The cattle sector in Central and Eastern Europe
Developments and opportunities in a time of transition
EAAP Technical Series No. 10
Th
e cattle
secto
r in C
en
tral a
nd
Easte
rn E
uro
pe
E
AA
P T
ech
nica
l Se
ries N
o. 10
Countries in Eastern-Europe are in a lengthy period of rapid changes. Ten Central and Eastern European countries entered the European Union in 2004 and two more entered in 2007. Surrounding countries to the east are in a similar process of change following the disintegration of the former Soviet Union. The transition processes were studied in a recent workshop resulting in this book. It is comprised of 13 contributions: four overview articles, one on the topic of animal welfare and eight country reports. The country reports come from a wide variety of countries in Eastern Europe and Asia: Slovakia, Poland, Baltic States, Russian Federation, Belarus, Ukraine, Caucasian countries and Central Asian countries. The country reports describe the transitions taking place in these countries. Both developments in the beef cattle sector and in the dairy chain are described with emphasis on the dairy chain situation. The authors are from a range of academic and professional backgrounds including universities, research and developmental institutions, farmers’ organisations, agribusiness and a marketing board. Some analyses are made and several critical points in development are signalled. Thus, barriers as well as opportunities for further development are mentioned and described in this book.
Editors:K.J. PetersA. KuipersM.G. KeaneA. Dimitriadou
ISSN 1570-7318ISBN 978-90-8686-104-0
Wageningen AcademicWageningen AcademicP u b l i s h e r ssseessbP u b l i s h e r sP u b l i s h e r sP u b l i s h e r s
Wageningen AcademicP u b l i s h e r s
cover EAAPts10.indd 1 27-4-09 9:14
The cattle sector in Central and Eastern Europe
The cattle sector in Central and
Eastern Europe
Developments and opportunities in a
time of transition
Editors:
K.J. Peters
A. Kuipers
M.G. Keane
A. Dimitriadou
EAAP Technical Series No. 10
ISBN: 978-90-8686-104-0e-ISBN: 978-90-8686-686-1
DOI: 10.3920/39978-90-8686-686-1
ISSN: 1570-7318
First published, 2009
© Wageningen Academic Publishers The Netherlands, 2009
This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned. Nothing from this publication may be translated, reproduced, stored in a computerised system or published in any form or in any manner, including electronic, mechanical, reprographic or photographic, without prior written permission from the publisher, Wageningen Academic Publishers, P.O. Box 220, 6700 AE Wageningen, the Netherlandswww.WageningenAcademic.com
The individual contributions in this publication and any liabilities arising from them remain the responsibility of the authors.
The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the European Association for Animal Production concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.
The publisher is not responsible for possible damages, which could be a result of content derived from this publication.
� The�cattle�sector�in�Central�and�Eastern�Europe
7
Table of contents
Introduction 9Kurt�Peters�and�Abele�Kuipers
Part 1 Overview articles
BeefsectorchallengesandperspectivesinnewEUmemberstates 13R.�Csillag,�A.�Rozstalnyy,�I.�Hoffmann�and�S.�Mack
DairysectorchallengesandperspectivesinCentralandEasternEurope 17A.�Rozstalnyy,�I.�Hoffmann�and�S.�Mack�
Developmentsincattleproductmarketsandproductprices 25K.J.�Peters
AnalysisofdevelopmentsinnewEUmemberstatesbasedonthedairyquotasituation 39A.�Kuipers,�A.�Malak-Rawlikowska,�M.�Klopcic�and�J.�Sataite
Thewell-beingofHeiferInternationalanimals 69T.S.�Wollen�and�D.P.�Bhandari
Part 2 Country reports
ThedairycattlesectorintheRussianFederationshowsatendencytoimprovement 77S.�Kharitonov,�I.�Yanchukov,�A.�Ermilov,�Y.�Grigoriev�and�O.�Osadchaya
CattlesectoranddairychaindevelopmentsinBalticcountries 87E.�Gedgaudas
CattlesectoranddairychaindevelopmentsinBelarus 97M.�Ramanovich
CattlesectoranddairychaindevelopmentsinUkraine 103I.�Ilienko
CattlesectoranddairychaindevelopmentinSlovakia 119M.�Stefanikova
CattlesectoranddairychaindevelopmentsinGeorgia,AzerbaijanandArmenia 133T.�Kartvelishvili
CattlesectoranddairychaindevelopmentsinPoland 153J.�Fałkowski,�A.�Malak-Rawlikowska�and�D.�Milczarek-Andrzejewska�
CattlesectoranddairychaindevelopmentsinKazakhstan,KyrgyzstanandUzbekistan 167T.�Karymsakov,�A.�Svitoys�and�K.�Elemesov�
Part 3 Concluding remarks
Remarksandrecommendationsoftheworkshop 175M.�Zjalic
Appendix.ShorthistoryoftheEAAPCattleNetworkWorkingGroup 179
� The�cattle�sector�in�Central�and�Eastern�Europe
9
Introduction
ThecountriesinEastern-Europeareinalengthyperiodofrapidchange.TenCentralandEasternEuropeancountriesenteredtheEuropeanUnionin2004andtwoenteredin2007.SurroundingcountriestotheEastareinasimilarprocessofchangefollowingthedisintegrationoftheformerSovietUnion.TheCattleNetworkoftheEAAPhasactivelyanalysedthetransformationprocessesinanumberofEAAPannualmeetings.PresentationsareavailableonthewebpageoftheCattleNetwork.In2004,aspartoftheEAAPmeetinginBled,Slovenia,aworkshopwasorganiseddealingwiththeconsequencesofEUentryforagroupofcountries.The‘new’EU-countries,butalsoallneighbouringcountriestotheEast,participatedinthismeeting.ResultsofthatmeetingareavailableintheEAAPTechnicalSeriespublicationNo.8:‘FarmmanagementandextensionneedsinCentralandEasternEuropeancountriesundertheEUmilkquota’.ThisworkshopwasorganisedbytheCattleNetworkWorkingGroup,theCentralandEasternEuropeanWorkingGroup,andtheCattleCommissionofEAAPduringtheannualmeetingoftheEAAPinVilnius,Lithuania.TheEasternlocationwasoneofthemotivesfordoingso.TheFAOagaingenerouslysupportedtheworkshopasbefore.About60personsfromawidevarietyofcountriesattended.Ms.AndieDimitriadouoftheEAAPsecretariattookcareofthelogisticsofthemeetingtogetherwiththetravelarrangementsoftheinvitedspeakers.ShealsocollectedanddistributedthePowerPointpresentations.Lateron,shecollectedthepublicationswhicharecompiledinthisbook.Weareverygratefulforhersupport.TheoriginalideafortheworkshopcamefromMr.KurtPetersandMr.AbeleKuipers.WetogetherwithMr.GerryKeanereviewedthepapersthoroughly.Mr.ArunasSvitojus,BalticHeiferFoundation,helpedaslocalorganiserrealisingtheworkshopandintheselectionoftheinvitedspeakers.Mr.AndriyRozstalnyy,FAOAnimalProductionandHealthOfficeratSubregionalofficeforCentralandEasternEuropewasverysupportiveintheorganisationoftheworkshop.SpecialgratitudeisgiventoMrs.MariaKadlecikovaFAORegionalRepresentativeforEuropeandCentralAsiaformakingthisworkshoppossible.Thisbookiscomprisedof13contributions:fouroverviewarticles,oneonthetopicofanimalwelfareandeightcountryreports.ThecountryreportscomefromawidevarietyofcountriesinEasternEuropeandAsia:Slovakia,Poland,BalticStates,RussianFederation,BelarusUkraine,Caucasiancountries(GeorgiaandAzerbaijan)andCentralAsiancountries(Kazakhstan,KyrgyzstanandUzbekistan).Thecountryreportsdescribethetransitiontakingplaceinthesecountries.Verypositivewasthefactthatthedevelopmentsinthebeefcattlesectoraswellasinthedairychainaredescribed.Themixofparticipatingspeakersfromuniversities,researchanddevelopmentalinstitutions,farmers’organisations,agribusinessclubsandmarketingboardswasverybeneficial.Someanalysesweremadeandseveralcriticalpointsindevelopmentweresignalled.Thus,barriersaswellasopportunitiesforfurtherdevelopmentarementionedanddescribedinthisbook.Thediscussionsduringtheworkshopwereofahighquality.Someconclusionsareaddedasalastchapterinthebook.
Kurt�Peters�and�Abele�Kuipers
Part 1 Overview articles
� The�cattle�sector�in�Central�and�Eastern�Europe
13
Beef sector challenges and perspectives in new EU member states
R.�Csillag1,�A.�Rozstalnyy1,�I.�Hoffmann2�and�S.�Mack2
1Food�and�Agriculture�Organization�of�the�United�Nations,�Subregional�Office�for�Central�and�Eastern�Europe,�Budapest,�Hungary;�[email protected];�2Food�and�Agriculture�Organization�of�the�United�Nations,�Rome,�Italy
Abstract
Meatconsumptiondeclinedduringthe1990sduetothefallinpurchasingpower.Since2000,meatconsumptionhasbeenincreasingandwiththeexceptionsofPolandandHungary,demandformeatcannotbesuppliedfromdomesticproduction.ManyslaughterhouseshaveclosedbuttheremainderhavebeenmodernisedtomeetEUstandards.Redmeatislosingmarketsharetopoultryduetohealthscares,highpriceandchangingdietaryattitudes.
Keywords:�beef,�consumption�trends,�processing
Introduction
SinceEUaccession,thenationalbovineherdsizehasdeclinedinmostoftheCEEcountrieswithacorrespondingfallinproductionandprocessingcapacity(Table1andTable2).AccessiontotheEuropeanUnion(EU)hashoweverstimulatedgreaterintensificationandconcentrationwithinthemeatproductionandprocessingsub-sector.Yetfarmstructuresremainfragmentedwithmanysmall,family-owned,semi-subsistenceunitscharacterisedbylowefficiencyandrelativelyhighproductioncosts.Theslowpaceofintensificationandthemovetomoreefficientproductionmethodspresentarealbarriertothedevelopmentofanefficientandintegratedmeatsector.Morethantwo-thirdsofbeef,andvirtuallyofallvealproduction,originatefromthedairyherd.Siresfrommeatbreedsareusedtoproducecrossbredstoberearedforbeef,butonlyonethirdofthebeefderivesfromspecificbeefbreedingherds.Beefproductionhasfalleninrecentyears.
Table 1. Totalofcattlepopulation(×1,000head).
2000 2001 2002 2003 2004 2005 2006 2007Bulgaria 652.2 641.1 699.0 736.2 679.6 630.0 636.5 611.0CzechRepublic 1,582.0 1,520.0 1,462.0 1,427.0 1,367.6 1,351.6 1,389.6 1,366.7Estonia 252.8 260.5 253.9 257.2 249.8 252.2 245.0 242.0Latvia 366.7 384.7 388.1 378.6 371.1 385.2 377.1 398.7Lithuania 748.3 751.7 779.1 812.1 792.0 800.3 838.8 787.9Hungary 805.0 783.0 770.0 739.0 723.0 708.0 702.0 705.0Slovenia 493.7 477.1 473.2 449.9 451.1 452.5 454.0 479.6Slovakia 646.1 625.2 607.8 593.2 540.1 527.9 507.8 501.8Poland 5,723.0 5,498.8 5,421.0 5,276.8 5,200.2 5,385.0 5,281.0 5,405.5Romania 2,870.4 2,799.8 2,877.8 2,897.1 2,808.1 2,861.1 2,933.6 2,819.0Sources:FAOSTAT,EUROSTAT,CzechStatisticalOffice(CSÚ),StatisticalOfficeofTheSlovakRepublic,StatisticalOfficeofEstonia,StatisticalOfficeofLithuaniaandUSDA.
Meat consumption
Thetrendinmeatconsumptionisanimportantsocialindicatoranditisnotsurprisingthatmeatconsumptionfellsignificantlyduringthemid1990’smirroringthecollapseofincomesandpurchasingpower.Since2000,however,totalmeatconsumptionhasstartedtoincreasethroughouttheregion(Table3).Increasingincomesinthenon-agriculturalsectorisraisingthedemandformeatthatcannotbesuppliedbydomesticproduction.MostofthenewEUmemberstatesremainnetimportersofbeefwiththeexceptionofPolandandHungary.
Processing
Thenumberofslaughterhousesandprocessingplantshasalsodeclinedsince1990.ThelargerenterprisesreceivedconsiderableinvestmentduringthepreparationforEUaccessioninordertomoderniseandharmonisetheiroperationtomeetEUstandards.Asignificantproportionoftheabattoirswerehoweversmall‘one-room’operations.MostofthesehavehadtocloseduetolackofcapitalandskillsnecessaryformeetingthestrictEUsanitaryandtraceabilityrequirementsaswellasanimalwelfare,environmental(handlinghighriskmaterials,wasteandeffluentdisposal)andmeatinspectionregulations.
Table 2.Numberofbovinesslaughtered(×1,000head).
2000 2001 2002 2003 2004 2005 2006 2007Bulgaria 422.00 161.27CzechRepublic 374.46 355.44 374.86 372.97 335.81 281.04 273.58 269.66Estonia 106.40 83.10 87.80 72.50 84.45 66.75 69.91 70.76Latvia 181.72 143.34 107.24 133.24 132.50 118.92 114.54 119.57Lithuania 562.50 416.60 372.00 330.20 337.17 312.28 238.75 252.43Hungary 173.50 148.22 145.45 121.92 126.00 130.19Poland 2,069.00 1,931.00 1,665.00 1,873.00 1,314.90 1,290.91 1,463.09 1,537.96Romania 1,115.00 1,206.00Slovakia 130.23 140.39 150.75 162.32 151.03 137.62 136.78 128.09Slovenia 119.32 99.08 93.80 112.40 98.85 99.67 81.71 87.45Sources:FAOSTAT,EUROSTAT,CzechStatisticalOffice(CSÚ),StatisticalOfficeofTheSlovakRepublic,StatisticalOfficeofEstonia,StatisticalOfficeofLithuaniaandUSDA.
Table 3.Beefandvealconsumption(kg/capita/year).
2000 2001 2002 2003 2004 2005 2006 2007Slovakia 9.3 7.0 6.8 6.9 6.4 6.9Hungary 4.3 3.9 4.3 4.1 3.9 3.1Poland 8.0 6.3 5.9 6.7 5.0 4.0CzechRepublic 12.5 11.6 11.3 10.4 10.0Estonia 12.1 11.4 13.3 10.4 12.8 12.4 13.8Lithuania 15.0 11.2 10.0 10.5 10.6 8.0Romania 4.7 3.5 3.4 4.4 4.9Bulgaria 5.0 4.9 4.9 5.1 5.1 5.1Sources:FAOSTAT,EUROSTAT,CzechStatisticalOffice(CSÚ),StatisticalOfficeoftheSlovakRepublic,StatisticalOfficeofEstonia,StatisticalOfficeofLithuaniaandUSDA.
� The�cattle�sector�in�Central�and�Eastern�Europe
15
Decline in red meat consumption
Consumptionpatternshavealsochangedinthepastdecade.Redmeatconsumption(includingbeef)hasdeclinedwhilepoultryconsumptionhassteadilyincreasedwiththeexceptionofatemporarydipresultingfromtheavianinfluenzascare.ThechangingconsumerpreferenceawayfromredmeatoriginatesfromtheoutbreakofBSE,therelativelyhighpriceofbeefcomparedtopoultrymeat,andnewdietaryattitudeswhichfavourlowerfatconsumption.
Future prospects
TheabilityofCEEcountriestoexpandanddeveloptheirdomesticandpotentialbeefexportmarketswilldependontheircapacitytoimprovetheirproductioncompetitiveness,bothintermsofpriceandquality.Thiscanbeachievedbyfurther:• restructuringandintensifyingbeefproductionandprocessing;• modernisationandconsolidationoffarms;• exploitingnichemarkets;• specialisationinbeefproduction;• improvingmeatqualityandproducttraceability;• developingandimplementingbreedingpoliciesandprogrammesthatfullyexploitthegenetic
potentialwithintheregion;• promotingnationaltrademarksandexploitingnichemarketsforlocalorspecialproductssuch
astheHungarianGrey.
References
CzechStatisticalOffice–ČeskýStatistickýÚřad(CSÚ).Availableat:http://www.czso.cz/eng/redakce.nsf/i/homeFoodandAgricultureOrganizationCorporateStatisticalDatabase(FAOSTAT).Availableat:http://faostat.fao.org/StatisticalOfficeofEstonia–EestiStatistika.Availableat:http://www.stat.ee/StatisticalOfficeofLithuania–StatistikosDepartamentasprieLietuvosRespublikos.Availableat:http://www.stat.
gov.lt/en/index/StatisticalOfficeoftheEuropeanCommunities(EUROSTAT).Availableat:http://epp.eurostat.ec.europa.eu/portal/
page?_pageid=1090,30070682,1090_33076576d=portal&_schema=PORTALStatisticalOfficeoftheSlovakRepublic-ŠtatistickýúradSlovenskejRepubliky.Availableat:http://portal.statistics.
sk/showdoc.do?docid=4UnitedStatesDepartmentofAgriculture(USDA).Availableat:http://www.usda.gov/wps/portal/usdahome
� The�cattle�sector�in�Central�and�Eastern�Europe
17
Dairy sector challenges and perspectives in Central and Eastern Europe
A.�Rozstalnyy1,�I.�Hoffmann2�and�S.�Mack2�
1Food�and�Agriculture�Organisation�of�the�United�Nations,�Subregional�Office�for�Central�and�Eastern�Europe,�Budapest,�Hungary;�[email protected];�2Food�and�Agriculture�Organisation�of�the�United�Nations,�Rome,�Italy
Abstract
ThereisadualmilkproductionstructureinmostcentralandeasternEuropeancountriesofsmallsubsistencefarmsandlargecommercialfarms.Cownumbershavedeclinedconsiderablybutmilkoutputhasbeenmaintainedthroughincreasedyieldpercow.Therehavebeenbigimprovementsinquality,particularlyinsomecountries.InPolandandCzechRepublicthenationalmilkquotaisabarriertoexpansion.InUkraine,Belarus,ArmeniaandGeorgiathenumberofcowsfelltolessthanhalffollowingthepoliticalchangesin1992,butinrecentyears,milkoutputhasincreasedagain.Thegreatestindustryproblemisthelargenumberofsmallproducersresultinginlowqualitymilkandthedeclininggeneticmeritofthecowherd.Thegreatestchallengeistofindthecapitaltomodernisetheindustry.
Keywords:�dairy�cows;�development;�milk�production
Introduction
ForcountriesthatjoinedtheEUsince2004,changesinthedairysectorhavebeendramatic.TheotherformerUSSRcountriescanlearnfromtheexperiencesofthenewEUcountries.
Central and Eastern EU countries
ThetotaldairycowpopulationoftheEUincreasedbyapproximately4.5millionafterthe2004expansion,andbyanadditional1.9millionaftertheaccessionofBulgariaandRomania.TheEU-15had~18.7milliondairycowsattheendof2004,andthishadincreasedbymorethan30%by2007(EUROSTAT,undated).InthenewEUmemberstates,thedairysectoraccountsfor7%to20%oftotalagriculturaloutput.
Herd size and production
InmostoftheCEEcountries,themajorityofthefarmsareverysmall,1-2cows(Figure1and2).Thesesmallfarmsarepredominantlysemi-subsistencedairyfarms.Thesmallestonesproducemilkandmilkderivatesfortheirownconsumption,andtradetherestasrawmilkandhomemadedairyproductslikecheese,curdandyoghurt.Thechangeinthepoliticalsystemintheregioninducedstructuralchangesinthedairysector.Thecooperativesthatusedtoholdlargedairyherdsweredissolvedduringprivatisation.Thereareonlysomecountrieswherethecooperativeformhassurvived.Theexistenceofthesmallsemi-subsistencefarmsandlargefarms,withherdsofmorethan100dairycowsresultindualstructureofdairyfarmsizeinCEEcountries.Thisfragmentedfarmsizestructureleadstohighmilkcollectionandotherprocessingcosts(sometimespoorqualityofrawmilk)onsmallfarms,whichresultsinlowcompetitivenessontheEUdairymarket.AfterEUaccession,afusionofsomeverysmalldairyfarmswasobserved.At
The�cattle�sector�in�Central�and�Eastern�Europe
18
thesametime,asignificantnumberoffarmers,whichownedsmallfarmseitherslaughteredtheirherdsandquitthedairybusiness,orswitchedtootherlivestockenterprisessuchasgoatorsheepproduction.Thenumberofherdsandnumberofdairycattlehasdeclinedoverthepastdecadein
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Estonia Hungary Latvia Lithuania Poland Slovenia Bulgaria Romania
1-10 cows 11-30 cows 31-100 cows 101< cowsDairy herds with
Figure 1.DairyherdstructureinsomeCentralandEasternEUcountries.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Estonia Hungary Latvia Lithunaia Poland Slovenia Bulagria Romania
Dairy cows in herds with
1-10 cows 11-30 cows 31-100 cows 101< cows
Figure 2.DairyfarmstructureinsomeCentralandEasternEUcountries.
� The�cattle�sector�in�Central�and�Eastern�Europe
19
mostoftheCEEcountries(Table1,Figure3)butmilkproductiondidnotfollowthistrend.Despitethedeclineinthenumberofdairycattlemilkproductionremainedquitestable(Table2).Duetomodernisation,concentration,EUharmonisation,andgoodbreedingtechnologiesmilkyieldpercowhasincreasedsignificantly(Table3).QualitystandardsofmilkhaveimprovedconsiderablyinsuccessfulattemptstoadjusttotheEUstandards.AnexampleoftheimprovementofthequalityofmilkinSloveniaisillustratedinFigure4.Similarchangescanbeobservedintheothercountriesintheregion.
0.0
20.0
40.0
60.0
80.0
100.0
120.0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
cz Czech Republicee Estonialv Latviapl Polandsi Sloveniask Slovakia
Figure 3. NumberofthedairycowsinCentralandEasternEUcountries(dairycowsin1997=100%).
Table 1. Numberofdairycows(×1000head)inCentralandEasternEUcountries(1998-2007).
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Bulgaria 387.1 421.4 431.0 362.6 358.6 358.2 361.8 368.7 347.8 350.1 335.9CzechRepublic
598.0 583.0 548.0 529.0 496.0 464.0 449.0 429.3 437.1 417.3 407.4
Estonia 167.7 158.6 138.4 131.0 128.6 115.6 116.8 116.5 113.1 108.9 104.1Hungary 379.0 384.0 376.0 355.0 345.0 338.0 310.0 304.0 285.0 268.0 266.0Latvia 262.8 242.1 205.6 204.5 209.1 204.6 186.3 186.2 185.2 182.4 180.4Lithuania 582.8 537.7 494.3 438.4 441.8 443.3 448.1 433.9 416.5 399.0 404.5Poland 3,360.8 3,215.1 2,982.4 2,929.6 2,934.6 2,816.1 2,730.4 2,754.8 2,637.0 2,677.3Romania 1619.5 1627.4 1566.4 1625.4 1639.4 1572.9Slovakia 300.0 265.0 251.0 242.5 230.4 230.2 214.5 201.7 198.6 185.0 180.2Slovenia 147.6 146.5 149.1 140.2 135.8 140.0 130.7 134.0 120.3 112.5 116.4Sources:Agripolicy.net,CentralStatisticalBureauofLatvia,CentralStatisticalOfficeofPoland,CzechStatisticalOffice,EUROSTAT,StatisticalOfficeoftheRepublicofSlovenia,StatisticalOfficeoftheSlovakRepublic,andStatisticalOfficeofEstonia.
The�cattle�sector�in�Central�and�Eastern�Europe
20
Milk quota
Thequotasystemallocatestwo‘nationalreferencequantities’toeachMemberState,onefordeliveriesofmilktodairies,andanotherfordirectsalesofmilkanddairyproducts.Ifeitherquotaisexceeded,alevyispayabletotheEUbudget.Thelevelofmilkquotaisaproblematicissueinmanycountries.InPolandandinCzechRepublicthenationalmilkquotaisaseriousbarriertothefurtherdevelopmentofthedairysector.WhilethetotaloutputofthePolishdairyindustryisapproximately12.0milliontonnes,theoutputallowedunderthenationalmilkquotaisonly9.2-9.4milliontonnes,whichmeansthatonlyabout75%oftheoutputiscommerciallyutilised.TheEUhasagreedtoretainthemilkquotasystemuntil2015,aftertheendofthecurrentCommonAgriculturalPolicyreform.
Table 2.Milkproduction(tonnes)inCentralandEasternEUmembercountries(2004-2007).
2004 2005 2006 2007Bulgaria 797.50 803.10 839.40 745.50CzechRepublic 2,563.22 2,543.20 2,392.50 2,445.52Estonia 536.10 571.20 605.90 593.40Hungary 1,541.71 1,594.00 1,448.35 1,447.73Latvia 478.10 501.70 592.32 630.70Lithuania 1,139.64 1,200.49 1,296.15 1,347.13Poland 8,151.40 8,825.19 8,825.99 8,744.39Slovakia 937.16 967.94 961.58 964.22Slovenia 503.34 508.34 511.02 530.37Sources:Agripolicy.net,CentralStatisticalBureauofLatvia,CentralStatisticalOfficeofPoland,CzechStatisticalOffice,HungarianCentralStatisticalOffice,NationalStatisticalInstituteofBulgaria,EUROSTAT,StatisticalOfficeoftheRepublicofSlovenia,StatisticalOfficeoftheSlovakRepublic,StatisticalOfficeofEstonia,StatisticalOfficeofLithuania,andUSDA.
Table 3. Cowyield(kg/year)inCentralandEasternEUmembercountries.
2000 2001 2002 2003 2004 2005 2006Bulgaria 3,273 2,854 3,641 3,653 3,716 3,490 3,522CzechRepublic 5,411 5,755 5,501 5,701 6,136 6,521 6,415Estonia 4,549 5,215 4,751 5,285 5,581 5,750 5,920Hungary 5,699 6,034 6,173 6,025 6,111 6,344 6,026Latvia 4,002 4,136 3,880 3,827 4,208 4,332 4,361Lithuania 3,465 3,919 3,994 4,035 4,109 4,271 4,343Poland 3,944 4,041 4,163 4,135 4,268 4,332 4,354Romania 2,542 2,634 2,753 2,863 3,524 3,583 3,583Slovakia 4,335 4,793 5,199 4,826 4,892 5,314 5,275Slovenia 4,490 4,667 5,201 4,589 4,980 4,880 4,880Sources:Agripolicy.net,CentralStatisticalBureauofLatvia,CentralStatisticalOfficeofPoland,CzechStatisticalOffice,HungarianCentralStatisticalOffice,NationalStatisticalInstituteofBulgaria,NationalInstituteofStatisticsRomania,EUROSTAT,StatisticalOfficeoftheRepublicofSlovenia,StatisticalOfficeoftheSlovakRepublic,StatisticalOfficeofEstonia,StatisticalOfficeofLithuania,andUSDA.
� The�cattle�sector�in�Central�and�Eastern�Europe
21
Consumption
TheconsumptionofmilkandmilkproductsinCEEisrelativelylowcomparedtoEU-15.Forexample,consumptionofmilkandmilkequivalentpercapitaforthefollowingcountriesisPoland250kg,Hungary135-155kg,Slovakia155kg,Slovenia240kg,andCzechRepublic230kg.
Dairy sector in Armenia, Belarus, Georgia and Ukraine
IntheformerUSSRcountries,thedairysectoraccountsforupto25%oftotalagriculturalproduction.Animalproductioninthesecountriessufferedseriouslyduringthetransitionperiodinthe1990’s(Figure5).Forinstance,inUkrainemilkinglivestockhavedecreasedtolessthanhalfin15years,andbytheendof2005amountedtoonly45%ofthe1990number.Afterthatrapiddecreaseinthecattlepopulationandthecorrespondingdecreaseinmilkproduction,agradualimprovementinthesituationhassincebeenobserved(Table4,Table5,).Themostimportantproblemsandconstraintsindairysectordevelopmentincludetheprevalenceofsmall-scalefarmsinthetotalrawmilksupplyoftenresultingintheproductionoflowqualityrawmilk,constraintstoaccessingcredit,lowpricesformilk,lackofinvestmentindairyfarming,andunderdevelopedlogisticsandinfrastructuresuchasmilkcollection,storinganddistribution.Theproductionoffeedsandfoddershavedecreasedsignificantlyandpasturesarenotwellmanaged.Theextentofartificialinseminationusehassharplydeclinedascentralisedbreedingfarmshavebeenabandonedandthecorebreedingstockhavebeendistributedtoprivateindividuals,whoareoftennotexperiencedinlivestockbreeding.Thishasledtodeteriorationofthegeneticcharacteristicsofcattle.Inaddition,highprevalenceofzoonoticandtransboundaryanimaldiseasesuchasbrucellosis,tuberculosis,footandmouthdiseasehinderthedevelopmentofthedairysectorinsomecountries.Milkyieldpercowisshownfor2002to2006inTable6,andfrom1992to2007,inFigure6.
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
1997 1998 1999 2000 2001 2002 2003 2004 2005
Share of milk in Bacteriological classextra (%)*Share of milk in Bacteriological class1 (%)**Share of milk with somatic Cell countup to 400,000/ml (%)
Figure 4. Share(%)ofmilkofdifferentbacteriologicalclassesinSlovenia.Sources:StatisticalOfficeoftheRepublicofSloveniaandGLiPHa.
The�cattle�sector�in�Central�and�Eastern�Europe
22
Governmentalandfinancialsupport,includinglowinterestrateloansandtimelysubsidies,tofosterinvestmentinthedevelopmentofsustainable,environmentallyfriendlydairyproductionthatcomplieswithEU/WTOqualityandhygienestandards,aswellsproductionoforganicdairyproducts,remainthemostimportantchallengesforthedairycattlesectoroftheCEEcountries.
0
5,000
10,000
15,000
20,000
25,000H
eads
1992 2007 1992 2007
elttac yriad fo .oN )latot( elttac fo .oN
Ukraine
Belarus
Figure 5.NumberofcattleanddairycowsinBelarusandUkrainein1992and2007.
Table 4.NumberofcattleanddairycowsinArmenia,Belarus,GeorgiaandUkraine.
2002 2003 2004 2005 2006Armenia totalcattle 514,244 535,784 565,800 573,260 592,067
dairycows 270,107 277,000 300,000 290,069 297,060Belarus totalcattle 4,084,500 4,005,100 3,924,000 3,989,000
dairycows 1,749,000 1,664,000 1,830,000 1,506,000Georgia totalcattle 1,180,200 1,215,895 1,242,500 1,252,073 1,265,097
dairycows 678,270 691,500 720,000 740,752 725,349Ukraine totalcattle 9,423,700 9,108,400 7,712,100 6,967,000
dairycows 4,820,400 4,620,600 4,202,900 3,863,000Sources:MinistryofAgriculturalPolicyofUkraine,MinistryofAgricultureandFoodofBelarus,FAOSTAT,andUSDA.
Table 5.Milkproduction(tonne/year)inArmenia,Belarus,GeorgiaandUkraine.
2002 2003 2004 2005 2006Armenia 475,113 498,100 535,831 557,300 570,000Belarus 4,772,500 4,682,600 5,124,100 5,650,100 5,869,900Georgia 720,703 743,270 754,992 760,786 690,000Ukraine 13,846,700 13,350,640 13,390,109 13,423,753 12,988,000Sources:MinistryofAgriculturalPolicyofUkraine,MinistryofAgricultureandFoodofBelarus,FAOSTAT,andUSDA.
