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Competitiveness of smallholder dairy farmers in East Africa

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Presentation by Isabelle Baltenweck to the 6th African Dairy Conference & Exhibition, Kigali, Rwanda, May 19-21, 2010.

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Competitiveness of smallholder dairy farmers in East Africa

  1. 1. Competitiveness of smallholder dairy farmers in East Africa<br />ESADA Conference, Kigali, 19th May 2010<br />Isabelle Baltenweck<br />International Livestock Research Institute<br />
  2. 2. Issues<br />Small scale dairy farms dominate production in most developing countries, including in East Africa<br />Can they compete internationally?<br />What factors influence competitiveness?<br />What is competitiveness?<br />
  3. 3. Outline<br />Increasing demand for milk and smallholders’ opportunities to meet the demand<br />Importance of smallholders in total livestock (milk) production<br />Dairy: milk.. and other benefits<br />Competitiveness: prices and costs of production<br />Conclusions<br />3<br />
  4. 4. The near future: the Livestock Revolution<br />Expanding populations, incomes and urban households across developing countries particularly in Asia<br />This is driving increased demand for livestock products, including milk<br />Much greater demand growth than for most crop products<br />
  5. 5. Percentage Increase in Total Demand for Livestock Products 1993 – 2020<br />Developed countries<br />Developing countries<br />% increase in demand<br />
  6. 6. Implications of the Livestock Revolution for milk production in Developing Countries<br /><ul><li>Model predicts that deficit countries will generally import feed rather than livestock products
  7. 7. Increase in production will thus occur mostly near where increase in demand occurs
  8. 8. As a consequence, Developing Countries will produce 52% of global milk in 2020, up from 32% in 1993
  9. 9. Presents huge apparent opportunities for milk producers in Developing Countries (if they can compete)</li></li></ul><li>Smallholders contribution to livestock production and market orientation<br />7<br /><ul><li>Smallholders dominate the production of livestock products
  10. 10. However, only about half sell milk regularly (60% Kenya and 40 % Rwanda and Uganda)</li></li></ul><li>Dairy production’s role in sustaining mixed small farming<br />System boundaries<br />INPUTS<br />Fertiliser<br />Seeds<br />Etc..<br />Field<br />Cattle<br />INPUTS<br />Feed<br />Fodder<br />INTERNAL FLOWS<br />Feed / Fodder<br />Organic fertiliser (Manure)<br />OUTPUTS<br />Milk<br />BW gain<br />Manure<br />Losses<br />OUTPUTS<br />Harvest <br />Losses<br />
  11. 11. Non-marketable smallholder production value often not considered<br /><ul><li>Manure – May equal up to 30% the value of milk produced
  12. 12. Home consumption
  13. 13. Display of status
  14. 14. Insurance & financing</li></ul>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)<br />
  15. 15. Key Dairy Markets mostly Informal <br />10<br /> Traditional market share % <br />SSA Kenya 88 <br /> Tanzania 98 <br /> Uganda 90 <br />L. America Mexico 33<br /> Nicaragua 86 <br /> Costa Rica 44 <br /> Brazil 44 <br />S. Asia India 85<br /> Sri Lanka 40<br /> Pakistan 98 <br />
  16. 16. Comparison of % imports in countries with strong vs. weak dairy traditions<br />11<br />Source: FAO data<br /><ul><li>Implication: imports cannot easily compete with traditional products</li></li></ul><li>Some survey data<br />Geographic distribution of surveyed households<br />
  17. 17. Competitiveness: farm- gate prices<br />13<br />Average milk prices by buyer ($ cent per litre)- 2008 data<br />
  18. 18. Competitiveness: costs of producing milk (US$)<br />14<br />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. <br />
  19. 19. Breakdown of various costs<br />Labour constitutes the highest cost of production in Uganda & Rwanda, while animal health cost takes the largest share in Kenya<br />
  20. 20. Aims of smallholder dairy production?<br />It’s about Milk<br />Competitiveness, even in very difficult environs<br />Best use of underutilized local resources – connected to crops<br />But it’s also about People<br />Employment<br />Both on farm and along supply chain<br />Livelihoods<br />Assets and nutrients<br />
  21. 21. Conclusions<br /><ul><li> 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. 22. Improving economies of scale (e.g. through collective action)
  23. 23. Access to services and appropriate technologies
  24. 24. Improving infrastructure
  25. 25. Creating an overall enabling policy and institutional environment for all participants in the sector</li></li></ul><li>Thank you<br />18<br />

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