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Emergent large traders in smallholder grain markets and their role in enhancing adoption of sustainable agricultural intensification practices in Kenya

10 March 2020
Publication Type: Working Paper
JEL Code: D13, Q12, Q13, Q16

Pervasive threats of climate change and land degradation have compounded the low farm productivity problem inherent in sub-Saharan Africa. Though sustainable agricultural intensification practices have been shown to improve resilience of farm production in the face of these emerging threats, they suffer low adoption rates typical of technology adoption in these regions. Recent evidence shows the emergence of large grain traders in the smallholder farm output markets. Given established correlation between contractual farm arrangements and technology adoption, the hypothesis is that these traders can incentivize technology adoption at scale at the farm level, given their financial capacity. This study tests this hypothesis using a large panel dataset from Kenya spanning a decade. A dynamic random effects Probit model is used to evaluate how past adoption of sustainable inputs influence subsequent adoption behavior, while a control function approach is used evaluate how sales to large grain traders affect the adoption of sustainable inputs at the farm level. Results indicate that sales to large grain traders lead to higher adoption of inorganic fertilizer but not improved seed and manure, and that land ownership is a key success factor in explaining sales to these market actors. The adoption of improved seed and organic manure is persistent across time, indicating state dependence in the use of these inputs. These results suggest that strategies to foster engagements between large grain traders and farmers can enhance uptake of inorganic fertilizer; such strategies should also be accompanied by efforts to enable resource-poor farmers access to these markets

Series title: Working paper 812
1 March 2020
Journal: Agricultural Economics Journal
20 February 2021
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