� The�cattle�sector�in�Central�and�Eastern�Europe
23
References
AgriPolicy.net.Structureandcompetitivenessof themilkanddairysupplychains.Availableat:http://www.europartnersearch.net/agri-policy/index.php?page=marketanalysis#milk
CentralStatisticalBureauofLatvia–CentrālāStatistikasPārvalde.Availableat:http://www.csb.gov.lv/CentralStatisticalOfficeofPoland-GłównyUrzęduStatystyczny(GUS).Availableat:http://www.stat.gov.pl/gus/
index_ENG_HTML.htmCzechStatisticalOffice–ČeskýStatistickýÚřad(CSÚ).Availableat:http://www.czso.cz/eng/redakce.nsf/i/homeFoodandAgricultureOrganizationCorporateStatisticalDatabase(FAOSTAT).Availableat:http://faostat.fao.org/GlobalLivestockProductionandHealthAtlas(GLiPHA).Availableat:http://www.fao.org/ag/aga/glipha/index.jspHungarianCentralStatisticalOffice–KözpontiStatisztikaiHivatal(KSH).Availableat:http://portal.ksh.hu/portal/
page?_pageid=38,119919&_dad=portal&_schema=PORTALMinistryofAgriculturalPolicyofUkraine-MіністерсвоАграрноїПолітикиУкраїни.Availableat:http://www.
minagro.gov.ua/MinistryofAgricultureandFoodofBelarus-МинистерствесельскогохозяйстваипродовольствияРеспублики
Беларусь.Availableat:http://mshp.minsk.by/structure/branches/livestockNationalInstituteofStatisticsRomania-InstitutulNationaldeStatisticaRomania.Availableat:http://www.insse.ro/
cms/rw/pages/index.en.do
Table 6.Milkyieldpercow(kg/year)inArmenia,Belarus,GeorgiaandUkraine.
2002 2003 2004 2005 2006Armenia 1,758 1,778 1,841 1,921 1,965Belarus 2,728 2,729 3,091 3,503 3,639Georgia 1,062 1,054 1,037 1,034 937Ukraine 2,872 2,889 3,125 3,419 3,308Sources:MinistryofAgriculturalPolicyofUkraine,MinistryofAgricultureandFoodofBelarus,FAOSTAT,andUSDA.
0
5,00
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1000
g
Armenia Georgia Belarus Ukraine
1992200220032004200520062007
Figure 6. Milkyieldperanimal(kg/year)inArmenia,Belarus,GeorgiaandUkraine.
The�cattle�sector�in�Central�and�Eastern�Europe
24
NationalStatisticalInstituteofBulgaria-НАЦИОНАЛЕНСТАТИСТИЧЕСКИИНСТИТУТРЕПУБЛИКАБЪЛГАРИЯ.Availableat:http://www.nsi.bg/Index_e.htm
StatisticalOfficeoftheEuropeanCommunities(EUROSTAT).Availableat:http://epp.eurostat.ec.europa.eu/portal/page?_pageid=1090,30070682,1090_33076576&_dad=portal&_schema=PORTAL
StatisticalOfficeoftheRepublicofSlovenia–StatističniUradRepublikeSlovenije.Availableat:http://www.stat.si/eng/index.asp
StatisticalOfficeoftheSlovakRepublic-ŠtatistickýúradSlovenskejRepubliky.Availableat:http://portal.statistics.sk/showdoc.do?docid=4
StatisticalOfficeofEstonia–EestiStatistika.Availableat:http://www.stat.ee/StatisticalOfficeofLithuania–StatistikosDepartamentasprieLietuvosRespublikos.Availableat:http://www.stat.
gov.lt/en/index/UnitedStatesDepartmentofAgriculture(USDA).Availableat:http://www.usda.gov/wps/portal/usdahome
� The�cattle�sector�in�Central�and�Eastern�Europe
25
Developments in cattle product markets and product prices
K.J.�Peters
Humboldt-Universität�Berlin,�Institute�of�Animal�Sciences,�Dept.�of�Animal�Breeding�in�the�Tropics�and�Subtropics,�Haus�9,�Philippstr.�13,�10115�Berlin,�Germany;�[email protected]
Abstract
WorldcattlestockscontinuetoshifttowardsAsiaandLatinAmericawithmajorgainsinChina,Brazil,CentralAsiancountriesandOceania.LargeststockreductionsoccurredinRussia,EasternEuropeancountries,butalsoinEUandNorth-America.Worldbeefproductionroseby2.3%in2007andisexpectedtorisein2008to68milliontonneswith56%producedindevelopingcountries.Allregionswherebeefisproducedfromthedairyherdshowlargereductionsinoutput(EasternEuropeancountriesandRussia-35.8%and-33,3%,EU-8,4%)whileinNorth-America(Canadaminus,USAplus)beefbenefitsfromfavourableexchangerates.BeefproductioninLatin-AmericacontinuestogrowwhileinArgentinatherecentlyintroducedexporttaxesreducesthecompetitivenessofbeefproductionbeyondthedomesticdemand.InAustralia,theoutputofbeefwilldependonthegrainpricesandpastincreasesarelesslikelytobesustained.Internationalbeeftradeamountstoabout7.1milliontonnesin2007,andthemarketmovedoutofdroughtperiodsinOceaniaandBSEincidencescurtailingtrade.MajorimportingcountriesbesidestheEUareRussia,USA/CanadaandChina;majorexportingcountriesareEU,EEC,Oceania,andIndia.LargestincreasesinimportsoccurredinEECandRussia,butonlyinRussiaarebeefimportsexpectedtogrowduetodemandincreasesandunfavourabledomesticproductionconditions.BeefexportsfromEECarelinkedtotradepoliciesinneighbouringcountries,mainlyRussia,wherecurrentlymajortradecontractsareestablishedwithBrazilandUSA.Internationalbeefpricesincreasedbyalmost7%in2008,duetogrowthinglobaldemandandlimitedexportsuppliesfromtraditionalproducersandfrombeeffromthedairyherd.Structuralfactors,pricepoliciesandproductioninefficienciesarethemajorreasonsforthedownscalingofcattleandbeefproductioninRussiaandEEC.Totalmilkproductionreached676milliontonnesin2007andisexpectedtogrowby2.5%in2008.Largestexpansionsoccurredindevelopingcountries,puttingtheirshareofglobalproductionataround47%,butinthemajorexportingcountries,responsiblefor80%ofglobalexport,milkproductionincreasedbyonly1%followingadeclineof0.7%in2007.StrongexpansioninBelarus,ArgentinaandtheUS,andmarginalgrowthintheEUandUkraine,waspartiallyoffsetbydeclinesinOceania.Thepriceincreaseformostdairyproductsin2007,duetoincreasingdemandinAsiaandRussia,effectivepoliciesinEUtoreduceoverproduction,anddepletionofmoststocks,isunlikelytobesustained,sincepreviousimportershaveexpandedtheirownproduction.Howworldmilkpricesaffectlocalproductionandcompetitivenessverymuchdependsontheimpactofregulationpoliciesactiveinmostdairycountriesaroundtheglobe.Observedcostsandpricesvarybyafactorof2.5andstilldonothaveamajorimpactonthecompetivenessofdairyproduction.Otherfactorsarelinkedtostructuralsectordevelopment,productionandprocessingefficiency.EasternEuropeancountriesandRussiadependtoalargeextendonsupportingpoliciestoallowthemodernisationofthephysicalandinstitutionaldairyvaluechain,tostimulateinvestmentinefficientproductionunitsandmarketinginfrastructure,andtoenhancedhumanskillsforqualityproduction.
Keywords:�cattle�population,�beef,�dairy,�production,�trade,�prices
The�cattle�sector�in�Central�and�Eastern�Europe
26
Introduction
Globalmeatproductionin2007reachedalmost275milliontonnes(milliontonnes)ofwhich24.5%derivesfrombovines(cattleandbuffaloes).Withanannualgrowthinbeefproductionofaround1%per�annum(p.a.)therelativecontributionofbeeftoglobalmeatproductionissteadilydecreasing.In2007poultryandpigmeatproductioncontributed32.6%and35%respectively,withexpectedgrowthratesof3.8%and1.8%for2008(FAO,2008a).Despitethefactthatmeatproductionwithmonogastricspeciescanbeexpandedfasterandhasabetterfeedefficiency,beefproductionbasedonconversionofroughagefeedswithsomeadditionalconcentratefinishing,continuestohaveaplaceinglobalmeatproductioninordertomeetconsumerdemands.AccordingtoFAOdataglobalmilkproductionisestimatedtohaveexpandedby1.8%to676milliontonnesin2007,andgrowthin2008isexpectedtoreach2.5%,asproducersrespondedtohighpricesin2007.Thelargestexpansionofproductionoccurredindevelopingcountriesliftingitsglobalshareinmilkproductionto47.5%(FAO,2008b).Only8%to9%oftheglobalmilkvolumeistradedofwhich80%iscoveredbysixleadingexportingcountries.Changesinproductionconditionsinthesecountriesandshorttermchangesindemandfordairyproductscanleadtomajorshiftsintheglobalmarketsituation.Thispaperdealswithtrendsanddevelopmentsincattlestocks,thedynamicsinbeefproductionandbeeftrade,andtrendsindairyproductionandmarkets.
World cattle stocks and changes
Worldcattlestocksduringthelastdecaderosemodestlyby1.32millionto1.38millionorabout0.5%p.a.MostcattlearekeptinLatinAmerica,ChinaandIndiaandstockchangesshowgainsandlosses.StocksdeclinedmostdrasticallyinRussiaandtheEasternEuropeantransitioncountries.Amodestdeclineisalsonoticeableinhighincomecountries(EU,USA/Canada),whilemajorstockexpansionsoccurredincountriesofthesouthernhemisphere,andmainlyincountrieswithfasteconomicgrowthsuchasBrazil(+3.0%p.a.)andChina(+1.8%p.a.).CentralAsiancountriesmovedtowardsastabilisedcattlesectorwithanincrease(+1.1%p.a.)overthelast10years.Australiacontinuesaphaseofrestockingafteraprolongeddroughtandfinalstockswilldependonthedevelopmentofbeefmarketsbutalsothedevelopmentoffeedprices(Table1).
Table 1.Cattlestocksandcattlemeatproduction(FAOSTAT,2008).
Country Cattlestock(million) Meatproductioninmilliontonnes2006 Changessince1996(%) 2006 Changessince1996(%)
Argentina 50.8 -0.1 3.0 +10.6Brazil 207.2 +30.9 6.1 +25.7Australia/NewZealand 38.2 +8.0 2.8 +16.8China 117.8 +18.4 7.2 +115.2India 180.8 -9.9 1.3 -2.6USA/Canada 111.5 -6.6 13.3 +4.2EU27 90.4 -9.1 8.0 -8.4Russia 21.4 -45.9 1.8 -33.3EastEuropeancountries(Ukraine,Moldova,Belarus)
10.8 -53.7 0.9 -35.6
CentralAsiancountries 17.1 +11.4 1.1 +13.8
� The�cattle�sector�in�Central�and�Eastern�Europe
27
AnewpolicydirectioninRussiaisnowstronglyencouragingtheimportoflivedairyandbeefcattleforrestockingandrevitalisingthecattlesector(in2007141.2millionhead).Mostoftheliveimportations(dualpurposecattle,dairycattle)havetraditionallybeensuppliedbyEUcountriesbut,smallnumberswerederivedalsofromAustralia.LivebeefcattlewereobtainedfromCanadaandinfuturealsofromtheUSA(Hansenet�al.,2008;USDA,2008a,b).
Trends in the beef sector
Despitethefactthatbeefproductioncontributesasteadilysmallersharetotheglobalmeatsupplyitisgrowingproportionallyfasterthanmeatconsumptionindevelopedcountries,indicatingaspecialpreferenceforbeefwithrisingpurchasingpowerandwithahighlevelofoverallmeetconsumption(Table2).
Production
Afteradeclineof1.3%in2006,worldbovinemeatproductionroseagainby2.3%in2007,mainlyduetoliftsofimportbansorrestrictions(Japan,Korea,Russia).LeadingbeefproducingcountriesareUSA/Canada,EU,China,Brazil,andAustralia/NewZealand.Expansionofbeefproductionoverthelastdecade(+1.15%p.a.)havebeenbelowhumanpopulationincreasesandisexpectedtogrowby2.7%endingat7.6milliontonnesin2017(FAPRI,2008).Duringthedecadefrom1996to2006majorexpansionsoccurredinChina,Brazil,Australia/NewZealand,CentralAsianCountries,andArgentinecountries(Table2).BeefmeatproductioninNorthAmericaisexpectedtoremainvirtuallyunchanged.ExpansionintheUnitedStateswillbeoffsetbya6%declineinCanadaduetoimpactsoftheimplementationoftheCountryofOriginLabelling(COOL)regulationbytheUnitedStates.TheincreaseinUSAbeefoutputwhichispartlyduetoitsdepreciatingcurrency,hasincreaseditscompetitiveness.Moreover,highsuppliesofdistiller-driedgrainsfromtheproductionofethanolhavehelpedtolessentheimpactofhigherfeedcosts(FAO,2008a)InBrazil,thelargestproducerinLatinAmerica,the5%growthin2007isexpectedtobereducedto2.5%in2008,ifnoalternativemarketsarefoundtooffsettheeffectofthenewrestrictionsimposed
Table 2.Worldmeatmarketssummary(FAOSTAT,2008).
Worldbalance 2006 2007a 2008b Change:2008over2007milliontonnes
Production 271.5 274.7 280.9 2.3Bovinemeat 65.7 67.2 68.0 1.1
SupplyanddemandindicatorsPercapitameatconsumption:
World(kg/year) 41.6 41.6 42.1 1.1Developed(kg/year) 81.1 82.4 82.9 0.7Developing(kg/year) 30.7 30.5 31.1 1.8
Change:Jan-Apr2007:2008FAOMeatpriceindex %
(1998-2000=100%) 115 121 131c 10aEstimated.bForecast.cJan-Apr2008.
The�cattle�sector�in�Central�and�Eastern�Europe
28
bytheEuropeanUniononimportsfromthatcountryduetoproductsafetyconcernsrelatedtoanimaldiseases.SinceRussiahasshownamajorinterestincontractedimportsofbeeffromBrazil,currenttrendsarestillsetforacomfortablegrowth(Hansenet�al.,2008;USDA,2008a).Argentina,withitswellestablishedexportorientedbeefproductionsystem,isalreadysufferingfromtheimpositionofgovernmentexporttaxes,stronglyreducingtheeconomiccompetitivenessofproducingbeefforexport,andshiftingthewholeagriculturalsectortodomesticmarkets.OthermajorbeefproducingcountriesinSouthAmerica(Chile,Columbia,ParaguayandVenezuela)areexpectedtoexpandtheirproductionbyaround5%(FAO,2008a).Steadyexpansionofcattlestocks,improvedmanagementpractices,andstronggovernmentsupportarethebasisforthecontinuedexpectedgrowthofbeefoutputinChina(+3%in2008).BeefoutputinAustraliaisexpectedtodeclineby3.3%in2008,duetomajoreffortstorebuildcattlestocks,andduetochangesincompetitivenessofgrainfeedinginfeedlotsduetohigherfeedcostsin2007.FavourableproductpricesforbeefwillboostbeefproductioninNewZealand,althoughfurtherdevelopmentislinkedtotherelativecompetitivenessofdairyandbeefproduction.BeefproductionintheEUcontinuesitsnegativetrend,asthenumberofdairycattleisdecliningduetomajormilkyieldincreases,andasthenumberofbeefcattleremainsstable.Thehugereductioninbeefproductionfrom1996to2006inEasternEuropeancountries(-35.6%)andRussia(-33.3%)islinkedtomajortransformationprocessesinthelivestocksectorinthesecountries.WhileinBelarusandUkrainetherestructuringprocesshasgainedmomentumandrevitalisedbeefoutput,inRussiabeefproductioncontinuestodecline,duetostructuralproblemsintheagriculturalsectorandreducedcompetitivenessofbeefinthedomesticmeatmarket(Hansenet�al.,2008;USDA,2008a).Thedynamicandinteractingtrendsinbeefproductionindifferentregionsandcountriesclearlysuggestthatbeefoutputfromhighyieldingdairyherdsisdeclining,whiledualpurposedairyherdswithlowermilkyieldsarestillamajorsourceofbeef,andbeeffromspecialisedbeefsuckler-cowsystemsareshowingthelargestexpansions.Theincreasedspecialisationandintensificationofdairyproduction,thus,stronglyaffectsbeefoutputandthetrendsinbeeftrade.Countrieswithlargerfarms(highratiooflandtohumans)andfavourableecologicalconditionsforbeefcattleproductionwillbethefuturebeefproducingcountries(Table3).
Beef trade
Internationalbeeftradeamountedtoabout7.1milliontonnesin2007andisforecastat7.2milliontonnesin2008.Thisrepresentsabout9.5%oftotalglobalbeefproduction.TheworldbeefmarkethasbeenaffectedbyaseriesofdroughtsinAustraliaandbytheBSEincidentsinNorthAmerica
Table 3.Originofbeef(Deblitzet�al.,2004).
Fromdairyherdtothesucklercows!• ‘Dairycountries’(<25%ofcowsaresucklercows)
– Poland,Pakistan,Hungary,CzechRepublicandGermany– Decreasingbeefsystems
• ‘Mixedcountries’(25to75%ofcowsaresucklercows)– NewZealand,Austria,France,IrelandandSpain– Balancedbeefsystems
• ‘Beefcountries’(>75%ofcowsaresucklercows)– USA,Canada,Brazil,Australia,ArgentinaandUruguay– Expandingbeefsystems
� The�cattle�sector�in�Central�and�Eastern�Europe
29
thatresultedintheimpositionofbansbymanyimporters.Asthesearebeingprogressivelylifted,tradeinbeefisresumingamorenormalpattern.AccordingtoFAOSTAT(2008),EasternEuropeancountrieshavegainedfirstpositionasbeefexporters,followedbyAustralia/NewZealandandIndia.Thelargestimport/exportbeefmarketisstilltheEU.MostofthistradeiswithintheEU,andtheimportofbeeffromBrazilhasdeclinedsubstantiallyduetoEUdemandsontraceabilityandproductionstandards.OtherSouthAmericancountriesarenotinastatetofillthegapsinceEUstandardscannotbemet,orasinthecaseofArgentina,duetolossofcompetitiveness(Table4).MajordownwardshiftsinexportsduringrecentyearsarenoticeableforUSA/CanadatomainlyJapanandSouthKoreaasaresultofBSEincidences.ThestrongEuro,highinternalpricesanddecreasedimportsfromBrazil,however,willdiscourageexportsfromtheEuropeanUnion.Canada’sbeefshipmentsarealsoexpectedtofall,negativelyaffectedbytheintroductionoftheCountryofOriginLabellinglegislationintheUnitedStates,whileexportsfromtheUSAareanticipatedtorise,sustainedbyaweakdollarandtheprogressiveliftingofimportbansbyitstraditionalimportingpartners.Russiaisthelargestnetimporterofbeefoverthelastfewyears(Table4).A12yeardeclineindomesticbeefproductionbecauseofdecreasedcattleandfeedstock,increasedgrainprices,andgenerallynegativeprofitabilityofcattleandbeefproductionhasdiscouragednewinvestors.In2006,theimportsoffrozenbeeftotalled647,200tonnes,andincreasedby25%in2007.SuppliestotheRussianbeefmarketshiftedfromEuropeansources(diseaserelatedimportbans)tomainlySouthAmericancountries(Table5).Recently,importsstartedagainfromUkraineandalsofromPoland(USDA,2008b).TheotherlargenetimporterofbeefisChina,alsoafteralongperiodofexportingbeef,thoughataratherlowlevels.Withcontinuousstrongeconomicgrowthandraisingdomesticbeefconsumptionitisassumedthatimportswillsteadilyincreaseintheyearsahead.Despiteremarkableprogressinexpandingcattlestocksandproductivity,beefproductionislimitedduetolimitedgoodpasturelandandhighopportunitycostforfeed(FAPRI,2008).ThestrongEuro,highinternalpricesanddecreasedimportsfromBrazil,however,willdiscourageexportsfromtheEU,whileexportsfromtheUSAareanticipatedtorise,sustainedbyaweakdollarandtheprogressiveliftingofimportbansbyitstraditionalimportingpartners(FAO,2008a).ExportsfromBrazilreflectdomesticproductiongrowthandtheopeningofnon-traditionalmarkets,suchasRussia,tooffsetimportrestrictionsimposedbytheEuropeanUnion,whileexportsfromArgentinahavedrasticallydeclinedandareexpectedtostabiliseataratherlowlevel,duetothe
Table 4.Cattlemeattrade1995-2005(×1000tonnes)(modifiedfromFAOSTAT,2008).
Country 1995 2005 Δ(%)Import Export Import Export Import Export
Argentina 3.02 42.71 2.57 9.24 -15 -78Brazil 60.33 0.01 3.05 1.66 -95 +165Australia/NewZealand 0.30 86.09 0.24 88.69 -20 +3China 8.77 1.79 11.05 1.52 +26 -15India - 27.87 - 31.25 - +12USA/Canada 114.73 177.92 23.35 26.66 -80 -85EU27 1,019.58 1,116.49 842.87 893.59 -17 -20Russia 149.70 0.17 259.39 0.00 +73 -100EastEuropeancountries(Ukraine,Moldova,Belarus)
1.95 42.68 5.85 95.09 +200 +123
CentralAsiancountries 8.45 0.85 0.09 0.08 -99 -91
The�cattle�sector�in�Central�and�Eastern�Europe
30
taxesleviedonexports;exportsbyotherLatinAmericancountries,Chile,Paraguay,Uruguaywillfillthegap.BuffalomeatexportsfromIndiahavesteadilygrowninthepastdecadeandarelikelytorisein2008,inresponsetostrongimportdemandsfromIndonesia,Malaysia,thePhilippinesandcountriesintheNearEast(FAO,2008a).
Beef prices
Drivenbyhighfeedcostandrisingglobalimportdemandandtemporalexportlimitationsbymajorexportingcountries,theFAObovinepriceindexrosebyaround7%from2007to2008(FAO,2008a).Thegeneralpricetrendoverthelast5yearsshowsasteadyincreaseforbeefandalsodemonstratesthatbeefcomparedtomonogastricmeatisexpensive,butissurpassedbylambmeat(Figure1).
Table 5.SourcesofbeefimportstoRussia(WorldTradeAtlas,2008).
Country 2007(%) Δ2005-2007(%)Brazil 65.8 +168.9Argentina 15.7 -40.0Paraguay 8.5 +27.3Ukraine 5.1 -41.5Uruguay 1.6 +266.7Germany 1.0 -59.3Ireland 0.6 -82.3Others 1.6 -69.6Total 100.0 +10.4
1992 1994 1996 1998 2000 2002 2004 2006 200890
100
110
120
130
140 USD per tonne
0
1,000
2,000
3,000
4,000
5,000
Ovine
Beef
Pigmeat
Poultry
2003 2004 2005 2006 2007 2008
A B
Figure 1. (A)FAOinternationalpriceindexformeatproducts(1998-2000=100%).(B)FAOinternationalpriceindexforselectedmeatproducts(FAO,2008a).
� The�cattle�sector�in�Central�and�Eastern�Europe
31
Nationalpricelevelsofbeefstronglyreflectrespectiveproductioncosts.Differencesbetweenexportorientedcountrieswithlowproductioncostsandthosedependingonimports,andwithonlyaminordomesticproduction,amountto200%(Figure2).Thepressureonmarketpricesderivingfromdifferencesinproductioncostsgenerallyleadstorespectivepolicymeasurestomaintainbeefproductionalsoinregionswithahighproductioncost.AstheIFCN-Beefhasdemonstrated,4foldcostdifferencesbetweenfarmsinresponsetofarmingconditions,landendowmentandlandvalue,andintensificationneedsexist(Deblitzet�al.,2004).Giventheimpactofecologicalfactorsonbeefoutput,theglobalsupplylevel,therangeofshortormediumtermpolicydecisionsrelatedtobeefproductionconditions,beefexportandimportregulations,domestictradeandpricepolicies,thegrowingconsumerdemandsrelatedtoSPSandtraceability,thechangingconsumptionpatternforbeefinrelationtomajordiseaseincidences,theworldmarketpriceofbeefwillalwaysshowstrongvariations,especiallysincethevolumeofgloballytradedbeefisonlyasmallfractionofthetotalproduction.
Trends in the dairy sector
Dairy production
Globalmilkproductionreached676milliontonnesin2007,upby1.8%over2006.Productiongrowthin2008isexpectedtobearound2.5%asproducersrespondtobetterpricesin2007.TheleadingdairyproductionregionsareEU(22.7%),India(14.3%),USA/Canada(13.4%),China(5.4%),Russia(4.6%),Brazil(3.8%),Oceania(3.6%),EasternEurope(2.9%),andCentralAsiancountries(1.9%).Majorexpansionsofdairyingduringthelastdecade(Table6)occurredincountrieswitheitherfastgrowingeconomiesandlowpercapitadairyconsumptionlevels,orlargeincreasesindemandfordairyproducts,suchasChina(+258%),CentralAsiancountries(+44%),India(40.4%),andBrazil(32.4%).Amongtheleadingdairycountrieswithhighlevelsofconsumptionofdairyproductsonly
Figure 2.Bovinemeat:internationalprices(FAO,2008b).
The�cattle�sector�in�Central�and�Eastern�Europe
32
Oceania(+30.3%)andNorthAmerica(+18.5%)dairyproductionhadasizableexpansion,whileintheEUthequotasystemkeptdairyoutputalmostconstant(FAO,2008a).Productiontrendsduringthelastfewyearshighlightthecontinuousexpansioninsocalleddevelopingcountriesreachingaglobalshareofalmost48%in2008.ThedairysectorinChinaexpandedby8%and9%during2006and2007,andinIndiaandPakistanby3%and4%,respectively.Thestrongimpactofpurchasingpowerondemandfordairyproductsincountrieswithafastgrowingeconomyandyetlowconsumptionlevelswillcontinuetoeitherprovideincentivesforexpandingthedomesticdairysectororforincreasingtherateofimportsofdairyproducts.AsshowninFigure3,thereappearsadependencybetweenpercapitaconsumptionofmilkandgrowthratesofdairyproduction.Thisstipulatescontinuoushighgrowthratesinallcountrieswithemergingeconomiesandshiftsofdietaryhabits.Changeofpurchasingpowerandlifestyleiswellconnectedwithurbanisationandover-proportionaleconomicgrowthinurbanareas,asthedatafromChinaconvincinglydemonstrate.Dairyoutputinthetraditionallyexportorienteddairyregionsoftheworld(Europe,Oceania,Brazil/Argentina)willnotchangeverymuch,andgrowthinsomeregions/countriesisoffsetbydeclinesinothers,whichdoesaffectexporttradeconditions.Thestronggrowthduring2008indairyproductioninBelarus(+3.9%),Argentina(+6.0%),theUSA(+2.7%),andthemarginalexpansionintheEU(+0.6%)andUkraine(+0.3%)isexpectedtobecounterbalancedbyamajordeclineinAustralia(-3.5%)andNewZealand(-4.5%)(FAO,2008a).InEasternEuropeancountries,thedairysectoroverthelastfiveyearsremainsstagnantinCaucasiancountries,showsacontinuousrevitalisationinCentralAsiancountries,appearstobeexpandingratherfastinBelarus(+4.0%during2007),turnstorecoveryinRussiawitharecentgrowthof+2.0%p.a.,andexhibitsaverymixedsituationinUkraine,whereafterconsiderablestabilisation,theexportofdairyproductstoRussiawereimpactedbyqualityproblems(-7.0%in2007)(Figure4).
Dairy trade
Only8%to9%oftheglobalannualdairyproductionistradedininternationalmarkets.In2007thevolumeofinternationallytradedproductsdroppedto5.6%milkequivalent.Themostimportantdairyproductstradedarebutter,cheese,milkpowders,caseinandcondensedmilk.TheEUandNewZealandremainthemajordairyexportersaccountingforover30%eachofallexports,followedbyAustralia.Conditionsinthesecountrieswilllargelyaffecttheglobaltrade(Figure5).TheEUisfurtherreducingitsexportabilityasaneffectofthequotasystemandinOceaniadairyoutputisreducedbyrecurrentdrought(mainlyinAustralia).Othertraditionaloremergingdairy
Table 6.Cattlemilkproductionlevelanddevelopment(milliontonnes)(FAOSTAT,2008).
Country 2006 Changessince1996(%)Argentina 8.1 -11.4Brazil 25.4 +32.4Australia/NewZealand 24.7 +30.3China 36.4 +257.8India 95.7 +40.0USA/Canada 90.6 +18.5EU27 153.8 +1.7Russia 31.3 -12.5EastEuropeancountries(Ukraine,Moldova,Belarus)
19.8 -35.6
CentralAsiancountries 12.7 +44.0
� The�cattle�sector�in�Central�and�Eastern�Europe
33
0
5
10
15
20
25
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007K
g pe
r milk
equ
ival
ent p
er c
apita Rural Urban
B
Figure 3. (A).Percapitaconsumptionofdairyproducts(DanishDairyBoard,2008c).(B).Urbanandruraldairyproductsconsumptionratesexpressedinmilkequivalent(ME)inChina(DanishDairyBoard,2008c).
0
5
1015
20
25
30
3540
45
50
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006Year
Pro
duct
ion
(in m
illio
n M
T)
Caucasian countries CAC Russian Federation Ukraine Belarus
Figure 4.MilkproductioninEasternEuropeancountries(FAOSTAT,2008).
The�cattle�sector�in�Central�and�Eastern�Europe
34
exportersarenotfullyabletooffsetthiseffectduetocomparablelowsuppliestotheworldmarket(Figure6).MajorimportingcountrieswereformanyyearstheemergingdairyconsumernationsinNorthAfrica,NearEast,SouthEastAsia,EastAsiaandChina.Inthelightofthereducedvolumeoftradeddairyproductslinkedwithdramaticpriceincreasesmanyimportingcountrieshavereducedimportsbyaround5%,raiseddomesticdairyprices,andcreatedincentivesfordomesticproduction.Importvolumescontractedbydevelopedcountrieshaveremainedrobust(FAO,2008a).Theproductstructureoftradeddairycommoditiesischanging.Exportofatraditionalproductsuchasbutterhasdeclinedby26%during2004to2008ingeneral,andintheEUfrom355,000tonnesin2004to105,000tonnes(-29.6%)in2008.OnlyBelarusisexpandingitsbutterexport.TheRussianFederationappearsasthedominantimporterofbutterandshowsexpandingtrendsaslongasthedomesticdairysectorisunabletomatchthegrowingconsumerdemandinthecountry.OthertraditionalimportersareNorthAfrica,SouthEastAsiaandtheMiddleEastGulfStates.Skimmilkpowder(SMP)exportsfromtheEU,AustraliaandNewZealandhavealsodeclinedbyalmost33%,whichwillgivetheUSAfirstplaceinexportingSMP.MajorimportersarecountriesinSouthEastAsia,NorthAfrica,andCentralandSouthernAmerica.
Australia 12 %
Other 11 %
Ukraine 3 %
Argentina 6 %
US 6 %
New Zealand 32 %
EU 30 %
Figure 5.Exporters’shareofworldtradein2006(milkequivalent)(DairyAustralia,2008).
