Potential Economic Impact Of Integrated Thrips Management In French Bean And Tomato In Loitokitok And Mwea Sub – Counties Of Kenya

In Kenya, thrips inflict nearly 60-80% and 80% yield loss in French bean and tomato, respectively. Management of thrips in horticulture is currently based on application of pesticides. In addition to increased environmental risks associated with pesticides, frequent use of these chemicals substantially increase production costs and pesticide resistance. Further, exports are limited due to non-compliance to Maximum Residue Levels (MRLs) in important consumer export countries especially the European Union (EU). International Centre of Insect Physiology and Ecology (ICIPE) and its partners are proposing the use of Integrated Pest Management (IPM) for the control and management of thrips and tospoviruses in Kenya. The Centre has developed effective control technologies against quarantine thrips on key vegetables like French beans, onions and tomatoes. However, before the dissemination of the developed technologies, there is need to assess the potential economic impact of the use of IPM in the control of thrips in French beans, onions and tomatoes in Kenya. Currently, such information is lacking. As such the government cannot effectively promote the technology and donors and farmers also have no basis for deciding on whether or not to invest in the technology. The objectives of this study were twofold. The first one was to measure the static ex ante economic returns to research on integrated thrips management in Loitokitok and Mwea sub–counties of Kenya. In the second objective, the dynamic ex ante economic returns to research on integrated thrips management in Loitokitok and Mwea sub–counties of Kenya was measured. Both primary and secondary data were used. Primary data were obtained from 300 farmers in Loitokitok and Mwea sub–counties of Kenya using a questionnaire. In addition, expert opinion was also sought from researchers and scientists from KALRO and extension workers from MOALF for information on several model parameters including expected yield increases, adoption rate, adoption lag, number of years to maximum adoption, success rate and the depreciation rate. Secondary data were collected from ICIPE‘s work plans and budgets for project costs and cost of IPM packages, journal articles for information on model parameters including elasticity of supply and demand for French beans and tomatoes and finally published literature from MOALF and HCDA provided information on yield and prices of French bean and tomatoes. The economic surplus model was employed to measure the potential benefits of the IPM thrips technology research and development (R&D). Project costs and costs of adoption formed the cost stream. The benefit: cost ratio (BCR), the Net Present Value (NPV) and the Internal Rate of Return (IRR) were calculated using the Cost-Benefit Analysis (CBA) framework. Assuming a conservative adoption rate of 1% and a 10% discount rate for the base deterministic scenario, the NPV of the research was estimated at $ 4.8 million, with an IRR of 31% and a BCR of 4:1. Sensitivity analyses were undertaken to assess the effect of different discount rates and adoption levels on the NPV, IRR and BCR. The results showed that predicted returns to investment were sensitive to changes in the levels of adoption. The project seemed worthwhile at lower discount rates than at higher discount rates. Lower discount rates imply that the cost of capital is cheaper, thus favoring investment in the technology. Risk analysis or probability weighted sensitivity analysis was carried out on NPV using the Monte Carlo simulation. The software @Risk was used in this regard at 10,000 iterations. The possible NPVs ranged from $63.16 million to $66.6 million. Since the possible range of NPV was positive, the probability of having negative NPV was excluded implying that there was no risk associated with implementation of this project. The results show that investment in IPM thrips technology is both financially viable and would lead to Pareto-efficient social welfare maximizing outcomes. It is therefore worth considering. Based on the positive potential return on investments, efforts to promote the adoption of IPM thrips are encouraged to ensure more efficient production and greater economic rewards for the farmer and the country as a whole.