FACTORS AFFECTING PROFITABILITY OF AGRIBUSINESS ACTIVITIES: A CASE STUDY OF SMALLHOLDER PIG FARMING IN THARAKA-NITHI COUNTY, KENYA

Abstract

The research study examined the influence of institutional arrangements and management factors on profitability of smallholder pig farming in Tharaka-Nithi County, Kenya. A two-stage sampling technique was employed in selection of 80 smallholder pig farmers and analyzed using descriptive statistics and stochastic frontier production function. The study revealed that male (75%) respondents dominated were within the active age, had 6 years’ pig farming experience with basic education. The results of Stochastic frontier production revealed that feed costs (p<0.01) and breed type (p<0.05) negatively reduced profit efficiency of the respondents while herd size (p<0.05) and veterinaryand drug costs (p<0.01) positivelyinfluenced profit efficiency. Inefficiency was increased byGender (p<0.1) and Debt Asset Ratio (p<0.01) while information trust (p<0.05) and experience reduced. The mean profit efficiency was 0.40 exhibiting low profit efficiency in the study area, efficiency level could be increased by 60% through better use of available resources, adoption of modern technology and transaction costs reduction. Thiswould be acquired if good management practices and marketing channels are adopted. The gamma parameter (γ)was 0.63 meaning 63% net revenue variation is due to profit inefficiencies. The study contributes to Agribusiness field and would improve policies associated with agribusiness development in Kenya.