a comparison of dairy policy and development in south asia and east africa: lessons for a pro-poor...

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

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

Alternative models of dairy development

Commercial/modern Smallholder/informal

Production profile

Nutrient and nutrition profile

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

Single objective enterprise model

Multiple objectives, farm-household model

Capital intensive Labor intensive

Strong economies of scale Weak economies of scale

Often subsidized Few subsidies, may be taxed indirectly

Alternative models of dairy development(cont)

Demand and product profile

Value added products, highly processed

Low cost products, traditional processing

High relative demand for food safety/quality

Low relative demand for food safety/quality

Commercial/modern Smallholder/informal

Policy profile

Highly regulated and monitored

Largely unregulated, unrecorded

Over-represented: loud voice in domestic and international policy

Invisible: little voice in domestic or international policy

Growth and opportunity profile

Stagnant future prospects? Growing future prospects?

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)

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

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)

Dairy production trends – East Africa

Ethiopia

Kenya

Sudan

TanzaniaUganda

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1965 1970 1975 1980 1985 1990 1995 2000

Mill

ions

Year

Milk

pro

duct

ion

(MT

)

Dairy production trends – Southern - East Africa

Madagascar

MalawiMozambiqueZambia

Zimbabwe

0

100

200

300

400

500

600

1965 1970 1975 1980 1985 1990 1995 2000

Tho

usan

ds

Year

Milk

pro

duct

ion

(MT

)

0

10

20

30

40

50

60

70

80

1965 1970 1975 1980 1985 1990 1995 2000

Millions

Year

Milk

pro

duct

ion

(MT

)

Bangladesh

India

Nepal

Pakistan

Sri Lanka

Dairy production trends – South Asia

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

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)

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 ($)

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 (%)

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.

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.

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.

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

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.

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.

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.

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.

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.

Thank you