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A comparison of dairy policy and development in South Asia and East Africa: lessons for a pro-poor dairy policy agenda

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Presentation by Steven J. Staal at the National dairy forum, Addis Ababa, Ethiopia, 23-24 November 2010.

Presentation by Steven J. Staal at the National dairy forum, Addis Ababa, Ethiopia, 23-24 November 2010.

Published in: Technology, Business

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  • 1. A comparison of dairy policy and development in South Asia and East Africa: lessons for a pro-poor dairy policy agenda
    Steven J. StaalInternational Livestock Research Institute
    Ethiopian National Dairy Forum, Addis Ababa, 23-24 Nov. 2010
  • 2. Outline of presentation
    Alternative models of dairy development
    Trend analysis to compare E Africa and S Asia dairy development and policy
    Results and implications
    An agenda for pro-poor dairy development
  • 3.  
    Single objective enterprise model
    Multiple objectives, farm-household model
    Often subsidized
    Few subsidies, may be taxed indirectly
    Capital intensive
    Labor intensive
    Strong economies of scale
    Weak economies of scale
    Human over-nutrition, threat to human health
    Human under-nutrition, sustaining human health
    System nutrient surpluses, threat to environment
    System nutrient deficits, sustaining natural resources
    Alternative models of dairy development
    Commercial/modernSmallholder/informal
    Production profile
    Nutrient and nutrition profile
  • 4. Value added products, highly processed
    Low cost products, traditional processing
    High relative demand for food safety/quality
    Low relative demand for food safety/quality
    Highly regulated and monitored
    Largely unregulated, unrecorded
    Over-represented: loud voice in domestic and international policy
    Invisible: little voice in domestic or international policy
    Stagnant future prospects?
    Growing future prospects?
    Alternative models of dairy development(cont)
    Commercial/modern Smallholder/informal
    Demand and product profile
    Policy profile
    Growth and opportunity profile
  • 5. An analysis of dairy development trends
    Staal, S. J., Nin Pratt, A., and Jabbar, M.2008. Dairy Development for the Resource Poor: A Comparison of Dairy Policies and Development in South Asia and East Africa. PPLPI Working Paper No. 44. (3 part series), FAO, Rome
    Data used from five South Asian countries and ten East African countries, based on FAOSTAT and the World Bank’s World Development Indicators database.
    A reduced form of the model relating milk supply (in litres) and its key determinants in the long run was estimated for five countries in South Asia (Bangladesh, India, Nepal, Pakistan and Sri Lanka) and 10 East and Southern African Countries (Kenya, Ethiopia, Sudan, Uganda, Tanzania, Malawi, Zambia, Mozambique, Zimbabwe, Madagascar) over 30 years (1970-1999)
  • 6. Modeling dairy development – main variables
    Indicator of dairy development
    Annual growth rate of milk production 1970-1999
    Dairy policy
    Milk producer's price/import price
    Macro policy
    Openness (Trade as % of GDP)
    GDP growth
    Domestic credit to private sector (% of GDP)
    Demand
    GDP per capita (US$, Yr 2000)
    Share of formally processed milk in total output (%)
    Urbanisation
  • 7. Main variables (cont)
    Input markets and labour
    Feed supplied to livestock (kgs of maize equivalent per animal)
    Mechanisation - number of tractors
    Manufacture Value Added per worker in agriculture ($)
    Technology and human capital
    Yield (lt/milking animal)
    R&D in agriculture per hectare ($)
    Life expectancy (years)
    Milking animals (number of heads)
  • 8. Dairy production trends – East Africa
  • 9. Dairy production trends – Southern - East Africa
  • 10. Dairy production trends – South Asia
  • 11. Results – East Africa
    Positive determinants of dairy trends in East Africa
    GDP growth and GDP per capita (2000 US $)
    Urbanisation
    Life expectancy (years)
    Yield (lt/milking animal)
     Negative factors include:
    Openness (Trade as % of GDP)
    Domestic credit to private sector (% of GDP)
    Share of formally processed milk in total output (%)
    Manufacture value added per worker in agriculture
  • 12. Results – East Africa (cont)
    Variables with no significant association:
    Milk producer's price/import price
    Feed supplied to livestock (tons of maize eq. Per head)
    Domestic demand (Mt)
    R&D in agriculture per hectare ($)
    Milking animals (heads)
  • 13. Results – South Asia
    Positive determinants of dairy trends in South Asia:
    GDP growth (%)
    Domestic demand (litres)
    Yield (lt/milking animal)
    Feed supplied to livestock (tons of maize equivalent)
    Number of tractors per hectare
    Milking animals, cows and buffalos (heads)
     Negative factors include:
    R&D in agriculture per hectare ($)
     