EU
New Zealand
Other Australia
USA
Figure 6.Shareofexporttradeinmilkequivalent(%)(DairyAustralia,2008).
� The�cattle�sector�in�Central�and�Eastern�Europe
35
Theglobaltradeinwholemilkpowder(WMP)isconstrainedbyinsufficientsuppliesdespitestrongimportdemandsfortheuseofreconstitutedmilkandotherproducts.MainexportersareNewZealandandAustraliaanduntilrecenttheEU,mainimportersareMiddleEastandcountriesinCentralandSouthAmerica.Theinternationaltradeincheeseisveryrobustandmarketdemandappearstobegrowing(+3.6%in2007)despiteconsiderablepriceincreases.TheEUistheworldleaderintheglobalcheesemarketwith35%ofthetotalmarketshare,andtheamountofmilkbeingusedforcheeseproductionisincreasing.AustraliaandNewZealand,thesecondlargestcheeseexporters(32%ofinternationaltradedcheesein2007),areexpectedtoreducetheirexportsduetoashortageinmilksupplies.TheUSAisamajorcheeseimporterunderpreferentialtradeagreementswiththeEU,NewZealandandAustralia,buthasrecentlyincreaseditsexports.OtherimportersareJapan,MiddleEastandNorthAfrica.
Dairy prices
Risingpurchasingpower,populationgrowthandlimitedagriculturalproductionresourceswillsustainhigherfoodpricesandespeciallythoseoflivestockorigin.Dairyproductionshouldbenefitfromthistrendsinceefficientproductionismuchdependentonfavourableecologicalconditionsandtheabilitytoimprovemanagementandtoconnecttomarkets.Therisingdemandfordairyproductsinemergingeconomieswithclimateslessfavourablefordairyingcanhardlybemetbyexpandeddomesticproduction,withonlymoderateyields.Thus,dairyproductionintemperateregionswithafavourableecologyremainsabeneficiaryofrisingglobaldemandsfordairyproducts.Dairyproductpricesrosefasterthanotheragriculturalcommoditiesduring2006and2007asaresultofdiminishingstocksinmajorexportingcountries.Underlyingreasonsforthedramaticchangesweretheconcomitanteffectsofhigherfeedprices,droughteffects,andtheeffectoftheEUCommonAgriculturalPolicydiminishingsurplusproductionthroughtherigidquotasystem(Morgan,2008).TheFAOindexofdairyproductprices(1998-2000=100)roseto266inApril2008,whichrepresentsa25%increaseinoneyear(Figure7).SMPexperiencedthehighestpriceriseandinducedincreasedproductionwhichfinallycausedamarkedadjustmentinprices.Butotherproductsexperiencedapricereduction(WMP8%,butter5%,cheese8%)duringearly2008.
6080100
120
140
160180200220240260
280300
1991
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Base
per
iod
1998
/200
0=10
0
Figure 7. Monthlyindicesofinternationalpricesofselecteddairyproducts(Exporttradevalueweightsfortheworld)(FAO,2008b).Theindexisderivedfromatrade-weightedaverageofaselectionofrepresentativeinternationally-tradeddairyproducts.
The�cattle�sector�in�Central�and�Eastern�Europe
36
Althoughitisexpectedthatdairypriceswillremainrobust,thereareanumberofuncertainties.Factorssupportingalowerpricearerelatedtotheabilityofimportingcountriestoexpandtheirowndairysectorandcutimports,orallowingexportcountriesaccesstotheglobalmarketwithoutprohibitiveexporttaxesasinthecaseofArgentina.Otheruncertaintiesarerelatedtochangesinfeedcostascausedbyexpandingland-useforbio-energy,impairingthecompetitivenessofdairyproduction.Thepropagationofbio-fuelislinkedtooverallenergypricesbutisalsolinkedtorespectivepoliciestoreducedependencyonfossilfuel.Policychangesinthisareaaffectconditionsfordairyproduction.Thecurrentcostleveloffuelandfeedaremarkedlyaffectingthecompetitivenessofintensivedairyproductionandcouldleadtomajorcullingandareductionindairysuppliestothemarket,whicheventuallywouldagainleadtoincreasingproductpricesintheglobalmarket.Theactualmilkpricesreceivedbydairyproducersshowverylargevariationindifferentcountriesandunderdifferentproductioncircumstanceswithincountries.AstheIFCNDairyreportof2005reveals(IFCN,2005),farmgatepricesdifferbymorethan100%withextremelylowpricesincountrieswithemergingdairysectorsandlowerfactorcostforlandandlabourandratherhighpricesincountrieswithintensivedairyfarms(Figure8).Priceincreasessuchasthoseduring2007maynotautomaticallyleadtohigherfarmgateprices.TheDanishDairyBoardreportsontheadjustmentsindifferentEUCountriesandtheUSAwhichvariedfrom16%inFinlandto34-38%inGermanyandHollandandupto45%inUKandIreland(DanishDairyBoard,2008a).Themarketpositionofdairyproducersindifferentcountriesisinfluencednotonlybythemarketpoweroftheeverdecreasingnumberofdairyprocessingplantsbutalsobytheincreasingdiscountersintheretailbusiness.Thus,marginsbetweenfarmgatepricesandconsumerprices(Figure9)dovaryconsiderablyacrosscountries,astheworkbyIFCNsoclearlydemonstrates(IFCN,2005,2006).Dairypricespaidtothefarmerandpricesobtainedinexportmarketsareverydifficulttorationallyexplain,sincetheyareinfluencednotonlybyproductionrelatedcostfactors,butalsobydomestic/nationalpricesupportarrangements,whicharemoreoftenrelatedtoruralsocialpoliciesthantoanythingelse.
Figure 8.Farmers’milkprices(US$per100kgmilk-4%fat,3.3%protein)(IFCN,2005).
� The�cattle�sector�in�Central�and�Eastern�Europe
37
Inmarketswithquotaregulationsformanagingimports,therealisedreturnsfromsalesofdairyproductsareaffectedbytherespectiveprotectedpricestructuresintheimportingcountries,whicharenormallywellabovetheinternationalpricelevel.OtherdistortionsofinternationalpricesarecausedbypreferentialtradeagreementsorgeneralexportsubsidiesofexportorientedcountriessuchastheEUandUSA.Exchangeratefluctuations,levelofmarketstocksofproductsintheEUandUSA,modificationsinsubsidyregulationsandpayments,andthevolumeoffoodaidsupplycanalsoimpactonpricedevelopments.Themarketablevolumeofdairyproductsisfurtherinfluencedbyseasonalityofproductionandtheseverityofrecurrentdroughts,asitmainlyoccursinthesouthernhemisphere,andthusimpactsonnationalandinternationalmarketprices.
Conclusion
Cattlearethemostimportantlargelivestockspeciesforsupplyingmeatandmilktofeedtheevergrowinghumanpopulation.Expansionofcattlepopulationsareoccurringmainlyinregionswithgrowingproductmarketsand/orwithfavourableproductionconditions,i.e.inemergingeconomiesandincountrieswithproductionreserves.Intraditionaldairyproducingcountrieswithhighyields,thenumberofcattleisstagnantandproductmarketopportunitiesaremetwithyieldincreases.Beefproductiongrowsatjustabove1%p.a.andistendingtomovetocountrieswithproductionreservesinthesouthernhemisphere,whilethehighlyspecialiseddairysystemsloosetheirroletosupplyfeedercattleforthebeefsector.InternationaltradeinbeefflowsfrommajorexportregionssuchasOceania,SouthAmerica,andIndiatodeficitcountriesparticularlyRussia,ChinaandtheEU.Majorchangesincattlestocksandbeefproductionoccurredduringthelast10yearsintransitioncountriesofEasternEuropeandCentralAsia,indicatingdifficultiesinovercomingstructuralchangesinthelivestocksector,ininstitutionsofthecattlevaluechain,andinregainingacompetitivecattlesector,butalsoinadjustingtonewqualitystandardsandtradepoliciesofneighbouringcountries.Beefpriceshavenotchangeddramaticallybutshowalargevariationacrosscountries.Milkproductionshowsasteadyexpansionof1.7%p.a.withconsiderabledifferencesaccordingtotheprevailingconsumptionlevel.Thelargestexpansionisoccuringincountriesofthesouthern
Figure 9.IFCNestimateforconsumerpricesformilk(US$perkgmilkin2004)(IFCN,2005).
The�cattle�sector�in�Central�and�Eastern�Europe
38
hemisphereandincountrieswithstrongeconomicgrowthfuelledbygrowingpurchasingpowerandeconomicstrengthofurbanareas.TheleadingdairyproducingregionsaretheEU,USA,IndiaandOceaniaandtheleadingexportcountriesaretheEUandOceania.Exceptionalpriceincreasesfordairyproductswererelatedtothegrowingimportdemandofdeficitcountries,andtoreducedproductstocksintheEU.Ageneralpriceadjustmentseemscorrelatedtoenergypricesanditseffectsongeneralproductioncostsandontheemergenceofbio-fuel.Dairypriceswillcontinuetofluctuateconsiderablyduetopricedisturbingeffectsofpolicies.
References
DairyAustralia,2008.Dairyproductionandtrade.Availableat:www.dairyaustralia.com.au/content/view/197/83/.DanishDairyBoard,2008.Mejeriforeningen.Percapitaconsumptionofdairyproducts.Availableat:http://www.
mejeri.dk/smcms/danishdairyboard_dk/Policies/International_dairy/Per_capita/Index.htm?ID=7925.Deblitz,C.,Charry,A.A.andParton,K.A.,2004.Beeffarmingacrosstheworld:anexpertassessmentfroman
internationalco-operativeresearchproject(IFCN).Availableat:http://www.csu.edu.au/faculty/science/saws/afbmnetwork/efsjournal/volume1/number1/EFS_Journal_v01_n01_01_ClausDeblitz_et_%20al.pdf.
FAPRI,2008.FAPRI2008U.S.andWorldAgriculturalOutlookDatabase.FoodandAgriculturalPolicyResearchInstitute.Availableat:http://www.fapri.iastate.edu/tools/outlook.aspx.
FAO,2008a.Foodoutlook,globalmarketanalysis.June2008.FoodandAgricultureOrganizationoftheUnitedNations.Availableat:http://www.fao.org/docrep/010/ai466e/ai466e00.htm.
FAO,2008b.Tradeandmarkets.FoodandAgricultureOrganizationoftheUnitedNations.Availableat:http://www.fao.org/es/ESC/en/15/162/highlight_176.htm.
FAOSTAT,2008.StatisticalserviceoftheFoodandAgricultureOrganizationoftheUnitedNations.Availableat:http://faostat.fao.org/.
Hansen,E.,Maksimenko,M.andDuBois,C.A.,2008.RussianFederationlivestockandproductssemi-annualreport2008.USDAForeignAgriculturalService.Availableat:http://www.fas.usda.gov/gainfiles/200803/146293870.pdf.
IFCN,2005.AnnualReport,2005.IFCNDairyResearchCenter.IFCN,2006.AnnualReport,2006.IFCNDairyResearchCenter.Morgan,N.,2008.Dairyprices,policiesandpotentialopportunitiesforsmallholderinAsia.AnAPHCABrief,2008.
Availableat:http::/www.fao.org/docrep/010/ai465e00.htm.USDA,2008a.GainReportNumberRS8014,release0120.08.UnitedStatesDepartmentofAgriculture,Foreign
AgriculturalService.Availableat:http://www.porkworld.com.br/img/File/41.pdf.USDA,2008b.UnitedStatesDepartmentofAgriculture.RussiaallowsforimportationofU.S.Livestock.05.Jun.
2008.04.Aug.2008http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB?contentidonly=true&contentid=2008/05/0120.xml.
WorldTradeAtlas,2008.Importenehmenzu.ZMPWeltAgrarMarkt,Januar2008.
� The�cattle�sector�in�Central�and�Eastern�Europe
39
Analysis of developments in new EU member states based on the dairy quota situation
A.�Kuipers1,�A.�Malak-Rawlikowska2,�M.�Klopcic3�and�J.�Sataite4
1Expertise�centre�for�Farm�Management�and�Knowledge�Transfer�(Agro�Management�Tools),�Wageningen�UR,�the�Netherlands;�[email protected];�2Warsaw�University�of�Life�Sciences,�Faculty�of�Economic�Sciences,�Warsaw,�Poland;�3University�of�Ljubljana,�Biotechnical�Faculty,�Slovenia;�4State�Enterprise�Agricultural�Information�and�Rural�Business�Centre,�Milk�Quota�Accounting�Bureau,�Vilnius,�Lithuania
Abstract
Theworlddairysituationwasrecently(2007)quitepositiveincomparisontotheperiod2002-2006.Demandfordairyproductsisgrowing,especiallybecauseoftherapidlyincreasingdemandinAsiancountries.In2007andearlypartof2008,asubstantialincreaseinmilkpriceswasseenintheEU,aswellasanincreaseinsomecostfactors(feedandenergy).Nevertheless,20outofthe25EUcountriesdidnotreachorjustreachedtheirnationalmilkquotainyear2006/2007.TheoverallmilkproductionvolumeintheEUisstableandexportisdecreasing.Onthecontrary,NewZealand,SouthAmericaandUSAarestrengtheningtheirexportpositionontheworldmarket.ThistrendhascausedadiscussioninEUaboutthefutureofthequotasystemafter2014;keepthisproductionrestrictinginstrumentorchooseanopenmarketsituation.ThesituationinsomeEUcountrieswillbedescribedindetail.Ascasestudies,thesituationincountriesofEasternEuropewithrelativelysmallherds,i.e.Poland,SloveniaandLithuaniaareexamined.Regionalisationofmilkproductioniscomparedagainstthequotasysteminuse:aregionalsystemversusanationalsystem.Thestructuraldevelopmentsinthevariousregionsinthesecountriesarealsocompared.ThedecouplingofEUsubsidiesfromproductionhasmadethechoiceofstrategymoreaneconomicalfarmmanagementdecisionthanbefore.ThedairysectorinEuropeisbecomingabusinessinariskymarketenvironmentaswasexperiencedbythepig,poultry,vegetable,andflowersectorsformanyyears.Becauseoffluctuatingmilkpricesinrecentyearsanduncertaintyaboutquotasystem,pricesofquotahavestartedtofluctuate.Itwillbeahugechallengeforthesectortocopewiththismarketsituationinasustainableway.Robustnessofthefarmbecomesafactorofmoreimportance.
Keywords:�milk�quota,�regional�and�national�systems,�chain�developments,�Eastern�EU�countries
Introduction
Inthisstudy,firsttheEUdairypolicywillbebrieflydescribed.ThequotasystemhasbeenthebackboneoftheEUdairypolicysince1984tobalancesupplyanddemand.Somecharacteristicsofthequotasystemwillbeoutlined,whichhavearelationshiptostructuraldevelopmentsofthesectorinthevariouscountries.Thentheapplicationofthequotasystemsince2004inthenewEUcountrieswillbedescribed.Emphasiswillbegiventostructuraldevelopmentaspects.Thiswillbedonemoreextensivelyforthreecountries,namelyPoland,SloveniaandLithuania.PolandischosenbecauseitisthelargestdairycountrythatenteredtheEUin2004.Ithasrelativelysmallfarms.Sloveniahasamountainouslandscapeandalsohassmallfarms.Inbothcountriesaformofregionalisationtakesplaceinapplyingthequotasystem.AdditionalattentionisgiventoLithuaniaasoneoftheBalticcountries:thiscountryhasanationallyappliedquotasystem,i.e.noregionalisationtakesplace.Thisyes/noregionalisationwasalsoareasonbehindtheselectionofthisBalticcountry.Also,extra
The�cattle�sector�in�Central�and�Eastern�Europe
40
informationisprovidedaboutRomaniaandBulgariaasthelastcountriesthatenteredtheEU.Thus,thestudycoversawidespectrumoftheexistingdiversityinEuropeandairyproduction.
EU Agricultural policy
DetailedinformationontheEUdairysectorcanbefoundinthefactsheet‘MilkandmilkproductsintheEuropeanUnion’(EC,2007a).Thisfactsheetexaminesthedairysectorinfactsandfigures,explainstheroleoftheEU’sCommonAgriculturalPolicy(CAP)inrelationtomilkproductionandmarketing,andhighlightsthemainfactorsthatwillinfluenceitsfuture.Accordingtothisfactsheet,acommonmarketorganisation(CMO)formilkandmilkproductswassetupin1968.Althoughovertheyears,thedairyCMOhaschangedfundamentally,itstilloperatesinthreeareas:• internalmarketsupport;• usingtradeinstruments;• makingdirectpaymentstofarmers.
Internal market support
‘Safety-net’�intervention
Nowadays,publicintervention(buyingintostorage)forbutterandskimmedmilkpowderislimited.Interventionagenciesmayonlybuyinbutterduringtheperiod1Marchto31Augustofanyyear.Thereisalsoamaximumorthresholdonthequantitiesofbutterofferedforintervention.Thisthresholdwas50,000tonnesin2006,40,000tonnesin2007and30,000tonnesfor2008andsubsequentyears.IfthethresholdisexceededtheCommissionmaysuspendconventionalinterventionbuyingandcontinuebuyingusingatenderingprocedure.In2003itwasagreedthatthebutterinterventionpricewouldbereducedby25%overafour-yearperiod,beginningon1July2004,thefourreductionsbeingthreetimes7%plusafinalcutof4%in2007.Moreover,theactualbuyinginpriceisonly90%oftheinterventionprice(i.e.€221.75per100kgon1July2007).Skimmedmilkpowder(SMP)interventionwasonlyopenbetween1Marchandend-Augusteachyear,foramaximumquantityof109,000tonnes.Beyondthisquantity,interventionmaybesuspendedandmaybereplacedbyatenderprocedure.TheSMPinterventionpricewasreducedby15%overathree-yearperiod,withreductionsof5%ineachof2004,2005and2006,resultinginthefollowingpricelevels:€205.52/100kgin2003/2004,reducingto€174.69/100kgfrom1July,2006
Disposal�of�dairy�products�on�the�internal�EU�market
Inorderthatahealthymarketbalanceismaintained,theEUdairyindustrycontinuestohaveaccesstomeasurestoensurethecompetitivenessoftheirdairyproductsontheinternalmarket.VariousschemesfordairyproductsontheEUmarketstillplayaroleinthedairyregime,thoughspendinghasbeenreducinginrecentyearsinmostcases.Themainsubsidiseddisposalschemesare:• cream,butterandconcentratedbutterfornon-profitorganisations,forcommercialpastryand
icecreammanufacture(stillasignificantscheme–disposalmeasuresforbutter,butteroilandcreamcoveredatotalquantityof600,000tonnesofbutterequivalentsin2004);
• SMPforuseinanimalfeed;
� The�cattle�sector�in�Central�and�Eastern�Europe
41
• skimmedmilkforthemanufactureofcasein/caseinates;• schoolmilk;• aidintheformofdairyproductsforthemostdeprivedpeople.
Private�storage�aid
Forbutterandcertaincheeses(mainlyItaliancheeses),cheeseproducerscanobtainfinancialsupport(aid)forstoragecosts.Duetoseasonalvariationsinrawmilkdeliveriestheproductionofsomeproductsishighforashortperiod,whichcandestabilisemarkets.Thisaidstabilisespricesbyhelpingproducerstotaketheproducttemporarilyoffthemarket.Inthecaseofbutteritalsoservesasanalternativetointervention.
Milk�quotas
ThemilkquotaregimehasbroughtstabilitytotheEU’sdairysectorsinceitsintroductionin1984.TheCAPreformof2003decidedthattherewillbethreeannualincreasesof0.5%ofquotavolumesfor11oftheEU-15memberstatesbeginningin2006(Greece,IrelandandNorthIreland,ItalyandSpainaretheexceptionsastheybenefitfromearlierquotaincreases).Tomeetgrowingdemandfordairyproducts,theEuropeanUniondecidedinMarch2008toincreaseitsmilkquotasby2%beginninginApril2008.TheEU-15wasextendedin2004with10newmemberstates.ThenationalquotasforallEUmemberstatesin2004,includingthenewcountries,areillustratedinFigure1(MaltaandCyprusnotlisted).ItisclearthatPoland,asnewEU-country,belongstothelargedairycountriesinEurope,ranking6thinquotaamountofthe25EU-countries.In2007,RomaniaandBulgariaenteredtheEU.Thesituationinthosecountriesisdescribedlaterinthispaper.
Figure 1.QuotaassignedtoEU-memberstatesin2004(→indicatesthenewEU-states;MaltaandCyprusarenotlisted).
The�cattle�sector�in�Central�and�Eastern�Europe
42
Using trade instruments
Exports
AstheEUmarketpriceishigherthantheworldpricefordairyproducts,exportsgenerallytakeplacewiththeaidofexportsubsidies.Followingthe1994multilateraltradeagreement(knownastheUruguayRound)oftheWorldTradeOrganization(WTO),exportsubsidieshavebeenrestricted–boththequantitiesexportedandtheamountoftotalsubsidiespaidoutarestrictlylimited(Table1).Inpracticeonlycheeseexportshavereachedthequantitativelimiteachyear.Subsidisedexportsofotherdairyproductshavebeenwellbelowthevolumeconstraints.TheEuropeanCommissionintroducedatenderingsystemforexportrefundsonbutter,butteroilandSMPinbulkin2004.Thissystemrunsalongsidethetraditionalfixedrefundarrangementsforallproductsandhasreinforcedthemoremarket-orientedapproachofthedairyregimepost-2003.
Imports
TheEUmaintainsrelativelyhightariffsondairyproducts,inordertosustaintheEUmarketprice.Thereareonlyminimalimportsatfulltariff.However,manyoftheEU’stradingpartnersbenefitfromspecialimportarrangements–knownasTariffRateQuotas(TRQs)–wherebyimportscancomeinatlowertariffs.SomeoftheTRQsarespecifictoparticularexportingcountries;othersareopentoallunderthemost-favourednation(MFN)system1.TRQsarenotalwaysfilled(i.e.fullyutilised).Thoseforpowders(about70,000tonnes)arehardlyused;thereareTRQsforseveraldifferentcheesetypes–amountingtojustover122,000tones–theaveragefillrateis40%;thebutterTRQsofapproximately89,000tonnesarealwaysfilled.
Making direct payments to farmers
Directpaymentsorincomesupport2004-2007waslinkedtokgofmilkquota.Theintentionwasthatthedirectincomesupportwouldbenearlyequaltothereductionininterventionpricesfrom2004to2007.Incomesupportwasin2007decoupledfromkgofmilk(i.e.fromproduction),theso-called‘decoupling’.Then,thesupportwillbelinkedtoland(ha)ortothefarmer.Tobeeligibleforsubsidy,thefarmerhastocomplywithanumberofconditions,theso-calledCross-Complianceconditions.Theseconditionsrefertoallkindsofaspectsofsustainablefarmingoralsotoasetof‘GoodFarmingPractices’.GoodfarmingpracticesthatarepartoftheCross-Complianceconditionsrelateto:
1MFNrequiresthateverytimeamemberstateimprovesthebenefitsitgivestoonetradingpartner,itmustgivethesametreatmenttoallotherWTOmembers,sothattheyremainequal.
Table 1.Subsidisedexports–maximumallowablequantitiesandvaluesforEU-25.
Products Quantities(tonnes) Values(€1,000)Butter/butteroil 399,300 947,800SMP 272,500 275,800Cheese 321,300 341,700Other 958,100 697,700
� The�cattle�sector�in�Central�and�Eastern�Europe
43
• environment;• productqualityandhygiene;• animalwelfare;• naturemanagementprogrammes(likepreventingerosionanddeteriorationofbiodiversity).These‘goodfarmingpractices’arearesultofthevariousEU-directives,liketheHygienedirectiveandtheEnvironmentalregulations.Insomecountries,publicagenciesordairycompanieshaveincorporatedthe‘practices’inso-called‘QualityAssuranceSchemes’.Farmersarestimulatedtoparticipateinsuchprograms.
Characteristics of quota system in relation to structural development
Theintroductionofaquotasystem,ashappenedin1984inthe‘old’EU-countriesandin2004inthe‘new’EU-countries,isaverycomplicatedprocess.Wehavetwotypesofquota:quotafordeliveringmilktothedairycompanies,i.e.topurchasers(QuotaA)andquotafordirectsalesfromthefarm(QuotaD).Introductionofsuchasystemrequiresinstitutionbuilding,settingupadministrativeprocedures,choicesaboutthesystem,thechoiceofprioritygroups,thehandlingofthebutterfatreference,controlaspects,farmmanagementandcostaspects,communicationwithfarmers,andlastbutnotleaststructuraldevelopmentaspects.Infactthequotasystemaffectsthedairyindustryandruraldevelopmentasawhole.ThisisdescribedfortheEasternEuropeancountriesbyKuiperset�al.(2007).Theimplementationofthequotasystemallowsdifferentoptions.Thechoiceofoptionsisveryimportantforthedevelopmentpossibilitiesofthedairysectorandtheindividualfarm.Especiallythewayquotatransferisarranged,thebuilt-upofanationalreserveandthedivisionofthecountryinregionsornotisessentialinthiscontext.Thevariouschoicestobemadearepresentedbelow.
Reference year
Thereferenceyearistheyearonwhichtheindividualquotaallocationtofarmersisbased.Forthenewmemberstates,thiswasusually2002,2003or2004oracombinationoftheseyears.EachmemberstatehasbeenassignedanationalquotabytheEU(seeFigure1).Thenationalquotaisdistributedoverthenationalreserveandtheindividualproducers.Insomestates,thenationalquotaisfirstdividedbetweenregionsand/orbetweenthemilkpurchasers,andinasecondstepassignedtotheindividualproducersbyregionalauthoritiesand/orbythepurchasersofmilk(cooperativesorprocessingplants).Thenationalquotaandindividualquotathathavebeenassignedareaffectedbythedevelopmentofthecowpopulationandmilkvolumeinthepast.ThedecreaseinthenumberofcattleandcorrespondingproductionvolumeintheCentralandEasternEuropeancountriesinyears1990-2002isillustratedinFigure2.
National reserve
Anationalreserveisneededtohelpfarmersinspecificproblemsituationsand/ortostimulatecertainnationalpoliciesonstructuraldevelopment.Thusthenationalreserveismeantto:• giveproblemfarmersastrongerbase;• provideforstructuralchanges.Itispossibletohaveamoreliberaloramoresocialapproachtodistributingquota.Withaliberalapproachthequotatransfersarelefttothemarket.Withasocialapproach,thenationalauthoritiescollectquotaatnationalorregionallevelandhaveguidelinesforthedistributionofthisquota.Inthiscase,thequotasystemisusedasadevelopmenttoolforthedairysectorandforruraldevelopment.
The�cattle�sector�in�Central�and�Eastern�Europe
44
Possibleconditionsforprovidingthisadditionalquotafromthenationalreserveare:• farmerswithdevelopmentplans;• youngfarmers;• regionswithlandreformplans.
Quota transfer and structural changes
Differentpolicieswhichexistconcerningquotatransferareasfollows:• QuotaExchangeBureau;• freetransferofquota;• transferofquotalinkedtoland;• leasing.Therealityisthateachcountryadoptsasystemthatismoreorlessfittedtotheownsituation.WhatcanwelearnfromthesystemspractisedintheWestern-Europeancountries?Welearnthatfreequotatransfergivesflexibility.Structuraldevelopmentsarenotblocked.Butwhenquotapricesincrease,thecostleveloffarmsalsoincreases.Thisimplies,thatthestartvalueofthefarmenterpriseishigherthanwithoutquota.Thisisnotfavourableforrestructuringandinvestmentingoodsotherthanmilkquota.Also,herdsizewillaffectstructuralchanges.Table2showsthatherdsizesdiffersignificantlybetweencountries.Whenherdsizeissmallitmaybeexpectedthatmanysmallfarmswillstopmilking,i.e.arenotallowedtodelivermilktothedairyplants.Thisiscausedbymilkqualityandeconomicissues.Forthedairysector,itisanadvantagethatquotagoesfreeofchargetootherfarmers.Thatwillkeepinvestmentinthesectorlimitedandcostlevelscompetitive.Quotatransferwithoutmoneytransactionsareonlypossiblewhenfreetransferisnotallowed.Inthiscaseallfreequotaflowstothenationalreserve.ThegovernmentAgencieshavetodistributethisquotaamongthefarmersthatremaininmilkproduction.Also,wholefarmtransfer,likeinFrance,isanoptionfordairycountrieswithasmallfarmstructure.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2002000259910991
No.
of d
airy
cow
s (in
100
0)Estonia
Lithuania
Latvia
Poland
CzechRepublic
SlovakRepublic
Hungary
Slovenia
Figure 2.DevelopmentofnumberofcowsinnewEU-memberstates.
� The�cattle�sector�in�Central�and�Eastern�Europe
45
Regions or not
Thephilosophybehindtheestablishmentofregionsisthatquotaisforcedtostaywithineachregion.Itprotectscertainregionsfromloosingquotaandfarms.Thisisespeciallythecaseforthelessfavouredagriculturalregions.Thecountriesthatoperateregionalquotasystemsare:• Germany:21regions(quotaprice:0.20-0.90€/kgmilk)• France:3-4regions• Poland:16provincesEachregionhasit’sowncharacteristics.Forexample,thequotapricesofthevariousregionsinGermanyin2004variedfrom€0.20-0.90.ThelowestpricesexistintheformerEast-Germanyregions,andthehighestpricesareinsouthernGermany(Bayern).Afirstindicationin2004ofquotapriceinPolandwas€0.20perkg,andinSlovenia€0.15-0.30perkg.Alsothenumbersofquotatransfersinthevariousregionssometimesdiffersignificantly,indicatingthatmoreorlessrestructuringofthedairysectorisgoingonindifferentpartsofacountry.Theadvantagesanddisadvantagesofinstalmentofregionsaresummarisedas:• Advantage:protectionofcertainregionstomaintaindairyhusbandryinthoseareas.• Disadvantage:economicdevelopmentsrestrictedtothebordersofaregion.
Present quota situation in new EU countries
ThepresentallocationofmilkquotatotheEUcountriesisshowninFigure1andthedevelopmentinthenumberofdairyfarmerswithquotaisshowninTable3.Inthe‘old’EU-countriesareductioninfarmnumbersof40-80%hasoccurredintheperiod1995-2007.Intheperiodof2005-2007anannualreductionindairyfarmnumbersof3-14%wasobserved.EspeciallyinSpain,PortugalandGreecethenumberoffarmsdecreaseddramatically.ThenewcountriesofLithuania,EstoniaandPolandhavealsoshownaverylargedecreaseindairyfarmnumbersinrecentyears(Table3).ThevariousEUcountriesshowaverydifferentstructureinsizeofdairyfarms(seeFigure3).Thenewcountriesshowevengreaterdiversityinthisrespect.Forinstance,Slovakiahasthelargestfarmsize,whileLithuaniahasthesmallestfarmsintheEU-25.Thedynamicsofdairyinginacountryistosomedegreeindicatedbythepressureofthefarmersonthenationalquota.Isthereatendencytoexceedtheindividualandnationalquotaoristhenationalquotanotfilledupbythefarmers?ThissituationisillustratedrespectivelyfortheEUasawhole(Figure4)andfortheindividualcountries(Figure5).AscanbeseeninFigure5,therehasbeenatendencyinrecentyears(2004-2007)thatmoreandmoreWesternEuropeancountriesdidnotutilisethenationalquota.ButthesituationinthenewmemberStatesismorecomplexanddifficulttopredict.InthefirstyearsafterenteringtheEUthe
Table 2.Numberandsizeoffarmswithquotainsomecountries(2004).
