Partial fulfillment for award of Master of Business Administration

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The dairy industry in Kenya plays an important role in the lives of many people.Recent research indicates that more than 2 million people are employed in the sub sector in one form or another.Within agriculture, the dairy industry plays an important roles as a contributor to GDP and an important source of livelihood for a huge portion of the Kenyan rural population.Dairy farming is also the only source of year long recurrent revenue from agriculture, though revenue flows do fluctuate with seasons
Kenya Cooperative Creameries (KCC) prior to its collapse in 1997 had a national network of chilling stations and processing and packaging plants.These resources enabled it to be a reliable outlet for all dairy farmers, cushioning smallholder farmers from price fluctuations.The national cold chain ceased to exist with the collapse of KCC.The dairy supply chain has been characterized as one with chaotic distribution, stagnant production and demand, poor returns to producers, low productivity by inefficient smallholder producers, wasted milk that carriers considerable health risks for consumers through poor handling and adulteration (Techno serve Kenya 2008).This characterization applies to the dairy supply chain in Kiambu District.
The study examined the relationship between price received and transaction costs in the determination of choice of market outlet(s) by dairy farmers in Kiambu District, using data collected in Kiambu district between August and October 2010.Mode of payment for milk sold, type of buyer and distance to market were identified as the most significant variables in determining the quantity of milk marketed in formal markets.The study also revealed several market challenges encountered by commercial dairy farmers; and suggests the need to re-examine policies underlying the formation and management of dairy farmer cooperative societies in Kenya