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Author(s) retain the copyright of this article. 

 

 

Full Length Research Paper 

Factors Influencing Agribusiness Profitability: An 
Analysis of Smallholder Pig Farming in Kenya's 

Tharaka-Nithi County 

Kororia V. and Chelule M. 

University of Kabianga, Kericho, Kenya. 

  Accepted 30 December, 2024  

 

      Aims: To increase the profitability of the pig subsector for farmers, particularly smallholder farmers, there have been  

     concentrated efforts to commercialize it. Smallholder farmers have not consistently made money in the field, despite  

     advancements. Profits for smallholder farmers have been inconsistent and disappointing. Since the impact of  

     institutional arrangements from a transaction cost perspective and managerial factors contributing to this inconsistency  

     have not been thoroughly determined, the reasons for the disparate profitability have not been experimentally  

     established. The study looked at how management practices and institutional structures affected the profitability of  

     smallholder pig farming in Kenya's Tharaka-Nithi County. 

     Research Methods: Eighty smallholder pig farmers were chosen using a two-stage sampling process. Data was  

     analyzed using the stochastic frontier production function and descriptive statistics after semi -structured interview  

     guides were used. 

     Findings: According to the study, the majority of male respondents (75%) were of working age, had six years of  

     experience raising pigs, and had only a basic education. Findings from the stochastic frontier  production, respondents'  

     profit efficiency was negatively impacted by feed costs (p<0.01) and breed type (p<0.05), but positively by herd size  

     (p<0.05) and veterinary and medication expenses (p<0.01). While information trust (p<0.05) and experience  

     decreased inefficiency, gender (p<0.1) and the debt-to-asset ratio (p<0.01) increased it. 
      Conclusion: The research area's mean profit efficiency was 0.40, indicating low profit efficiency. By  
      adopting current technologies, reducing transaction costs, and making better use of the resources  
      already available, the efficiency level may be raised by 60%. Adopting effective management  
      techniques and marketing avenues would result in this acquisition. The gamma parameter (γ) was  
      0.63, indicating that profit inefficiencies account for 63% of the variation in net revenue. The study  
      advances the subject of agribusiness and would enhance Kenyan policies related to the growth of  
      agribusiness. 
 
      Key words: Smallholder farmers; institutional arrangements; management factors; stochastic frontier analysis;  
      profit inefficiency. 
 

 
INTRODUCTION 

 

The demand for animal protein has increased to an all-time 
high due to urbanization and population growth. The rate of 
food production in Kenya is already out of step with the rate 
of demand. Kenya generates an estimated 12,000 tons of 
pig meat for KES 1.2 billion, hence this has forced the 
country to import pork worth USD 700,000. The number of 
pigs killed in Kenya has risen from 360,000 to 388,200 
during the past five years, an increase of almost 8% [1]. 

One of the main causes of food disparity is the inability to 
supply the population's diets with the necessary quantity of 
animal protein [2].  
The livestock industry in Kenya accounts for 12% of the 
country's GDP and 50% of all jobs. Dairy products, milk, 
meat, eggs, wool, hides, and skins make up the majority of 
this industry. Over the past ten years, meat consumption has 
been rising quickly, and by 2025, it is predicted to reach 13.3 

 
 

 

 

African Journal of Pig Farming ISSN: 2375-0731 Vol. 12 (1), pp. 001-007, December, 2024. Available online at 

www.internationalscholarsjournals.org © International Scholars Journals 

 
 

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2 

 

million tons [3]. The consumption of meat (beef, chicken, 
mutton, goat, pork, and camel) is predicted to continue 
rising from the present average of 19 kg per capita annually 
as most urban centers continue to expand [4]. Through pig 
rearing, pork could be a significant factor in successfully 
lowering the inadequate amount of animal protein in diets. 
Unfortunately, smallholder farmers in Kenya lack proper 
agricultural methods and are poorly organized, which 
results in low yields and ultimately very low profits. 
Additionally, SHFs are not business-oriented, which means 
they do not run their agricultural operation as a business 
[5].  
 