Country Farms Cow/farm Milkprod/cowNetherlands 30,000 52 7,500Lithuania 130,000 2.5 5,015Poland 450,000¹ 4.5 3,840Hungary 30,000 12 6,317Estonia 7,120 16 5,119CzechRepublic 3,400 212 5,718Slovenia 10,900 10.3 4,993¹Farmswhoreceivedquotafordeliveringtothemarket;totalnumberoffarmswasabove700,000.
The�cattle�sector�in�Central�and�Eastern�Europe
46
Table 3. DevelopmentofnumberofdairyfarmerswithaquotainEU(EC,2007b).
Memberstate 1995 2005 2007 Change1995-2007
Annualchange1995-2005
Annualchange2005/2007
Austria 83,793a 53,713 47,378 -43.5% -4.3% -6.1%Belgium 24,047 14,533 12,672 -47.3% -4.9% -6.6%Denmark 15,301 6,540 5,354 -65.0% -8.1% -9.5%Germany 230,125 113,020 103,480 -55.0% -6.9% -4.3%Greece 30,316 7,752 6,288 -79.3% -12.7% -9.9%Finland 31,872a 17,833 15,213 -52.3% -5.6% -7.6%France 167,593 109,822 100,853 -39.8% -4.1% -4.2%Ireland 48,013 24,194 21,875 -54.4% -6.6% -4.9%Italy 107,011 52,674 46,651 -56.4% -6.8% -5.9%Luxembourg 1,465 991 923 -37.0% -3.8% -3.5%Netherlands 42,249 23,187 21,209 -49.8% -5.8% -4.4%Portugal 73,197 15,804 12,294 -83.2% -14.2% -11.8%Spain 132,352 35,906 28,465 -78.5% -12.2% -11.0%Sweden 17,023a 9,449 8,369 -50.8% -5.7% -5.9%UK 41,132 20,629 18,326 -55.4% -6.7% -5.7%CzechRepublic 2,991 2,727 -4.5%Estonia 1,859 1,506 -10.0%Latvia 25,457 22,141 -6.7%Lithuania 111,097 82,281 -13.9%Hungary 6,076 6,175 0.8%Poland 343,000 276,508 -9.8%Slovenia 10,578 8,897 -7.9%Slovakia 814 734 -5.0%aFigures1996-97.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Slov
akia
Den
mar
kU
K NL
Cypr
usCz
ech
Swed
en
Esto
nia
Mal
ta (p
rov)
Italy
Lux
Spai
n
Belg
ium
Fran
ce (p
rov)
Hun
gary
Ger
man
y (P
rov)
Ire
land
(200
5)
Port
ugal
Gre
ece
Finl
and
Latv
ia
Aus
tria
Slov
enia
Pola
nd
Lith
uani
a
0 to 5050 to 100100 to 200200 to 300300 to 500500 plus
Figure 3.StructureofmilkproductioninEU-25-distributionofdairyholdingsbyquotasize(tonnes)inyear2006-2007(EC,2007b).
� The�cattle�sector�in�Central�and�Eastern�Europe
47
newmemberStatesdidnotfullyutilisetheirquota.ButwillthistrendcontinueafteradaptationtothenewEU-situation?Thisquestionwillalsobetackledintheshortdescriptionsofthedairysituationintheindividualcountriesinthenextsection.Thedynamicsindairyingisalsorelatedtothequotapricesfarmersarepreparedtopay.AnestimateofthetrendinthesepricesisdepictedinTable4.WhileinWesternEuropeancountries,liketheNetherlandsandBelgiumwithtraditionallyhighprices,adeceasingtrendisvisible,inseveralothercountriesquotapricesarerising.TheincreaseinpricesinDenmarkandIrelandisparticularlynoticeable.Whendescribingthesituationinthenewcountriesinthenextsection,thefocuswillbeonthestructuraldevelopmentaspects.
+ 15
1,75
4
+ 24
6,43
8
+ 1,
218,
001
+ 1,
226,
232
+ 1,
239,
371
+ 1,
147,
080
+ 1,
060,
073
+ 81
7,49
6
+ 77
9,63
0
+ 85
3,61
0
+ 1,
079,
759
+ 1,
067,
060
+ 1,
148,
916
+ 77
3,72
8
- 1,2
31,5
74 - 627
,193
+ 86
6,30
8
+ 86
3,28
2
+ 1,
044,
550
+ 94
3,60
8
+ 22
,443 + 47
5,00
6
+ 48
2,81
9
+ 52
0,09
5
- 686
,285
- 526
,974
- 1.9
19.4
26
+ 92
6,35
6
-3,500,000
-3,000,000
-2,500,000
-2,000,000
-1,500,000
-1,000,000
-500,000
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07
tonn
es
Total Overshoot Overshoot minus Under use
86,71
4.778
30,75
1.483
28,61
9.767
8,656.28
6
724.5
9
638.2
69
-7,46
0.909
-14,6
88.45
4
-35,5
42.52
5
-37,9
61.27
4
-44,3
71.87
-45,6
46.52
3
-53,4
80.16
5
-53,8
25.26
7
-63,5
56.27
8
-71,3
64.19
7
-79,1
86.41
6
-92,4
84.46
1
-198,52
5.617
-226,76
9.453
-232,74
5.9864
-325,16
0.559
-479,35
7.312
-636,52
2.804
617,6
23.25
2
-900,000
-700,000
-500,000
-300,000
-100,000
100,000
300,000
500,000
700,000
900,000
IT AT NL DK DE LU CY MT IE SI BE EL EE CZ PT SK FI LV ES SE PL LT HU UK FR
tonnes
2004/05 2005/06
2006/07
Figure 4.Overshootandunder-useofEU-quotaamountinyears1993-1994till2006-2007(EC,2007b).
Figure 5.Overshootorunder-useofnationalquotaamountsinEU-25inyears2004till2007(EC,2007b).
The�cattle�sector�in�Central�and�Eastern�Europe
48
Quota and structural developments in new member states
Inthissection,wedescribethesituationinthe10newEUcountries,exceptMaltaandCyprus.Thefocuswillbeonthestructuraldevelopmentaspects.Thiswillbedonemoreextensivelyforfivecountries,namelyPoland,Slovenia,Lithuania,RomaniaandBulgaria.PolandischosenbecauseitisthelargestdairycountrythatenteredtheEUin2004.Ithasverysmallfarms.Sloveniahasamountainouslandscapeandalsorelativelysmallfarms.Inbothcountriesaformofregionalisationisusedinapplyingthequotasystem.Thiswasalsoareasonbehindthechoiceofthesetwocountries.Also,theregionalisationisappliedmore(Poland)orless(Slovenia)strictly.LithuaniaisthecountrywiththesmallestaveragefarmsizeintheEUandhasanationaloperatingquotasystem.RomaniaandBulgariaareincluded,becausethesecountrieshaverecentlyenteredtheEU.ThiswaywecoverinsomewhatmoredetailawidespectrumoftheexistingdiversityinCentralandEasternEurope.
Slovenia
General�overview�of�the�Slovenian�dairy�sector
Inquotayear2006/2007,thetotalquotaallocatedtotheSloveniandairyfarmingsectorwas576,638tonnes.Outofthis,549,428tonneswasformilkdeliverytodairies(A-quota)and27,210wasfordirectsales(QuotaD);seeTable5.Partofthenationalquotawasleftasanationalreserveforsolvingproblemcases,suchasmistakesinallocationoralreadyinitiatedinvestmentinmilkproduction.Duringthequotayear2006/2007,atransferofquotawasmade:4,174tonnesofQuotaDwastransferredtoQuotaA,and126tonnesfromQuotaAwasmovedtoQuotaD.Attheendofquota
Table 4.Pricespaidperkgofquotaindifferentmemberstatesin2007/2008(Euros).
Memberstate 2007marketprice Administrativeprice DevelopmentsincelastyearTheNetherlands 70-80cents DecreasingBelgium(FL/W) 37/25cents DecreasingFinland 6-36cents 4cents DecreasingCzechRepublic 7cents DecreasingSlovenia DecreasingPoland 10-20cents DecreasingFrance 0/15cents StableSweden 9cents StableAustria 50-70cents StableGermany 23/42cents StableSpain 27cents StableItaly 30cents StableLuxembourg €1.20 IncreasingUnitedKingdom 6cents IncreasingDenmark 62cents IncreasingIreland 10-28cents 12cents IncreasingCyprus €1.33 IncreasingLatvia 43-72cents IncreasingHungary 6cents IncreasingSlovakia NopriceSource:MemberSatesestimates.
� The�cattle�sector�in�Central�and�Eastern�Europe
49
year2006/2007,thetotalquotaallocatedtoSlovenianfarmerswas553,476tonnesformilkdeliverytodairies(Aquota)and23,162tonnesfordirectsales(Table5).Thestructureofthedairysectorcanbedescribedbythedevelopmentinnumberoffarmsandquotasizeoffarmsandthetypeoffarmland(flat,hilly,mountainorlessfavouredarea).Thenumberof
Table 6. Numberofdairyfarms,dairycowsandquantitiesofmilksoldofffarminSlovenia.
Year No.ofherds No.ofdairycows
Quantityofmilksold(kg) No.ofdairycows/farmTotal Percow Perherd
1980 55,533 150,694 303,831,000 2,016 5,471 2.71985 58,194 175,696 352,454,200 2,120 6,063 2.91990 43,656 161,992 359,184,200 2,217 8,228 3.51995 30,040 132,532 388,394,400 2,968 12,942 4.42000 16,869 117,775 447,831,000 3,758 26,516 6.82002 12,589 113,599 473,500,000 4,154 38,577 9.32003 11,500 112,484 484,200,000 4,323 42,104 9.72004 10,900 112,500 488,683,000 4,344 44,833 10.32005 10,578 111,424 506,888,419 4,549 47,919 10.52006 9,509 111,000 512,034,328 4,613 53,847 11.72007 8,897 106,000 528,426,472 4,985 59,394 11.9
Table 5.Quotafordeliveriestodairiesandquotafordirectsales,2006/2007(AgencyforAgriculturalMarketandRuralDevelopment,2007).
Deliveries(tonnes)–QuotaA Directsales(tonnes)–QuotaD Total(A+D)Nat.Ref.Quantity 549,428 Nat.Ref.Quantity 27,210 576,638Numberofproducers 8,897 Numberofproducers 2,320 9,369Allocatedquota 553,476 Allocatedquota 23,162 576,638NationalReserve 1,117 NationalReserve 250Nat.Ref.Quantityontheendof2006/2007
554,593 Nat.Ref.Quantityontheendof2006/2007
22,045 576,638
Table 7.Farmstructurebasedonquotafordeliveriesintheyear2005-2006(AgencyforAgriculturalMarketandRuralDevelopment,2006).
Quotasizecategory(tonnes)
Numberoffarmsperquotasizecategory
%oftotalfarms Quotaallocatedtofarmsinthisquotasizecategory(tonnes)
%ofallocatedquota
0-50 6,614 68.77 137,813 26.5850-100 1,755 18.25 123,699 23.86100-150 611 6.35 74,049 14.28150-200 261 2.71 44,946 8.67200-300 221 2.30 52,501 10.13300-500 122 1.27 46,069 8.89500-750 23 0.24 13,531 2.61>750 10 0.10 25,795 4.98Total 9,617 100.00 518,404 100.00
The�cattle�sector�in�Central�and�Eastern�Europe
50
farmsandmilksalesisdescribedinTable6.Thequotasizeoffarmsin2005-2006and2007-2008isdescribedinTables7and8,respectively.Ascanbeseen,50%ofthenationalquotain2005-2006,and45%ofthequotain2007-2008,belongtofarmswithlessthan100,000kg.Obviously,thereisasmallscaledairystructureinSlovenia.Inlastfewyears,thepercentagesofquotainallcategoriesabove100,000kgareincreasingby0.2-0.5%peryear.
Regions
InSlovenia,12statisticalregionsexist.TheaveragesizeofthefarmsinthevariousregionsisillustratedinFigure6.Bothdeliveriestothepurchaser(QuotaA)aswellasdirectsales(QuotaD)arepresentedinFigure6.
Table 8.Farmstructurebasedondeliveriesfortheyear2007-2008(AgencyforAgriculturalMarketandRuralDevelopment,2008).
Quotasizecategory(tonnes)
Numberoffarmsperquotasizecategory
%oftotalfarms Quotaallocatedtofarmsinthisquotasizecategory(tonnes)
%ofallocatedquota
0-50 5,863 64.37 125,302 22.4650-100 1,786 19.61 126,716 22.71100-150 699 7.67 84,765 15.19150-200 308 3.38 52,952 9.49200-300 259 2.84 62,100 11.13300-500 146 1.60 55,591 9.96500-750 35 0.38 20,797 3.73>750 12 0.13 29,696 5.32Total 9,108 100.00 557,918 100.00
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
Pomurs
ka
Podrav
ska
Korošk
a
Savinj
ska
Zasav
ska
Spodn
je-po
savs
ka
Jugo
vzho
dna S
lov.
Osredn
jeslov
ensk
a
Gorenjs
ka
Notran
jsko-k
raška
Gorišk
a
Obalno
-kraš
ka
Sloven
ia
Quo
ta A
/farm
in k
g
2004/20052005/20062006/20072007/2008
Figure 6.StructureofSlovenianfarmsregardingtheaveragequotasizein12regions.
� The�cattle�sector�in�Central�and�Eastern�Europe
51
Quota�transfer�and�structural�developments
InSlovenia,noofficial regionalquotaschemeexists, like inPoland,GermanyandFrance.Nevertheless,thequotatransferruleshavebeendesignedinsuchawaythatastructuralpolicyisenvisaged.Thepolicyistoprotectdairyfarminginthehillyandmountainregions.Withinthe12statisticalregions,quotaamountscanbetransferredfromonefarmtoanotherwithoutanydeductioninquotawherequotais�transferred�together�with�land.Themaximumofquotathatcanbetransferredtogetherwithlandis15,000kgofmilk/ha.Incasethatonefarmer(farmerA)rentslandfromanotherfarmer/owner,itispossibletotransferquotafromowneroflandtofarmerAforthedurationoftherentalperiod.Transfer�of�Quota�without�Land:inthecaseoftransferofquotawithoutland,partoftheindividualquotaisallocatedtothenationalreserve,asfollows(RepublicofSlovenia,2006):a.transferofquotainsidestatisticalregion: %toNationalreserve
– fromfarmtofarminthehillyandmountainregion 0%– fromfarmtofarminsidetheregionswithlimitedpossibilitiesforfarming(OMD) 5%– fromfarminlowlandtofarmwithlimitedpossibilitiesforfarming(OMD) 5%– fromfarmtofarminlowland 10%– fromfarmwithlimitedpossibilitiesforfarming(OMD)tofarminlowland 10%
b.transferofquotabetweenstatisticalregions: %toNationalreserve– fromfarmtofarminthehillyandmountainregions 0%– fromfarmtofarminregionswithlimitedpossibilitiesforfarming(OMD) 25%– fromfarminlowlandtofarmwithlimitedpossibilitiesforfarming(OMD) 25%– fromfarmtofarminlowland 30%– fromfarmwithlimitedpossibilitiesforfarming(OMD)tofarminlowland 30%
Whenquotaistransferredbetweenregions,25to30%ofthetransferredquotagoestothenationalreserve,whichdiscouragesquotamovementfromoneregiontoanother.However,quotacanbetransferredwithoutdeductiontohillyandmountainousregions.Didthispolicyhaveanyeffect?InTable9,wecanseethechangeofquotainthevariousregionsoverthelastfouryears.TheincreaseintotalquotaisduetotheenlargementofquotabyEUandbythetransfersofQuotaD(directsales)toQuotaA(deliveriestodairies).
Table 9.Distributionofquotafordeliveriestodairiesbetweenregions(kg).
Region QuotaA2004/2005
QuotaA2005/2006
QuotaA2006/2007
QuotaA2007/2008
Index2006-2007/2004-2005
Pomurska 48,778,782 50,242,512 53,520,748 50,554,361 109.7Podravska 93,160,150 97,418,174 103,412,443 103,018,557 111.0Koroška 31,075,782 32,663,161 35,110,992 34,983,212 113.0Savinjska 78,268,847 82,224,073 87,087,225 86,865,253 111.3Zasavska 3,412,588 3,607,568 3,813,578 3,693,365 111.8Spodnjeposavska 14,815,907 15,410,827 16,360,068 16,191,470 110.4Jugovzhodna 50,780,500 52,839,254 56,325,108 55,471,471 110.9Osrednjeslovenska 79,832,858 82,263,993 86,986,767 85,583,485 109.0Gorenjska 77,634,231 80,537,654 85,747,185 85,651,799 110.5Notranjsko-kraška 4,003,636 4,504,829 5,101,046 4,899,338 127.4Goriška 16,332,622 16,603,997 17,018,971 16,395,299 104.2Obalno-kraška 687,473 725,155 720,213 670,136 104.8Total 498,783,376 519,041,197 551,204,344 543,977,746 110.5
The�cattle�sector�in�Central�and�Eastern�Europe
52
ThelowestincreaseinquotaisvisibleinthewesternpartofSlovenia(GoriškaandObalno-krašskaregions).Theseregionsbelonglargelytothelessfavouredareas.Goriškahasalsopartlyveryhillycountryside.InFigures7and8theovershootandunder-useofquotainthese12regionsisdepicted.Thisindicatesthatuntilnowmostoftheregionsstillhavereserve.Fourregions(Zasavska,Spodnjeposavska,GorenjskaandNotranjsko-Kraška)have‘noreserve’inmilkquotaA.ThehillyandmountainousareasarepartlylocatedintheGorenjska,Goriška,KoroškaandOsrednje-Slovenskaregions.ExceptintheGorenjskaregion,theseregionsstillunder-usetheirQuotaA.Eachregionhasitsowncharacteristics.ThestructuraldevelopmentperregionisillustratedinFigure9.Thetotalamountofmilksoldtodairies,theaveragequotaperfarm,andthereductioninnumberoffarmsduringthefirst4quotayears,aredepicted.Areductioninfarmnumbersof12to34%hastakenplace,showingthatlargedifferencesinregionalrestructuringexist.Theaverage
Quota A - State on 31.3.2006
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
in to
ns
Allocated Quota ARealization
Pomurs
ka
Podrav
ska
Korošk
a
Savinj
ska
Zasav
ska
Spodn
je-po
savs
ka
Jugo
vzho
dna
Osredn
jeslov
ensk
a
Gorenjs
ka
Notran
jsko-k
raška
Gorišk
a
Obalno
-kraš
ka
Quota D - State on 31.03.2006
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
in to
ns
Allocated Quota DRealization
Pomurska
Podravska
Koroška
Savinjsk
a
Zasavsk
a
Spodnje-posavsk
a
Jugovzh
odna
Osrednjeslo
venska
Gorenjska
Notranjsk
o-kraška
Goriška
Obalno-kraška
Figure 7.Overshootandunder-useofQuotaAinthe12regionsinSlovenia.
Figure 8.Overshootandunder-useofQuotaDinthe12regionsinSlovenia.
� The�cattle�sector�in�Central�and�Eastern�Europe
53
farmsizedoesnotseemtobeamajorfactorinthisdevelopment.Othernaturalcharacteristicsoftheregionareapparentlymoreimportantinaffectingthedevelopments.ThemarketformilkquotahasnotyetbecomeveryactiveinSlovenia.Thequotapriceinquotayear2006/2007wasbetween€0.083and€0.17perkgmilkquota.Suchaquotapricewasinfluencedbythefactthatownersofmilkquotareceivedattheendofquotayear2006/2007,thehistoricalrightsfortheirmilkpremium.Thisstimulatedfarmerstobuyquota.WithregardstothedistributionofquotafromNationalReserveinrecentyears,inquotayear2007/2008nearly‘nomarket’existedformilkquota.Forthisreason,thepriceofmilkquotaforthetimebeingisbetween€0.00and€0.05perkg.However,thepricediffersbetweenregions.Thehighestquotaprice,andalsothehighestdemandforquota,areintheGorenjska,SavinjskaandOsrednje-Slovenskaregions.IngeneralwecansaythatmilkquotatransfertakesplacefromthePomurska,Zasavska,GoriškaandObalno-kraškaregionstotheGorenjska,SavinjskaandOsrednje-Slovenskaregions.Transferofquotaonanationalscaleisasfollows:• Inquotayear2005/2006quotawastransferredasfollows:8,323,719kgofQuotaA(minus
deductionforNationalReserveinamountof598,461kgofQuotaA).Itmeans,thatonaverage7.2%wenttoNationalReserve.Only1.7%fromtotalQuotaAwastransferredfromonefarmtoanotherfarm.
• Inquotayear2006/2007quotawastransferredasfollows:5,593,160kgofQuotaA(minusdeductionforNationalReserveinamountof376,980kgofQuotaA).Itmeans,thatonaverage6.7%wenttoNationalReserve.Only1.0%fromtotalQuotaAwastransferredfromonefarmtoanotherfarm.
• Inquotayear2007/2008quotawastransferredasfollows:3,660,103kgofQuotaA(minusdeductionforNationalReserveinamountof252,103kgofQuotaA).Itmeans,thatonaverage6.9%wenttoNationalReserve.Only0.7%fromtotalQuotaAwastransferredfromonefarmtoanotherfarm.
Milk deliveries to dairies per region 2007/2008 (million kg)
51 mio.29 t.
- 28 %
3.7 mio.36 t.
- 13 %
16 mio.60 t.
- 27 %
0.7 mio.61 t.
- 31 %
4.9 mio.35 t.
- 34 %
16 mio.45 t.
- 31 %
55 mio.81 t.
- 33 %
87 mio.65 t.
- 15 %
35 mio.77 t.
- 12 % 103 mio.65 t.
- 21 %
86 mio.74 t.
- 22 %
86 mio.96 t.
- 17 %
Slovenia:Total milk quota: 544 mio.Average quota/farm: 62 t.Reducing no. farms: - 21 %
Goriška
Obalno-kraška
Notranjsko-kraška
JuhovzhodnaSlovenija
Pomurska
Podravska
Koroška
Savinjska
Gorenjska
Osrednje-slovenska
Spodnjeposavska
Zasavska
Figure 9.StructuraldevelopmentsinthevariousregionsinSloveniaintheperiod2004/2005until2007/2008.
The�cattle�sector�in�Central�and�Eastern�Europe
54
Purchasers�of�milk�
Thevolumeofmilkgoingtothevariouspurchasershaschangeddramaticallyinrecentyears,especiallybecauseoftheincreasingquantityofmilksoldtoItaliandairyplants(seeTable10).
Poland
General�overview�of�the�Polish�dairy�sector
PolandisasignificantdairyproducerinEuropewithatotalmilkproductionof11.7milliontonnes(Table11),whichplacesitonthe6thpositioninEurope.ThedairysectorbelongstothemostimportantsectorsinthePolishagricultureandfoodeconomy.Itaccountstogetherwithbeefproductionfor26%ofPolishagriculturaloutputvalue.In2002therewereabout875,000dairyfarmsfromwhichabout42%-376,000weredeliveringmilktotheprocessors.In2007,657,000dairyfarmswerecountedofwhich247,000(40%)weredeliveringmilktotheprocessors.27,500farmsdidhavedirectsalestotheconsumer.InApril2007therewere232recognisedpurchasersofmilk(J.Falkowski,personalinformation,2007).Changeoftheeconomicalsystemanddrasticadjustmenttothemarketconditionsduringthetransitionperiodinthe90-tiescauseda43%declineinthedairyherdinperiod1990-2005.Anincreaseofthemilkefficiency/milkyieldpercow(29%duringtheperiod1989-2005)couldn’tcovertheherddeclinewhatcausedanoverallcutinmilkproductionof27%inthesameperiod.
Structure�of�dairy�production�in�Poland�
ThedairysectorinPolandcharacterisesaratherhighlevelofdiffusion,notcomparablewithanyother‘old’EUMemberState.Theaveragestatisticaldairyherdonafarmin2005accountedfor3.93heads.Duringthetransitionprocess(since1989),directlyconnectedwithradicalchangesoftheeconomicalconditionsofproduction,theaverageherdsizeincreasedonlywithabout14%(2.9in1989to3.3in2002),whilethedairyherddeclinedwithca40%(fromca.5millionin1989to
Table 10.SalesofmilktoSloveniaandItalyplants(litres).
Year SaleofmilktoSloveniandairyplants
SaleofmilktoItaliandairyplants
Fat,% Protein,%
1980 303,831,000 - -1985 352,454,200 - -1990 359,184,200 3.74 -1995 388,394,400 3.93 3.242000 447,831,000 4.10 3.362002 473,500,000 4.13 3.332003 484,200,000 4.14 3.342004 486,000,000 2,683,000 4.16 3.362005 448,600,000 58,288,419 4.15 3.362006 378,129,000 133,905,328 4.09 3.332007 338,715,000 189,711,472 4.11 3.34
� The�cattle�sector�in�Central�and�Eastern�Europe
55
Tabl
e 11
.Characteristicsofm
ilkproductioninPolandinperiod1989-2007(IE
RiGŻ,1990-2007;G
US,1989-2007).
1989
1990
1994
1998
2000
2001
2002
2003
2004
2005
2006
2007
Num
berofdairycow
s[1,000heads]
4,994
4,919
3,863
3,471
3,098
3,005
2,873
2,897
2,796
2,795
2,824
2,787
Index%
100
98.5
77.4
69.5
62.0
60.2
57.5
58.0
56.0
56.0
56.5
55.8
Milkyields[litres/cow
/year]
3,260
3,151
3,121
3,491
3,668
3,828
3,902
3,969
4,083
4,200
4,200
4,300
Index%
100
96.7
95.7
107.1
112.5
117.4
119.7
121.7
125.2
128.8
128.8
131.9
Milkproduction[millionlitres]
15,926
15,371
11,866
12,178
11,494
11,538
11,527
11,546
11,478
11,600
11,633
11,750
Index%
100
96.5
74.5
76.5
72.2
72.4
72.4
72.5
72.1
72.8
73.0
73.8
Milkdeliveries[millionlitres]
11,385
9,829
6,269
7,070
6,583
7,025
7,219
7,316
7,997
8831
8,419
8,380
Shareofdeliveriesintotalm
ilk
production%
71.5
63.9
52.8
58.1
57.3
60.9
63.2
63.4
69.7
76.1
72.4
70.9
The�cattle�sector�in�Central�and�Eastern�Europe
56
3millionin2001)andmilkproductionalsowithabout30%(from16milliontonsin1989to11.6milliontonsin2005).DuringtheEUpre-accessionperiodtherestructuringofthedairysectorinPolandaccelerated.TheexecutionofEUstandards(especiallysanitaryandveterinarynorms,andmilkqualityrequirements)aswellastheimplementationoftheCAPinstruments(mainlypreparationstoimplementthemilkquotasystem),stimulatedproducerstostartmodernisingtheirprocessesandincreasingtheirscaleofproduction.Investments,financedbyfarmers’ownsources,loansgrantedbybanksanddairyprocessingenterprisesandpre-accessionsupportresultedinanoutstandingimprovementinmilkquality.Intheperiod1999-2005theshareofextra-classmilk(accordingtotheEUstandards)intotalmilkdeliveriesincreasedfrom35%to92%.FordairieswithanEUcertificatethissharewasevenhigher,andaccountedfor98%ofmilkdeliveries.Thesestrictqualityrequirementsalsobroughtaboutnegativesocialconsequences,however.Alotofmainlysmall,inefficientproducerswerenotabletoadjust,andwereforcedtoeitherquitmilkproductionorchangetosemi-subsistencefarming.Ineffect,in2004therewere712,000farmswithdairycows,butonlyabout48%ofthemweredeliveringmilkormilkproductstothemarket(Wilkinet�al.,2007).ThestructureofthedairysectorinPolandisillustratedinFigure10.Intheperiod1996-2002thenumberofdairycowskeptinthesmallestfarms(1-9cows)decreasedby37%,whichwasmainlyduetothefactthat34%ofthosefarmsresignedfrommilkproduction.Hence,itsshareintotalnumberofdairycowsdiminishedfrom86%in1996to64%in2002.Atthesametimetheshareofdairycowskeptinmiddlesizefarms(10-49)tripledfrom8%to29%(seeFigure10).During2003-2005,theprocessoffarmconcentrationfurtheraccelerated.Thenumberofdairyfarmsdecreasedby19%whereasdairycownumbershrunkonlyby2.7%.In2005theshareoffarmswithmorethen10cowsinmilksalesexceeded50%,whereasitsshareinthetotaldairycowherdaccountedfor40%(Wilkinet�al.,2007).ThelargechangesinmilkvolumeperregiondepictedinFigure11canbeexplainedbythefactthatintheperiodJanuary-July2004noquotasystemyetexistedinPoland.Solargechangesinregionalproductionoccurredwhenthequotasystemcameintosight.
37.7
24.923.1
7.5
0.5 1.3
5.5
27.3
15.5
21
26.1
2.7 1.7
5.6
0
5
10
15
20
25
30
35
40
1 to 2 3 to 4 5 to 9 10 to 29 30 to 49 50 to 99 >100
19962002
Figure 10.Numberofdairycowsandnumberofdairyfarmsaccordingtothefarmingsizein1996and2002(Wilkinet�al.,2007).
� The�cattle�sector�in�Central�and�Eastern�Europe
57
Organisation�of�the�milk�quota�system�and�transfer
ThemodelofthequotaregimeinPolandwasbasedonaregionalorganisation.TheNationalAuthorityresponsibleforimplementingandadministratingthesystemistheAgriculturalMarketAgency(AMA)withsupportofits16regionalbranches(oneineveryProvinceorregion).Thefollowingwaysoftransferareallowedbetweenfarmsandregions:permanenttransfer(tobuy/sell/donation),temporarytransferbyleasing(in/out)andconversionofthewholesale/directsalequota(permanentlyortemporary).• Permanent�transfer�regarding�the�regional�organisation�of�the�system.Permanenttransferof
quotaisallowedonlybetweentheproducerswhohavetheirfarminthesameregionofRBAMA(however,in2007isdecidedthattheregionallimitsofquotatransferwillbeabolishedasofbeginningofthe2009/2010milkquotayear).
• Temporary�contracts�–�leasing�of�quota.Theleasingcontractisvaliduntiltheendofthecurrentmilkquotayear.LeasingtransfersareallowedonlywithinthewholesaleproducerswithfarmslocatedinthesameregionofRBAMA.
Inthefinalpre-accessionnegotiations,Polandreceived8.96milliontonnesofmilkquotafromwhich95.4%asawholesalequota(limitfordeliveriestoprocessing).Inaddition,itwasassigned0.426milliontonnesfortherestructuringreservetobeusedasof2005/2006.Thefirstquotaallocationhasbeenmadeatthebeginningof2004,directlytoproducerswithrespecttotheirdeliveriesduringthereferenceyear(1April2002–31March2003).AccordingtodataoftheAgriculturalMarketAgency,duringthefirstallocationca.355thousandproducersreceivedthewholesalelimitand78thousandproducersthedirectsalesquota.Wholesalequotaassignedin2004/2005wasca.1.2milliontonnes(14%)higherthandeliveriestoprocessingin2003,hencetherewassomespacefordevelopmentinmilkdeliveries.Nevertheless,duetoadynamicrestructuringofmilkproductionduringthefirstmilkquotayear,thisgapwasalmostfullysuppliedbytheproducers.
