Journal of Agricultural Economics and Rural Development AJAERD

Vol. 6(1), pp. 712-717, February, 2020. © www.premierpublishers.org, ISSN: 2167-0477

Research Article

Effects of Value Addition on the Profitability of Irish Potato

Production in Bomet County, Kenya
Cosmas K. Korir *1, Christopher O. Gor2, Paul. O. Odwori3, Michael E. Omunyin4 and Kibet, N5
*1,5Department of Agricultural Biosystems and Economics, University of Kabianga, Kenya
2Department of Agricultural Economics & Extension, Jaramogi Oginga Odinga University of Science and Technology,
Kenya
3School of Economics, University of Eldoret, Kenya
4Department of Horticulture, University of Kabianga, Kenya

In Bomet County farmers produce Irish potatoes for household consumption and income
generation. The farmers have been urged to adopt value addition practices to increase their
profits and household income. But since value addition comes with a cost, it raises a question of
whether value addition increases farm profitability or not. The study used single cross-sectional
data from 200 randomly selected farmers to determine the effect of value addition on the
profitability of Irish potato production. The data were collected using a structured and
unstructured questionnaire. Gross Margin Analysis was used in determining the profitability of
various forms of value addition. Statistical packages for social scientists was used in data
analysis. The study found that the most common form of value addition practiced by the farmers
was sorting while grading, chipping and frying were practiced by few farmers. The study found
that value adders earned more profits than non-value adders. The study further established that
sorting was more profitable to farmers while frying, grading and chipping led to losses. Therefore,
there is a need to identify cost-cutting technologies for grading, chipping and frying as these
forms of value addition are not profitable to the farmers.
Keywords: Farmers, Irish potatoes, Kenya, Profitability, Value addition

INTRODUCTION

Irish potato is an important crop species in Kenya whose
volumes comes second after maize. It remains the
mainstay for most rural farmers in cooler regions where the
crop is widely grown. Previous studies have shown that
farmers who can play with factors that affect price, that is,
demand and supply can be able to fetch good prices at all
times for their products making the production of potatoes
a lucrative affair. The studies further noted that by
embracing value addition, the farmers would reduce post-
harvest losses of about 40-50% through proper handling
and storage (Ministry of Agriculture, Annual Report 2013).
A study by Ferris et al. (2012) noted that the bulk of the
Irish potatoes are sold as ware potatoes and eaten as a
boiled vegetable. In Kenya, urban residents are the
country’s main consumers and the reason for the soaring
demand for ware potatoes and processed products, such
as chips and crisps in restaurants and bars (Kirumba et al.,
2004 and Tesfaye et al., 2010). On the other hand, fresh
consumption is common in rural areas where Irish
potatoes are produced. In general, Kenya has an
expanding food processing industry, driven by its growing
urban population, changing population structure, new
eating habits, and increased tourism.
According to GoK (2014), at least 20% to 32% of
households grow potatoes in Bomet County. Production
and value addition in potatoes are essential livelihood
strategies for millions of poor smallholder farmers
(Devaux, et al., 2011). A study by Pravakar et al. (2010)
*Corresponding Author: Cosmas K. Korir, Department of
Agricultural Biosystems and Economics, University of
Kabianga, Kenya. E-mail: korircosmas.ck@gmail.com

