Estimating public and private costs and benefits of implementing a milk quality assurance system in Kenya: A case study

Assuring food safety is increasingly important in emerging and developing economies. Despite being a public good, food safety in these economies is often addressed through limited private sector innovations while the public health costs and impact of food-borne diseases are largely unknown. This study estimates annual private and public costs and benefits of a quality-based milk payment system (QBMPS) in Kenya. Private costs and benefits were estimated using a partial budget analysis. From a private perspective, results show that participating farmers benefit most from the QBMPS, with a net profit of about USD 0.02 USD/kg) from an additional investment cost USD 0.0125/kg to produce Grade A milk. The cooperatives and processor have a net loss of 0.025 USD/kg milk, mainly driven by testing and initial investment costs. Disease burden was calculated using the Disability Adjusted Life Years (DALYs), while direct and indirect health costs were calculated using an incidence-based analysis. We estimate an annual disease burden of 53,000 DALYs from milk-related infectious diseases and a generated health benefit of 13 KES/kg due to reduction in disease incidence if 15% of Kenya’s milk goes through the QBMPS. These health benefits justify public and private sector support for a QBMPS.