  • 14. Results – South Asia (cont)
    Variables with no significant association:
    Milk producer's price/import price
    Openness (Trade as % of GDP)
    Domestic credit to private sector (% of GDP)
    GDP per capita (2000 US$)
    Illiteracy rate (%)
    Share of formally processed milk in total output (%)
  • 15. Summary of dairy development comparisons – East Africa
    Demand-related factors play a key role, as seen in countries with the fastest growth in milk production (Sudan, Kenya and Uganda).
    Formal milk markets, input markets, technology and policy do not explain the differences between fast growing countries and the rest.
    This suggests that adjusting supply to type and quality of products demanded, expanding demand by reducing consumer prices and reducing transaction costs should be a necessary condition to expand the dairy sector in East Africa.
  • 16. Summary of dairy development comparisons – South Asia
    Consumption of dairy products higher than in EA, and demand has driven growth for the past 30 years in all countries.
    Unlike the rest, India and Pakistan linked the Green Revolution to successfully expand production which is reflected in the contribution of input markets and technology to growth in milk production.
  • 17. Key lessons for dairy development and policy - Markets  
    Demand side change is key
    The analyses highlight the importance of demand, brought about either through growth in GDP/capita or exports, or through increased urbanization.
    Supply side interventions can be over-credited with bringing about growth
    The Indian milk revolution, for example, may be largely a result of demand side forces, plus links to technology trends in crop production
    Knowing the real markets, rather than assuming
    Demand is based on local perceptions and traditions
    Market understanding should be based on local realities, not based on assumed duplication of the trends observed elsewhere.
    Where poor people are the main consumers, interventions to provide low-cost products are likely to simulate dairy development.
  • 18. Key lessons for dairy development and policy - Technology 
    Improved dairy animals and technology.
    Nearly all strong dairy development growth scenarios are associated with increased yield per animal and genetic improvement.
    Use of exotic cattle genes is a rapid and potentially sustainable path to higher productivity, even among resource poor farmers, and in warm climates
    Feed and fodder – mixed results overall
    Only India and Pakistan were able to link dairy development with crop sector growth
    Kenya case study showed that planted fodder technology played a key role
    India case study showed that crop residues played main role.
    Avenue for increased productivity may be through improved breed of “food-fodder” crop varieties, bred to produce higher crop residues with better feed characteristics
  • 19. Key lessons for dairy development and policy – Traditional markets
    One key finding
    Traditional/informal milk markets played a key role in dairy development in both regions and in most countries.
    Strongest growth - Pakistan, India, Sudan, Kenya, and Uganda, traditional markets control over 80% of marketed milk
    Evidence suggests traditional market dominance is due to continued strong demand for the products they offer. Strong demand for traditional products by some high income consumers suggests traditional markets will continue.
    No evidence that formal market structures are required to stimulate dairy development, in fact negative role in E Africa and no role in Pakistan. than have the traditional, informal market.
    Policies that tolerate such markets, but also support increased quality and food safety are likely to be both pro-poor and pro-growth in nature. Policies that simply oppose and attempt to police such markets, are likely to impact negatively on both small farmers, consumers and of course small scale market agents.
  • 20. Key lessons for dairy development and policy – Dairy coop development
    Mixed message on dairy coop development.
    In Kenya, evidence that dairy coops played role in providing a stable market environment and delivering farmer services.
    In India no empirical evidence that coop development was associated locally with dairy development as measured, found to be associated with genetic improvement in dairy animals.
    No evidence that dairy coops are more effective than other market channels in linking poor farmers to output markets.
    The mixed experience suggests that dairy cooperative development is dependent on good cooperative management, on honest and effective investment of resources, and on accountability to the interests of the farmer members.
     
  • 21. Key lessons for dairy development and policy – Smallholder competitiveness
    Smallholders are competitive.
    Ample evidence that smallholder dairy producers are competitive generally, and are likely to endure for some time to come
    Particularly where the opportunity costs of family labour and wages remain low.
    Continued dominance of role of smallholders in all the countries studied, even in the context in some cases of steady economic growth.
    Policy-makers and investors should resist the assumption that larger scale production will “more efficiently” meet growing consumer demand. Instead, that growing demand should be used as a mechanism to help continue and sustain smallholder dairy enterprises.
  • 22. An Agenda for Pro-Poor Dairy Policy and Development
    Objectives of pro-poor dairy development
    Employment creation in rural and periurban areas both on farm and along market distribution and value chains.
    Reliable income generation and asset accumulation for resource-poor farmers.
    The provision of low-cost and safe dairy products to resource-poor consumers.
    Improved natural resource management and sustained farming systems through dairy cattle-mediated nutrient cycling.
    Improved child nutrition and cognitive development in resource-poor households.
  • 23. Elements of a model for pro-poor dairy development
    Build on traditional dairy product consumption habits and preferences, at the same time as promoting demand for new products.
    Support development and evolution of traditional domestic markets for milk and dairy products, at the same time as promoting appropriate formal and export market development.
    Emphasize and support the role of smallholder dairy production as primary means of rural income generation and sustaining the intensification of mixed crop-livestock systems.
    Appropriate, improved animals and the systems required to deliver those to smallholders
    Fodder technologies and exchange mechanisms for fodder and crop residues
    Institutional mechanisms for enhancing smallholder participation in growing local markets – cooperatives but also contract farming, other forms of farmer groups.
  • 24. Thank you