Effects of Value Addition on the Profitability of Irish Potato Production in Bomet County, Kenya
Korir et al. 713
further noted that value addition in agricultural marketing
is key in increasing farmers’ incomes and in poverty
reduction. Lundy et al. (2002), postulated that to take
advantage of value addition potential, the resultant
activities must be competitive, sustainable and involve
low-income rural populations. The participation of low-
income rural populations is critical to achieving poverty
reduction. According to Culas and Mahendrarajah (2005),
farmers should attain income levels similar to the industry
workers (and others) They also pointed out that the ability
to attain the same income level should be based on the
assumption of effective labor use and other factors of
production, all of which are possible through farm
diversification and value addition. Furthermore, the
Northern Ireland Business (2010) pointed out that by
diversifying farms into rural enterprises, farmers are likely
to grasp a range of benefits that they don't often find in
traditional farms. Ramirez (2001) found that value-adding
activities accounted for a 350 % increase in household
incomes and said value-adding could prove useful as a
poverty reduction tool if it leads to an increase in 'on and
off' farm rural employment and income. Golleti et al. (1999)
also highlighted the poverty reduction potential of post-
harvest and value-added activities and emphasized gains
in rural income and employment are complemented by
reductions in food prices for urban dwellers and
improvements in processing and market chains.
According to Quaye and Kanda (2004), analysis of
marketing margin is crucial in identifying the effects of
market actors on prices received by consumers and
producers of agricultural products. To date, enormous
studies have been conducted globally to determine the
effects of the production and marketing of Irish potatoes
on profitability and farmer's income. For instance, a study
by Sebatta et al. (2015) used break-even analysis to
determine the effect of potato value addition on farmer's
income in Uganda. The study found that farmers who did
value addition earned more income than those who did not
do value addition. That is, those who did value addition
earned income 40% above the amount earned by non-
value adders. The study further established that prices of
value-added seed potatoes were 30% more than the
prices on non-value-added potatoes. On the other hand,
the value-added ware potato had the highest maximum
price at UGX.1,200 per kilogram while non-valued added
potato products had the lowest price of UGX.150.00. The
study concluded that value addition in potato farming is a
profitable venture that can increase farmer's incomes.
Omari (2015) used descriptive statistics and the Multiple
Linear Regression model to analyze the production and
marketing of Irish potatoes in Tanzania. The study found
that farmers and food sellers made the highest marketing
margin of 63%.
In Kenya, limited studies have been conducted to
determine the profitability of Irish potatoes in the face of
value addition practices. For instance, Muthoni and
Nyamongo (2009) reviewed the constraints affecting ware
Effects of Value Addition on the Profitability of Irish Potato Production in Bomet County, Kenya
Irish potatoes in Kenya. The study found that lack of on-
farm storage facilities (which is a form of value addition)
reduced farmer's earnings or income. Kaguongo et al.
(2008) also concur that the majority of farmers in Kenya do
not store Irish potatoes due to a lack of storage facilities.
Instead, they sell directly after harvested and end up
receiving low prices and thus incomes. Kirumba et al.
(2004) noted that the production and marketing of Irish
potatoes are very challenging for farmers. The study noted
that during the season of high supply farmers receive low
farm-gate and wholesale prices and vice versa during the
season of high demand due to seasonality in production
coupled by lack of storage facilities. That is, farmers
receive farm-gate prices and wholesale prices that range
between KES 400-500/Bag and KES 900-1100/Bag
respectively. During the season of high demand, the
farmer receives farm-gate and wholesale prices that range
between KES 1000-2000/Bag and KES 1600-2000/Bag
respectively.
The general assumption was that a huge potential for Irish
potato processing exists and that households who decide
to exploit this potential were well-off in terms of welfare. It
was also assumed that the decision to engage in value
addition was premised on higher expected utility by the
producers. Interaction of these two decisions was
expected to be reflected in the welfare status of farmers in
terms of the increase in household incomes through an
increase in the profitability of value-added Irish potato
products. That is, an Irish potato farmer was expected to
choose to engage in value addition practices to increase
food security and household income. The value addition of
Irish potatoes was expected to increase farm income
hence enabling the household to improve their welfare. It
was thus assumed that Irish potato farmers who will adopt
value addition practices will have their profits increased
and subsequently increase in household income and
welfare. Despite the high prices of potatoes farmers
receive, production and value addition activities are
characterized by high costs thus raising the question of
whether value addition is a profitable activity on not. To
verify this, this study determined the effect of value
addition practices on the profitability of Irish potatoes in
Bomet County.
METHODOLOGY
Description of the study area
The study was conducted in Bomet County (Figure 1). The
County lies between latitudes 0º 29' and 1º 03' south and
between longitudes 35º 05' and 35º 35' east. It is bordered
by four counties; Nakuru to the east, Kericho to the North-
East, Nyamira to the south and Narok to the West. Bomet
covers an area of 2037.4 km2. The County lies up to
2,300m above sea level. Major crops produced in the
County include; tea, Irish potatoes, maize, pyrethrum and
a bit of coffee. Dairy/milk production, especially in Sotik

Figure 1: Map of Bomet County, Kenya.
Source: Modified map from www.bomet.go.ke
Sub-county, is also a major economic activity. The County
population was estimated to be 782,531 in 2012 and was
projected to reach 846,012 in 2015. The Irish potato
annual production for the year 2013 was 25,517 Tonnes
with a value of Kshs 965,918,182 (Bomet County
Development Profile, 2013).
Data and data analysis
Primary data was used in the study. A structured and non-
structured questionnaire was used in the collection of data.
Data on physical quantities and prices of various value
addition activities in Irish potato were captured. The data
was obtained from Sub-County agricultural offices,
Agricultural Sector Development Support Programme
(ASDSP), Kenya National Potato Farmers Association
(KENAPOFA) and Kenya National Farmers Federation
(KENAFF). SPSS computer program was used in the data
analysis and results presented in the form of tables.
Effects of Value Addition on the Profitability of Irish Potato Production in Bomet County, Kenya
J. Agric. Econ. Rural Devel. 714
Sampling procedure
The study adopted a multistage sampling procedure.
Within the County, five Irish potato producing Sub-
Counties were also purposively selected. In each of the
five Sub-Counties, the simple random sampling method
was used to select 4 wards to give a total of 20 wards. In
each of the selected wards, a list of Irish potato farmers
was generated in the 20 wards with the help of County and
Sub-County Agricultural Officers. A total sample size of
200 smallholder Irish potato farmers was then selected
using a systematic sampling technique.
Sample size
Since the population of Irish potato farmers in Bomet
County is unknown, the infinite formula for determining
sample size was used. The study adopted the formula
specified by Kothari (2004). Mathematically, this is given
as:
Korir et al. 715

