2016 Annaul Report : Linking smallholder producers to urban and peri-urban poultry markets

Mrs. Margaret Musilu, a project beneficiary, shows her brood of improved KALRO indigenous chicks (left) and her flock of improved birds (right).
Mrs. Margaret Musilu, a project beneficiary, shows her brood of improved KALRO indigenous chicks (left) and her flock of improved birds (right).

Linking smallholder producers to urban and peri-urban poultry markets

A needs assessment exercise undertaken at the beginning of FOSEMS Phase II project focused on identifying major challenges faced by the target communities and opportunities that could be leveraged to help improve attainment of project objectives, catalyze positive outcomes among the target beneficiaries and draw lessons for future interventions. One of the key findings of this assessment was the identification of market agents that would be linked with the target beneficiaries to provide a market-pull for the poultry value chain through provision of market linkages to lucrative urban and peri-urban markets.

Nguku Products 2010 Ltd and Bene Hatcheries Ltd were identified to provide market linkages to the target groups in Makueni County. Nguku Products Ltd is a poultry rearing and marketing business, based in the outskirts of Nairobi, where they supply poultry meat to supermarkets and institutions. The company has sales outlets within the suburbs of the city. Bene Hatcheries are based in Makueni County and service TaitaTaveta where buyers from Tanzania come to buy live birds. Bene are also involved in the supply of day-old chicks and extension services for poultry producers with the county.

Nguku projected a demand for 2,000 birds or 2.6 MT of meat per month with a market value of KES 2,496,000 or USD 24,960 (1 kg of meat selling at KES 960/00). Producers would earn KES 1,440,000 (for birds weighing an average of 1.8kg in live weight at KES 400 per kg) or USD 14,400 per month. On their part, Bene Hatcheries had projected a demand for 2,000 live birds every week, which translates to KES 1,200,000 or USD 48,000 per month (assuming
live weight of 2kg per bird and KES 300 per kg). This combined market translated to USD 72,960 per month and USD 875,520 annually.

Meetings were organized between Nguku and 11 representatives from the three hubs.These meetings gave these potential aggregators a chance to have a clear understanding of market requirements, the costs involved in marketing their produce as well as experience commercial production of poultry. The main outcome of this meeting was an agreement between Nguku and the aggregators to commence transactions during the period under review.

Adapting the aggregator model to the poultry value chain for enhanced market access

Aggregating small quantities of produce into marketable quantities helps smallholder producers to access large markets that would otherwise remain untapped. The challenge of small quantities of produce is seen in excess costs to market, uneven quality standards and inconsistent and unreliable supply.

Unable to command good prices or influence the marketing process, smallholders are thus resigned to be price-takers, which further disenfranchises them from the very value chains intended to benefit them. Limited knowledge and skills in improved management practices, limited access to improved technologies to enhance productivity, high cost of inputs and limited access to extension services are the main constraints faced by smallholder poultry producers in Makueni County.

These challenges were identified both at the end of FOSEMS Phase I as well as during the needs assessment done before the start of Phase II. Addressing these challenges in a sustainable manner was thus a critical success factor of the scale-up efforts of the project’s second phase. This involved integrating target beneficiaries into value chain initiatives and amplifying the gains made in the first phase.

A decision was thus taken to adapt the aggregator model to the poultry value chain as a means of addressing constraints in both the production as well as marketing issues. Production constraints identified included high cost of inputs, limited access to improved varieties of chicks (KALRO and Kenbro), and limited access to extension services. Marketing constraints related to low market prices and limited outlets.

The aggregator model addresses value chain constraints by amalgamating the outputs from individual members of a group or community. The group or community is able to interphase with markets and command improved prices due to economics of scale. During the period under review, the (Aggregator) Model was deployed based on a “hub and spoke”strategy to enhance collective marketing. Three hubs were developed and each was equipped with an incubator for hatching eggs into chicks, power connection (either through solar panels or electric power grid), a back-up generator and a mechanical grinder (to help in feed preparation).

The theory of change was premised on improved access to affordable and high quality inputs
(feed, vaccines) as well as services (vaccination and information on improved management and marketing) while enhancing market linkages through aggregation and collective access. The hub catalyzed economies of scale for producers while cutting down costs to market for producers and transactional costs for market agents.

It is thus envisaged that upon maturity, these hubs will be the focal point for both production and marketing activities, starting with the poultry value chain and extending to other complementary value chains such as cereals. We expect the hubs to provide a platform through which other services such as financing and insurance, can be bundled.