Dairying in Asia: Opportunities, challenges and some lessons

Vinod Ahuja

Livestock Policy OfficerFood and Agriculture Organization of the UN

Regional Office for Asia and the PacificBangkok

Growth in global dairy

production:

0

50

100

150

200

250

300

350

400

Developed Countries Developing

Countries

Mil

lio

n t

on

nes

1995 2007

With Asia leading the way

0

50

100

150

200

Asia LAC SSA MENA

1995

2007

Consolidating its global

position in milk production

0

100

200

300

400

500

600

700

800

1995 2000 2005 2009

Million tonnes

Asia Rest of the world

20%

36%

Within Asia

0

50

100

150

200

250

300

1995 2000 2005 2009

South Asia East Asia

South East Asia Central Asia

Western Asia

63%

66%

21%

Main contributors . . .

0

50

100

150

200

250

300

1981 1991 2001 2009

India Pakistan China Others

44%46%

26%

14%

37%

16%

But wide range of growth rates . . .

0 2 4 6 8 10 12 14 16

Vietnam

China

Bangladesh

Philippines

Thailand

India

Pakistan

Indonesia

Nepal

Mongolia

Sri Lanka

CAGR (percent, 2001-09)

Consumption constantly

outpacing production

0

5

10

15

20

25

1990 1995 2000 2005 2007

Mil

lio

n t

on

nes

Asian dairy imports

Yet tremendous room for

consumption growth

0

50

100

150

200

250

Dev

elop

ed

Pak

ista

nM

ongo

liaIn

dia

Nep

al

Sri

Lan

kaK

orea

Thai

land

Chi

naM

yanm

arV

iet N

am

Ban

glade

shM

illio

n t

on

nes

What about productivity?

Milk productivity across major regions

of the world

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

1961 1971 1981 1991 2001 2007

Kg/anim

al/year

Asia

Africa

Europe

North America

Oceania

World

0

500

1000

1500

2000

2500

3000

1961 1971 1981 1991 2001 2009

Kg/a

nim

al/year

Wide variation across countries

Thailand

Vietnam

China

India

Pakistan

Sri Lanka

Bangladesh

Huge opportunities for

� Productivity gains

� Quality gains

� Substituting imports

� Spreading risks, improving competitiveness

� Protecting environment through mixed/integrated farming

� Nutrition, income, jobs . . .

�

�

� Continuing strong positive outlook for global dairy industry but increased volatility in international prices

� Rapidly declining common resource base and growing feed costs

� Increasing environmental concerns and enforcement

� Increased consumer demand for food safety, convenience, quality

� Growing intensity and pressure to intensify and scale up livestock systems for higher outputs per unit of land/ water/labour

� Despite rapid growth and scaling up smallholder continue to produce over 90 percent of local milk marketed in Asia

Changing production and market

landscape

India: 70 million households have dairy cattle, 52 million

linked to smallholders (13 million to coops).

China: 2 million dairy farms in 2005 with farms < 20 cows

accounting for 65% of milk production.

Philippines: 13,000 families engaged in smallholder dairy with employment of 17,000.

Pakistan: 55 million smallholders

Mongolia: 2 million farmers in 2006 (80% hold dairy cattle).

Sri Lanka: 70% of 3.5 million smallholder own dairy cows.

Bangladesh: 80 million households are smallholder dairy farmers.

Smallholder dairy critical to rural sectors

How do small producers feature in

various countries?

Where do we go from here?

Lessons learned case studies and regional

strategy and investment plan for

smallholder dairy development in Asia

Philippines: Dairy Development Zones (targeted development based on priority indicators).

Pakistan: Haleeb case (private sector linkages to smallholder holders)

India: Anand model linked to Operation Flood activities.

Thailand/Bangladesh: strong role of cooperatives (supported by development interventions)

Sri Lanka: an example of very limited support for dairy until recently

China: Inner Mongolia/Heilongjiang-examples of third part milk collection stations; dairy barns, private sector investment linkages to smallholders.

Vietnam: strong dairy development through government support (down to local levels) supported by privatization of markets

Mongolia: total cow to consumer approach; strong socio-cultural aspects, each link in dairy chain has to be sustainable and profitable; generic branding/marketing

What are some of the models?

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8

Bangladesh

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1.5

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2.5

3

3.5

4

4.5

5

Year-

to-y

ear gro

wth

(%

)

00-0

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01-0

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02-0

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03-0

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04-0

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05-0

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06-0

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07-0

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India

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Year-

to-y

ear gro

wth

(%

)

00-0

1

01-0

2

02-0

3

03-0

4

04-0

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05-0

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06-0

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07-0

8

Pakistan

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2

3

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5

6

Year-

to-y

ear gro

wth

(%

)

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01-0

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Sri Lanka

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3

4

5

6

Year-

to-y

ear gro

wth

(%

)

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01-0

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02-0

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03-0

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05-0

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06-0

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Philippines

1995: Creation of national dairy authority

1995-2000: Experimentation with large commercial dairy farms

2001: Launch of dairy zone model

-16

-14

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07-0

8

Mongolia

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-4

-2

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12

14

Year-

to-y

ear gro

wth

(%

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Thailand

0

5

10

15

20

25

Year-

to-y

ear gro

wth

(%

)

97-9

8

98-9

9

99-0

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China

0

5

10

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20

25

30

Year-

to-y

ear gro

wth

(%

)

97-9

8

98-9

9

99-0

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Vietnam

What are some general lessons?