73.7
92.6
106.8
62.5
118.1
86.6
109.1
156.1
103.9
117.1
97.9 101.9 106.4 102.9 107 111.5 108.7
0
20
40
60
80
100
120
140
160
180
Dolnośląskie
Kujawsko-pomorskie
Lubelskie
Lubuskie
Łódzkie
Małopolskie
Mazowieckie
Opolskie
Podkarpackie
Podlaskie
Pomorskie
Śląskie
Świętokrzyskie
Warmińsko-mazurskie
Wielkopolskie
Zachodniopomorskie
Poland
Region
Percen
tage
Figure 11.Changeinmilkdeliveriestodairiesin16regions(deliveringperiodJanuary-July2005comparedinpercentageperregiontoJanuary-July2004).
The�cattle�sector�in�Central�and�Eastern�Europe
58
Deliveriestoprocessingduringthefirstmilkquotayear(2004/2005)wereca.2%lowerthanwholesalequotaassigned.Atthesametimedirectdeliveriestoconsumerswere33.4%lowerthandirectsalesquota,hencetotalnationalquotawasnotbindingtheproduction.Moreover,accordingtoaccessiontreaty,thefirstyearofthemilkquotasysteminPoland(2004/2005)wasnotchargedbythesuper-levypayment.However,duetoaverydynamicdevelopmentofmarketedmilkproductioninPoland,deliveriestoprocessingduringthefirstmilkquotayear(2004/2005)increasedby13.5%,(Figure11)accompaniedatthesametimebyareductionofdirectdeliveriestoconsumersandselfsuppliesonthefarm.Asaresultofthisrestructuring,thetotalmilkproductioninPolandhasnotchangedandthecommercialproductionratioincreased.Developmentinmarketedmilkproductionhasbeenfollowedbyafarmconcentrationprocess.Duringthefirstmilkquotayearnumberofregisteredwholesaleproducersdecreased(Figure12)by12.6%anddirectsalefarmsby40%.Consequently,theaveragewholesalequotaassignedtothefarmsincreasedbyca.30%tothelevelof27thousandkg.Inthesecondmilkquotayear2005/2006milkdeliveriesincreasedbyafurther5%,whatinconsequencecontributedtothenationalquotaoverrunby1.79%(ca.287.6thousandtonnes)2.ThePolishsurpluswasthirdlargestintheEUafterItalyandGermany.Noneofthe‘newmember’Countries,exceptCzechRepublic,hasexceededthenationalquota.DuringthefirsttwoyearsofthemilkquotasystemfunctioninginPoland(April2004-April2006),thenumberofdairyproducersdeliveringmilktoprocessingdecreasedby21.4%(Figure11).Atthesametime,milkdeliveriesraisedandhencetheaveragemilkproductionpercommercialfarmhasgrownby47%.Althoughabovechangesaffectedthewholecountry,significantdifferencesbetweenregionswithrespecttorateandscopeofrestructuringhavebeenobserved.Thereare5regionsfromthe16administrativeregionsinPolandwithalargeandincreasingproduction,accountingin2006for67%ofmilkdeliveredtodairies.Theseare:Mazowieckie,Podlaskie,Wielkopolskie,Warmińsko-MazurskieandŁódzkie.ItmightbeobservedthatmilkproductionmovestowardsthenorthernpartofPoland,whereverygoodnaturalconditions,alongtraditionofmilkeconomyandfavourableagrarianstructurehavefacilitateditsdevelopment.Theseregionscharacterisealsoahighnumberoflargeherds(over10cows),wherelivesca50-60%ofthetotalcowpopulation.
2Wholesalequotawasoversuppliedby3.32%,butdirectsalequotawasundersuppliedby39.38%,henceineffecttotalexcessreached1.79%(dataprovidedbyAgriculturalMarketAgency,August2006).
355.2
310.5
279.3
20.8
30.727.1
74.1
84.0 85.8
200.0
220.0
240.0
260.0
280.0
300.0
320.0
340.0
360.0
380.0
IV2004
IV2005
IV2006
IV2004
IV2005
IV2006
IV2004
IV2005
IV2006
0
10
20
30
40
5060
70
80
90
100
Number of wholesale producers (x 1000)Average wholesale quota per farm (x 1000 kg)Milk quota for deliveries owned by producers x 100 000 t
– 21.4%
+47.4%
+16%
Figure 12.Characteristicsofmilkwholesaledeliveriesatthebeginningofthe2004/2005,2005/2006,2006/2007milkquotayears(OwncalculationsbasingondataprovidedbyAgriculturalMarketAgency).
� The�cattle�sector�in�Central�and�Eastern�Europe
59
Themilksupplylimitinthethirdquotayear(2006/2007)wasenlargedbytherestructuringreserve,whatincreasedinitiallytheassignedlimitby5%.AfterthischangetheentirePolishmilkquotaamounted9,379mldkg.Asitwasexpectedthenationalmilkquotain2006/2007and2007/2008werenotoverrun.
Influence�of�the�quota�transfer�system�on�structural�development�
Sincethemilkquotasystemisbindingproductiontothearea,becausetransferofthemilkquotaisnotpermittedbetweentheregions,milkproductionrestructuringhasbeendisturbed.Themainproblemsconcerningmilkquotasaretwo:first,theplafondwhichislimitingproductionandwasoversuppliedin2005/2006(soproducerswerepunishedbythelevypayment),andsecondly,thequotatraderestrictions,whichresultinratherhighquotapricesandinhibitrestructuringofmilkproduction.Thepointisthatquotaisallowedtobetradedonlybetweenthefarmershavingtheirholdinginthesameadministrativeregion.Thatruleisextremelyunfavourableforrestructuringofdairyproduction.Intheregionswheremilkproductiondevelopedveryfast,likeinPodlaskie,WielkopolskieandMazowieckie,averyhighdemandforproductionquotasisobserved.Thisdemandcannotbemetbyexistingsupply,thereforequotapricesintheseregionsareafewtimeshigherthaninotherregions.Producerswhowanttodeveloptheirproductionhavetobearaveryhighcostsofinvestmentsorpaythesuper-levyforoverrunningthequota.Thesetransferprocedurescreatealsoahugebarrierforprocessingcompanies,whichhavetosearchfortherawmilkoutsidetheregion,increasingtransactioncosts.Thisruleinhibitstransitionofquotafromthelessfavourablemilkproductionregions(mainlysouthofPoland)tothosewithgoodconditionsformilkproduction.However,thisunfavourablerulewillbeabandonedatthebeginningofthe2009milkquotayear.Despiteofallconstrainsconcerningmilkquota,themilkproductionsectorinPolandhasbeendevelopinginrecentyearsinafastspeed:rigorousstructuraldevelopmentstookplacewithinthevariousregions.ThesechangesaredepictedinFigure13.Theaveragefarmquotasizeperregion
LubelskieŁódzkie
Wielkopolskie
Warmińsko-Mazurskie
Podlaskie
Mazowieckie
632.7750.9
1,052.8
1,496
661.8
1,671.6
Wholesale milk deliveries 31.03.2005 [mio kg]
1,500 – 1,680 750 – 1,500 600 – 750 190 – 600 180 – 190
90 – 180
Podkarpackie
Małopolskie
Opolskie
Zachodniopomorskie
13 t; -37%; 0.26
11 t; -32%; 0.22
102 t; -48%; 0.48
23 t; -31%; 0.47
168 t; -53%; 0.59
85 t; -33%; 0.61
59 t; -33%; 0.64
32 t; -24%; 0.58
71 t; -30%; 0.57
18 t; -26%; 0.30
Figure 13.StructuraldevelopmentsinthevariousregionsinPolandinperiod2004/2005till2007/2008.Thenumbersconcern:averagequotaamount/farmintonnes(2007/2008);%reductioninno.offarmsin4yearperiod;priceofquota/kginZlote(2008).
The�cattle�sector�in�Central�and�Eastern�Europe
60
variedfrom11tonnes(inPodkarpackieregion)to168tonnes(inZachodniopomorskieregion).Thereductioninnumberoffarmswithquotainlast4quotayearsfluctuatesfrom24%(inMazowieckieregion)to53%(inZachodniopomorskieregion).AlsothequotapriceislistedinFigure13:itvariesfrom0,06europerkgmilkinPodkaropackieregiontill0,17europerkginthePodlaskiregion.Thereappearedtobesomerelationshipsbetweentheparametersmeasuredinthevariousregions,whichareusedtoillustratestructuraldevelopments.Especiallytheaveragefarmsizeofaregion,expressedinaveragequotaamountperfarmperregion,isastrongindicator.Forinstance,thecorrelationbetweentheaveragequotafarmsizeandthereductioninnumberoffarmsinacertainregioninlast4yearsappearedtober=0.70,indicatingthatalargerfarmsizegoestogetherwithastrongerrestructuringprocess.Alargeraveragefarmquotasizeinacertainregionisalsopositivelycorrelated(r=0.60)withatendencytoexceedtheindividualquotainthatregionmoreoften.Apparently,largerfarmsinPolandseemtohaveagreaterpressuretoproduce.Alargeraveragefarmquotasizealsorelatestoahigherquotapriceinthatregion(r=0.51).Inotherwords,largerfarmshavemorepressuretoproduceandtooenlargethefarmand,therefore,arepreparedtopayonaveragemoreperkgquotabought.Eventhoughthequotawasenlargedbyrestructuringreserveandenlargedbyafurther2%inthe2008milkquotayear,itwillcontinuetohamperfarmdevelopmentinforthcomingyears.Togetherwithgrowingmilkyields,thedairycownumberwillhavetobegraduallyreducedtokeepuptheproductionwithintherestrictedlevel.Growinginternaldemandwithslightlyreducedexport,whileproductionislimited,maycauseimportgrowthAtthesametimethefarmconcentrationprocesswillbenecessarytocompeteontheEUmarketandtodealwiththegrowingproductioncosts.Ontheotherhand,quotatradewillbefreedfromtheregionlimitsin2009,whichwillcreatemoreincentivesforregionalconcentrationofmilkproductionandwillenhancetheprocessofmilkproductionrestructuringfurther.Itcanbeexpectedthattheprocessofpolicy-drivenrestructuringwillcontinueinthenearfuture,sincenewregulationsrequireadditionalinvestmentsfromeithertheprocessingorthemilkproducingsector.PolicydrivenrestructuringwillbealsocausedbyreformoftheEUdairymarketorganisationresultingfromboth:futuredebateontheCommonAgriculturalPolicyaswellasWTOnegotiations.
Romania
AsacandidateEUmemberstate,RomaniaobtainedamilkquotaallocationfromtheEuropeanCommissionbytheendof2004andisfixedat3,245,000tonnesofwhich:• 1,093,000tonnesfordeliveriestoprocessors;• 1,964,000tonnesfordirectsales;• 188,000tonnesofnationalreserve.Thereferenceyearforthefatproductionis2004.Thereferenceperiodforvolumeis1April2005-31March2006.
Evaluation�on�request�for�milk�quota�system�by�1�April�2007
ByApril12007,amilkquotasystemwasinplaceandsincethenallocationshavebeenmadetothosewhoappliedfor,andareeligibleto,obtainmilkquota.However,duetomanycircumstances,allocationofquotaisstillunderdiscussionandwillbesubjecttochanges.Onthebasisoftheapplicationsmade,thefollowingconclusionscanbedrawn:• Deliveryquota
– nationalallocation1,093,000tonnes;– ofwhichinreserve21,860tonnes;– availableforallocation1,071,140tonnes;
� The�cattle�sector�in�Central�and�Eastern�Europe
61
– requestforallocation1,022,607tonnes;– 2%ismadeavailable1,002,155tonnes;– 68,985tonnesisreservedforfarmswithextensionsofthefarm(e.g.land)andnewinvestmentsinthefarm(e.g.housing).
250,493holdings(farms)appliedforquotafordirectdeliverytomilkprocessingfacilities.TheserequestscanbedividedinthefollowingquantitiesasshowninTable12.Intermsoffarmsize,therequestfordeliveriestoprocessorsareshowninTable13.
• Directsalesquota– nationalallocation1,964,000tonnes;– ofwhichreserve39,280tonnes;– availableforallocation1,924,720tonnes;– requestforallocation2,186,431tonnes.
622,504holdings(farms/individuals)appliedforquotafordirectsales.Theserequestscanbedividedinthefollowingquantities(Table14).Onlyfourfarmshaveaquota>1millionkg.
• Allocationofquotaforextensionsandnewholdings– availableforextensionsandnewholdings68,985tonnes;– numberofapplications1,233;– quantityofmilkrequested181,588tonnes;
Table 12.Volumerequestsbyfarmsfordirectdeliverytomilkprocessingfacilities.
Volume(kg) %<5,000 40.45,000-10,000 16.410,001-50,000 17.850,001-100,000 19.9>100,000 5.8
Table 13.Farmssizerequestingdirectdeliverytomilkprocessingfacilities.
Numberofcowsperapplicant %<2 43.63to5 18.06to10 7.911to50 16.451to100 3.8>101 10.3
Table 14. Volumerequestsbyfarmsfordirectsales.
Volume(kg) %<5,000 66.75,000-10,000 14.910,001-50,000 13.050,001–1,000,000 5.1>1,000,000 0.4
The�cattle�sector�in�Central�and�Eastern�Europe
62
– estimationoftheallocation38%.• Quotatransferandregions
InRomania,8regionsareestablished,eachwithaseparatequota.Onlytransferswithinregionsareallowed.Withinaregion,freetransferofquotaexists.However,20%ofeachtransferistakenawaytogotothenationalreserve.Therefore,regionalisationandaconsiderableredistributionofquotaareenvisagedinRomania
Bulgaria
Thedairysectorreformturnedouttobeamuchmoreseriouschallengeforthelocalindustryandpolicymakersthaninitiallythought(USDA,2007;A.Kuipers,personalcommunication).Thisreportstatesthat‘thereformhadlotsofeconomic,socialandpoliticalimplications.Politicianshadtotakedifficultdecisions,notalwaysbasedonthebestmarketapproach.Lackoftrustbetweenvariousprivateandpublicplayersfurthercomplicatereformimplementation’.
Dairy�sector�development
Restructuringofthedairysectorhascontinuedin2006and2007withfurthercommercialisation,consolidationandenlargementofbiggerfarms,anddeclineinthenumberandroleofsmallerfamily-typefarms.In2006/2007,therehasbeenasignificantgrowthinthenumberoffarmswith10-20cows(32%)andfarmswith20-30cows(15%).Similarly,thenumberoffarmswithmorethan100dairycowsrose18%althoughtheystillaccountforonly7%ofallcows.Farmswithonlyonecow(backyardruralsemi-subsistencefarms)were10%lessin2006thanin2005,andaccountedfor25%ofBulgaria’sdairycows.Thenumberofsmallfarmsraisingupto9dairycowshasfallenby8%(seeTable15).AccordingtotheNationalDairyBoard(NDB)data,asofMarch2007,Bulgariahad96,595registereddairyfarms,whicharegroupedinthreecategoriesdependingontheircompliancewiththeEUhygieneandmilkqualitystandards:• Firstcategory(fullycorrespondingtoEUstandards)–1,125farms.• Secondcategory(meetingEUequipmentandhygienestandardsbutnotfullymeetingmilk
qualitystandards)–1,238farms.• Thirdcategory(notmeetingEUstandards)–94,232farms.Outofthetotalregisteredfarms90,415are‘small’withupto10cows,5,749are‘average’sizewith10-50cows,and431are‘large’farms(>50cows).Accordingtoanotherindustrysource(AssociationofMilkProcessors(AMP))78%offarmershave1-9cows.Themilkiscollectedat4,200milkcollectionstations.
Table 15.StructureofthedairyfarmsectorinBulgariain2006(MinAg,2007).
Dairycowsperafarm Farms DairycowsNumber Change2005/2006 Number Change2005/2006
1-2 113,328 -9.9% 140,500 -9.6%3-9 21,470 0.5% 92,400 2.6%10-19 3,552 31.8% 44,700 28.1%20andmore 1,578 2.5% 72,500 7.9%Total 139,928 -7.5% 350,100 0.7%
� The�cattle�sector�in�Central�and�Eastern�Europe
63
Milk�supply
Thetotalamountofmilkproducedin2006was1,515milliontonnesofwhich1,298milliontonnes(86%)cowmilk,107,000milliontonnes(7%)sheepmilkand102,000milliontonnes(6,7%)goatmilk.The2006milksupplywasslightly(0.5%)higherthanin2005,withastablegrowthinbuffaloandsheepmilk,adeclineingoatmilkandaslightincreaseincowmilk.Theaveragemilkyieldin2006was3,600litrespercow,1,428litresperbuffalo;87.3litrespereweand221litrespergoat(Table16).Theproductionofprocesseddairyproductswas12.6%lessthanin2005.About50%ofallfreshmilkproducedonfarmswasdeliveredtodairies.IntroductionanddistributionofmilkquotasinMay-July2007causedlotsofeconomicandpoliticalturmoil.Thedairyindustrywassplitovertheissue.Thetwomajorindustryorganisations,theNDBandAMP,expressedverydifferentpositions.Thesedifferenceswereconceptual,sometimespoliticised,orrelatedtocertaineconomicinterests.TheNDBhas8regionaldairyboards.Itissupportiveoffastermarketreformsandconcentrationdespitethenegativesocial/politicaleffects.TheAMPhas120members.Itismoreconcernedaboutthesocialandpoliticaleffectsinruralareasandthegoalistocontinueproductionofsmallerdairyfarmsasabackboneofthedairyindustry.ThenationalreferencequantityformilksetforBulgariain2007/2008is979,000tonnes,ofwhich722,000tonnesarefordeliveriesand257,000tonnesarefordirectsales,muchlessthanthetraditionalproductionof1.2-1.3milliontonnes.A‘reserve’quotaof39,180tonnesmaybeaddedin2009(countingcurrenton-farmconsumption).Thereferenceaveragefatcontentis3.91%.AsofJune/July2007,atotalof96,572farmershadindividualdairyquotas.Theaveragedairyfarmhasaquotaof7.0tonnesfordeliveries,and3.0tonnesfordirectsales.AccordingtotheNDB,5,100farmshavemorethan10cows(5.5%ofalldairyfarms)andcanproduceunderquota220,000tonnesofmilk.Thenumberoflargefarms(morethan50cows)is446andtheirmilkquotaisintotal189,000tonnes.Thesefiguresaredisputable,accordingtoprocessors,whoclaimthatonly35%ofthetotalmilkquotaisproducedbythelargefarms,whiletheremaining65%iscollectedfromsmallfamilytypefarms.
Milk�deliveries�quota
Asthedemandformilkdeliveriesexceededthequotabymorethan200,000milliontonnes(NDBdata)theNDBhadtoreducethequantityofrequestedmilktothesizeofthequota.Thisreductionwasappliedmainlytofarmsthatproducesub-standardqualitymilk(thethirdcategory,seeabove),basedonmethodologyapprovedbytheMinistryofAgricultureandForestryinDecree#51.
Table 16.Productionofmilkatfarmsbytypeofdairylivestockfor2002-2006inBulgariain2006(tonnes)(MinAg,2007).
Year Cow Buffalo Sheep Goat Total2002 1,305,912 4,410 93,479 104,820 1,508,6212003 1,308,525 5,276 88,679 101,530 1,504,0102004 1,344,750 6,229 117,682 129,381 1,598,0422005 1,286,909 6,989 105,057 109,114 1,508,0692006 1,298,709 7,132 107,535 102,297 1,515,6732006in1000liters 1,260,883 6,891 104,201 99,414 1,471,389Change2005vs.2006 0.9% 2.0% 2.4% -6.2% 0.5%
The�cattle�sector�in�Central�and�Eastern�Europe
64
Aspecialreservewithinthemilkdeliveriesof92,463tonneswassetbasedonMinAginformationaboutinvestmentprojects.ThisdecisionwasapprovedbytheAgriculturalMinisterinOrdinance09-231/April13,2007.Thus,thequantityofmilkdeliveriesthatremainedforactualdistributionwas630,000tonnes.Itwasdistributedasfollows:192,400tonnestoallfarmsinthefirstcategory(1,125)meeting100%oftheirapplications,94,600tonnestoallfarmsinthesecondcategory(1,238)alsomeeting100%oftheirapplications,and342,500tonnestofarmsinthethirdcategory(94,209),whichis47%lessthantheirapplications.Byregions,theregionaldairyboardsinPlovdivandRoussereceivedthehighestshares,22%and17%,respectively.Reductioninquotasforthethirdcategoryfarms,themostnumerousgroup,causedprotests.Althoughthereisclearlegislation(Decree#51)aboutquotadistribution,thelackofapublicregisteroffarmsandtheirindividualquotasresultedinspeculationsaboutNDBjustificationforitsdecision.Onsomeofthereducedquotafarms,thequotaislowerthantheaveragemilkyield.Forexample,intheYambolarea,thereare3,606dairyfarmsinthethirdcategorycomparedto48inthefirst,and123farmsinthesecond,categories.Mostofthesefarmswillnotbeabletogotothesecondcategoryattheendof2007,whichmeansthatin2008manywillbeshutdownanddairycattlewillbeeitherslaughteredorsold.InregionofDobrich,farmersstartedtosellcowsatalowpriceof€250orslaughterthemduetoreducedquotas(140,000tonnesrequestedand90,000tonnesapproved).
Milk�direct�sales�quota
Milkdirectsalesquotasdidnotattractmanyfarmapplications–allrequestswerefullymetsincefarmsappliedforonly77,600tonnes.Outofthat,10,213tonnesweredistributedtothefirstcategoryfarms;6,176tonnestothesecondcategory,and61,202tonnestothethirdcategory.Byregions,thehighestshareofquotaswasreceivedbyBlagoevgrad(30%)andSliven,(26%).Thus,186,000tonnesremainedunused.
Dairy�manufacturers�response
Currently,dairymanufacturersevaluatetheirfixedexpensesforregistration,reporting,monitoringandtraceabilityformilkfromsmallerfarmsasmuchhigherthantheirprofitfrommilkprocessing.Manywilltrytooptimisemilkpurchasesbyswitchingtoasmallernumberoflargersuppliers,and/orimportsofpowdermilk/wheyasasubstituteforfreshmilk.TheindustryestimatesthatBulgarianmilkproductionwillbeefficientonlywhenmostfarmsproduce6-7,000litersaveragemilkyieldwithapotentialfor10,000liters(currently,itisabout3,600liters)whichmeansnotmorethan170,000-200,000cowstomeetthecurrentproductionceilingof979,000tonnes.
Dairy�products�market
Theissueofmilkqualityistightlyrelatedtothedynamismofthedairyproductsmarketasfollows:• Commercialsupplyofmajordairyproducts(liquidmilk,yogurtandcheese)hasslowlyincreased
since2003attheexpenseofhomeproductionalthoughitstillremainshigh.• Overthepast5years,distributionandsalesofdairyproductshavesteadilymovedfromtraditional
smallerretailoutletstosupermarketsandhypermarketswherequalityandhygienerequirementsaremorestringent.Forexample,in2006/2007,48%to89%ofvarioustypesofliquidmilkweresoldinsuper/hypermarkets.
• Retailqualityandsafetyrequirementsfordairyproductsbecomeincreasinglystringent.InearlyJuly,majorretailersannouncedthattheywouldrequireanewcertificationIFS(InternationalFoodStandard,introducedbyGermanandFrenchretailers,recentlyacceptedbyItaly)standardsfromlocalsuppliers.Sinceonlyafewhavesuchastandardinplace,thepressureformoreinvestment
� The�cattle�sector�in�Central�and�Eastern�Europe
65
islikelytoincrease,whichinturnwillaffectthepurchasesofrawmilk.IfBulgariancompaniescannotrespondfastenoughtoretailers’demand,importsfromotherEUcountriescanquicklyreplacelocalsupply.
Thedairyprocessingsectorcontinuestoattractforeigninvestors:twoofthelargestdairycompanieswerepurchasedbyforeigncompanies.Asanexample,thedairycompanyFamaisthemarketleaderinNorth-EastBulgariaanditislocatedclosetotheRomanianmarket.Ithasawelldevelopedmilkpurchasingandcollectionsystem,wellknownbrands,experienceinworkingunderaprivatelabelandhasgooddistributionnetworks(capacityis180tonnesmilkfordailyprocessing).Theicecreammarketalsoattractedseveralmajorinvestorsoverthepastyear.Currently,themarketsizeisestimatedat€40millionor11,000mtwiththeprospecttogrowto15,000mtor20%inthenext1-2years.TopcompaniesonthismarketareNestle(viaDelta)35%marketshare,andDarkowith22%marketshare.Theremaining45%issplitamongseverallocalcompanieswithabout10%shareeach(Karil,Izida,Deni).In2006,thecompaniesregisteredagrowthof5-20%comparedto2005,withthetrendcontinuingin2007.
Quota�transfer�and�regions
Bulgariaisdividedin8quotaregionstostartwith.Soregionalisationisenvisaged.Therulesconcerningquotatransfersarestillindevelopment.
Slovakia
InSlovakiain2004,85%ofthenationalherdof211,000cowsweremanagedon820farms.Indeed,Slovakiahaslargefarms.Theremainderofcowsareonverysmallfarms,mainlyforsubsistencefarming.ThiskindoffarmingexistsintheNorthernSlovakianregions.Slovakiadoesnothaveafreemarketformilkquota.Quotaisfixedtothefarm,i.e.tothecows.Whenafarmersellscows,hisquotaisdecreased;whenhepurchasescows,hisquotaisincreasedwithoutpayingforthequota.Awholefarmwithquotacanbetransferredtoanotherfarmer.ThisisasimilarsystemasinFrance.Thereisnotaregionalquotasystem.ThefillingofthenationalquotainSlovakiafromyear2004-2007wasbetween93%and95%.
Hungary
Hungaryisaspecialcountryinrespecttothequotasystem.ItwastheonlycountryjoiningtheEUin2004thatdidhaveanationalquotasysteminplacebeforeentering.Thequotasystemwasestablishedin1996.Thesituationisalsounique,becauseHungaryhasamixtureofverylargeandsmallfarms.In2004,about1000largefarmshadonaverageabout600cows.Inaddition,morethan20,000smallfarmshadabout7cowsonaverage.Thetotalquantityofnationalquotais1,947,280tonnes,ofwhich1,782,650tonnesarefordeliveriesand164,630tonnesisfordirectsales.Transferofquotawasinitiallyrestricted.Hungaryisconsideredasoneregion.
Czech Republic
ThenumberofdairycattleinCzechRepublicdecreasedby37%from1989-2003(1.248millionto0.46million).In2004,43%ofthefarmshadbetween100and300cows,and38%offarmershadmorethan300cows.TheCzechRepublic,SlovakiaandHungary(partly)havethelargestfarmsinEurope.
The�cattle�sector�in�Central�and�Eastern�Europe
66
Thereisnoregionalquotasystemandtransferofquotaisfree.
Baltic countries
IntheBalticcountries,noquotaregionsareestablished,thusfreetransferofquotabetweenfarmsexists.Alsoleasingofquotaisallowed.Theadministrationofquotaandtheapplicationofthequotarulesareveryliberalinthesecountries.Therestructuringisverystrong,especiallyinEstonia.IntheBalticcountries,non-useofagriculturallandhasbecomenormalindicatingdrasticchangesinagriculturalstructures.InEstonia,2,428farmerswereassignedaquotain2004.However,4,356farmersdidnotapplyforquota.Thesesmallerfarmsobviouslywillleavethesectorinyearstocome.About57%ofthequotaholdershave1-10cows,29%have10-50cows,4%have50-100cows,9%have100-500cows,and1%haveabove500cows.Thisisaremarkabledistributionwithalargespreadfromsmalltolarge.Nearly10%ofdairyfarmshavefrom100-500cows.ThestructureoffarminginEstoniadiffersverymuchfromthoseinLithuaniaandLatvia.Lithuaniahad448,000dairycowsin2004.Thesecowsaremanagedon270.635farms,whichindicateanaverageofabout2cowsperfarm.InLatvia,therewere4,800cowskeptin2004givingtheaverageherdsizeofnearly6.
Case�study�of�extra�attention�to�the�structural�developments�in�Lithuania:�auction�of�quota
LithuaniaistheonlycountryintheEUwithanauctionsystemoftransferofquota.Sellersandbuyersmeeteachotherviainternetatanauction.ThissystemissomewhatcomparabletotheQuotaExchangeBureausinDenmark(centralisedBureau)andGermany(atregionallevel).Upuntilthepresent,3auctionshavebeenheld.TheamountofquotaexchangedandpricespaidarelistedinTable17.
Structural�developments
TheaveragequotaofthefarmsinthevariousregionsinLithuaniavariesfrom7.8tonnes(Svenčionysregion)to30.6tonnes(Siauliairegion).ThisillustratestheverysmalldairyfarmsizeinLithuania.Arigorousrestructuringofthedairysectoristakingplace(seeFigure14).Inthelast4quotayears,therewasareductioninthenumberoffarmswithquotaof31%(Tauragéregion)to46%(Rokiškisregion).ThisrestructuringlookssomewhatsimilartothesituationinPoland(seeFigure13),whilethechangesinSloveniashowamuchmoremodesttrend(seeFigure9).Itwouldbeveryinterestingtostudythefactorsbehindthelargedifferencesinrestructuringbetweenthecountriesbutalsobetweenthevariousregionsinthedifferentcountries.
� The�cattle�sector�in�Central�and�Eastern�Europe
67
Table 17.QuotaexchangeinLithuaniathroughanauctionsystem(1euro=3.413litters).
1stauction(November2007)
2ndauction(March2008)
3rdauction(November2008)
No.ofpotentialsellers 2,119 2,489 933Totalamountforsalein1000tonnes 19.7 23.5 11.5No.ofpotentialbuyers 328 380 134Totalamountrequestedin1000tonnes 11.7 10.7 3.7No.ofbuyers 244 342 127Totalamountpurchasedin1000tonnes 4.8 9.6 3.7No.ofsellers 576 842 251PricesellersdemandedAverageinlitters/kg 0.46 0.22 0.11Lowestversushighest 0.05-2.50 0.05-1.50 0.01-2.0PricebuyerspaidAverageinlitters/kg 0.28 0.20 0.06Lowestversushighest 0.23-0.60 0.10-0.50 0.03-0.20
No. of producers delivering milk to buyers Total sold milk to buyers, counted by national reference fat content (3,99%) in tAverage quota amount per farm in tons Reduction in no of farms with quota from 2004/2005 to 2007/2008
Percentage reduction in no. of farms from 2004 to 2008
4850
137554
26,9
4211
- 44%
5998
61982
10,1
3178
-32%
7395
175395
23,3
3484
-31%
7737
187915
23,2
6736
-43%
6912
182921
27,5
4206
-36%
6532
186593
27,1
6322
-46%
7017
213943
30,6
6593
-46%
4368
114129
25,2
2655
-37%
5951
51644
7,8
6831
-44%
5333
74652
13,1
4588
-42%
Figure 14. StructuraldevelopmentsinthevariousregionsinLithuaniaintheperiodfrom2004/2005to2007/2008.
