Economics and marketing

Importance of economics

Is the process of evaluating the value of rice in terms of inputs and output.

Inputs involved in rice production( Variables)

Production Costs



Making profits in rice farming like in other crop is a goal every farmer is aspiring to attain. The profit margin a farmer gets however depends on how much he/she spends on farm inputs.


Cost of producing irrigated rice variety Basmati (BS370) and rainfed rice variety NERICA1 both of which have a romatic characteristic are presented below



      Inputs                                                                                Costs   (KES)                          


                                                                             Irrigated (BS370)           Rainfed (NERCA1)


Land preparation                                              4,500                            4,500


Nursery preparation                                          3,500                            0


Total cost of seed                                             1,600                            3,100


Cost of transplanting fertilizer (DAP, MAP)      4,000                           4,000


Cost of top dressing fertilizer (SA, CAN)         4,000                           4,000


Pesticide costs                                                900                               900


Water Management                                         2000                             0


Labour costs paddling/leveling                        3,000                            0


Labour costs for sowing/transplanting            4,800                            4,800


Labour costs for fertilizer application              600                               600


 Labour costs for weeding                              7,200                            7,200


Labour costs for pesticide application             600                               600


Labour costs for bird scaring                         9,000                            9,000


Labour costs for harvesting, stacking            6,000                            6,000


Labour costs on loading/offloading                 2,600                            1,800


Labour costs for cleaning and drying             2,600                            1,800


Cost of bags                                                   1,300                            900


Transport costs                                              2,600                            1,800


TOTAL                                                                  60,800                          51,000







Marketing is a process involving buying and selling of paddy rice (unmilled) and milled rice in their respective markets.     Paddy rice, milled rice and rice by products markets spread in different rice growing regions in Kenya are highlighted below.


Paddy Rice markets



  • National Cereal Produce Board (NCPB)
  • Lake Basin Development Company (LBDC)
  • Dominion farms
  • Small Scale mills
  • Cooperative Societies
  • Cross border traders (Tanzania, Uganda Sudan)
  • Cap well Industries
  • Mwea rice Mill
  • Nice rice Millers
  • Ahero NIB rice Mill


Milled Rice Markets



  • Supermarkets
  • Institutions (learning institutions, Orphanage homes  and Hospitals)
  • Other private companies (NGOs)
  • Parkers
  • Regional markets (Uganda and Southern Sudan) 


Markets for by-products



  • Feed manufacturers (Dairy, poultry, fish)
  • Cottage industries


Markets for value added products



  • Supermarkets
  • Institutions (hospital)


Prices   (These can change any time)



  • Prices for paddy
  •  Aromatic                                                           KES 55/kg
  • Non aromatic                                                   KES 35/kg


 Prices for milled rice


  • Aromatic                                                           KES 140/kg
  • Non aromatic                                                   KES105/kg


 Prices for by products


  • Broken pishori                                                  KES 70/kg
  • Broken non aromatic                                         KES 60/kg
  • Chicken feed                                                    KES 40/kg
  •  Bran meal                                                     KES 14/kg




There are three types of rice markets namely Local, National and Regional. The markets have distinct characteristics which define their functions. The characteristics are listed below.





  •        Quality is least considered
  •        Quantity not sufficient
  •        Price fluctuation
  •        Segmented markets
  •        Prices are low
  •        Not branded
  •        Weak competition


       Liberalized market




  •        Quality is demanded (Aroma)
  •        Quantity not sufficient
  •        Price fluctuation
  •        Market is segmented
  •        Branded 
  •        Strong competition


       Liberalized market




  •        Quality is demanded (Aroma)
  •        Quantity not adequate
  •        Price not an issue
  •        Markets are integrated
  •        Branded
  •        Can be upgraded
  •        Strong competition









Gross margin is the difference between total costs that vary as farming activities are expanded. Negative GM indicates that a farmer is not making profits but if it is positive it means a farmer is making profit. It is calculated per unit area.  Gross Margin per acre (in KES) for irrigated and rainfed rice is shown below.



Item                                                     Irrigated                                   Rainfed

                                                            Variety: Basmati370                   Variety: NERICA1

Gross output (Q)(80Kgbag)                    26                                             18

Price (P)/80Kgbag                                 4,500                                        3,600

Total Variable Costs (TVC)                     60,800                                      51,000

Revenue (QxP)                                      117,000                                   64000

GM (QP-TVC)                                        56,200                                      13800

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