Livestock Market Opportunities for the Poor The LiveSTOCK Xchange 2011: The Sere Legacy Steve Staal, Derek Baker and Ranjitha Puskur ILRI, Addis Ababa, 9-10 November 2011
Key Issues & Questions Customer is King: Complex dual reality of increasing consumer expectations for quality, safety but continued dominance of traditional markets – how do we find the right balance? All the world’s now a Value Chain: increasing client demand for “value chain analysis and interventions”. Do we have the right tools? How do we ensure that VC performance includes positive impact on poor and women? (do we keep endlessly hiring economists?) Would you recognize an Innovation if one walked by?: New fads are Innovation Platforms and Hubs. Do we know whether they work? If so, do we know how to “do them.” Export your way to Wealth: Policy makers love the idea of some other country buying all their goods. How large and how viable are the opportunities and do they really matter for the poor? I’m Competitive but really Poor: Seems that poverty is still key to smallholder competitiveness. Can we drive technology uptake and market access so that can make farmers competitive but not-so-poor?
This session Following this intro, we will have a presentation covering highlights of 4 Briefs 1. Animal-source foods in the developing world: demand for quality and safety 2. Smallholder competitiveness and market-driven uptake of technology: strong now, but having to raise the game going forward 3. Changing approaches to pro-poor livestock market development: Innovation and upgrading in the value chain 4. The interface of market access and SPS requirements: lessons from recent ILRI research Then we will follow a World Café session to generate thinking and feedback on the following questions: What are the knowledge gaps where more research and evidence are needed? Are we missing any key issues? Where we have evidence, what should be our priorities be to have most positive impact for the poor? Are there new partnerships or audiences we should be targeting? How do we better leverage evidence for impact?
Smallholder competitiveness and market-driven uptake of technology: we can compete. Smallholder competitiveness is grounded in The “household model” of production (multiple objectives, multiple benefits) Multiple benefits, maximum use of low cost resources and farm synergies, interactions, not completely dependent on profits The large scale “enterprise model” of production (1 objective and benefit=profit) Capital intensive , mechanization and economies of scale advantages only work when labor costs are high Guess what, where we work labor costs are generally are not high Not just dairy: Competitiveness results across species, systems Pig production in Vietnam Small producers (1-2 sows or <15 growers) have lower unit costs than larger (4 sows, <40 growers) Industrial production cannot meet demand. Best scenario shows only 12% of supply in 10 year. Industry will depend on smallholders for years (and years) Dairy production in Kenya Comparison of 3 levels of intensification of dairy production revealed above-normal profit of 19% to 28% of revenue across all systems – each using different production strategies. Additionally , non-market benefits (finance, insurance, manure, traction) add 16% to 21% on top of revenue Guess what: result is over 1 Million smallholder dairy farmers, only a few dozen industrial dairy farmers (and that number is falling) Poultry and dairy production in Kenya Analysis of scale of production and efficiency : no difference in efficiency or profitability of small vs large
Smallholder competitiveness and market-driven uptake of technology: improving productivity Technology uptake that drives competitiveness Sweet potato feed technology for pigs in China Both raises offtake (2-7 more pigs for slaughter/yr) and lowers unit cost of production Improving productivity and market success of livestock producers in Ethiopia Diagnostic studies led to integrated interventions: 20% higher sheep offtake, 2-3 times increase in number of market-oriented dairy producers, 400% increase in no of households in cattle fattening Targeting dairy technology and policy for impact Integrated GIS and household analysis showed that improved dairy does not depend on land holding, or having male household head – its for anyone. Also identifies which technologies are likely to fit best where, and among which hhs. No blanket approach, which has undermined most livestock development strategies. Policy implications: each 1 km of poor rood in between lowers dairy uptake by 0.6 % Conclusions The “end of smallholders” is a myth. Challenge anyone who believes it. Targeted studies consistently demonstrate competitiveness of smallholders across species and systems. However, widespread, aggregated data are not available. Competitiveness is still tied to having cheap labor, and so to generally being poor. However, technologies are available that can increase profitability, increase incomes and assets – in many cases are examples of being lifted out of poverty. Challenge More widespread understanding of smallholder competitiveness, to re-orient investment and policy. Who else is going to supply the growing demand? Better targeting and scaling up of technology interventions – blanket approaches, perceived wisdom still prevail.
