competitiveness of smallholder dairy farmers in east africa
DESCRIPTION
Presentation by Isabelle Baltenweck to the 6th African Dairy Conference & Exhibition, Kigali, Rwanda, May 19-21, 2010.TRANSCRIPT
Competitiveness of smallholder dairy farmers in East Africa
ESADA Conference, Kigali, 19th May 2010
Isabelle BaltenweckInternational Livestock Research Institute
Issues
Small scale dairy farms dominate production in most developing countries, including in East Africa Can they compete internationally? What factors influence competitiveness? What is competitiveness?
Outline
Increasing demand for milk and smallholders’ opportunities to meet the demand
Importance of smallholders in total livestock (milk) production
Dairy: milk.. and other benefits Competitiveness: prices and costs of
production Conclusions
3
The near future: the Livestock Revolution
Expanding populations, incomes and urban households across developing countries particularly in Asia
This is driving increased demand for livestock products, including milk
Much greater demand growth than for most crop products
Percentage Increase in Total Demand for Livestock Products 1993 – 2020
-10
0
10
20
30
40
50
60
Meat Milk
-10
0
10
20
30
40
50
60
Meat Milk
-10
0
10
20
30
40
50
60
Meat Milk
Developing countries
Developed countries
% in
crease
in
dem
an
d
Implications of the Livestock Revolution for milk production in Developing Countries
Model predicts that deficit countries will generally import feed rather than livestock products
Increase in production will thus occur mostly near where increase in demand occurs
As a consequence, Developing Countries will produce 52% of global milk in 2020, up from 32% in 1993
Presents huge apparent opportunities for milk producers in Developing Countries (if they can compete)
Smallholders contribution to livestock production and market orientation7
Region % of Production by Small-holder / poor farmers
(definition of ‘small-holder’ in brackets) Beef Chicken (meat)
Milk (cow)
Small Rum. (meat) Eggs
Eastern Africa (≤ 6 milking animals) 60 90 60-90 56 87
Bangladesh (< 3 ha of land) 65 77 65 78 77
India (< 2 ha of land) 75 92 69 92 71
Smallholders dominate the production of livestock products
However, only about half sell milk regularly (60% Kenya and 40 % Rwanda and Uganda)
Dairy production’s role in sustaining mixed small farming
INPUTSFertiliserSeedsEtc..
OUTPUTSHarvest
Losses
Field
INTERNAL FLOWSFeed / Fodder
Organic fertiliser (Manure)
System boundaries
OUTPUTSMilk
BW gainManureLosses
INPUTSFeedFodder
- -
Cattle
Non-marketable smallholder production value often not considered
• Manure – May equal up to 30% the value of milk produced
• Home consumption• Display of status• Insurance & financing
Non-cash income can be as high as 78% of annual income where local market linkages are weak and opportunities for labour are limited (Moll et al., 2001)
Key Dairy Markets mostly Informal
10
Traditional market share %SSA Kenya 88
Tanzania 98Uganda 90
L. America Mexico 33Nicaragua 86 Costa Rica 44Brazil 44
S. Asia India 85Sri Lanka 40Pakistan 98
Comparison of % imports in countries with strong vs. weak dairy traditions
11
Implication: imports cannot easily compete with traditional products
Source: FAO data
Geographic distribution of surveyed households
Some survey data
Competitiveness: farm- gate prices
13
26
16
2018
0
3028 29
3235
28
24 25 26 25
0
5
10
15
20
25
30
35
Cent
s per
litr
e
Uganda Rwanda Kenya
Individualcustomers
Private MilkTraders
Dairy Co-operatives
Chilling Plants
other
Average milk prices by buyer ($ cent per litre)- 2008 data
Competitiveness: costs of producing milk (US$)
14
Milk produced
per hh(Lts)
Total Revenue
($)
With family labour Without family labour
Totalcost($)
Gross margin
($)
Costper litre
($)
TotalCost($)
Gross margin
($)
Cost perlitre ($)
A B C D=B-C E=C/A F G=B-F H=F/A
Uganda 2,552 685 470 214 0.18 214 471 0.10
Rwanda 4,083 1,462 1,262 200 0.31 947 515 0.25
Kenya 2,849 846 455 391 0.16 262 584 0.11
IFCN data: globally, average cost of milk production ranges from $0.14 to $0.60, with weighted average of $0.28. Africa has the lowest and Western Europe the highest costs.
Breakdown of various costs
Uganda Rwanda Kenya 0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
GROSS MARGIN
GROSSMARGIN
GROSS MARGIN
Cost ($ per litre) of milk production by country
Gross margin
Breeding cost
Extension services cost
Animal health cost
Water cost
Concentrates cost
Fodder cost
Hired labour
Housinng cost
Dollars
($
)
Labour constitutes the highest cost of production in Uganda & Rwanda, while animal health cost takes the largest share in Kenya
Aims of smallholder dairy production?
It’s about Milk Competitiveness, even in very difficult
environs Best use of underutilized local resources –
connected to crops But it’s also about People
Employment Both on farm and along supply chain
Livelihoods Assets and nutrients
Conclusions
Smallholder dairy producers in East Africa and elsewhere in developing countries can effectively compete, mainly due to strong local demand. This can further be enhanced by:
• Improving economies of scale (e.g. through collective action)
• Access to services and appropriate technologies• Improving infrastructure • Creating an overall enabling policy and
institutional environment for all participants in the sector
Thank you
18