In Kenya, the number of pigs killed has been continuously 
increasing over time. With a poverty rate of 65% in 
Tharaka-Nithi County, pig farming is crucial to smallholders' 
and households' risk diversification and livelihood security 
because they are a valuable asset that can be used to 
generate income for emergency cash needs, school fees, 
and the purchase of farm inputs [6]. When improved 
husbandry techniques and management abilities are used, 
the small-scale pig farming business has been shown to be 
highly profitable [2]. In order to promote genetic 
improvement and raise pig production in Kenya, careful 
breeding stock selection and well-run breeding programs 
are required [6,7].  
However, a variety of productivity and market-related 
barriers, such as illnesses, inadequate nutrition, and 
disorganized marketplaces, result in smallholder pig 
farmers in Tharaka-Nithi County earning inconsistent and 
meager returns from their business. Pig output rises with 
effective institutional structures and managerial abilities, 
raising farmers' incomes and ultimately their profit margins. 
Only if the pig subsector is operated like a business will this 
be possible [8].  
Since all of the major chain participants help one another to 
increase efficiency and competitiveness, the growth of the 
pig value chain is significant since it affects farmers' 
profitability [9]. The county's subsector is primarily 
unorganized, with a lack of technology, information, and 
services, as well as poorly managed markets. Additionally, 
pig herds are at danger of disease during outbreaks due to 
a lack of feed quality control methods, which results in 
stunted growth and lower market value. The absence of 
farmer groups in the pig industry also hinders the exchange 
of useful information in the produce market. Low-binding 
relationships between smallholder farmers and traders 
result in high transaction costs [10]. Therefore, smallholder 
farmers must set up effective institutional arrangements in 
order to reduce these high transaction costs.  
 
A few studies have assessed how institutional structures 
and management characteristics affect the profitability of 
smallholder pig farmers. The majority looked at how 
institutional, social, cultural, technological, marketing, and 
farmer and farm conditions affected farm-level profit 
efficiency [11,12,13,14,15,16,17,18]. However, identifying 
the key elements that affect profit efficiency is a top 
research objective. This is because smallholder pig 
farmers' profit efficiency is influenced by more than just 
management characteristics and institutional structures.  

 
Research is therefore required to determine which 
institutional arrangements and management aspects should 
be prioritized in order for smallholder pig farmers to be 
profitable. This study made an effort to close this knowledge 
gap as well. 

  METHODOLOGY 
 

  Study Region, Sampling Method, and Data  
   Gathering Tools 

 

The study was conducted in Kenya's Tharaka-Nithi County. A 
descriptive study design was employed. Smallholder pig 
producers in the research area were chosen using a two-
stage sampling procedure. The Maara constituency was 
purposefully chosen for the first stage due to the area's high 
concentration of pig farmers and its favorable agro-ecological 
conditions for pig rearing. The second step was a stratification 
random sample of 16 smallholder pig farmers from each of 
the five wards, for a total of 80 farmers. The farmers were 
traced within the stratified areas using the snowballing 
method.  
Farmers were interviewed in-person using semi-structured 
interview schedules to gather primary data, which were then 
analyzed using the stochastic frontier production function and 
descriptive statistics. 

 
Empirical Model Specification 
 
To analyze the data, the Stochastic Frontier 

Production Function (SFPF) was used. The 

Stochastic Frontier Approach was utilized to 

determine which factors contributed to profit 

inefficiencies. It takes into consideration both 

the inefficiency component and random error 

[19]. By assuming a profit function that 

behaves in a way consistent with the 

stochastic frontier notion, this study applies 

the [21] model in accordance with [20]. In 

accordance with the work of [22], the 

functional form of the stochastic profit frontier 

was ascertained by fitting it with the less 

restrictive translog and evaluating the 

sufficiency of the highly restrictive Cobb-

Douglas.  

 

Equation 3, which is essentially the input-

output transformation and transaction costs 

model [23], is the stochastic profit model that 

is employed. Equation 4 represents the 

inefficiency model. The econometric model 

was typically defined to be: 

 
Yi = xiβ+ ei ………. (1) 

 
Yi = β0 + ∑ i= 1βi Xi + Vi - Ui (Cobb-Douglas function) (2) 

 
lnYi = β0 + β1lnX1+ β2lnX2 + β3lnX3 + β4lnX4 



3 

 

+β5lnX5+ β6lnX6+Vi - Ui (Translog function) (3) 

 
Where: 

lnY1 = Normalized profit (net revenue per 

kilogram of output sold); X1= Feed cost 

(kg); X2=Wage rate (include wage rate for 

both hired and family labor) (man-days); 

X3 = Breed type; X4= Herd size; X5= 

Search costs and X6= Drug/Veterinary 

costs (Kshs); Β0, β1,,,β5= Parameters to be 

estimated; 

 
Ui = Degree of inefficiency which is half-

normal distributed (iid N|) (0, σu2). Ui is 

closely related to the profit inefficiency 

which may arise from management 

factors and institutional arrangements. 

 
Vi = statistical disturbance term that is 

caused by factors outside the scope of 

the farmers which is assumed to be 

identically and normally distributed with a 

mean of zero (iid) and constant variance 

of V~N ((o, σ2v) and independent of U. 

