The document discusses the competitiveness of smallholder dairy farmers in East Africa, highlighting their significant role in milk production amidst rising global demand. It explores factors affecting competitiveness, including production costs and market orientation, while emphasizing the opportunities presented by the livestock revolution. Recommendations for enhancing competitiveness include improving economies of scale, access to services, infrastructure, and supportive policies.

1. Competitiveness of smallholder dairy farmers in East AfricaESADA Conference, Kigali, 19th May 2010Isabelle BaltenweckInternational Livestock Research Institute

2. IssuesSmall scale dairy farms dominate production in most developing countries, including in East AfricaCan they compete internationally?What factors influence competitiveness?What is competitiveness?

3. OutlineIncreasing demand for milk and smallholders’ opportunities to meet the demandImportance of smallholders in total livestock (milk) productionDairy: milk.. and other benefitsCompetitiveness: prices and costs of productionConclusions3

4. The near future: the Livestock RevolutionExpanding populations, incomes and urban households across developing countries particularly in AsiaThis is driving increased demand for livestock products, including milkMuch greater demand growth than for most crop products

5. Percentage Increase in Total Demand for Livestock Products 1993 – 2020Developed countriesDeveloping countries% increase in demand

6. Implications of the Livestock Revolution for milk production in Developing CountriesModel predicts that deficit countries will generally import feed rather than livestock products

7. Increase in production will thus occur mostly near where increase in demand occurs

8. As a consequence, Developing Countries will produce 52% of global milk in 2020, up from 32% in 1993

9. Presents huge apparent opportunities for milk producers in Developing Countries (if they can compete)Smallholders contribution to livestock production and market orientation7Smallholders dominate the production of livestock products

10. However, only about half sell milk regularly (60% Kenya and 40 % Rwanda and Uganda)Dairy production’s role in sustaining mixed small farmingSystem boundariesINPUTSFertiliserSeedsEtc..FieldCattleINPUTSFeedFodderINTERNAL FLOWSFeed / FodderOrganic fertiliser (Manure)OUTPUTSMilkBW gainManureLossesOUTPUTSHarvest Losses

11. Non-marketable smallholder production value often not consideredManure – May equal up to 30% the value of milk produced

12. Home consumption

13. Display of status

14. Insurance & financingNon-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)

15. Key Dairy Markets mostly Informal 10 Traditional market share % SSA Kenya 88 Tanzania 98 Uganda 90 L. America Mexico 33 Nicaragua 86 Costa Rica 44 Brazil 44 S. Asia India 85 Sri Lanka 40 Pakistan 98

16. Comparison of % imports in countries with strong vs. weak dairy traditions11Source: FAO dataImplication: imports cannot easily compete with traditional productsSome survey dataGeographic distribution of surveyed households

17. Competitiveness: farm- gate prices13Average milk prices by buyer ($ cent per litre)- 2008 data

18. Competitiveness: costs of producing milk (US$)14IFCN 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.

19. Breakdown of various costsLabour constitutes the highest cost of production in Uganda & Rwanda, while animal health cost takes the largest share in Kenya

20. Aims of smallholder dairy production?It’s about MilkCompetitiveness, even in very difficult environsBest use of underutilized local resources – connected to cropsBut it’s also about PeopleEmploymentBoth on farm and along supply chainLivelihoodsAssets and nutrients

21. 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:

22. Improving economies of scale (e.g. through collective action)

23. Access to services and appropriate technologies

24. Improving infrastructure

25. Creating an overall enabling policy and institutional environment for all participants in the sectorThank you18