� It is important to carefully target smallholder dairy development interventions (Philippines). Same is true of pro-poor, social programmesneed to be carefully targeted and are usually only sustainable if linked to remunerative markets (Bangladesh)

� Governments have to careful about interventions in the sector, including pricing policies (Pakistan) and dairy cow loan schemes (Bangladesh, Vietnam, Mongolia)

� In some cases, Governments need to be concerned about monopoly power of processors (floor pricing for milk might work in this situation) (China)

� Government investment in large operations usually does not work (Philippines)

� School milk programmes, when implemented with a focus on smallholders, can support dairy development (as well as generating long term demand for dairy products) (Thailand, Philippines)

Some lessons from FAO studies

� Industry institutions and smallholder groups (associations, cooperative etc) can have a pivotal role in supporting dairy development (India, Philippines, Thailand)

� Creative and carefully thought out linkages with private sector (which includes technical assistance, financial support) can allow smallholder to move up into a different marketing chain (Philippines, Pakistan)

� Smallholders need an accessible and affordable complete package of support services (animal health, breeding, extension, finance, etc) to produce milk competitively (Bangladesh, India, Mongolia).

� Milk quality and attractive product branding/presentation are pre-requisites for persuading modern urban consumers to switch from imports to milk produced by local smallholders (China, India, Mongolia, Philippines)

� Low tariff regimes facilitating importation of cheap dairy products have hampered development of local dairy industry

Some lessons from FAO studies

Key strategic pillars

Human resources

and knowledge

management

Enabling environment

Productivity and

competitiveness

Market linkages

FAO-CFC-APHCA partnership

FAO

CFC

APHCA

National

Govern-

ments

Milk

producers

Dairy Asia

Network

Project funding

TCP on

School milk

Project

implementation support and leadership

Elements of the CFC proposal

• Country coverageCountry coverageCountry coverageCountry coverage

• Thailand, Myanmar and BangladeshThailand, Myanmar and BangladeshThailand, Myanmar and BangladeshThailand, Myanmar and Bangladesh

• Three componentsThree componentsThree componentsThree components

• Milk Production Enhancement Milk Production Enhancement Milk Production Enhancement Milk Production Enhancement

• Milk Marketing EnhancementMilk Marketing EnhancementMilk Marketing EnhancementMilk Marketing Enhancement

• Capacity Building and Information DisseminationCapacity Building and Information DisseminationCapacity Building and Information DisseminationCapacity Building and Information Dissemination

• Duration: 4 yearsDuration: 4 yearsDuration: 4 yearsDuration: 4 years

Elements of the FAO proposal on

school milk

• Country coverageCountry coverageCountry coverageCountry coverage

• Thailand, Myanmar and BangladeshThailand, Myanmar and BangladeshThailand, Myanmar and BangladeshThailand, Myanmar and Bangladesh

• The componentsThe componentsThe componentsThe components

• Review of school milk programmesReview of school milk programmesReview of school milk programmesReview of school milk programmes

• Design and/or strengthen school milk programmes with a Design and/or strengthen school milk programmes with a Design and/or strengthen school milk programmes with a Design and/or strengthen school milk programmes with a targeting of schools in more rural areas targeting of schools in more rural areas targeting of schools in more rural areas targeting of schools in more rural areas

• Assess alternative and innovate funding options for financing Assess alternative and innovate funding options for financing Assess alternative and innovate funding options for financing Assess alternative and innovate funding options for financing school milk programsschool milk programsschool milk programsschool milk programs

• Link the development of these local programmes with Link the development of these local programmes with Link the development of these local programmes with Link the development of these local programmes with opportunities for smallholder dairy participation opportunities for smallholder dairy participation opportunities for smallholder dairy participation opportunities for smallholder dairy participation

• Support the development of Support the development of Support the development of Support the development of SMEsSMEsSMEsSMEs for manufacturing and packaging for manufacturing and packaging for manufacturing and packaging for manufacturing and packaging range of semi valuerange of semi valuerange of semi valuerange of semi value----added dairy productsadded dairy productsadded dairy productsadded dairy products

• Duration: 2 yearsDuration: 2 yearsDuration: 2 yearsDuration: 2 years

Elements of the APHCA proposal on

Asia Dairy Network

• Country coverageCountry coverageCountry coverageCountry coverage

• All APHCA countriesAll APHCA countriesAll APHCA countriesAll APHCA countries

• The componentsThe componentsThe componentsThe components

• Creation of an information and knowledge networkCreation of an information and knowledge networkCreation of an information and knowledge networkCreation of an information and knowledge network

• Creation of a Creation of a Creation of a Creation of a demand drivendemand drivendemand drivendemand driven dairying group with a membership dairying group with a membership dairying group with a membership dairying group with a membership base that included dairy firms, dairy institutions, producer base that included dairy firms, dairy institutions, producer base that included dairy firms, dairy institutions, producer base that included dairy firms, dairy institutions, producer organizations, dairy research organizations, and other organizations, dairy research organizations, and other organizations, dairy research organizations, and other organizations, dairy research organizations, and other concerned regional and international partnersconcerned regional and international partnersconcerned regional and international partnersconcerned regional and international partners

• Duration: 4 yearsDuration: 4 yearsDuration: 4 yearsDuration: 4 years

Thank you