The coefficients of variables x1, x2, x3, 

x4, and x5 are estimated from the 

maximum probability of the profit function 

and are understood as the variables' 

elasticities. All of the coefficients have the 

proper sign. The link between the inputs 

used by the chosen smallholder pig 

farmers and their pig net revenue was 

ascertained using a stochastic frontier 

model.  

The inefficiency model was used to 

examine the study's goal, and profit 

inefficiency (u)  was the dependent 

variable, while the independent variables 

were the inefficiency factors. 

The average county wage rate will be 

used in the study as a stand-in for the 

family workers' pay. The average salary is 

what the hired laborers in Tharaka-Niti 

County's pig farms make on average. 

This is calculated on the assumption that 

a worker would only be at the pig farm for 

two hours each day. 

RESULTS AND DISCUSSION 

Institutional Structures and Pig Management 
Techniques 
 

The institutional setup and management procedures of the 

smallholder pig sample was on a modest scale, which could 
be a result of the farmer's financial circumstances. 

According to the study, the majority of pig farmers used the 
semi-intensive management technique of penning (68%) 
and the intensive technique of stall-feeding (32%), which 
involved keeping the animals in a clean pigsty and 
providing them a balanced diet. In contrast to local 
consumers, who paid high prices with substantial search 
and contracting expenses, smallholder pig farmers in the 
study area sold their pigs to dealers directly 60% of the 
time, who provided exploitative prices. According to the 
study, 41% of smallholder pig farmers belonged to a 
farmer's group, whilst the majority (59%) did not. 
Participants in farmer groups gained from trainings that 
forced them to embrace new technologies and adhere to 
management techniques suggested by trainers and 
extension agents.  

Pig Producers' Profit Efficiency in the 
Research Area 

Table 2 displays the maximum likelihood 

estimates (MLE) of the parameters in the 

stochastic frontier model.  

 

With the exception of labor and search costs, 

the majority of the inputs used were 

statistically significant at various levels, 

according to the production function results. 

With a coefficient of -0.255, the feed cost 

coefficient was correctly signed and 

statistically significant (p <0.01), indicating that 

a 1% increase in feed prices would result in a 

25% drop in the enterprise's net revenue level, 

which was consistent with the findings of [18]. 

Pigs' breed type coefficient was negative and 

statistically significant (p<0.05), with a 

coefficient of -0.100, meaning that a 10% 

decrease in net revenue would result from a 

1% increase in the usage of subpar breeds. In 

line with the study of [27], the herd size was 

positive and statistically significant at the 

(p<0.005) level, with a coefficient of 0.080 

despite being inelastic, meaning that a 1% 

increase in the number of pigs would result in 

an 8% increase in net revenue. Finally, the 

cost of medications and veterinary care was 

positive and statistically significant at p <0.01. 

One of the main factors influencing the profit 

level of the pig firm in the research region 

seemed to be the coefficient, which was 

elastic in character. However, this suggested 

that a 1% increase in veterinary and 

medication costs would result in a 50% 

increase in the company's net revenue. This 

was consistent with the findings of [28], who 

discovered that a strengthened veterinary 

service system provided high-quality 

information about animal health and possible 

alternatives to antibiotic use, such as 

improved farm management, vaccines, and 

immunodulators.  



4 

 

 

Although there was a clear correlation, the 

cost of labor coefficient of 0.444 was not 

statistically significant, suggesting that it 

was not a significant factor in determining 

the profit efficiency of the pig firm in the 

research area. The net revenue level rose 

by 0.444 for every unit rise in labor costs. 

This was consistent with the results of [29], 

which showed that labor had an inverse 

relationship with mustard yield but was not 

statistically significant. The inelastic nature 

of the search cost coefficient, which was -

0.052, suggested that it was not a 

significant factor in determining the profit 

efficiency of the pig firm in the research 

area. As a result, the net revenue level 

decreased by 0.052 for every unit rise in 

search expenses.  

 

Factors Contributing to Pig Production's 

Profit Inefficiency 

 

Gender was positive and significant at p < 0.10, 

according to Table 2's inefficiency model results. 

According to the study of [6], this suggests that profit 

inefficiency rises with gender, indicating that households 

led by women are more profit-efficient than those 

headed by men since they were more involved in farm 

activities. Lack of faith in market information was 

associated with a decrease in profit inefficiency, as 

evidenced by the negative and significant (p<0.05) trust 

in market information. Farmers had to pay more to find 

better clients and pricing due to information asymmetry, 

which resulted in transaction costs. These costs 

included personal time, travel expenses, and 

communication costs. The results of [30], who 

discovered  that knowledge asymmetry causes 

opportunism and mistrust among the participants in the 

milk value chain, supported this. The results also aligned 

with the research of [9], which found that the more trust 

between company partners in the marketing channel, 

the better the circumstances for successful commercial 

operations. [31] found that the sources of knowledge in 

flood farming were reliable.  