The�cattle�sector�in�Central�and�Eastern�Europe
68
References
AgencyforAgriculturalMarketandRuralDevelopment,2008.SodobnoKmetijstvo,Yearbook41,March2008.AgencyforAgriculturalMarketandRuralDevelopment,2007.SodobnoKmetijstvo,Yearbook40,No.1,March2007.AgencyforAgriculturalMarketandRuralDevelopment,2006.SpecialSupplement‘SodobnoKmetijstvo’,Yearbook
39,No.2,May2006.EuropeanCommission(EC),2007a.MilkandmilkproductsintheEuropeanUnion.Availableat:http://ec.europa.eu/
agriculture/publi/fact/milk/2007_en.pdf.EuropeanCommission(EC),2007b.ReportofCommissiontoCouncil,Brussels12-12-2007(COM-2007-800final).GUS,variousyears.Statisticalyearbooks(volumesfrom1989-2007).GUS(MainStatisticalOffice),Warszawa.IERiGZ,variousyears.Rynekmlekastaniperspektywy.MarketAnalysesSeries(volumesfrom1990-2007),Warszawa
ISSN1231-2673.Kuipers,A.,Klopcic,M.andSvitojus,A.(eds.),2006.FarmmanagementandextensionneedsinCentralandEastern
EuropeanCountriesundertheEUmilkquota.EAAPTechnicalSeries,No.8,WageningenAcademicPublishers,theNetherlands.
MinAg,2007.MinistryofAgriculturestatisticalbulletin#105.MinistryofAgriculture,Bulgaria.RepublicofSlovenia,2006.UREDBA.ospremembahindopolnitvahUredbeouvedbidajatvezamlekoinmlečne
proizvode.UradnilistRS,št.132/2006zdne15.12.2006,str.14588(OfficialgazetteoftheRepublicofSlovenia,No.132/06,published16.12.2006,p.14588).
USDA,2007.Bulgariadairyandproducts-acupofhotmilkforBulgariandairyreform2007.GainreportnumberBU7023.Date7/23/2007.UnitedStatesDepartmentofAgriculture,ForeignAgriculturalService.Availableat:www.fas.usda.gov/gainfiles/200707/146291846.doc
Wilkin,J.,Milczarek,D.,Malak-Rawlikowska,A.andFałkowski,J.,2007.ThedairysectorinPoland.Regoverningmarketsagrifoodsectorstudy,IIED,London.
� The�cattle�sector�in�Central�and�Eastern�Europe
69
The well-being of Heifer International animals
T.S.�Wollen�and�D.P.�Bhandari
Heifer�International,�1�World�Avenue,�Little�Rock,�Arkansas�72202,�USA;�[email protected]�
Abstract
HeiferInternationalisanon-governmentalorganisation(NGO)providinglivestockandtrainingincountriesofCentralandEasternEuropewithofficesin10ofthosecountries.Heiferprojectsareformedaroundstronglocalcommunitygroupsandprovidequalitylivestock,trainingandrelatedsupporttomen,womenandyouthinordertoassistwithfoodsecurityandtoimprovelivelihoods.Trainingandextensionservicesareprovidedtoassistfamiliestoimproveanimalhousing,management,breeding,nutritionandveterinaryhealth.Animalsreceivehumanehandlingandprotectionandinturnprovidefood,otherby-productsandworktothefamily.Traininginagro-ecologyintegrateslivestockproductionintosustainablefarmingsystems,whichprotectandenhancethelocalenvironment.Groupsaretaughthowanimalscanbecomeavitalpartoffamilyactivitieswithoutcausingaburdenonfarmresourcesandareintegratedintothecommunity.Animalwell-beingrecommendationsareprovidedaccordingtothetopicalareasofanimalnutrition,animalreproduction,animalhealth,animalhusbandry,carefortheenvironmentalandhumaneslaughter.Eachsectionlistscriticalelementstoachieveinordertoenhancethehealthandproductionoftheanimals.Eventhoughrelativelysimple,thecommunitygroupcanusetheserecommendationsforthreeimportanttasks.Theyformanoutlineofitemstoincludeinthepreparationofanimalhealth-relatedproposalstofunders.Theyalsoformthetrainingprogramoutlineforlivestockparticipants.Finally,theyserveasatoolformonitoringandevaluatingthesuccessofprojectsrelatedtolivestock.Theoverallobjectiveoftheserecommendationsistoselectandrearanimalsthatimprovefamilylivelihoodsandthataresuitabletoavailableresources.AsHeiferworkswithtrainedanimalhusbandrystaffandhealthcarespecialistsinalllocations,theserecommendationscanbeadaptedbylocallivestockprojectmanagementasneededtolocalconditionsandobjectives.Thisisthecaseformanyresource-deficientareaswherelivestockkeeperslackextensiveresourcesforlivestockcareandoftenmanageanimalhusbandryatbasiclevels.Furtheronthespectrumoflivestockfarmsarelargerscaleoperations,forwhichproductquality,quantityanduniformityareimportantfortheexternalmarketandrequireahigherlevelofmanagement.Regardlessofthescale,localcustomsshouldalwaysbetakenintoconsiderationincludingtraditionalpractices,localleadershipandotherexperiences.
Keywords:�animal�well-being,�animal�nutrition,�animal�reproduction,�animal�health,�animal�husbandry,�care�for�the�environment,�humane�slaughter
Introduction
HeiferInternationalisanon-governmentalorganisation(NGO)providinglivestockandtrainingin18countriesofCentralandEasternEuropewithofficesin10ofthosecountries:Albania,Armenia,Bulgaria,Kosovo,Lithuania,Poland,Romania,Russia,SlovakiaandUkraine.ToensuretheappropriatecareofHeiferprojectanimals,allrecipientfamiliesandcommunitiesparticipateinextensivetrainingpriortoreceivingtheir‘livingloans’.Throughtrainingandextensionservices,Heiferenablesfamiliestoimproveanimalhousing,management,breeding,nutritionandveterinaryhealth(Aaker,2007:124).Allanimalsreceivehumanehandlingandprotectionwhilegeneratingfoodandincomeforfamiliesengagedintheprograms.Traininginagroecology
The�cattle�sector�in�Central�and�Eastern�Europe
70
allowsrecipientstointegratelivestockproductionintosustainablefarmingsystems,whichprotectandenhancethelocalenvironment.Inthismanner,animalsreceiveadequatecare,improvefarmconditionsandbecomeavitalpartofafamilylivelihood.TraininginthesepracticesisprovidedbyHeifertechnicalstafforprojectpartners,whothemselveshavebeentrainedinHeifer’smodelofparticipatorymethodsofvalues-basedcommunitydevelopment(Aaker,2007:46).Thismodelisbasedonlessonsfromthefield,includinganunderstandingofthelocalsituationandpractices,envisioningopportunitiesandobstaclestosuccess,designingactionplansandfollow-upmonitoringandevaluation.Localanimalhealthandhusbandryspecialistsareenlistedtoprovidespecificlessonsonveterinaryandagro-ecologicalsubjects.
Animal well-being recommendations
HeiferInternationalhasdevelopedanimal�well-being�recommendationstoserveasguidelinesforlivestockrecipientsandcommunity-basedanimalhealthworkers(HeiferInternational,2008).Heifer’srecommendationsencompassmorethanjustanimalhealth,encouragingholisticanimalmanagement.Thisholisticapproachincludesallfacetsofanimalhusbandry,nutrition,reproduction,humaneslaughterandenvironmentalimpact–reinforcedbycontinuouslearningandmonitoringofsuccess.Theoverallobjectiveofthefollowingrecommendationsistoselectandraiseanimalsthatimprovefamilylivelihoodsandthataresuitabletotheresourcesavailableintherespectivecommunity.AsHeiferworkswithtrainedanimalhusbandrystaffandhealthcarespecialistsinalllocations,thesestandardrecommendationscanbemodifiedbylocallivestockprojectmanagementasneededtoadapttolocalconditionsandobjectives.Thisisthecaseformanyresource-deficientareaswherelivestockkeeperslackextensiveexternalresourcesforlivestockcareandcanthusmanageanimalhealthandhusbandryatbasiclevels.Ontheoppositeendofthisspectrumarefor-profitlivestockoperations-forwhichproductquantity,qualityanduniformityareimportant-requiringahigherlevelofhealthandhusbandrymanagement.Regardlessofthescale,localcustomsshouldalsobetakenintoconsiderationforcommunitylevelmanagement,includingtheuseofindigenouspractices,traditionalleadershipandotherexperiences.SelectionofappropriateanimalmanagementforHeiferInternationallivestockwillbemadefromthesixmajorareasofconsideration.Eachcontainnumerousrecommendationsforimprovedhusbandryandindicatorsthatassistthelivestockmanagerinmonitoringhis/hermanagementprogress.
Animal nutrition
AnimalnutritionisoneofthemajorconcernsforHeiferinfieldprojectactivities.Projectbeneficiariesareencouragedtoprovidenutritionthatisappropriatetoage,gestationstage,andproductionandgrowthrequirements.Thereshouldbeacontinuoussupplyfreshwatertoallanimals.Feedmustbestoredtoretainqualityandtosafeguarditfromcontaminationandrodents.Individualfeedingredientscanbecombinedwithlocalforagestomeetlivestock,poultryandfishnutritionrequirements.Fodder,energyandorproteinreservesshouldbestoredfortimeswhenfreshfeedsarenotavailable.Pasturegrassescanbeorganisedandwarehousedfornearlyyear-roundfeeding,dependingontheclimate.Intensivelymanagedrotationalgrazinggivesfarmersmorebenefits.ForproducersfollowingNationalOrganicStandards,certifiedorganicfeedsubstancesmustbestoredaccordingtoregulationsandpasturesmaintainedaccordingtotheruleswithproperrecordsmaintained.
� The�cattle�sector�in�Central�and�Eastern�Europe
71
Animal reproduction
Animalreproductionmanagementincludesappropriateselectionproceduresoffemalesandmalesofeachanimalspecies,well-designedbreedingprograms,recordedgestationcalendarsandbirthingcareofanimalsthatHeiferprovidestocommunitymembers.Animalsareselectedforgeneticimprovementbasedonrecipientcommunity’seconomicconditionsandabilitytofeedandprovidecare.Pregnancyoffemalelivestockiscertifiedpriortopurchase.TheHeifercommunitygroupisinvolvedintheselectionprocesstoguaranteethatprojectparticipantshavehusbandryskills,availableresourcesandamarketfortheoffspringandotherproducts.Localanimaltypesandbreedsthataresuitableforthelocalenvironmentarethebestchoiceforreproduction,whenavailableandingoodquality.Abreedingplanispreparedwiththeappropriatemalebreedingstockfornaturalbreedingorartificialinsemination.Breedingplansareorganisedforallreproductivelyactiveanimals.Appropriateequipmentandatrainedtechnicianareusedwhenemployingartificialinsemination.Appropriatecareformaleanimalsisprovidedduringnon-breedingseason.Duringgestation,feedandcareforpregnantanimalsisprovidedinapropermanner:pregnantfemalesarenotoverusedfordraft-powerandadequatenutritionlevelsaremaintainedaccordingtostageofgestation.Atthetimeofbirth,adry,heated(whennecessary)areaisprovidedthatisprotectedfromsevereweatherasmuchaspossibleandappropriatefortherespectivelivestockspecies.Afterward,appropriatenutritionthroughlactationisprovidedtoinsuretimelyrebreeding.Birthingcyclesaretracked,recordedandmonitoredinordertomeetspeciescapabilityunderthelocalconditions.
Animal health
HeiferInternationalsupportsbasicpreventivehealthcareprograms,treatmentofdiseaseconditionsandsurveillanceforemerginglocal,catastrophicandzoonoticdiseases.Theuseofethnoveterinaryproducts,localhealersandtraditionalremedieswhenappropriateandavailablearepromoted,especiallyinveryruralandremoteareas.Commercialmedicationsarepurchasedthroughreliablesourcestoavoidcounterfeits.Recordsofproductnames,manufacturer,supplier,lotnumberandexpirationdatearekept.Acoldchainisprovidedwhenrequiredformedicineandvaccines.Medicineswillbestoredinclean,safe,temperature-controlledenvironment,whenrequired.Expiredproductsaredestroyedimmediatelyandhazardousproductsarestoredaccordingtolabelrecommendations.Allmedicines,insecticides,pesticidesandotherproductsareusedstrictlyaccordingtothelabelunlessundersupervisionofveterinaryadvice.Alternativetherapiesandmanagementpracticeswillbeconsideredfordeworminganduseofantibioticsinordertoreducedevelopmentofresistance.Appropriatedeliverydevicesandprotectiveclothingareutilisedwhenneeded.Milkwithholdingtimesandslaughterwithdrawaltimesareobserved.Sickandrecoveringanimalsareisolatedfromhealthystockwhenpossible.Mortalitywillbeinvestigatedanddiagnosedinordertoavoidrecurringillness.Keepingarecordofallmedicalandalternativetreatmentsandmortalityisgoodforbuildingfuturehealthprograms.Diseasepreventionisnormallyachievedbyvaccinationschedulesandstrategicdewormingprograms.Allpreventivetreatmentsarerecorded.Internalandexternalparasitesaremonitored,managedandtreated.Healthchecksformineralsufficiencyforlivestockonrotationalgrazingpasturesshouldbeestablished.Diseasesurveillancecanbeanassettolocalgovernmentlivestockdepartmentsanddiagnosticlaboratories.Pre-purchasehealthchecks,bloodtests(especiallythoserequiredbythegovernment)andfecalcounts,aregoodprecautionswhenpurchasingnewanimalsforthecommunity.New
The�cattle�sector�in�Central�and�Eastern�Europe
72
herdanimalsareputinquarantine,usuallyfor30days.Diagnosticproceduresforherdillnessareestablishedanddiseasedordeadanimalsaredisposedofcompletely.Localauthoritieswillbeinvolvedtomonitorzoonoticdiseases.
Animal husbandry
Appropriateanimalmanagement,facilities,hygieneandrecordkeepingarediscussedhereundertheserecommendationsataminimumbasiclevelfornewlivestockrecipients.Animal�management:Animalsshouldbeidentifiedinahumaneandsanitarymannerbyeartag,tattoo,brand,ear-notchorothermeans.Recordsarekeptoneachanimalfrombirthorpurchaseuntiltheanimalleavesthefarm.Functionalandhumanerestraintequipment(e.g.noserings)areinstalled.Animalsarekeptsafefrominjurybytrainingstaffinimprovedanimalmanagement.Taildocking,teethclipping,castration,dehorning,andotherequipmentmustbemaintainingoodworking.Tackiskeptcleanandoiled.Thesameistrueforshearingequipment.Techniciansaretrainedforeachrespectivehealthandmanagementprocedure.Woolandotherby-productsadequatelystoredfortopmarketpricesandlocaluse.Animal�facilities:Zerograzingunitsshouldbebuiltcorrectly,stockedproperly,cleanedregularlyandthemanurecollectedforuseinfarmingsystems.Animalsaregivendailyexerciseandsunlightwhenkeptinconfinement.Appropriatefencingisutilisedforanimalspecies;kepttightandingoodrepair.Appropriategatesareutilisedandkeptthemingoodworkingorder.Dryshelterandhousingisprovidedwithadequatelightingandairflow.Amplelots,pasturesandwoodlandsthatarehazard-freeandnotover-usedwillbeused.Milk�hygiene:Milkfacilitiesandequipmentarekeptcleanandmeetlocalmilkordinancestandardsforproductiontype.Milkersandmilkhandlersmustpracticegoodpersonalhygiene.Theappropriatemilkingtimeforeachanimalisestablishedandmilkhandlingandcoolingisconductedinatimelyfashion.Milkproductqualityprotectedandproductsafetypromotedthroughsoundmilkhandlingandpreservationmethodsforrawandprocessedproducts.Animal�records:Recordsforpure-bred,indigenous,rareandheritagebreedanimalsaremaintainedup-to-date.Breedingrecordsaremadeavailablesuchas:breedingdates,sire,birthdate,growth,weaning,andbodyconditionscoringdata.Healthrecordsaremaintainedincludingincidents,treatment,vaccinationandfinaldisposition.Causesofmortalityanddispositionofthecarcassaredocumented.
Care for the environment
HeiferInternationalencouragesdiversificationoflivestockandcropspeciestoavoidharshimpactontheenvironment.Inaddition,manureandpasturemanagementarekeyfactorstakenintoconsideration.Manure�management:Manureisremovedregularlyandcompostedinanappropriatelocation.Manureisutilisedforcropfertiliser,bio-gasandotherapplications.ManureisstoredadequatelytoavoidpestsPasture�management:Anadequatepasture/livestockdensityisensuredtoallowforproperanimalnutritionwithminimalsupplements.Thelandandpasturesaremanagedtocontrolsoilerosion.Overconsumptionofgrasses,shrubsandtreesforfodderisavoidedtoensurebestregeneration.
Animal slaughter
Fromtheanimalwell-beingperspective,HeiferInternationalhasdevelopedbasicrecommendationsforhumaneslaughterofanimalsforconsumptionandforsale.
� The�cattle�sector�in�Central�and�Eastern�Europe
73
Humaneslaughterincludesthefollowingpractices:(1)slaughterofanyanimalisonlyconductedbyproperlytrainedindividuals;(2)slaughterequipmentiskeptinsharp/goodworkingorder;(3)slaughteriscompletedasquicklyaspossibletominimiseanimalanxiety;(4)onlyhealthyanimalsareslaughteredforfood;and(5)anyanimalthathasdiedfromunknowncauseswillnotbeusedforhumanconsumption.
Training
TrainingisanothermajorpieceofoverallactivityforHeiferInternationalatalllevels.Eachcountryprogramshouldhaveadequatelytrainedstaffthatisconnectedtooutsidetechnicalexpertise.Trainingwillbeprovidedtoallprojectrecipientsinallaspectsofanimalwell-being.Heiferstaffand/orprojectpartnersshouldbeequippedwithsufficientskillsandresourcesfortrainingandmonitoring.Recipientsmusthavesufficientresourcesandotherabilitiestoutilisethetrainingthatisprovided.Bestpracticesaredocumentedandsharedthroughoutcountryprogramsandbeyond.Localcultureandtraditionsareincludedinalltraining.
Monitoring
Monitoringisimportanttoguaranteethesuccessfulapplicationofeachoftheaforementionedrecommendations.It isthereforeessentialthattheprogramcalendarfortrainedstaffincludemonitoringtime,whichshouldbecompletedonschedule(Aaker,2007:105-116).EachHeiferInternationalcountryofficeshouldalsocreateananimal�well-being�committeewiththetaskofreviewingandmonitoringprojectconditionsonaperiodicbasis.Thecommitteewouldserveastheforumofdiscussionwhenissuesofwell-beingarepresented,hearquestionsofabusebroughtbeforethegroupforevaluationandmakerecommendationstoprojectmanagers,programpartners,andthecountrydirector.Thecommitteeshouldincludeaveterinarian(fromthelocalcountryHeiferstaff,ifavailable),aprogramstaffpersonandaprogrampartner/lay-personfromoutsideHeifer.Thecommitteeshouldmeetregularlyandplanamonitoringvisittoeachprojectsiteatleastonceayear.Attimes,thecommitteemaydeemitnecessarytoremoveananimalfromaprojectfamilyduetounhealthyorabusiveconditions.Projectcontractsshould,therefore,containprovisionsstipulatingwhatconstitutesunhealthyorabusiveconditionsandtheactionsthatwillbetaken.Projectanimalsmaybesubjectedtoavarietyofundesirableconditionsthatposenoliferisk,butareinhumane.Afewexamplesarelistedbelow:• seriousmedicalproblemswithoutadequateveterinarycare;• lackofadequatefoodorwater;• exposuretoextremetemperatures;• inadequateshelterorbedding;• housinginunsanitaryenclosures.
References
Aaker,J.,2007.TheHeifermodel,cornerstones;values-baseddevelopment.Atrainingmanual.HeiferInternational,LittleRock,USA.
HeiferInternational,AnimalWell-Being,2008.Atrainingdocument.HeiferInternational,LittleRock,USA,8pp.
Part 2 Country reports
� The�cattle�sector�in�Central�and�Eastern�Europe
77
The dairy cattle sector in the Russian Federation shows a tendency to improvement
S.�Kharitonov1,�I.�Yanchukov2,�A.�Ermilov2,�Y.�Grigoriev3�and�O.�Osadchaya3
1Russian�State�Agrarian�University�–�MATA,�Timiryazevskaya�str.�48,�127550�Moscow,�Russia;�[email protected];� 2Moscow�Regional�Breeding�Organization,� Vinogradnaya� str.� 9-Б,�Dolgoprudniy,�141706�Moscow�region,�Russia;�3All�Russian�State�Research�Institute�on�Animal�Husbandry,�Dubrovitsy,�Podolskiy�District,�142132�Moscow�Region,�Russia
Abstract
ThedairycattlesectorisoneofthemostimportantbranchesofanimalhusbandryintheRussianFederation.Intheperiodfrom1992to2000,productionofmilkandmilkproductsdecreasedsignificantly.Themainreasonforthiswastheunstablesituationinthecountrywhichresultedinreducedanimalnumbersandproductivity.Thisnegativetrendinmilkproductionwashaltedin2005whentheNationalPriority-ProjectonDevelopmentoftheAgrariansectorwasestablishedandstartedtobeimplementedbytheGovernment.Thispaperoutlinesthemaincharacteristicsofmilkproductionandmilkconsumption,structureofmilkproductionbyfederalregionsandbyvarioustypesoffarms,breedcomposition,theorganisationalschemeofbreedinginthedairycattlepopulation,andperspectivesonthedevelopmentofthedairysectorintheRussianFederation.
Keywords:�agricultural�enterprises,�breed,�breeding�management,�dairy�cattle,�households,�milk�production,�milk�consumption�
Introduction
Duringthe1990s,Russiaexperiencedsomedramaticchangesinitssocial-economicstructure.Thebreak-upoftheSovietUnionandtransitionofthenationaleconomicsystemfromcentralisedstatecontroltobeingmarketorientedhadagreatimpactontheexistingequilibriumfordifferentbranchesofthenationaleconomy,theirstructure,andtheinfluenceofthestatesectoronthegeneraleconomicsituationinthecountry.Abreachinthepriceparityforagriculturalproduceononehand,andenergysources,farmmachineryandequipment,fertilisersandmixedfeedsontheother,resultedinasharpdeclineinagriculturalproductionandoutputbyagriculturalenterprises,whichinthemainweresubjecttonationalisation(privatisationandrestructuringtojointstockcompanies).Asaresult,thegrossoutputofagriculturalproductsdecreasedconsiderably.Inanimalhusbandry(i.e.dairycattlesector),itresultedinadeclineinlivestocknumbersforagriculturalenterprises,lowerproductivityoffarmanimals,andstructuralreorganisationoftheagrariansector.Ifintheearlynineties,agriculturalenterpriseswere100%representedbycollectivefarmsandstatefarms.Alreadybythemidnineties,themajorlargeandmediumsizelivestockfarmsweretransformedtojointstockcompanies,agriculturalcooperativesandothernon-stateamalgamations.Atthesametime,someprivatefarmsweredevelopingandtheystartedtoproduceagriculturalgoods,notonlyfortheirownconsumption(asithappenedinmostcasesinindividualhouseholdsoftheruralpopulation),butforsale.
The�cattle�sector�in�Central�and�Eastern�Europe
78
Production and consumption of milk products in the Russian Federation
InthelivestockindustryoftheRussianFederation,oneofthemainsectorsthatplaysaleadingroleintheproductionofanimaloriginproductsisdairycattlehusbandry.Forthereasonsthathavebeenmentionedabove,productionofmilkinallcategoriesofdairyfarmsinRussiadeclinedverysignificantlyduringtheperiodfrom1990to2005.Whilein1990theproductionofmilkwas55.7mt,theamountofmilkproducedin2005wasonly31.1mt,areductionof44.1%(Table1).Afterwards,thistendencystopped,andsince2005,theproductionofmilkhasslowlyincreased.AccordingtoofficialinformationoftheCentralStatisticalBureauoftheRussianFederation,in2007,totalproductionofmilkinallcategoriesoffarmswas31.4mt(DzaparidzeandKhrestin,2008).Accordingtoofficialdatafortheperiodstudied(2005-2007),worldmilkproductionincreasedby5.0%.ThemainincreaseinmilkproductionwasobservedintheAsianregion(11.2%)andthecountriesoftheEuropeanUnion(5.0%).IntheRussianFederation,thetendencytoincreasemilkproductionwasnotsostrong(about1.0%),butastabilisationofmilkproductioninthecountryisobvious.DatashowingtheratiobetweenexportandimportofmilkproductsindifferentcountriesarepresentedinTable2.ItisevidentthattheimportsofmilkproductsintotheRussianFederationismuchgreaterthantheexports.Duringtheperiod2005-2007,thecountryimported5.1%-5.9%ofannuallyworldtradedmilkproducts.Atthesametime,exportofmilkproductsfromRussiawasonly0.2-0.3mt.Thus,theratiobetweenimportandexportofmilkproductsrangedfrom1:7-1:13.5.Indynamicaspectsfrom2005to2007,importofmilkproductsdecreasedby33%,whileexportbecamelessby33%.ThesamesituationisobservedincountriesoftheAsianregionwhereimportsofdairyproductswas4.8-5.4timesgreaterthanexports.IncontrasttoRussiaandAsiancountries,thestatesoftheEuropeanUnionandUSAexportedmoremilkproductsthantheyimported.Forinstance,exportofmilkinEuropeancountrieswas6-7times
Table 1. Productionofmilk(DzaparidzeandKhrestin,2008).
Country/region Milkproduced(mt)2005 2006 2007
Worldtotal 642.3 656.8 674.6EuropeanUnion 146.9 145.5 154.2USA 80.3 82.5 83.5Asiaregion 216.2 227.8 240.3RussianFederation 31.1 31.2 31.4
Table 2.Importandexportofmilkproducts(DzaparidzeandKhrestin,2008).
Country/region Import(mt) Export(mt)2005 2006 2007 2005 2006 2007
Worldtotal 43.6 45.2 45.5 45.4 47.5 48.0EuropeanUnion 2.0 2.0 2.0 13.7 12.8 12.7USA 2.3 2.0 2.0 4.6 4.7 4.8Asiaregion 21.8 23.6 23.7 4.5 4.4 4.5RussianFederation 2.2 2.6 2.7 0.3 0.2 0.2
� The�cattle�sector�in�Central�and�Eastern�Europe
79
morethanimported.Inaddition,itneedstobenotedthatimporteddairyproductsbytheRussianFederationcomprised8-9%oftotalvalueofmilkproducedinthecountry.Russiatakesthe5thplaceintheworldonconsumptionofmilk,rankedbehindthecountriesoftheEuropeanUnion,UnitedStates,IndiaandChina.Thedynamictrendinmilkconsumptionforthelast5yearsispresentedinFigure1.Figure1showsthattheconsumptionofmilkintheEuropeanUnionistendingtodeclineslightly.ThelevelofconsumptionofdairyproductsintheEUcountriesin2007comprised95.5%ofthe2003values.Inthesameperiod,thesituationwithmilkproductsconsumedbythepopulationoftheUSwasmorestable:27.2mtofdairyproductswasconsumedin2003comparedwith27.4mtin2007.ThedynamictrendindairyproductsconsumptionintheRussianFederationlookssimilartothechangesintheEuropeancountries,butonanotherlevel.WhiletheRussianpopulationconsumed13.4mtofmilkproductsin2003,thevalueofmilkproductsconsumptionhaddeclinedby10%in2007.In2007,theuseofmilkproductsinRussiaaccountedfor43.8%and35.3%,respectivelyofthesameindicesintheUnitedStatesandEuropeanUnion.Asforthemaincategoriesofmilkproducts,itcanbeconcluded(accordingofficialsources)thatintheRussianFederationtheconsumptionofcheesehasincreasedfrom498,000tin2003to660,000tin2007(32.5%).Consumptionofmilkbutterinthesameperiodwasstableatabout440,000tperyearwithasmallannualvariation(about5-7%).AccordingtothenormsestablishedbytheRussianAcademyofMedicalScience(RAMS),theprovisionofmilkandmilkproducts(expressedasliquidmilk)shouldbe392kgpercapita.InTable3,theconsumptionofmilkandmainmilkproductsintheRussianFederationandindevelopedcountriesisshown.ItisobviousthatthelevelofconsumptionofthemainmilkproductsismuchlessthanrequiredtomeetthenormsofRAMS,andcomparedtocorrespondingindicesindevelopedcountries.
Table 3. Provisionofmilkandmilkproducts(kgpercapita)(DzaparidzeandKhrestin,2008).
Product AmountrequiredtothenormsofRAMS
ConsumptionRussia Developedcountries
Milk 114 64 112-182Sourmilkdrinks 32 14.4 29-46Cheese 21 6.2 18-29MilkButter 6.1 4.2 2.1-7.7
05
10152025303540
2003 2004 2005 2006 2007Year
Milk
con
sum
ptio
n (m
t)
EC USA Russia
Figure 1. Dynamictrendinmilkconsumptioninselectedcountries.
The�cattle�sector�in�Central�and�Eastern�Europe
80
Russiaisdividedinto7federalterritorialadministrativeregions,e.g.Central,North-Western,Southern,Privolzhskiy,Ural,SiberianandFarEastern,whichinturnaresubdividedintorepublics,kraisandoblasts.ThestructureofmilkproductionbyfederalregionsispresentedinTable4.ThefiguresinTable4showthat86%oftotalmilkwasproducedin4regions:Privolzhskiy(33%),Central(20%),Siberian(17%)andSouthern(16%).Therestofthecountry(3regions:North-Western,UralandFarEastern)togetherproducedjust4.5mtofmilkaccountingfor14%oftotalmilkproductioninRussia.OneofthemainreasonsthatmilkproductiondecreasedintheRussianFederationwasadiminutionindairycattlenumbers.Whilein1990thenumberofcattlewas57,043,000head,attheendof2007itwasonly23,310,000onallcategoriesoffarms.ThedynamicchangesinthenumbersofdairycowsindifferenttypesoffarmsispresentedinTable5.Itisevidentthatintheperiodexaminedthemaximumcurtailmentinnumberofdairycowsoccurredinagriculturalenterprises:thenumberofcowsonthesefarmsdeclinedby39%andamounted3.97min2007.Thesametendencywasalsoobservedintheprivatesector,althoughitwasrathersmallcomparedtotheagriculturalenterprises.Asaresult,thetotalpopulationofcowsdecreasedby26.5%in8years.ItisremarkablytonotethatlivestocknumbersdeclinedinallregionsandalloblastsoftheRussianFederation.Table6providesinformationontheproductivityofdairycattleinagriculturalenterprises,aswellasfarmers’householdsandprivateauxiliaryhouseholds.Intheearlyyearsofthe20thcentury,thesituationwithmilkproductionintheRussianFederationwasmoreorlessstable.Inspiteofasignificantreductioninthenumberofdairycattleinagriculturalenterprises,thetotalmilkproducedinthiscategoryoffarmsessentiallydidnotdecrease.Astablesituationwithmilkproductionwasobservedintheprivatesectorandanabsolutelypositivetendencyhasbeenshowninfarmers’households.Incontrastwiththeninetiesoflastcentury,whenareductionofdairycattlepopulationwasaccompaniedbyasimilardecreaseinmilkproduction,thetotalvolumeofmilkproducedinyears2000-2007indifferenttypesofdairyfarmshasremainedthesame:32.3mtin2000and32.2mtin2007.
Table 4. Structureofmilkproducedbyfederalregionsin2007(DzaparidzeandKhrestin,2008).