Quality and safety in developing country animal-source foods: are consumers there, aware, and do they care? Developing country consumers are aware of product quality and safety – and have their own ways of assessing it are prepared to pay for it – 50-75% prepared to pay 10% price premium for pork with improved hygiene. 36% would do so for use of traditional feeds. Revealed price premia typically 5-25% for attributes, and additive across attributes. differ in quality and safety preferences – by consumer characteristics, and by uses of the product. Young people prepared to pay for animal welfare practices. Informal markets remain markets of choice for many poor consumers, and are outlets for sales by poor producers (>85% on E Africa and >70% in India) have specific characteristics that govern producers’ capacity to supply high-quality products (trader networks, some tight/some loose linkages between buyers and sellers, preferences for fresh or live product) feature businesspeople that can and do change practice if incentives are right – camel meat sellers in Kenya reported higher sales from improved quality and safety practices; cleanliness of premises and clothing were sought after by consumers
Quality and safety in developing country animal-source foods: how do we get the consumers’ valuation of the piggies to market?Information motivates consumer perceptions of value – takes many forms: “assurance” as well as “measurement” needs packaging as grades and standards – weights of animals are one starting point needs marketing as certification, labeling and branding – most sought- after attribute in studies of Kenyan, Ethiopian, and Tunisian meat… was a government inspection stamp.Conclusions pro-poor opportunities exist for high-value products, but co-ordination is needed highly segmented markets offer many different such opportunities, but these need describing and promoting to all agents in the chain consumers’ preferences may not be reflected in traders’ or retailers’ conduct – new tools are needed to assess this; training has shown some success
“What‟s Kiswahili for „quality‟?” % of consumers identifying major factorsin meat purchase at two locations in Kenya, by income group
Value chains can deliver the milk, meat (and fish)…but they need upgrading to deliver development outcomesThe value chains framework – a means to an end ubiquitous in development livestock value chains have unique and complex features – which offer opportunities targeting multiple value chain stages has a positive influence on success of pro-poor livestock development projects Consumers
Value chains need upgrading…need new modes and methods Evolving approaches sharpening our focus on targeting smallholders, women and the marginalized rapid whole chain appraisal has provided a good basis nuanced approaches to focus on specific issues e.g., disease impact statistical work and modeling, and network analysis have added more structure and required formal definition of value chain performance (CRP 2) piloting to become a major research and communication mechanism (CRP 3.7)
Value chains need upgrading… are these mechanisms the gamechangers??New value chain arrangements (– don’t say “institutions”) innovation platforms as a communication and co- ordination mechanism – jury is still out! service hubs to enable market access and engage private sector – what would it look like in a small ruminant context? scaling out and up? BDS as a development tool – who has the incentive to make change? utilizing the trader environment – who are these people?
Value chains need upgrading… what next??Where do we need to go from here? new partnerships and partners – and engaging the private sector urgent need for performance measures and metrics, and methods – a leadership opportunity, especially with CRP 3.7 meeting demand from development agencies – especially with proven models
International trade in livestock products: if a little is good, then a lot can be… better (perhaps) Control of transboundary disease is expensive, but can yield benefits beyond the target species/system may benefit only the better off favors in-country meat processing SPS may not be a real barrier to increased exports, because feeds represent a much more significant cost than SPS (5% of product value) unit costs are raised by high losses and low productivity – usually due to more mundane diseases, and nutrition Regional markets need more study, but they feature high unit transaction and transport costs. Tariff and NTB reductions yield the greatest benefits when transactions costs are also reduced they lack pre-requisite regional enabling policy and business environment results of one risk study indicate that regional trade is not a threat to animal health good examples are available from some traditional systems, with strong governance (despite weak government!)
International trade in livestock products: a goal that yields other benefitsConclusions productivity, through feeding and animal health, are the building blocks of trade success – hence policy support can be borrowed from export promotion this must be complemented with low-cost transactions – ILRI can help identify the necessary policies and public-private-partnerships co-ordinated industry strategy will help identify target markets/products/quality levels several new ILRI initiatives in Southern Africa seek to extend benefits of trade to the poor, by enhancing value chain co-ordination.
“We work for the governance”Chilled meat ready for air transport from Somalia
“How much per kg?”High costs of transport and logistics