A Collaborative Research Project Funded by: Implemented by: Value chain analysis of the Kenyan poultry industry: The case of Kiambu, Kilifi, Vihiga, and Nakuru Districts Julius J. Okello Zachary Gitonga Jane Mutune Ruth M. Okello Martin Afande Karl M. Rich Africa/Indonesia Team Working Paper 24 October 2010 (blank page) Africa/Indonesia Team Working Paper Table of contents Preface ................................................................................................................................................... iii Glossary .................................................................................................................................................. iv Executive Summary ................................................................................................................................. v 1. Introduction ........................................................................................................................................ 1 1.1 Overview of the poultry sector and study motivation ................................................................. 1 1.2 Description of sites ....................................................................................................................... 3 2. Sector-level poultry chains: Overview and identification of actors .................................................... 5 2.1 Background on study districts and actor identification ................................................................ 5 2.2 Roles of chain actors, business linkages, and governance mechanisms .................................... 13 3. Poultry value chains, products flows and governance ..................................................................... 26 3.1 Commercial layer and egg value chains ..................................................................................... 26 3.2. Value chain for commercial broilers .......................................................................................... 36 3.3 The value chain for indigenous/traditional poultry .................................................................... 43 3.4 Value chains for guinea fowl and ducks ..................................................................................... 48 4. Impact of HPAI on producers and retailers ....................................................................................... 51 4.1 Effect of HPAI on livelihoods ...................................................................................................... 51 4.2 Impacts on commercial broiler and layer producers .................................................................. 54 4.3 Impacts on retailers (hotels) ....................................................................................................... 55 5. Policies and regulations on HPAI ...................................................................................................... 56 6. Conclusions ....................................................................................................................................... 58 References ............................................................................................................................................ 60 Appendix 1: Chain actors interviewed in each study district ................................................................ 62 Appendix 2: Poultry chain actors interviewed in Kiambu District ........................................................ 63 Appendix 3: Poultry chain actors interviewed in Nakuru District ......................................................... 64 Appendix 4: The slaughter slab ............................................................................................................. 65 Appendix 5: Gross margin analysis of production of 500 layers ........................................................... 66 Appendix 6: Gross margin analysis of production of commercial broilers, 300 birds .......................... 67 i Pro-Poor HPAI Risk Reduction List of Tables Table 1. Poultry populations in Kenya, by province and category, 2006 (thousand birds) .................... 1 Table 2. The poultry population in Kiambu, by division (count) ............................................................. 7 Table 3. Poultry population in Kilifi District, 2008 ................................................................................ 10 Table 4. Poultry population in Vihiga District, by category .................................................................. 13 Table 5. Day-old chicks (DOC) produced by the major hatcheries in Kenya, 2006 ............................... 14 Table 6. Weekly volumes of broiler day-old chicks (DOC) sold by dealers in Nakuru .......................... 15 Table 7. Prices of various poultry feeds in Kiambu District, February-March 2009 (Ksh per 70 kg bag) .............................................................................................................................................................. 22 Table 8. Gross value added (VA) per week in commercial layer and broiler value chains ................... 52 List of Figures Figure 1. Study sites ................................................................................................................................ 3 Figure 2. Map of Kiambu District showing study areas and major trading centers ............................... 7 Figure 3. Map of Nakuru District showing the study areas and major trading centers .......................... 9 Figure 4. Map of Kilifi District ................................................................................................................ 11 Figure 5. Map of Vihiga District............................................................................................................. 12 Figure 6. Poultry population (counts) in Vihiga District ........................................................................ 15 Figure 7. The table egg value chain in Kenya ........................................................................................ 28 Figure 8. Estimated volumes (trays/week) handled and average prices (Ksh/30-egg tray) charged by the various actors in the egg value chain ............................................................................................. 31 Figure 9. Value chain for culled/spent layers with estimated shares of volume handled by each channel .................................................................................................................................................. 32 Figure 10. Average prices (Ksh/bird) charged by various actors (in red) and estimated volume of culled layers (number of birds, in blue) marketed per week in the spent-layers value chain in the study sites ............................................................................................................................................. 35 Figure 11. Broiler value chain and volume shares for each channel, 2009 .......................................... 40 Figure 12. Average prices (Kshs/bird) charged (in red) and estimated volumes of broilers (number of birds, in blue) handled per week by the various actors in the broiler value chain in the study sites .. 41 Figure 13. Value chain for indigenous chickens and volume shares handled by each channel ........... 47 ii Africa/Indonesia Team Working Paper Preface Since its re-emergence, HPAI H5N1 has attracted considerable public and media attention because the viruses involved have been shown to be capable of producing fatal disease in humans. While there is fear that the virus may mutate into a strain capable of sustained human-to-human transmission, the greatest impact to date has been on the highly diverse poultry industries in affected countries. In response to this, HPAI control measures have so far focused on implementing prevention and eradication measures in poultry populations, with more than 175 million birds culled in Southeast Asia alone. Until now, significantly less emphasis has been placed on assessing the efficacy of risk reduction measures, including their effects on the livelihoods of smallholder farmers and their families. In order to improve local and global capacity for evidence-based decision making on the control of HPAI (and other diseases with epidemic potential), which inevitably has major social and economic impacts, the UK Department for International Development (DFID) has agreed to fund a collaborative, multidisciplinary HPAI research project for Southeast Asia and Africa. The specific purpose of the project is to aid decision makers in developing evidence-based, pro-poor HPAI control measures at national and international levels. These control measures should not only be cost-effective and efficient in reducing disease risk, but also protect and enhance livelihoods, particularly those of smallholder producers in developing countries, who are and will remain the majority of livestock producers in these countries for some time to come. Authors Julius J. Okello, Lecturer, Department of Agricultural Economics, University of Nairobi Zachary Gitonga, Research Assistant, University of Nairobi Jane Mutune, Assistant Lecturer, Kenyatta University Ruth M. Okello, Graduate Student, Michigan State University Martin Afande, Research Assistant, University of Nairobi Karl M. Rich, Senior Research Fellow, Norwegian Institute of International Affairs, and Agricultural Economist, International Livestock Research Institute (ILRI) Disclaimer The views expressed