Farmers have lost faith in commercial crop farming owing to low returns, new research shows.
A study done by financial services firm ICEA Lion indicates that farmers are increasingly getting low returns from cash crops.
“Revenue from commercial agriculture as a proportion of the market value of agriculture sector output fell steeply from 27 per cent in 2013 to 16 per cent in 2018,” said the study report.
ICEA Lion attributes the drastic decline to rising costs of production.
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"Aggregate fertiliser costs rose by 68 per cent while the cost of crop chemicals increased by 165 per cent between 2013 and 2018,” said ICEA Lion Head of Research Judd Murigi.
He further said the aggregate cost of fuel and power increased by 34 per cent while the cost of manufactured feeds was up 28 per cent during the period.
The report said the aggregate cost of production rose by 53 per cent between 2013 and 2018 to hit more than Sh60 billion. This adversely affected the returns of cash crop farmers.
“Commercial crop revenue halved from 28 per cent of the market value of crop produced in 2013 to 14 per cent of the market value output in 2018,” said the report.
The study attributed the decline in output over the same period to poor crop yields occasioned mostly by poor farming practices.
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“Increase in annual usage of key inputs between 2013 and 2018 was more than double the increase in yearly commercial agricultural output in the same period, indicating that the law of diminishing returns was taking hold,” said the report.
Other than horticulture, coffee and tea, the only sub-sector offering farmers hope is livestock farming, whose returns are promising, the firm noted.