Analysis of market structural characteristics, conduct and Performance of sweet potato industry in Rachuonyo South district, Kenya

Abstract

Sweet potato (Ipomea halalas L) is a high yielding crop with higher food value than many staple food crops. Its production in Kenya is mainly concentrated in Rachuonyo South district. To minimize market inefficiencies depicted by volatile food crop prices and to promote growth of the agricultural sector by the year 2030, Kenya government formulated myriad food and agricultural policies. However, implementation of the policies in the sweet potato sub sector has faced challenges due to insufficient information on the marketing system of sweet potatoes. The purpose of this study was therefore, to analyze market structural characteristics, conduct and performance of the sweet potato industry in Rachuonyo South district. Specifically, the study sought to: Identify and examine determinants of demand for sweet potatoes in Rachuonyo south district, establish profit models at various distribution channels of sweet potatoes in the region, examine the type of market power exercised by sellers of sweet potatoes in the region, determine relationship between sweet potatoes market structural characteristics and profitability of the market for sweet potatoes in the region, establish existing relationship between competition among the sellers of sweet potatoes and profitability of the market for sweet potatoes in the region. The study was based on SCP paradigm and it adopted both exploratory and correlational research designs. Population of the study included 166 farmers, 55 wholesalers and an infinite number of retailers. A sample size of 116 farmers and 384 retailers was determined. Individual farmers were selected using simple random sampling technique while a purposive sample of 384 retailers and a census of 50 wholesalers were taken after excluding 5 wholesalers involved in questionnaires pretesting. Primary data were collected using questionnaires while relevant secondary data were from documented literature. OLS technique was used to estimate profit and demand models. Market power was determined using Lerner indices. The study revealed that demand for sweet potatoes was determined by several factors which differed in their magnitude of effects. These include; incomes of dominating buyers fJ= 0.504,p < 0.01 at the farm level andfJ= ·0.309,p < 0.01 at the retail market, own price (fJ=. 0.999, p < 0.01) and P = -1.688, p < 0.01 at the wholesale and retail markets respectively. Profitability models showed that duration in business had significant effects at the retail market (fJ = 0.647, p < 0.01) and at the wholesale market (fJ = 0.808, p < 0.01) while total operation costs had significant negative effect on profitability at the farm level (jJ = -0.258, p < 0.01). Barriers to entry into the market had fJ = 0.873, p < 0.01 on wholesale profits, fJ = 0.117, P > 0.05 and P = 0.003, p > 0.05 on retail and farm profits respectively. Unlike at the farm and retail markets, high monopoly powers existed at the wholesale market (L= 0.8043). The study concludes that demand and profitability of sweet potatoes are determined by several factors which vary in their magnitude of effects. Sweet potato is an inferior good and its market is imperfectly competitive. This study recommends enhanced competition at the wholesale market. Retailers should direct their purchases to markets dominated by low income buyers. Farmers should increase their profits by reducing their operation costs and potential sweet potato sellers should gain hands on experience before starting their own sweet potato businesses. Findings of this study may be used for decision-making in the sweet potato sub sector by the sweet potato traders and other stakeholders and for further research in the sweet potato industry in Kenya.