MSU Agricultural Economics  Research > Food Security III > Policy Syntheses > No. 41

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


Paul J. Strasberg, T. S. Jayne, Takashi Yamano, James Nyoro, Daniel Karanja, and John Strauss

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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. Without 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:

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:

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 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:

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:

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