Federalregion MilkproducedAbsolutevalue(mt) %
Central 6.44 20North-Western 1.93 6Southern 5.15 16Privolzhskiy 10.63 33Ural 1.93 6Siberian 5.47 17FarEastern 0.64 2
Table 5. Numbersofdairycowsinvariouscategoriesoffarms(m)(DzaparidzeandKhrestin,2008).
Categoryoffarm Year2000 2001 2002 2003 2004 2005 2006 2007
Agriculturalenterprises 6.49 6.09 5.65 5.13 4.67 4.29 4.07 3.97Farmers’households 0.25 0.28 0.31 0.35 0.36 0.41 0.47 0.49Privatesector 5.98 5.85 5.79 5.61 5.22 4.85 4.86 4.85Total 12.66 12.22 11.75 11.09 10.25 9.55 9.41 9.30
� The�cattle�sector�in�Central�and�Eastern�Europe
81
Inthiscontext,itneedstobekeptinmindthatthegreatestroleinmilkproductionisplayedbyagriculturalenterprisesandbyhouseholdsofthepopulation,whichproducedrespectively44.0%and52.0%ofmilkin2007.Theproportionoftotalmilkproducedinfarmers’householdswasnotsosubstantialandamountedtoonly3.9%oftotal,althoughitincreasedbymorethantwofold(1.8%in2000vs.3.9%in2007).Thestablesituationwithproductionvolumeinthecountryhasbeenachievedinspiteofareductioninthedairylivestockpopulationduetorisingmilkproductivityofcows.ThedataondynamictrendsinaveragemilkyieldpercowinagriculturalenterprisesofvariousregionsisshowninTable7.AccordingtoTable7,averagemilkyieldpercowduringtheperiodunderreviewhasincreasedfrom2,341kgin2000to3,798kgin2007.Theincreaseinaveragemilkyieldforthisperiodwas62.2%forthewholeofRussia.ThehighestaverageproductivitypercowoccurredintheNorth-Easternregion(4,753kg)wheremilkyieldincreasedby59.9%fromthebaseoftheyear2000.Inotherfederalregions,alterationsinaveragemilkyieldfortheperiodunderreviewwasfrom47.9%intheFar-Easternregionto67.8%intheSouthernregion.
Breed composition of dairy cattle of Russia
ThepopulationofdairycattleintheRussianFederationisrepresentedby24breedswhichcanbestructurallyclassifiedasfollows:• Blackandwhitebreedswhichinclude:BlackandWhite,Istobenskaya,Tagilskaya,andHolstein
ofBlackandWhitecolor.• Simmentalandrelatedbreeds:Simmental,Sychevskaya,RedandWhite,andHolsteinofRed
andWhitecolor.
Table 6. Milkoutputfromdifferenttypesoffarms(mt)(DzaparidzeandKhrestin,2008).
Categoryoffarm Year2000 2001 2002 2003 2004 2005 2006 2007
Agriculturalenterprises 15.3 15.5 16.0 15.4 14.4 14.0 14.1 14.2Peasants’households 0.6 0.6 0.7 0.8 0.9 1.0 1.1 1.3Householdsofthepopulation 16.4 16.8 16.8 17.2 16.9 16.2 16.2 16.7Total 32.3 32.9 33.5 33.4 32.2 31.2 31.4 32.2
Table 7. Averagemilkyieldpercow/yearinagriculturalenterprises(DzaparidzeandKhrestin,2008).
Region Averagemilkyieldinyear(kg)2000 2001 2002 2003 2004 2005 2006 2007
Central 2,358 2,609 2,798 2,981 3,130 3,319 3,613 3,790North-Western 2973 3,350 3,637 3,878 4,059 4,295 4,629 4,753Southern 2,467 2,728 2,968 3,088 3,238 3,669 3,973 4,140Privolzhskiy 2,277 2,460 2,718 2,924 2,988 3,155 3,463 3,476Ural 2,359 2,352 2,688 3,029 3,137 3,360 3,793 3,971Siberian 2,157 2,369 2,690 2,721 2,684 2,983 3,106 3,302FarEastern 1,725 1,691 1,884 1,952 1,999 2,047 2,265 2,550Total 2,341 2,551 2,878 2,979 3,068 3,292 3,623 3,798
The�cattle�sector�in�Central�and�Eastern�Europe
82
• Brownbreeds:BrownSwissandKostromskaya.• Red breeds: Red steppe, Suksunskaya, Bestuzhevskaya, RedGorbatovskaya, and Red
Tambovskaya.• Originalbreeds:Ayrshire,Kholmogorskaya,Yaroslavskaya,Jersey,Dagestanmountaincattle,
Zebucattle,andYakutskaya.Itisallowedtouseanyinterclasscrossesandoffspringshallbeconsideredpurebredsofthedambreed.ThepercentagedistributionofdifferentbreedsofdairycattleintheRussianFederationisshowninTable8.ThedatainTable9summarisetheproductivityofthepedigreedairycattlepopulation.ThegroupofblackandwhitebreedsisthemostwidelyspreadanditisfoundinallregionsoftheRussianFederation.Itisoneofthefewbreedsthatincreasedinnumberofanimalsfromyeartoyear.ThecommonfeatureofthebreedsofthisgroupisthattheanimalsoriginatedfromDutchandNorthGermancattle,andthisservedasabasistocombinetheminonecommongroup.Duringtheprevious40-50years,animalsoftheblackandwhiteHolsteinbreed(siresinmajority)havebeenwidelyused,andarebeingusednow,inthisgrouptoincreasemilkyieldandshape,aswellasconformationandadaptabilityoftheuddertomachinemilking.ThereproductionofHolsteingeneticmaterialgoesintwodirections:duetotheimportsofworldwidebreedingstock(fromUSA,Canada,recentlyfromGermany,Netherlands,Denmark,Hungary)andduetotheintroductionoflocallybredsiresandtheirintensiveuseforbreedingpurposes.Inrecentyears,embryotransplantationisbeingwidelyused,mainlyfortheproductionofsires.Theblackandwhite,asrule,hasthehighestpotentialformilkyieldwithmoderatebutterfatandproteincontents.Atpresent,Russiaisusingabreed-regionalsystemofdairycattleselection.Ofcourseitdoesn’tmeanthatanyregionalpopulationispresentedasanisolatedgroupbutexchangeofgeneticmaterial
Table 8. Percentagedistributionoflivestockbreedsofdairycattle(Shapochkin,2007).
Breed(groupofbreeds) Relativenumberofanimals,% Relativenumberofcows,%2005 2006 difference 2005 2006 difference
BlackandWhite 55.2 56.5 +1.3 54.9 56.4 +1.5Simmental 13.4 12.6 -0.8 13.2 12.2 -1.0Kholmogorskaya 9.2 9.6 +0.4 9.5 9.8 +0.3Redsteppe 5.7 5.0 -0.7 5.7 5.2 -0.5RedandWhite 3.7 3.7 0 3.5 3.6 +0.1Others(19) 12.8 12.6 -0.2 13.2 12.8 -0.4
100% 100% 100% 100%
Table 9. Averageproductivetraitsofcowsinthemainbreedsofdairycattle(breedingpartofpopulation)(Shapochkin,2007).
Breed Milkyield(kg) Fatcontent(%)2005 2006 difference 2005 2006 difference
BlackandWhite 4,209 4,483 +274 3.75 3.75 0Simmental 3,138 3,307 +169 3.73 3.76 +0.03Kholmogorskaya 3,791 3,972 +181 3.68 3.71 +0.03Redsteppe 3,592 3,819 +227 3.82 3.83 +0.01RedandWhite 4,004 4,222 +218 3.80 3.83 +0.03Allbreeds 3,937 4,190 +253 3.76 3.77 +0.01
� The�cattle�sector�in�Central�and�Eastern�Europe
83
isrestrictedbylocalinterests.Theregionalbreedingsystemsarebasedontheoblastprogramsofselectiontargetedtothegeneralimprovementofproductivityandbreedingperformanceofanimals.TheLeningradandMoscowregionsaswellastheSverdlovsk,PermandOmskregionstaketheleadingpositionsinraisingblackandwhitedairycattle.Untilthe1960s,SimmentalandrelatedbreedsdominatedinRussia.Intheseyears,thepopulationofSimmentalcattleintheBlacksoilzonereached95%ofthetotalnumberofdairycattle.Atthattimethelargestherdsize(over800,000head)wasintheVoronezhregion.Bythenineties,theSimmentalpopulationinmanytraditionalrearingzoneshaddecreasedtolessthanhalf(Samara,Kaluga,Tulaoblasts)andhadnearlydisappearedinKemerovo,AmuroblastsandinKhabarovskandPrimorskiykrais.Inthe1990s,theRedandWhitebreedofdairycattlewasapprovedinRussia.ThisbreedwasselectedbyusingtheRedandWhitedairycattleinthepopulationofpurebredSimmentalcattlewhichwasrepresentedasatypicaldual-purposebreed.InthegroupofSimmentalrelatedbreeds,theRedandWhitebreedisdistinguishedassignificantlyspecialiseddairycattlewithhighmilkyieldsandimprovedudderquality.ThemajorityofmoderncattlebreedsclassifiedasBrownSwissbreed,wereselectedinSwitzerlandandadjacentmountainregionsofGermany,AustriaandItaly.Since1995,theBrowncattleinRussiaaresubdividedintotwobreeds:BrownSwiss(whichincludesasmallnumberofcattleoftheDagestanBrownCaucasianbreedasatypebecauseithadnosiresatAIstations)andtheKostromskayabreed.ThefirstgroupofBrownSwissanimalswasimportedtoRussiafromSwitzerlandin1861toafarmoftheMoscowAgriculturalAcademy.ThisbreedsoonbecameverypopularintheMoscow,Smolensk,TulaandotherregionsofRussia.NowtheBrownbreedshavelosttheironcepre-eminentpositioninthetotaldairycattlebreedingpopulationinRussia.Actually,BrownbreedsofcattlehavealmostdisappearedintheMoscowregionbutarestillpreservedinsomefarmsofVladimir,NizhniyNovgorod,Bryansk,TulaoblastsaswellinTatarstan.NowthepopulationofBrownbreedcowsisabout6.5%ofthetotalnumberofcattleinRussiaandisatendingtofurtherreduceinnumberofanimals.RedcattlehavealonghistoryinRussia,sinceearly18thcentury,whenthefirstimmigrantsfromGermanyandHollandcametosettleinRussia.TheybroughtwiththemcattleofdifferentRedandBlackandwhitebreedsandtheirpredecessorscanstillbefoundinGermany,Switzerland,FranceandHolland.Attheendof19thcentury,AnglerandDutchbreedswereusedtogeneticallyimprovethesecattle.ItisworthmentioningthatattemptstocrossRedSteppewithimportedAnglerandRedDutchcattleintheseventiesandninetiesfailedtosubstantiallyincreasemilkyieldsandnowsomefarmscrossredcowswithRedandWhiteHolsteinsires.ThelastgroupofcattlebreedshasaspecificsignificancesinceeachbreedisindependentandasruleisnotusedforcrossingwithotherbreedsexceptwiththeKholmogorskayaandYaroslavskayabreedswhereintroductionofBlackandWhiteHolsteingenesisallowed.Inthesixtiesandseventiesof20thcentury,thetotalnumberofKholmogorskayabreedcowsexceeded1.1millionin35oblastsofRussia.Thenumberofoblastshasincreasedduetotheregionsandrepublicsthathaveatypicalcoldclimate(Murmansk,Kamchatka,Magadan,Tjumen,Yakutia).In1993,thePecherskiytypeofbreedwasconfirmed,whichiswelladaptedtothesevereclimaticconditionsoftheNorthernpartoftheKomirepublic.TheYaroslavskayabreedwasselectedinthe20thcenturyintheCentralEuropeanpartofRussiabyusinglocalNorthernforestcattle.TheKholmogorskayabreeddidhaveasignificantinfluence,ontheformationoftheexistingpopulationoftheYarislavskayabreed,whiletoalesserextent,animpactofBlackandWhiteDutchcattlestillexists.Atpresent,theYaroslavskayabreedofdairycattleiscommoninYaroslavl,Ivanovo,VologdaandTveroblastsoftheRussianFederation.Theremainingbreedsofdairycattle,excepttheAirshirebreed,belongtolocal,practicallyisolated,breedsraisedundercertainenvironmentalconditionsandwelladaptedtothem.Theaverage
The�cattle�sector�in�Central�and�Eastern�Europe
84
productivetraitsofcowsinthemainpopulationsofdairycattleareshowninTable9.ItisclearthattheaveragemilkyieldaswellasfatcontenthaveincreasedsignificantlyinallthemainbreedsofRussiandairycattle.Ithasresultedinanincreaseinmilkyieldof6.4%,andinfatcontentof0.002%inthewholebreedingpopulationofdairycattleinRussia.
System of breeding work in dairy cattle of Russia
ThemanagementofgeneticresourcesintheRussianFederationisbasedontheFederallaw‘OnPedigreeAnimalHusbandry’.Thislegislativedocumentwasintroducedin1995.Itdefinesthebasicprovisionsforactivities(conditions,requirements,obligations,rights)ofbreedinganimalowners(organisations,enterprises,jointstockcompanies,farmers’households,privateentrepreneurs)irrespectiveofthetypeofownership(RussianFederation,1995).Thefarmanimalpopulationisdividedintothreetypesofpedigreeorganisations:• breedingplantswhicharerepresentedbythebestbreedingfarms;• breedingreproducerswhichanswertobreedingrequirementsbuthaveworseresultsofbreeding
activitiesthanbreedingplantshave;• organisationsonartificialinseminationoffarmanimals(AIstations).ThelatestofficialresultsofthebreedingactivitiesforthefirsttwotypesofpedigreeorganisationsarepresentedinTable10.DatainTable10showthatcomparedwith2008,in2006,thenumberofbreedingfarmswasconsiderablylower:forbreedingplantsby16unitsandforbreedingreproducersby79units.Thishasledtoadecreaseinthenumberofpedigreeanimals.In2006,theproportionofrecordedanimalswaslittlemorethan5%ofthetotaldairylivestockpopulation.Onapositivenote,theaveragemilkyieldpercowinthebreedingpartofthepopulationsignificantlyexceededthevalueforinthewholepopulation-inbreedingplantsby75%,andinbreedingreproducersby35%.Itwasthefundamentalreasonwhyeconomicindicesincreasedinbreedingfarms.Theprofitabilityratereached17-19%.BesidebreedingfarmsandAIstations,theorganisationalschemeofmanagementofdairycattlebreedingresourcesinRussiaincludestwoupperlevels:federalandregionalones.Onthefederallevel,theMinistryofAgricultureisresponsibleforelaborationoffederalprogramsaimedatimprovingthesocio-economicsituationinthewholeruralsector.Inanimalhusbandry,theFederalMinistryworksoutgeneralconcepts,specificstandardsandprinciplestosupportprogramsimplementation.Onregionallevels,therearestateregionaladministrationswhichareresponsibleforimplementationofprogramsinregions(republics,krais,oblasts).TheyareworkinginclosecollaborationwiththeFederalMinistry,buttheyarefreetointroducetheirownprogramsintheframeworkoftheirauthoritiesandresources.
Table 10. MainresultsofbreedingworkinpedigreeenterprisesinthedairycattlesectorofRussia(Shapochkin,2007).
Traits Breedingplants Breedingreproducers2006 ±to2005 2006 ±to2005
Numberoffarms(units) 300 -16 680 -79Numberofanimals(thousandheads) 456.1 -10.4 671.3 -39.1Numberofcows(thousandheads) 255.0 -3.0 370.9 -19.3Averagemilkyield(kg) 6267 +267 4838 +242Averagefatcontent(%) 3.88 +0.01 3.81 0Profitabilityrate(%) 19.3 +1.0 17.1 +0.7
� The�cattle�sector�in�Central�and�Eastern�Europe
85
Inconclusion,thepresentsituationofdairycattleintheRussianFederationhasbecomemorestableandpredictablethanitwasinthe1990s,butremainsrathercomplicated.Theofficialdocument‘Concept-ForecastforRussia’sAnimalHusbandryDevelopmentuptoYear2010’,whichhasbeenapprovedbythescientificsessionoftheRussianAcademyofAgriculturalSciencesandGoverningBoardoftheRussianMinistryofAgriculture,envisagesthefollowingactions(MinistryofAgricultureoftheRussianFederation,2001):• restorationanddevelopmentofthepopulationandstructureaswellaspreservationoftheunique
genestockofbreedinganimals;• creationoffavorableconditionsforinvestmentpolicyinthissector;• raisingtheeconomicefficiencyofactivitiespursuedbybreedingorganisationsandenterprises.Toresolvetheseissues,ithasbeendecidedfirstofalltoimprovethenormative–methodologicalaswellaseconomicalandmaterialfoundationofcattlebreeding,whichisaimedat:• increasingthenumberofbreedingherdsandanimalsunderregistration(identification,maintaining
thedatabasetobeusedasabasisforofficialherdbooksofpedigreeanimals);• increasingthepaceofgeneticprogressforbreedinganimalpopulationsaccordingtotheselected
characteristicsduetotheintroductionandoptimisationofbreedingprogramswiththepopulationsoffarmanimals;
• optimisationofthebreedingorganisationsinfrastructure(associationsonbreeds,systemonfarmanimalsartificialinsemination,independentlaboratoriestoregisterphenotypicalcharacteristicsandappraisaloftheanimalsgeneticvalue);
• increasingtheeffectivenessofdistributionofthebestgeneticresources,itsrationaluseandrealisationofthepotentialundertherealconditionsofagriculturalproduction;
• conductingtheobjectivemonitoringofthebreedinglivestocksector,projectionofitsdevelopmentandoptimisationofbreedingprograms;
• Russia’saccessiontointernationalorganisationsdealingwithpedigreeanimalhusbandry.ImplementationofthesestepsintothepracticeofdairycattlehusbandryintheRussianFederationofferstheopportunitytolookaheadwithdefiniteoptimism.
References
Dzaparidze,T.andI.Khrestin(eds.),2008.InquirybookofdairymarketinRussia.Moscow,RussianFederation,335pp.Shapochkin,V.(ed),2007.Year-bookonresultsofbreedingworkindairycattleofRussianFederation.LesnyePolyany,
Moscowregion,RussianFederation,287pp.MinistryofAgricultureoftheRussianFederation,2001.Concept-forecastforRussia’sanimalhusbandrydevelopment
uptoyear2010.Publishedasspecialissue.RussianFederation,1995.FederalLaw‘Onanimalbreeding’,legislativenumber123.ApprovedbyStateDumaon
12.07.1995andsignedbyPresidentoftheRussianFederationon03.08.1995.
� The�cattle�sector�in�Central�and�Eastern�Europe
87
Cattle sector and dairy chain developments in Baltic countries
E.�Gedgaudas
Lithuanian�Cattle�Breeders�Association,�Kalvarijos�g.�128,�Kaunas�46403,�Lithuania;��[email protected]
Abstract
DairyfarminghistoricallyandtraditionallyisstilloneofthemostimportantagriculturalsectorsinallthreeBalticcountries.Inthebeginningofthe20thcentury,animalrecordingwasstartedandbreedingassociationswereestablished.Theywereworkingveryactivelyuntilcollectivisation.WhenBalticcountriesbecameindependentfromtheSovietUnion,thebreedingsystemhadtobere-establishedinallthreecountries.Dairycooperativefarms,agriculturalcompaniesandfamilyfarmsstartedtheiractivities,butthemainpartwassmallkeeperswith2-3cows.Animalidentification,milkrecording,dataprocessing,milktestandbreedingprocessesweredeveloped.BeforebecomingEUmembers,BalticcountriesreceivedverybigsupportforagriculturefromEUfunds.Ithelpedtoincreasefarmsizeandtomodernisecattlefarmsandofferedpossibilitiestoimprovethequalityofherdmanagement.Italsocreatedthepossibilityforincreasedproduction,allowedareductioninthepriceofmilk,facilitatedimprovedanimalwelfareandachievedEUstandardsformilk.TheEstonianHolsteinisthedominantbreedinEstonia;theLatvianBrownisthedominantbreedinLatvia,andtheLithuanianBlackandWhiteisthedominantbreedinLithuania.Cowsofdifferentbreedsarebeingmilkrecordedandaveragemilkyield,proteinandfatcontentsdifferbetweenbreeds.InallBalticcountries,farmersusemoreandmoreHolsteinbreedsemenforinseminationoftheircows.Inthefuture,Holsteinwillbethemaindairybreed.TotalnumberofcattleinEstoniais242,000,including112,700cows,inLatviatotalnumberofcattleis389,700,including195,600cows,inLithuaniathetotalcattlenumberis787,900,including414,800cows.MilkrecordingisbestdevelopedinEstonia,where,in2007,90.9%cowswereinmilkrecorded.InLatviaitwas70%,andinLithuaniaitwasonly47.6%.TheaveragesizeofmilkrecordedherdsislargestinEstoniaat74,inLatviaitis13,andinLithuaniaitis17.Duetoareductioninthenumberofsmallfarms(1-5cows),theproportionofbigfarmsisincreasinggradually.SmallkeepersinBalticcountriesgooutofthedairybusinessbecausetheygetsupportfromEUtodoso.Milkproductionincreaseseachyearinallthreecountries.InEstonia,theaverageyieldofmilkacrossthevariousbreedsin2007was7052kgwith4.15%fat(293kg)and3.36%protein(237kg).InLatvia,theaverageyieldofmilkwas5478kgwith4.37%fat(239kg)and3.37%protein(185kg),whileinLithuania,milkyieldwas5863kgwith4.28%fat(251kg)and3.36%protein(197kg).Allthreecountriesaretryingtoimprovegeneticmerit.TheyaremembersofICAR,whileEstoniaandLatviaarealsomembersofINTERBULL.EstoniaisthemostliberalBalticcountryintheareaofcattlehusbandry.Ithasachievedthebestresultsinthissector,becausegovernmentinstitutionshavetheleastinfluenceontheworkandactivitiesofcattlebreeders.
Keywords:�Baltic�countries,�cattle,�cows,�fat,�milk�yield,�protein
Introduction
Historicallyaswellastraditionally,thedairysectorhasbeen,andremains,oneofthemostimportantagriculturalactivitiesinallthreeBalticcountries.Dairycattleselectionstartedtodevelopattheendofthe19thcenturyandthefirstcattlebreedingassociationswereestablishedatthebeginning
The�cattle�sector�in�Central�and�Eastern�Europe
88
ofthe20thcenturyandcontinuedtobeactiveuntilcollectivisation.EvenduringSoviettimes,allthreecountriesmaintainedanddevelopeddairytraditions,althoughmostofthecattlewerepartofgovernmentownedcollectivefarmsandprivateownerswereallowedtohaveonetothreecowsforpersonalneeds.AftertheBalticcountriesdeclaredindependencein1991,theystartedtoestablishfamilyfarmsandagriculturalcooperativecommunities,whichinitiatedthecreationofcattlebreederassociations.TheseassociationswereestablishedintheBalticcountriesin1992and1993.Thenewassociationsencounteredalotofissuesinrespecttocattlefarmrestructuring.Theassistancereceivedfromforeignexpertswasgreatlyappreciatedduringthetransitionperiod.Foreignexpertshelpedtoestablishcattlemarketingsystemsandtostrengthenbreedingassociations,sotheycouldatleastpartiallytakeoverthefunctionscarriedoutbythegovernmentsduringthetransitionperiod.InEstonia,mostofthebreedingfunctionsweretransferredtotheEstonianCattleBreedingAssociationbasedonEUlegislation.Meanwhile,inLatviaandLithuaniagovernmentswereactivelyregulatingbreedingfunctionsandallrequireddocumentformsandrequirements.Inordertousebullseffectivelyandconductmilkrecordingintheircountries,BalticcountriesjoinedICAR.AllthreecountriesweregrantedaspecialICARstamp:• EstonianAnimalRecordcenterwasgrantedin2006;• Latvianpublichomeanimalsbreedandrecordingcenterwasgrantedin2005;and• LithuanianMinistryofAgriculturewasgrantedin2007.ThemembershipoftheINTERBULLorganisationisalsoveryimportanttoallthreecountries.FarmerscanchooseandcomparebullsbyusingINTERBULLevaluationdata.AsofnowonlyEstoniaandLatviaaremembersofINTERBULL.ThemaindairyorganisationsintheBalticcountriesare:• inEstoniathereisone-AnimalBreeders’AssociationofEstonia;• inLatviatherearetwo–(1)LatvianCattleBreedingAssociations,and(2)LatvianAssociation
oftheHolsteinCattle;• inLithuaniatherearethree–(1)LithuanianCattleBreedersAssociation,(2)LithuanianBlack
andWhiteCattleBreedersAssociation,and(3)LithuanianRedCattleBreedersAssociation.TheyallareunitedbytheumbrellaorganisationChamberofAgricultureoftheRepublicofLithuania.
ThecurrentpopulationofLithuaniais3.5million,thatofLatviais2.4millionandthatofEstoniais1.4million.Themostmilkpercapital(574kg)isproducedinLithuania,andtheleast(370kg)isproducedinLatvia(LatvijasStatistika,2008;SLRV,2008).Thequantityofmilkproducedpercapitahasbeengrowingsince2000;inLithuaniaitincreasedby15.88%,inLatviaitincreasedby5.94%andinEstoniaitincreasedby10.85%.Inmilkproduction,LithuaniaexceedsEstoniaby10.1%andLatviaby35.54%(Figure1).TheLithuanianpopulationconsumesonly300kgofmilkanddairyproductspercapitaandthereforethecountryshouldactivelysearchforthemarketsfordairyproducts(SLRV,2008).FarmersrealisedthatbecomingpartofEUprovidesbiggeropportunitiesfordairycattlefarmsbutatthesametimetheyalsohavetofacehighercompetition.UsingtheEUsupportsfordifferentprograms,theBalticcountrieshavestartedactivecattlefarmmodernisation,payingsignificantattentiontocattlebreeding.Theherdsofthegrowingfarmscontinuetoincrease,butatthesametime,smallfarmersavailingofearlyretirementopportunities,areleavingthedairybusiness.Duetothesechanges,thenumberofdairycattlestartedtodeclineintheBalticcountries.TheaveragesizeofdairyherdsisfourcowsinLithuania,threecowsinLatvia,andfifteeninEstonia.Comparedto2000,theoveralldairycattlenumberdecreased,inEstoniaby20.5%,inLithuaniaby19.3%,andthelowestdecreaseisnotedinLatviaatonly9.6%(Figure2).Thedecreaseincattlenumberscanbeexplainedbythedecreaseinthenumberoffarmers.AlotofsmallfarmersretiredfromthedairybusinessinLatviaresultinginadecreaseof44.3%,inEstoniathedecreasewas34.7%,andinLithuaniaitwas35.2%(Figure3).Itisexpectedthatthenumber
� The�cattle�sector�in�Central�and�Eastern�Europe
89
0100200300400500600700
2000 2001 2002 2003 2004 2005 2006 2007
Year
Milk
in k
g LithuaniaLatviaEstonia
Figure 1.MilkproductionpercapitalintheBalticcountries.
Num
ber o
f co
ws
0
100,000
200,000
300,000
400,000
500,000
600,000
2000 2001 2002 2003 2004 2005 2006 2007Year
LithuaniaLatviaEstonia
Figure 2.DairycattlenumbersinBalticcountries.
Dai
ry fa
rms
num
ber
020,00040,00060,00080,000
100,000120,000140,000160,000180,000200,000220,000
2001 2002 2003 2004 2005 2006 2007
Year
LithuaniaLatviaEstonia
Figure 3.DairyfarmnumbersinBalticcountries.
The�cattle�sector�in�Central�and�Eastern�Europe
90
willcontinuetodecreaseinLithuanianextyear(EestiStatistica,2008;LatvijasStatisika,2008;SLRV,2008).Despitethedecreaseinthenumberofcattle,productivityisincreasinginallthreecountries.Thefarmersrealisedthatunderfreemarketconditionstheyhavetoincreasetheoutputofmilk,improvethequalityandinvestineconomicallyusefulcattle.Therefore,demandforworldclassgeneticshasdeveloped.Breedingheifersandcows,provenbulls,embryosandsemenfromGermany,Denmark,Finland,theUSAandothercountriesarebeingimportedintotheBalticcountries.UntilnowmostofthesemenhasbeenimportedfromEUcountries,withtheleastamountfromthirdworldcountries.ThesemenofbullsthatareevaluatedintheBalticcountriesisnotsoldbetweenthe3countries.Thequalityofthemilkalsoimprovedduetobetterqualityfeed,betterherdmanagementandthesenseofownership.Byusingthebreedingbullsthatpassallthequalifications,animprovementwasnoticedincowappearance,legsandlongevity.Holstein,whichwaschosenforbreedimprovement,providedahigheconomicimpactinallthreecountries.Thebiggestincreasesince2000inmilkquantitywasnotedinEstonia,withanincreaseof28.1%,inLatviaitwas13.7%andinLithuaniaitwas17.4%(Figure4)(EstonianAnimalRecordingCentre,2008;VALDC,2008;Žemės,2008).Sinceestablishmentofindependence,alltheBalticcountrieshavebecomeconcernedaboutthesecurityandmaintenanceofthecattlebreedgenepool.Allthreecountrieshaveafewbreedsthattheyintendtopreserve.InLithuaniathefollowingrarebreedsarebeingpreserved:LithuanianNativeWhiteback,LithuanianLightGrey,LithuanianBlackandWhiteoldgenotype,LithuanianRedoldgenotype.InLatvia,theLatvianBlueCattlearebeingpreservedandinEstoniatheEstonianNativecattlearebeingpreserved.AnationalcoordinatorisassignedtoeachcountryfornationalgeneticresourcespreservationandcoordinatorsmaintainrelationshipswithFAO.RarecattlebreedsareincludedintotheWorldAgriculturalAnimalsVarietyCatalog(WorldWatchList;Scherf,2000).Inregulatedherds,theHolsteinisthemostnumerousbreedamountingtoabout240,000andcontinuestoincrease(Figures5through7).InFigure7,only2.3%ofthecowsareshowntobeHolsteininLithuania;howeverthislownumberisduetothefactthatLithuanianBlackandWhite,whichmakesabout70%ofthecowpopulation,ismixedwithHolsteinandhasover70%ofHolsteinbreedmix.Hopefully,in2009throughthecooperationofassociationsandgovernmentinstitutions,thenameoftheLithuanianBlackandWhitewillbechangedtoLithuanianHolstein.LithuaniahasthebiggestpopulationofRedcows(about62,000cows).Thebasisforbreedingismilkrecording.Basedonthenumberofdairyanimals,themostcowsinmilkrecordingareinEstoniaat90.9%,followedbyLatviaat69.4%,andLithuaniaat47.6%(Figure8)(EstonianAnimalRecordingCentre,2008;VALDC,2008;Žemės,2008).ThedecreaseinmilkrecordedherdswasveryextremeinLatviaandLithuania.Before1990,inLithuaniamorethan500,000,andinLatviamorethan400,000,cowswererecordedcomparedto188,400and121,400cows,respectivelyin2007(LatvijasStatistika,2008;Žemės,2008).In
Milk
kg
0600
1,2001,8002,4003,0003,6004,2004,8005,4006,0006,6007,200
1990 2000 2001 2002 2003 2004 2005 2006 2007
Year
LithuaniaLatviaEstonia
Figure 4.MilkyieldpercowinBalticcountries.
