.1.1 IntroductionThis chapter covers the various studies carried out related to this study. It also intends to bring forth the research gap which exist and hence the necessity to carry out the research. The theory which guides through the research is also covers together with the conceptual framework.2.1.2 Significance of Dairy Keeping in Developing Countries Dairy cattle are kept all over the world. There are several reasons to keep dairy cattle at the household level according to Bonnier (2004). Short term reasons are for direct economic returns on products such as milk, meat, hides, manure and traction. Long term reasons may be for investment, bank and/or life insurance. Kenya has one of the largest dairy industries in Sub-Sahara Africa and developments in the industry span over a period of 90 years and have undergone various evolutionary stages, therefore making Kenya self-sufficient in milk 2.1.3 Milk productionMilk is among the most perishable products and for that case requires intensive capital investment, which may requires storage machines. It’s for this reason therefore that milk prices and inputs related to milk production are price elastic. According to Siggel( 2006), International profitability and comparative advantage, this frequent fluctuation in milk prices contributes to declining production due to factors related to frequent and unanticipated climatic changes, inadequate quality feeds, poor access to breeding technologies, among other factors. Waithaka (2010) also noted that most small scale farmer’s produces low quantities of milk in that they do not want to adopt and embrace new technologies in their farms. Most farmers still sticks to traditional methods where sheds are poorly built and maintained rendering the cattle to be highly susceptible to diseases related to environment. The idea by waithaka in his article titled ‘Dairy productivity’ goes in hand with sentiments by Kamau (2010) in his study on ‘What a startup dairy farmers need to know about cattle’, who argued that a good husbandry should be clean and hygienically maintained to minimize food poisoning especially I zero grazing unit. However, Waithaka and Kamau fail to address to the related practices suggested to effects on dairy production, which this study will sought to cover. This study will therefore fill the gap with the incorporation of their knowledge. According to Sustainable livestock enterprise, a study by Owuor (2010), the type of breed does determine much the quality and quantity of milk produced. Awuor noted that most farmers in the country owns indigenous breeds which produce an average yield of up to 10 kg per day per cow. However in my opinion, in relation to this idea is that farmers in the efforts to boast their dairy production, then they must rear new breeds of dairy cows which can give at least 30 kgs of milk per dag per cow. According to a survey by Kenya agriculture productivity assistant program, (KAPAP) (2010), farmers earns at most 20% of the possible income assuming average production per household is 2 cows each producing 6-8 kg per cow per day and further the milk prices of ksh 20 – ksh 220.127.116.11 Dairy profitabilityProfitability to dairy farmers refers to the ability to produce quality goods that are valuable in both local and international market, Barney (2008). However Tacken (2009) relates the hindrance on dairy profits to the high cost of feeds and inadequate knowledge of husbandry best practices. In his study on Profitability of Dairy Industry , whose objective was to determine how farmers can improve profits from dairy sector, further observes that extensive growth of cash crops by many farmers leave little land for dairy farming, hence making dairy products negligible. The sentiments by Tacken coincides with that by Kamau, (2011) who noted that high cost of manufactured feeds is triggered by high fuel and raw material costs which in the long run will reduce dairy profits, if the market will not adjust appropriately. Kamau, who focuses his study on organic farming, rather is of the opinion that cows should be directly grazed on natural feeds rather than artificial. The two studies on the other hand fail to address to socio-economic factors which are bound to dairy profits such as land sizes and others. However this is not the case for Kiama( 2009), in his study on Success in Agriculture who point out that dairy profits have dropped due to lack of knowledge on alternative nutritious feeds by small scale farmers. He noted that farmers are not conversant with nutritious feeds like lucerne, caliagra and gliricidia, which when fed on livestock will increase the level of milk significantly. However, this study fails to bring forth an elaborate comparison in production of milk between nutritiously fed cows and ordinarily fed one. According to Ortmann et al. (2010) in their study on factors influencing the long term competitiveness of milk, the study investigated the factors affecting profitability of commercial milk. The study found out that the herd size, level of farm debt, ratio of trading income to total milk income among other factors, had an effect on profitability. However, this study failed to address the effects of dairy production on profitability of commercial milk. Previous studies have used varying approaches to measure profitability of milk. Hopps and Maher (2007) used gross margins per litre to measure profitability. Gross margin Analysis at farm level was used to establish that the dairy farm is economically viable. In the study Gross Margins were obtained in the three years considered and the cost of production of milk per litre was compared to the selling price to show the profit Margins. This idea by Hopps and Maher is anticipated to be very essential in this study. 2.1.5Socio-economic factors According to Nderitu (2009), the actual size of land to most farmers is small due to fragmentation as families enlarge and population increases. Thus, the dairy farmers have problems with growing enough fodder for the animals. Gloria (2008) is of the opinion that the high demand for milk in Kenya urban areas has been affected by high costs of production, processing, transportation (poor infrastructure), inaccessibility to affordable credit and high cost of electricity, among others. Other constraints were due to lack of good Information Communication Technology (ICT), poor governance and lack of an enabling environment, low value addition which translates into poor prices in markets. It is therefore imperative to facilitate the sub sectors growth and development, reduce production cost and increase value addition for milk products with the hope of increasing trade subsequent economic growth.Nyoro (2006) in his study on Impacts of agricultural productivity, profitability and food security, reveals that access to both internal and external financial sources have an influence to the size and growth dynamics. High entry costs may indicate the presence of profit in the industry and may serve as entry barriers for new entrants as they may lack financial capacity to invest in technology and expansion. A social cultural belief of small holder’s farmers is that dairy farming is a subsistence undertaking which affects their investment levels in dairy ventures. Most rural farmers perceive other agricultural products like coffee and tea as more lucrative and concentrate investments in them. This is supported by government through marketing boards that are able to export the products and fetch good prices for them. The dairy industry lacks government supported marketing boards and as such marketing is poorly integrated and left to the private sector control. The liberalization of the dairy market has thus cut-failed the contribution of dairy farmers and reduced their profitability in the agricultural sector.