raw potato sold (i) and TR for value-added potato products

(j) for while TVCij denotes TVC for raw potato sold (i) and
n= (1) TVC for value-added potato products (j).
Where n = sample size, p= proportion of the population
doing value addition, q = 1-p, z = the standard variate at a
given confidence level (a = 0.05), e= the acceptable error RESULTS AND DISCUSSIONS
(precision). Using p = 0.6 assuming a conservative
sample, z = 1.96, q = 0.4 and an acceptable error of 6.78% Effects of value addition practices on the profitability
(e). q is the weighting variable and is computed as 1-P. of Irish potato among farmers in Bomet County
The sample size, computed using the above formula was
thus 200 respondents. Mean gross margin per acre
The sample was determined as:
The profitability of Irish potato value addition was
1.962x0.6x0.4 determined using gross margin analysis and results are
𝑛= = 200 (2)
0.06782 presented in Table 1. The gross margin of value-added
and non-value-added potatoes were compared and the
Profitability estimation results indicate that there is a significant difference (P =
0.028) between the gross margin of value adders and non-
To evaluate profitability, Gross Margin Analysis (GMA) value adders. Non-value adders made losses of around
was used. GMA included Total Revenues (TR), Total 29,306 per acre as compared to value adders who earned
Variable Costs (TVC) and excluded Total Fixed Costs a profit of 16,676 per acre. The findings corroborate with
(TFC). Mathematically, GMA formula is given as: those of Oluoch et al. (2016) who found that the more
value a farmer added to the raw tuber, the better the
GMAij = TRij - TVCij (3)
income obtained from the market in Homabay County,
Where GMAij denotes GMA for raw potato sold (i) and
Kenya.
GMA for value-added potato products (j). TRij denotes TR
Table 1: Effects of value addition on profitability among Irish potato farmers in Bomet County
Type of farmer N Mean Standard Deviation Standard Error Mean Mean difference P-values
Non-value adder 75 -29,306.67 44,449.70 5132.61 -45,982.83** 0.028
Value-adder 125 16,676.16 159,336.80 14251.52
Source: Own computations, 2018. T-test was performed to determine if a significant difference exists between value
adders and non-value adders based on the selected variables. *, **, *** means significant at 10%, 5% and 1% respectively.
N is the number of observations.
Characterization of profitability of potatoes and was no significant effect on household income. The reason
household income by value addition practices could be due to low production levels/subsistence farming
category which translates to low incomes. Contrary results are
reported in Golleti et al. (1999), Pravakar et al. (2010) and
Table 2 below shows that sorting was found to be very Sebatta et al. (2015) who found that value addition in
profitable to farmers earning them a profit of Kshs agricultural marketing increases farmer's incomes.
27,106.92. Frying, grading and chipping led to losses of Ramirez (2001) also found that value-adding activities
Kshs 55,900, Kshs 55,889.20 and Kshs 30,000 increase household incomes by 350%. Studies by
respectively. This means that Irish potato farmers should Kaguongo et al. (2008), Muthoni and Nyamongo (2009),
focus more on the sorting of Irish potatoes and find new Maganga et al. (2012) and Omari (2015) concur that that
cost-effective technologies to carry out grading, chipping value addition through access to adequate on-farm
and frying of which they are comparatively disadvantaged storage facilities eventually increases farmer’s earnings or
to carry out profitably. It is also noted that despite the value income.
addition of Irish potatoes profitable in Bomet County, there
Table 2: Profitability of potatoes by value addition practices category
Value Statistic Annual Quantity Cost per Price per unit of The total cost Gross
addition income valued- unit value-added of production margin
practice added produced product
Grading Mean 211743.1 3.8462* 3.0769*** 38.4615*** 55889.2308 -55889.2***
Sorting Mean 362769 67.39* 111.53*** 2848.872*** 38607.3684 27106.92***
Chipping Mean 14000 35* 50*** 2000*** 30000 -30000***
Frying Mean 620000 205* 80*** 4200*** 55900 -55900***
Source: Own computations, 2018. T-test was performed to determine if a significant difference exists between value
adders and non-value adders based on the selected variables. *, **, *** means significant at 10%, 5% and 1% respectively.
N is the number of observations.

Effects of Value Addition on the Profitability of Irish Potato Production in Bomet County, Kenya
 J. Agric. Econ. Rural Devel. 716

CONCLUSION, RECOMMENDATIONS, AND Kirumba, W., Kinyae, P. and Muchara, M. (2004). Irish
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Effects of Value Addition on the Profitability of Irish Potato Production in Bomet County, Kenya
Accepted 9 December 2019
Citation: Korir CK, Gor CO, Odwori PO, Omunyin, ME
Kibet N (2020). Effects of Value Addition on the Profitability
of Irish Potato Production in Bomet County, Kenya.
Journal of Agricultural Economics and Rural Development,
6(1): 712-717.
Copyright: © 2020: Korir et al. This is an open-access
article distributed under the terms of the Creative
Commons Attribution License, which permits unrestricted
use, distribution, and reproduction in any medium,
provided the original author and source are cited.