ECONOMIC IMPACT OF INTEGRATING NON-FOOD BIO-FUEL FEEDSTOCK CROPS IN SMALLHOLDER FARMS IN NYERI, LAIKIPIA AND LAMU COUNTIES, KENYA.

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1 ECONOMIC IMPACT OF INTEGRATING NON-FOOD BIO-FUEL FEEDSTOCK CROPS IN SMALLHOLDER FARMS IN NYERI, LAIKIPIA AND LAMU COUNTIES, KENYA. JACKSON KIPNGETICH LANGAT A Research Thesis submitted to Graduate School in partial fulfillment of the requirements for the award of the Doctor of Philosophy in Agribusiness Management of Egerton University. EGERTONUNIVERSITY October, 2014 i

2 Declaration Declaration and Recommendation This thesis is my original work and has not been presented for an award of a degree, diploma or certificate in this or any other University. Jackson Kipngetich Langat Reg.No. KD15/0278/10 Signature: Date:. Recommendation This thesis is submitted with our approval as University Supervisors Signature:.. Date:... Prof. J.K. Lagat (PhD) Associate Proffesor in Agricultural Economics Department of Agricultural Economics Egerton University, Njoro Signature:.. Date: Prof. G. Owuor (PhD) Associate Proffesor in Agribusiness Management Department of Agricultural Economics Egerton University, Njoro Signature:.. Date: Dr. B. Muok (PhD) African Centre for Technology Studies (ACTS) ii

3 Copyright 2014 Jackson Langat No part of this thesis may be reproduced, stored in any retrieval system, or transmitted in anyform, electronic, mechanical, photocopying, recording or otherwise without prior permission of the author or Egerton University on his behalf. All rights reserved iii

4 Dedication I dedidcate this thesis to all members of my family for their support and understanding in the entire time of my studies. iv

5 Acknowledgement I wish to express my sincere thanks to the entire members of staff at the Department of Agricultural Economics and Agribusiness Management of Egerton University for their support in the entire period of my studies at the institution. Special thanks to my supervisors, Prof. Job Lagat, Prof. George Owuor and Dr. Benard Muok for their tireless effort in working with me to make this work a reality. I also wish to acknowledge and express my gratitude to the Agricultural Research for Development (ARD) dimension of the European Research Area (ERA), Austrian Development Agency, the University of Natural Resources and Life Sciences for granting me the research funds, and African Economic Research Consortium (AERC) through the CMAAE secretariat for the partial scholarship towards the payment of my tuition fees. Lastly, I wish to acknowledge the small holder farmers who provided the information to make this study possible and the enumerators who took part in data collection. My peers also critiqued my work and I acknowledge their input to my work. v

6 Abstract The government of Kenya has identified the potential for bio-fuel to reduce carbon emissions, minimize reliance on fossil fuels, improve rural livelihoods and reduce poverty. There is however little understanding whether farming of bio-fuel feedstock poses competition for land against food crops, or mitigates food insecurity through increased income and increased employment along the bioenergy supply chain. The bio-fuel crops considered in the study were Jatropha, Croton and Castor. The objective of the study was to determine the economic impact of integrating non-food bio-fuel crops into small holder production farm systems households. The study areas purposefully selected were Nyeri, Laikipia and Lamu counties forming the clusters from which a representative sample of 273 respondents was drawn using simple random sampling out of which 129 households were control group. Primary data was collected using a structured interview schedule. A propensity score matching was used to determine the impact of engaging in bio-fuel feedstock farming on socioeconomic status of households; logistic regression model to identify the constraints to adoption; and data envelopment analysis to assess technical efficiency of household farm crop enterprises. Results show that household size, a proximity to the urban centre, gender of the household head, land size and access to off-farm income were the main determinants to cultivate bio-fuel crops. It of was only farmers on the maize enterprises that the integrated farms were technically more efficient than their counterpart control group. Finally there was no positive impact of integration of bio-fuel crops on household income and stock of assets owned. It is recommended that to promote the bio-fuel feedstock on the smallholder farms, rural road infrastructure needs to be improved while targeting women participation in the enterprise. Concerted efforts also need to be made to address the agronomic challenges of the bio-fuel crops so as to boost yields. vi

7 Table Contents Declaration and Recommendation...ii Copyright...iii Dedication...iv Acknowledgement...v Abstract...vi Table Contents...vii List of Figures...x List Acronyms and Abbreviations...xi CHAPTER INTRODUCTION Background information Statement of the Problem General Objective of the study Specific Objectives of the study Research Questions Justification Scope and Limitations Definition of terms...7 CHAPTER LITERATURE REVIEW Bio-fuel and Food Security Energy security Bio-fuel and Environment Bio-fuel Policy Potential Economic gains from bio-fuel Biodiesel Processing Technologies Theoretical Background Profit-maximizing Farmer Theories Utility Maximization Theories Farm Household Choices under Uncertainty Empirical Model...19 CHAPTER METHODOLOGY The study areas Sample selection Empirical models Logistic regression Model Data Envelopment Analysis (DEA) model Propensity Score matching model Variable description and measurement...34 CHAPTER RESULTS AND DISCUSSION...35 vii

8 4.1 Characterization of households Household heads...educationstatus Age and gender of the household heads and their household size distribution Land preparation means and tenure system Group membership Household access to training, extension services and credit Distance to urban market and access to off-farm income Bio-fuel feedstock adoption within smallholder farms over the years Allocation of land to bio-fuel crops Bio-fuel crops planting...materialsand 48 thei Cropping system undertaken by the farmers Use of fertilizers/manure in the bio-fuel crops enterprises Methods used by farmers in bio-fuel feedstock seeds harvesting Incomes earned by households from sale of bio-fuel feedstock seeds Expansion of bio-fuel feedstock crop enterprise Technical efficiencies of the household farms Crop enterprises technical efficiency difference for integrated and non-integrated farms socio-economic factors that influence technical efficiency in crop production Socioeconomic impact of integration of bio-fuel crops in household farms Regression of selected household outcomes on the socioeconomic and institutional factors Factors that determine the propensity of households to integrate bio-fuel crops Impact of integration of bio-fuel crops on households income and assets CHAPTER CONCLUSION AND RECOMMENDATIONS Summary and conclusions Recommendations REFERENCES APPENDIX 1: HOUSEHOLD QUESTIONNAIRE APPENDIX 2: LOGISTICAL REGRESSION RESULTS ON FACTORS THAT INFLUENCES INTEGRATION OF BIO-FUEL CROPS APPENDIX 3: TOBIT RESULTS ON THE FACTORS THAT INFLUENCE CROP TECHNICAL EFFICIENCY APPENDIX 4: REGRESSION OF HOUSEHOLD SOCIOECONOMICCHARACTERIST ICS ON INCOME AND ASSETS (UNWEIGHTED) APPENDIX 5: DETAILED RESULTS FOR PROPENSITY SCORE MATCHING

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