 

At p<0.01, the debt-to-asset ratio was statistically 

significant and positive. This suggested that when the 

debt-to-asset ratio increased, so did profit inefficiencies. 

The greater the ratio, the greater the liabilities of the 

farm business relative to the assets, which needed to be 

balanced. A high ratio rendered agricultural businesses 

insolvent and prevented them from obtaining additional  

credit [32]. [33] believed that dairy farms in the UK with a 

low debt-to-asset ratio were more productive.  

 

Table 2 showed that the results of pig rearing experience 

were negative and significant at 5%. This implies that 

specialization evolved throughout time, resulting in better 

manufacturing techniques and increased profitability. This 

result was consistent with that of [34], who found that more 

agricultural production experience improves critical 

assessment of the applicability of superior production 

choices, such as the effective use of productive resources.  

 

With a coefficient of 0.119, the age variable showed a 

positive indication but was not statistically significant. 

These outcomes aligned with the conclusions of [18]. They 

found that older farmers are less likely to embrace modern 

inputs and innovative methods. Additionally, since young 

farmers are more likely to have received some formal 

education, they may be better able to learn new 

techniques and gather information, which will increase 

technical and allocative efficiency and profit efficiency. 

Years of formal schooling are typically used to measure  

 

There was no statistically significant correlation between 

schooling and either variable. This is in line with the 

research of [35], which found that farmers in the study area 

who had received formal schooling did not demonstrate 

greater levels of profit efficiency.  

 

Distribution of Profit Efficiency 

 
The calculated stochastic frontier model's individual profit 
efficiencies for the sampled pig farmers are shown in Table 
3. The farmers' estimated profit efficiencies ranged from 
0.094 to 1, which is a significant difference. The 
projections are left-skewed, with an estimated mean profit 
efficiency of 0.40.  
 
According to the study, the production level was almost 
60% below the border, with pig farmers in the study region 
producing at about 40% of the possible production level. A 
study by [32] found that this was a sign of product waste 
brought on by farmers' inefficient use of resources. The 
results also indicated that by using more variable inputs to 
increase production and making better use of the 
resources already available, profit efficiency in pig farming 
in the research area could be raised by 60%. 

 

CONCLUSION 

 
The purpose of the study was to evaluate the variables 

influencing the profitability of smallholder pig farmers in 

Kenya's Tharaka-Nithi County. The aforementioned study 

suggests that pig profit inefficiency is negatively impacted 

by household head experience and faith in market 

information. Also, the debt-to-asset ratio had a favorable 

impact on profit inefficiency on the farms in the research 

region. Pig farmers were not entirely profit-efficient, 

according to the study, but there is a lot of room for further 

profitability.  



5 

 

 

RECOMMENDATIONS 

 

1. To achieve the required economies of 

scale, pig farmers should create groups like 

producer organizations or cooperative 

societies. This will lessen knowledge 

asymmetries and increase countervailing 

market power.  

2. The study's conclusions lead to the 

following policy recommendations: sufficient 

pig production training (to introduce them to 

new developments) and fundamental 

financial management knowledge, such as 

the ideal debt-to-asset ratio and debt 

utilization.  

3. In the research area, males predominate 

in pig production. Pig farming, however, 

should be the starting point for programs 

aimed at empowering women because it 

offers substantial financial access 

prospects. To  improve their livelihoods and 

raise their income, women must also be 

encouraged to work in the pig industry.  

 

To solve the fundamental issues 

smallholder pig farmers confront, the 

industry's major participants should develop 

a logical and comprehensive solution. To 

guarantee coordination and cooperation 

among various national institutions and 

agencies, both at the federal and municipal 

levels, as well as between private sector 

organizations, producer groups, and 

development partners, the government can 

collaborate with other stakeholders.  

 

Suggestions for Further Research 

 
Since the study concentrated on the variables that affect 

smallholder pig farms' profitability, it would be wise to 

conduct additional research on the use of smart farming 

in smallholder pig farming, since this could help to 

promote an integrative management strategy. Capturing 

the effects of smart solutions in smallholder pig farming 

could be taken into consideration when redesigning the 

study. 

 

CONSENT 

 
The author(s) have gathered and preserved the 

respondents' written consent in accordance with 

international or university standards. 

 
COMPETING INTERESTS 

 
Authors have declared that no competing interests exist.  

 
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	INTRODUCTION
	METHODOLOGY
	RESULTS AND DISCUSSION
	Institutional Structures and Pig Management Techniques
	Pig Producers' Profit Efficiency in the Research Area

	CONCLUSION
	RECOMMENDATIONS
	Suggestions for Further Research

	CONSENT
	COMPETING INTERESTS

