An analysis of the economic value of cattle in smallholder livestock production systems in Western Kenya: Case of Kisii and Rachuonyo Districts.

In developing countries, financial markets function poorly and opportunities for risk management through formal insurance generally absent. To cope with this, cattle have tended to assume non-market, socio-economic roles. Analyses of cattle systems, production patterns and producer decisions more often focus on market variables, resulting in possible inconsistent results. This is particularly so, when estimating the total contribution of livestock. The non-market functions are often ignored since they are difficult to value, yet they may contribute to a better understanding of existing livestock production systems. The purpose of the study was to estimate the value of non-market contribution of cattle and determine its contribution to the competitiveness and survival of smallholder cattle systems. The study used primary data collected through questionnaire interviews with two hundred and fifty sample farmers in Kisii and Rachuonyo districts. Four analytical methods were used in this study; the contingent valuation method, the Tobit model, the multiple regression model and complete budget analysis for the cattle enterprise. The results indicate that non-market benefits are highly valued by cattle keepers and comprise 18%, 15% and 14% of the animal’s total perceived value in extensive, semi-zero grazing and zero grazing systems, respectively. The budget analysis results indicate that smallholder cattle production systems are profitable and competitive when market and non-market contributions are taken into consideration. The latter contribute significantly to the survival of smallholder systems. The non-market benefits influence producers to hold cows after milk production has declined. Infrastructural development is noted as an important policy issue that needs to be addressed so as to minimize transaction costs faced by cattle producers. In addition, there may be need to integrate female headed households into financial and insurance markets since they have limited alternative sources of income to buffer risks.