer, was shown to have significant positive
effects on productivity per unit of land; and 
FS II Policy Synthesis No. 41
Page 3
6. There is a meaningful payoff to formal education
in terms of food crop productivity; fertilizer use
was also found to be positively associated with
education.
POLICY AND FUTURE RESEARCH
IMPLICATIONS:   In general, the results indicate
that discussions of agricultural commercialization
and its effects were positive in most cases.   The
strength of these findings is consistent with
empirical findings from Mali, Senegal and
Table 1.   Selected Farm Statistics by Zone and Quartile of Gross Value of Food
Production Per Acre, 1996/97 
Agro-
Regional
Zone
Gross Value of Food
Production per Acre 
Food Crop
Area
Land
Owned
Fertilizer
Nutrients
Applied to
Food Crops
Household
Commercializatio
n
Index
Quartile  Ksh/acre   acres / person   kgs / acre   percent 
Coastal
Lowlands
1 1102 0.29 0.59 0.01 17
2 2310 0.25 0.43 0.61 28
3 3897 0.37 0.63 0 27
4 8933 0.23 0.76 0.06 32
Eastern
Lowlands
1 795 0.59 1.1 0.28 10
2 2031 0.52 1 0.86 25
3 3815 0.28 0.69 1.71 30
4 10490 0.25 0.79 2.29 42
Western
Lowlands
1 1309 0.4 0.76 0 27
2 3074 0.47 0.97 0.01 22
3 4806 0.33 0.73 0.06 22
4 10839 0.28 0.62 1.35 27
Central
Lowlands
1 8392 1.1 1.37 1.55 58
2 12520 0.87 2.71 0 68
3 16227 1.2 2.85 3.97 81
4 21881 1.06 2.28 1.52 78
Western
Transitional
1 3403 0.32 0.78 7.05 35
2 6733 0.37 0.95 11.75 32
3 10524 0.41 0.81 23.01 43
4 19039 0.42 0.77 21.29 53
Western
Highlands
1 2987 0.24 0.33 7.249 27
2 5968 0.23 0.4 11.94 41
3 9853 0.2 0.47 12.58 35
4 19216 0.15 0.33 20.1 37
Central
Highlands
1 2295 0.34 0.85 9.076 40
2 7542 0.28 0.56 16.75 54
3 12394 0.22 0.5 22.12 53
4 27126 0.18 0.56 33.3 59
High
Potential 
1 5581 0.56 1.37 20.67 38
2 10010 0.82 1.6 27.23 56
3 13744 0.7 1.51 30.44 56
4 21720 0.81 1.17 38.54 62
Source: KAMPAP Household Survey, 1996/97 season. 
FS II Policy Synthesis No. 41 
Page 4
Mozambique where robust complementary
relationships were found between household-level
cash cropping and food crop performance.  But this
conclusion should not be overgeneralized.  What
matters is what kind of commercialization, how
particular schemes are organized, and their effects
on smallholder access to inputs, management advice,
market outlets, price levels and price risks, etc.
The most important pathways by which crop
commercialization may improve food crop
productivity are hypothesized to be: 
1. Crop commercialization provides a source of cash
that allows the household to overcome credit-
related constraints on the purchase of fertilizer
and other cash inputs; 
2. Participation in a cash crop (e.g., coffee in some
areas) improves the household’s access to inputs
distributed through the cash crop marketing firm
(e.g., coffee cooperatives), which may result in
the household using some of that input on food
crop production; and
3. Cash income from commercialized production
patterns also facilitates the ability to purchase
draft oxen and traction equipment that may
promote food crop productivity.
The emerging picture indicates the benefits of
attempting to address the risks and market failure
aspects necessary to make increased agricultural
commercialization viable rather than accept these
risks and market failures as inherent, unalterable
features of the African context that require a “food
first” production orientation.  Increased access to
food depends on income growth, and for the
majority of African smallholders dependent on
agriculture, income growth is tied to productivity
growth in agriculture, i.e., increasing the value of
production generated from available household
resources.
Governments in Africa are seeking policies designed
to increase rural incomes through productivity-
enhancing technology packages.  Cash crop
promoters such as sugarcane mill owners or coffee
processors can be important investors and partners
in this process, but their performance is critical to
determining whether the welfare outcomes for
smallholders are positive or negative.  A major task
for future research is to understand better how
successful commercialization arrangements linking
smallholders and marketing/processing firms have
been structured so that their successful ingredients
can be replicated and incorporated more broadly
into commercialization strategies in other regions.
This is likely to yield high payoffs in terms of
increasing agricultural productivity and food
security.
*Special support for this study was provided by the Food Security and
Productivity Unit of the Productive Sectors Growth and Environment Division,
Office of Sustainable Development, Africa  Bureau, USAID
(AFR/SD/PSGE/FSP), and USAID/Kenya through the Egerton
University/KARI/MSU Kenya Agricultural Monitoring and Policy Analysis
Project.  The research was conducted under the Food Security II Cooperative
Agreement between AID/Global Bureau, Office of Agriculture and Food
Security, and the Department of Agricultural Economics at Michigan State
University.  Thanks to John Strauss and Michael Weber  for comments on
earlier versions of this report.  The views expressed in this document are
exclusively those of the authors.
The authors are Associate Researcher, Land Tenure Center, University of
Wisconsin; Visiting Associate Professor, Graduate Research Assistant,
Thoman Fellow, in the Department of Agricultural Economics,  Michigan
State University; Research Associate, KAMPAP; and Professor, in the
Department of Economics, Michigan State University, respectively.
The authors would like to thank Gerald Nyambane and Margaret Beaver for
research assistance.
This paper is a summary of a report entitled Effects of Agricultural
Commercialization on Food Crop Input Use and Productivity in Kenya.
MSU International Development Working Paper No. 71. It can be obtained by
writing to:
MSU Bulletin Office
10-B Agriculture Hall
Michigan State University
East Lansing, MI 48824-1039
 

Effects of Agricultural Commercialization on Food Crop Input Use and Productivity in Kenya

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