� The�cattle�sector�in�Central�and�Eastern�Europe
91
Estonian Red
24.5%
Other breeds0.2%
Estonian Native0.6%
Estonian Holstein74.7%
Latvian Braun63.6%
Holstein 32.7%
Latvian Native0.4%
Other breeds3.4%
Lithuanian Black and
White74%
Other breeds2.8%
Lithuanian Native0.4%
Lithuanian Red
21.4%
Holstein2.3%
Figure 5.CowpopulationdistributioninEstonia.
Figure 6.CowpopulationdistributioninLatvia.
Figure 7.CowpopulationdistributioninLithuania.
Num
ber o
f cow
s
50,000
150,000
250,000
350,000
450,000
550,000
650,000
1990 2000 2001 2002 2003 2004 2005 2006 2007
Year
LithuaniaLatviaEstonia
Figure 8.NumbersofcowsinmilkrecordinginBalticcountries.
The�cattle�sector�in�Central�and�Eastern�Europe
92
Lithuania,associationsandbreedingenterprisesareputtingadditionalemphasisonmilkrecording;however,thelackofacommonbreedingstrategybasedoncollaborationbetweendifferentinstitutionsledtothedecreaseofthenumberofrecordedcows.Thedecreaseinmilkrecordedcowswasalsoimpactedbythelowmilkprice.Alongwiththeincreaseindairyherdproductivity,themilkproductionlevelofrecordedcowsisalsoincreasinginallthreecountries.Theproductionlevelinthemilkrecordedherdsisincreasingduetoaconsistentemphasisonbreedingworkperformedbytheassociations.Since2000,cowproductivityincreasedmostinEstonia(29.7%),withanaverageproductivityin2007of7,052kgmilk.InLatvia,theincreasewas19.5%,withanaverageproductivityin2007of5,478kgmilk.ThelowestincreaseinproductivitywasnotedinLithuania(17.3%),withanaverageproductivityin2007of5,863kgmilk(Figure9)(EstonianAnimalRecordingCentre,2008;VALDC,2008;Žemės,2008).Theproteinyieldisincreasingalongwiththemilkyield.Since2000,averageproteincontentinmilkincreasedmostinEstonia(40.3%)withanaveragemilkproteinof3.36%in2007.InLithuania,theincreasewas26.4%withthesameproteincontentasinEstonia(3.36%),andinLatvia,theincreasewas21.1%withanaveragemilkproteinof3.37%in2007(Figure10)(EstonianAnimalRecordingCentre,2008;VALDC,2008;Žemės,2008).Currently,thefarmers’mainfocusistheincreaseofproteincontentinmilk.
Milk
kg
3,0003,5004,0004,5005,0005,5006,0006,5007,0007,500
1990 2000 2001 2002 2003 2004 2005 2006 2007
Year
LithuaniaLatviaEstonia
Pro
tein
in k
g
100120
140160180
200220
240260
1990 2000 2001 2002 2003 2004 2005 2006 2007
Year
EstoniaLithuaniaLatvia
Figure 9.AveragemilkproductionofcowsinmilkrecordinginBalticcountries.
Figure 10.AverageproteinyieldofcowsinmilkrecordinginBalticcountries.
� The�cattle�sector�in�Central�and�Eastern�Europe
93
Themilkfatincreaseisalsorelatedtotheoverallmilkyieldincrease.Since2000,fatcontentinmilkincreasedmostinEstonia(27.6%)withameanfatcontentof4.15%in2007.InLithuania,fatcontentincreasedby22.7%withameanfatcontentof4.28%in2007,andinLatvia,fatyieldincreasedby18.8%withmeanfatcontentof4.37%in2007(Figure11)(EstonianAnimalRecordingCentre,2008;VALDC,2008;Žemės,2008).MilktestlaboratoriesareestablishedinallthreecountriesandareconnectedtotheICARreferencelaboratoriesnetwork.LaboratoriesareequippedwithmodernmilkanalysisequipmentandareaccreditedaccordingtoISO/IEC17025standards.BeforejoiningtheEU,theBalticcountriesraisedthemilkquoteissue.AllthreecountriesnegotiatedacceptablemilkquotasbeforejoiningEU.Milkquotashelpedthethreecountriestocontrolandadministerthemilkproductionandtobalancemilkvolume.Lithuaniareceivedthebiggestmilkquota(Figure12)(ProductschapZuivel,2007).DuetomilkandcheeseconsumptionincreasesinEurope,inApril2008,thequotaswereincreasedforallEUcountriesby2%anditwasagreedthatthemilkquotawouldberemovedin2015.Atpresent,milkquotasinLithuaniaarebeingauctioned.Since
Fat i
n kg
0
50
100
150
200
250
300
350
1990 2000 2001 2002 2003 2004 2005 2006 2007
Year
LithuaniaLatviaEstonia
2005/062006/07
2007/082008/09
Est
onia La
tvia
Lith
uania
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Years
Milk ('000 t)
Figure 11.AveragefatyieldofcowsinmilkrecordinginBalticcountries.
Figure 12.NationalmilkquotainBalticcountries.
The�cattle�sector�in�Central�and�Eastern�Europe
94
2007itwasdecidedtostartsalebyelectronicauction.Thefarmersthathavecomputersandinternetaccesscanacquirequotawithoutleavingtheirhouses.Milkquotainauctionscanbepurchasedonlybyactualmilkproducers,whichhaveusableland(fortentonsofmilkquotatheyshouldhavenolessthan1hafarmland)andhavetoberegisteredintheofficialregister.Themilkcanbesoldonlytoapproveddistributors.Quotasmaybetradedatanauctiontobeheldthreetimesayear.InEstonia,quotaistradedwithcowswhileinLatviathereisfreetradeinquota.Ofthethreecountries,Lithuaniaexportsmostdairyproducts,whichconsistofcheeses,milkpowderandbutter.EstoniaandLatviaconsumemostoftheirdairyproductsinternallyandthemainexportdairyproductinbothcountriesischeese.Forallthreecountries,Russiaisthebiggestexportpartner.MostoftheimportsofdairyproductsisdonebyLatvia,whilethequantitiesofimportsbyLithuaniaandEstoniaaresimilar.In2007,farmerswereveryhappywithanincreaseincowproductivityandhighermilkcollectionprices,hopingtoincreaseinvestmentindairyproducts.Milkcollectionpriceswereincreasinguntiltheendof2007,butin2008,whenthemilkcollectionpricesignificantlydecreased,manyfarmersintendedtoretirefromthedairybusiness.IntheJanuary–Mayperiodof2008,themilkcollectionpricedecreasedinLithuaniafrom€32.9to€24.09per100kg.InLatvia,itdecreasedfrom€33.83to€27.72per100kg.InallthreeBalticcountries,theaveragemilkcollectionpriceisthelowestofall25EUcountries.InMay2008,themilkcollectionpriceinLithuaniawasthelowestwithadifferenceofupto€11per100kgcomparedtotheEU25averageprice(Figure13)(LietuvosRespublikosŽemėsŪkioMinisterija,2008a,b).ThereasonwhythemilkpricesinLithuaniaarethelowestisbecauseafterprivatisationmilkproductionlandedinprivatecompanies.Thosecompaniesestablishedmilkcollectionpricesthatwerenotinfavorofthefarmers.Theexplanationthemilkproductioncompaniesprovideforthelowpricesisthatitiscostlytocollectthemilkespeciallyasmostfarmsaresmall.Uptillnow,milkproducersandfarmershavenotreachedcommonground.However,thesolutionmightbeinfarmers’cooperationregardingmilkcollectionandpartialproduction.
Conclusions
Themarketisdamagedandinitiativesaresloweddownduetotightgovernmentregulationsandunwillingnesstopasstheresponsibilitiestoassociations.Suchgoverningorientedstructureencouragestheusenationalmoneyinalessefficientandeconomicalway.EstoniaisoneofthemostliberalcountrieswithintheBalticcountrieswiththeleastgovernmentinterferenceinthebreedingareaand,therefore,showsthebestresults.
05
1015202530354045
2004 2005 2006 2007 2008 Jan. Feb. Mar. Apr. May.
Year Months 2008
Per
100
kg
in €
EU 25LithuaniaLatviaEstonia
Figure 13.MilkcollectionpricesinBalticcountriesandaverageof25EUmembers.
� The�cattle�sector�in�Central�and�Eastern�Europe
95
Thesaleofmilk,milkproductsandbreedinganimalsthatpresentlytakesplaceishandledseparatelywithineachofthethreecountries;howeverthecountriesshouldcollaboratemoreinthebreedingarea.Inthecurrentglobalisationprocess,Lithuania,LatviaandEstoniamightconsidersomesortofcooperationtobecomemorecompetitiveinworldmarkets.AlthoughthenumberofcowsisdecreasingintheBalticcountries,milkproductionisincreasing,whichcallsforhigherdairyproductexport.ThisismostapplicabletoLithuania,whichshouldbemoreactiveinexportmarkets.INTERBULLmembershiphaspositivelyimpactedtheLatvianandEstonianbreedingsector.LithuaniamustalsobecomeamemberofINTERBULLtobeabletoperformacompletebullevaluation.
References
EestiStatistica,2008.Availableat:http://www.stat.eeEstonianAnimalRecordingCentre,2008.ResultsofAnimalRecordinginEstonia2007.Elmatar2008.52pp.LatvijasStatistika,2008.Availableat:http://www.csb.gov.lvLietuvosRespublikosŽemėsŪkioMinisterija,2008a.VĮAgroRinka.Žemėsūkioinformacijosirkaimoverslocentras.
Lietuvosžemėsūkioirmaistoproduktųrinkosinformacinėsistema.Nr.8(92)/2008m.27p.LietuvosRespublikosŽemėsŪkioMinisterija,2008b.VĮAgroRinka.Žemėsūkioinformacijosirkaimoverslocentras.
Lietuvosžemėsūkioirmaistoproduktųrinkosinformacinėsistema.Nr.12(96)/2008m.30p.ProductschapZuivel,2007.StatistischJaaroverzicht2007.ProductschapZuivel,theNetherlands,116pp.Scherf,B.D.(ed.),2000.WorldWatchListfordomesticanimaldiversity.3rdedition.FoodandAgricultureOrganisation
oftheUnitedNations,Rome,Italy.Availableat:ftp://ftp.fao.org/docrep/fao/009/x8750e/x8750e.pdfStatistikosdepartamentasprieLietuvosRespublikosVyriausybės(SLRV),2008.Availableat:http://www.stat.gov.lt.ValstsAģentūraLauksaimniecībasDatuCentrs(VALDC),2008.Availableat:http://www.ldc.gov.lvŽemėsūkioinformacijosirkaimoverslocentras(Žemės),2007.Kontroliuojamųkarviųbandųproduktyvumas2006-
2007metų(20061001–20070930)apyskaita70.Vilnius2007.108pp.
� The�cattle�sector�in�Central�and�Eastern�Europe
97
Cattle sector and dairy chain developments in Belarus
M.�Ramanovich
IFCN�Dairy�Research�Center,�Schauenburgerstr.�116,�24118�Kiel,�Germany;��[email protected]
Abstract
MilkproductionisoneoftheimportantbranchesoftheBelarusianagriculturalsector.Inthebeginningofthe90’s,milkproductioninBelaruswasnegativelyaffectedbythecollapseofthesocialistsystem.Bothnumberandproductivityofcowsdecreasedsignificantly.Since2001,improvementinthesituationoftheBelarusiandairysectorhasbeenseen.Milkproductionincreasedduetogrowingproductivityinlargescalefarms.Inresponsetothegrowingmilkproduction,Belaruscouldincreasemilkprocessingandtheexportofdairyproducts.ThemilkpricepaidtoproducersinBelarusisregulatedbythegovernment.AsaconsequencethepricelevelinBelaruswassignificantlybelowtheworldmarketpriceformilkduringtheperiodoftheanalysis.Fortheanalysisoffarmeconomics,themethodologyoftheIFCNDairyResearchCenterwasused.ResultsshowedthatthecostofmilkproductioninBelaruswaslow.Evenwithamilkpricebelowtheworldmarketlevel,producerscouldrealiseaprofitfrommilkproduction.
Keywords:�Belarus,�cattle�sector,�milk�production,�dairy�chain,�farm�economics
Introduction
ThedairysectorisoneoftheimportantbranchesofBelarusianagriculture.TheaimofthisstudywastoanalysethecurrentsituationandrecentdevelopmentsinthedairysectorinBelarus.Thestudycontainsananalysisofthewholedairychain.Developmentsinmilkproductionandprocessing,aswellasdevelopmentsofdairytradeandprices,wereanalysed.AdditionalattentionwaspaidtotheeconomicsofmilkproductioninBelarusincomparisonwithselectedEuropeancountries.
Methods and data
Inthisanalysis,thestandardmethodologyoftheIFCNDairyResearchCenterwasapplied.TheanalysiswasbasedontheofficialagriculturalstatisticsfromBelarus(http://belstat.gov.by),theFAOdatabase(http://faostat.fao.org)anddatacollectionbytheIFCNNetwork(http://www.ifcnnetwork.org).Forthefarmlevelanalysis,theconceptoftypicalfarmsandtheTIPI-CALsoftware(Hemme,2000)wereused.
Status and developments in Belarus dairy sector
Traditionally,thecattlesectorwasanimportantcomponentoftheagriculturalsectorofBelarus.IntheSovietUnion,Belarusianagriculturespecialisedinmilkandbeefproductionforthecommonmarket.AsareturnservicefromotherSovietrepublics,thecountryreceivedcropproductsforhumanconsumptionandfeedingofanimals.ThisspecialisationceasedafterthecollapseoftheSovietUnion,causingsignificantchangestotheagriculturalindustryofBelarus(ZMP,2002).Thestructuralchangestothedairysectorafterthecollapseofthesocialistsystemin1990causedasignificantreductionofdairyherdsandcowproductivity.Asaconsequence,milkproduction
The�cattle�sector�in�Central�and�Eastern�Europe
98
decreaseddramatically.From1990to2000,annualmilkproductiondecreasedby40%from6.8to4.1mt(EnergyCorrectedMilk).Since2001,aconsolidationofmilkproductionhasoccurred(Figure1).Thevolumeproducedincreasedsignificantlyandamountedto5.4mtin2007.Thisincreaseofmilkproductionwasachievedthroughanimprovementofcowproductivitywhilethenumberofcowswasstilldecreasing.In2007theaveragemilkyieldpercowperyearwas3.6twhilethetotalnumberofcowsdecreasedto1.5millionhead.InBelarus,adualsystemofmilkproductionexists.Producerscanbedividedbroadlyintotwogroupsnamely:large-scalefarmsandhouseholds.Large-scalefarmsareformercollectivefarms(kolkhozes)andinmostcasesherdsizeisintherangeof400-800cows.Householdshavemilkproductionasasubsidiarybusinesswith1-3cows.Thestructureofmilkproductionhaschangedovertheyears.Inthebeginningofthe90’s,theshareofbigfarmsdroppedfrom75%to60%andremainedstableforseveralyears.Since2001theimportanceoflarge-scalefarmshasincreasedagain,andby2007,theyproducedabout80%ofthetotalmilksupply.Positivedevelopmentsatfarmlevelbroughtpositiveeffectsforthewholedairychain.Withtheincreasedmilkvolumeproduced,theamountofmilkdeliveredtodairiesincreased(Figure2).In
ECM= Energy Corrected Milk (4% fat, 3.3% protein)
0
1
2
3
4
5
6
2000
2001
2002
2003
2004
2005
2006
2007
Milk production in mill t ECM
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2000
2001
2002
2003
2004
2005
2006
2007
Milk yield in t ECM/cow/year
0.00.20.40.60.81.01.21.41.61.82.0
2000
2001
2002
2003
2004
2005
2006
2007
Cow number in mill heads
Figure 1.DevelopmentofmilkproductioninBelarus(Hemme,2008).
0
1
2
3
4
5
6
2000 2001 2002 2003 2004 2005 2006 2007
Informal milk, on farm use
Milk delivered to dairies
Figure 2.EvolutionofmilkdeliveryinBelarus(mtECM)(Hemme,2008).
� The�cattle�sector�in�Central�and�Eastern�Europe
99
2000,lessthan2mtofmilkwereprocessedtodairyproductsbutby2007,milkprocessinghaddoubledto4mt.Thereasonforthisincreaseinmilkdeliveredisanon-goingindustrialisationofmilkproduction.Householdsproducingmilk,mainlyforhomeconsumption,aregoingoutofbusinesswhileatthesametimelargescalefarmsarecontinuallyincreasingmilkproduction.Withgrowingmilkproductionandmilkprocessing,thedairysectorinBelarushasbecomeanimportantmilkexporterontheworldmarket.Whilemilkimportsforconsumptionhasremainedverylowinrecentyears,milkexportshavesignificantlyincreased(Figure3).Between1996and1999,Belaruswasexportingdairyproductsequivalenttoonly6to9%ofthetotalmilkproduced.Sincethentheshareofexportsoftotalmilkproductionhasincreasedrapidlyandin2006and2007about35%oftotalmilkproducedwasexported.Thecurrentsituationanddevelopmentsinthedairysectorwerestronglyinfluencedbyagriculturalpolicies.Themilkproductionsector,especiallythelarge-scalefarms,isgovernedbynumerousstateregulations.Oneofthemostdestructiveregulationsisthemilkpricepolicyastherawmilkpriceisfixedbythegovernment.Inaddition,farmerscannotchoosethedairyprocessortheyprefer.Inmostcases,farmersareobligedtodelivertheirmilktothedairyprocessingplantintheiradministrativeregion.Thisinterferenceofstateinstitutionsdisturbscompetitioninthedairymarket.Furthermore,thedeliveryobligationsweakensthepositionofmilkproducersagainstmilkprocessors.TheimpactofpriceregulationisshowninFigure4.Themilkpricepaidtoproducershasbeencontinuouslybelowtheworldmarketprice.Thepricedifferenceinmostyearswasabout5US$
0%
5%
10%
15%
20%
25%
30%
35%
40%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
exports on production
Imports on consumption
Figure 3.Dairyexportsandimports(Hemme,2008).
05
101520253035404550
National price
World market
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Figure 4.Milkpriceevolution(US$/100kgECM)(Hemme,2008).
The�cattle�sector�in�Central�and�Eastern�Europe
100
per100kgmilk,butthegapincreasedastherecentyearsandgrowthinworldmarketmilkpricewasnotfullytransmittedinpricespaidtomilkproducersinBelarus.Asaconsequence,thepricedifferencein2007increasedupto25US$/100kg.
Dairy farm economics
TobetterunderstandthedevelopmentsinthedairysectorofBelarusaninternationalcomparisonofdairyfarmeconomicswascarriedout.BelarusianmilkproducerswerecomparedwithproducersfromGermany,Poland,BulgariaandUkraine.Theresultsareshownfor2006.Thefarmsanalyseddifferedinherdsize,intensityofmilkproductionandownership.MilkproductionpercowperyearisshowninFigure5togetherwiththenumberofcowsperfarm.The3typicalfarmsanalysedinBelaruswereonehouseholdplotwith2cows(BY-2)andtwolarge-scaleagriculturalenterprises(BY-650andBY-650++)eachwitha650cowsbutwithdifferentfarmqualityandherdmanagementstandards.Thefirstofthese(BY-650),hadaveragemanagementwhilethesecond(BY-650++)wasmanagedaccordingtobestpractice.Themanagementqualityaffectedthemilkyield.Thebest-managedfarmhadanannualmilkyieldofabout5.6t,whilethefarmwithaveragemanagementonlyyielded3.3t.FarmsinUkrainewereahouseholdplotwith2cows(UA-2)andonelargescalefarmwith641cows(UA-641).TheUA-2hadamilkyieldpercowcomparabletoBY-2andBY-650.ThemilkyieldpercowofUA-641wasslightlybelowthelevelinBY-650++.ThetwofarmsinBulgariawerefamilyfarms.The2-cowfarmrepresentsahouseholdplotproducingmilkasasidebusiness.Thisfarmwillprobablygooutofbusinessinthenextfewyears.TheBG-34wasalargerfamilyfarmspecialisinginmilkproductionandintendingtoincreaseherdsizeinfutureyears.With4.5tpercowperyear,themilkyieldoftheBG-2wassignificantlyhigherthaninthefarmsofthesamesizeinBelarusundUkraine.ThemilkyieldpercowintheBG-34wasonthesamelevelwiththelargerfarminUkraine.ThefarmsinPolandweretypicalfamilyfarmswith15(PL-15)and65cows(PL-65).ThemilkyieldofPL-15was6.7tpercow.Thebiggerfarmshadmoreintensivemilkproductionwithanannualyieldof7.2tpercow.
0
1
2
3
4
5
6
7
8
9
DE
-80N
DE
-120
N
PL-
15
PL-
65
BG-2
BG-3
4
UA-
2
UA-
641
BY-2
BY-6
50
BY-6
50 +
+
tons
milk
(EC
M)/c
ow/y
ear
Figure 5.Milkyieldontypicaldairyfarms(thenumberfollowingthecountrydesignationisthenumberofcowsperfarm)(Hemme,2007).Thedatareferto2006.
� The�cattle�sector�in�Central�and�Eastern�Europe
101
ThetypicalfarmsfromGermanywereaveragesized(DE-82)andsomewhatlarger(DE-120)familyfarmsfromNorthernGermany.Withmorethan8.1tmilkpercowDE-82hadthehighestmilkyieldofalltheanalysedcountries.Tocomparetheeconomicsofmilkproductionintheselectedcountries,thecostsofmilkproductionandmilkpricespaidtoproducerswerecalculated(Figure6).Costsofmilkproductionconsistofthreecostelements:(a)costsfromprofitandlossaccount(comprisingofallcashcostsanddepreciationcostsforfarminvestments)–non-milkreturns(comprisingofcattlereturns,beefreturns,salesofmanure,etc.);(b)opportunitycostsforfamily-ownedresources(land,labourandcapital)usedinthedairyenterprise;and(c)quotacosts(comprisingofrentsandopportunitycostsforownedquota).Thiswasonlyrelevantforcountrieswithamilkquotasystem(GermanyandPoland).Generally,twocostlevelscouldbeidentifiednamelyahighcostlevelof34-42US$/100kgmilk,andalowcostlevelofUS$15-22/100kgmilk.AllthreefarmtypesanalysedinBelarusbelongedtolowcostcategory.Furthermore,relativelylowcostsofmilkproductionwerefoundformilkproducersinUkraineandonthelargerfarminBulgaria(BG-34).ThecostsofmilkproductioninGermanyandPoland,andthesmallfamilyfarminBulgariaweresignificantlyhigher.Incomparisontohighcostcountries,milkproducersinBelarushadacostadvantageofaboutUS$20per100kgmilk.Theanalysisalsoshowedsignificantdifferencesinmilkpricespaidtothefarmersinthecountriesstudied.Thelowestmilkprice,onaverageaboutUS$17per100kgmilk,waspaidtosmallscalefarmsinUkraineandBelarus.LargescalefarmsinBelarusreceivedUS$20-21per100kgmilk.ThefarmsinBulgaria,andthelargescalefarminUkraine,receivedbetweenUS$25-30per100kgmilk.ThehighestmilkpriceofUS$35-36per100kgmilkwaspaidtofarmersinGermanyandPoland.Comparedtothemilkpricepaidinhigh-pricedcountries,milkproducersinBelarusreceivedaboutUS$15lessper100kgmilk.Withtheproductioncostsandmilkpricelevelin2006,largescalefarmsinBelaruswereabletoachieveabusinessprofitfrommilkproduction.ThesmallscalefarminBelaruswasabletocoverallcashcostsbutwasunabletogenerateareturnfullycoveringopportunitycostforownlabour,landandcapital.AsimilarsituationwasfoundinUkraine,butduetoahighermilkprice,thelargescalefarmwasabletosecureasignificantlyhigherprofitthanthelargescalefarmsinBelarus.Also
0
5
10
15
20
25
30
35
40
45
DE
-80N
DE
-120
N
PL-
15
PL-
65
BG-2
BG-3
4
UA-
2
UA-
641
BY-2
BY-6
50
BY-6
50 +
+
US
-$/ 1
00 k
g m
ilk (E
CM
)
Quota costs (rent and opportunity costs)
Opportunity cost (excl. quota)
Costs from P&L account - non-milk returns
Milk price
Figure 6.Economicsofmilkproductionintypicaldairyfarms(Hemme,2007).Thedatarefertotheyear2006.Note:P&L=ProfitandLoss.
The�cattle�sector�in�Central�and�Eastern�Europe
102
inBulgaria,thelargerfarm(BG-34)wasmuchmoreprofitablethanthesmallerfarm(BG-2).Evenwithsignificantlyhighermilkprices,theprofitabilityofmilkproductioninGermanyandPolandwasthepoorest.Amongfarmsofthefourcountriesanalysedonlyone(PL-65)wasabletothecoverfulleconomiccostsofmilkproduction.
Conclusions
TheBelarusiandairysectorrecoveredafterthecollapseofthesocialistsysteminthebeginningof90’sandhasachievedasignificantincreaseinmilkproductioninrecentyears.Themain-stayofthedairysectorinBelarusarelargescalefarmsproducingmostofthemilk.Withtheincreaseofmilkproduction,significantsuccessininternationaldairytradewasachieved.In2007,Belarusexportedabout35%ofmilkproducedintheformofdairyproductsandreachedaself-sufficiencyrateinmilkofabout151%.Duetogovernmentregulationofthemilkprice,thepricepaidtoproducerswassignificantlybelowtheworldmarketlevel.FarmeconomicanalysisshowedthatofmilkproductioninBelaruswasprofitable.LargescalefarmsinBelaruswereabletoachieveaprofitproducingmilkatlowcost.
References
Hemme,T.,2000.IFCN–Aconceptforinternationalanalysisofthepolicyandtechnologyimpactsinagriculture.EinKonzeptzurinternationalvergleichendenAnalysevonPolitik-undTechnikfolgeninderLandwirtschaft.LandforschungVölkenrode,Sonderheft215,Braunschweig.
Hemme,T.(ed.),2007.IFCN2007DairyReport2007.InternationalFarmComparisonNetwork,IFCNDairyResearchCenter,Kiel.
Hemme,T.(ed.),2008.IFCN2007DairyReport2008.InternationalFarmComparisonNetwork,IFCNDairyResearchCenter,Kiel.
ZMP,2002.LandwirtschaftinGUS:Tier-undPflanzenproduktion.ZMPZentraleMarkt-u.Preisberichtstelle,Auflage:1.
� The�cattle�sector�in�Central�and�Eastern�Europe
103
Cattle sector and dairy chain developments in Ukraine
I.�Ilienko
Association�‘Ukrainian�Agribusiness�Club’,�Tbiliskiy�Provulok�4/10,�03055�Kiev,�Ukraine;��[email protected]
Abstract
DuetotheUkraine’saccessiontotheWorldTradeOrganisation(WTO),thereisneedtoexpandintonewmarketsandtoincreasethequalityofmeatanddairyproducts.Inthispaper,themajorandmostimportanttendencies,whichmayinfluencethecompetitivenessofthedairychaininUkrainearesummarised.Therapiddecreaseinlivestocknumbersandtherestructuringofthelivestockproductionsector,whichtookplaceforthelast17years,hadobjectivereasons.Whilebigfarmsweretryingtogetridofloss-generatingorlow-profitactivities,ruralresidentsweremaintainingrelativelystablenumbersofcattle,forthepurposeofmaintainingorimprovinglivingstandards.Asaresult,thenumberofcattleisincreasingwithinsocalledindividualhouseholds.Theindividualhouseholdsandsmallfamilyfarmsarealsoanimportantsupplierofmeatanddairyproductstothepopulationandtotheprocessingindustry.Thecattlepopulationdecreasedinthetwolastyearsby6%and11%,respectivelycomparedtocorrespondingperiodofthepreviousyear.Themostimportanttrendinmilkproductionbyagriculturalenterprisesistheprofitabilityoflargefarmenterprises,withonaveragemorethan500cows.Thistrendencouragescompanies,whichalreadyoperateeffectively,tofurtherincreasetheirscaleofproduction.Thegreatestherdincreasesoccurredincompanieswithmorethan1000cows.Acrossthewholedairychaintherearemanyweaknesses,startingwiththeprevalenceofhouseholds’inthetotalrawmilksupplyandthelowqualityofthismilk.Thereisalsoapronouncedseasonalpatternofrawmilkproduction,alackofinvestmentindairyfarming,andunderdevelopedlogisticsorinfrastructureformilkcollection,storageanddistribution.Thispaperpresentstheofficialstatistics,statementsbysectorplayersinthecourseofinterviewsandtheresultsofrecentempiricalstudies.
Keywords:�cattle,�dairy�chain,�Ukraine
Cattle populations and its spatial distribution in Ukraine by region
Inthepastdecadeaconsiderabledecreaseinthecattlepopulationinvolvingallbreedshastakenplace.Thistendencyistheresultofthenegativeprofitabilityofmilkproductionandlowpricesformilk,lowproductivityandcomparativelyhighprimarycostsofproduction.Inaregionalcontext,mostofthelivestockandpoultrypopulationisconcentratedinVinnitsa,whichholdsaleadingpositioninthelivestockpopulationasawholeandinthecowpopulationinparticular.TheleadingregionsinlivestocknumbersasofJanuary1,2008areasfollows(×1000head):Vinnitsa383.7,Khmelnitskiy325.1,Lviv317.5,Poltava310.2andChernigiv294.8(Figure1).ThegreatestnumbersofcowsacrosstheUkrainianregionsarefoundinagriculturalenterprisesinCentralandNorth-EasternUkraine,withsuchregionsasPoltava,Chernigiv,Kyiv,Cherkasytakingthelead.IntheCentralregions,NorthandNorth-East,livestockproductionismostlyspecialisedingrowingcattlefordairypurposesandmeatisasecondaryproduct.Intermsoflivestockdensity(headper100ha),theWesternregionstakethelead(Figure2).
The�cattle�sector�in�Central�and�Eastern�Europe
104
Figure 1. CattlepopulationinUkrainebyregion(×1000head).(StateStatisticsCommitteeofUkraine,2008)
Total cattle: head per 100 ha AA
35.6
10.0
1.5(NV)
(NV)
Figure 2. SpatialdistributionoftotalcattleinUkraine(headper100haagriculturearea)(CalculationsofUCAB&vTibasedonthedataoftheStateStatisticsCommitteeofUkraine,2008).
� The�cattle�sector�in�Central�and�Eastern�Europe
105
Genetic diversity
Altogether,32breedsarefoundinUkraine.Ofthese,17areofmilkandmilk-meattypes,namelyWhiteheadUkrainian,RedPolish,Pinzgauer(alldomesticbreeds),BrownCarpathian,RedSteppe,Lebedin,Simmental(adaptedbreeds),UkrainianRed-Piebald,UkrainianBlack-Piebald(breedsselectedfromforeignbreeds);UkrainianRedMilk(UkrainianFat-Milktype),North-EastmilktypeofBrownbreed(breedscreatedfromforeignbreeds);Golshtin/HolsteinofEuropeanselection,Golshtin/HolsteinofCanadianselection,SimmentalofAustrianselection,Shvitsbreed,AnglerandAirshire(allforeignbreeds).ThedistributionofcattlebreedsissummarisedinFigure3.Thereare7domestictypesofmeat-breedsinUkraine,whichhavebeenselectedovertime,namelyGrayUkrainian,Ukrainian,Volynska,Polisska,Simmental,Znamyanska,whichaccountfor76%ofallmeatcattle.Theremaining24%arespecialisedforeignbreeds:AberdeenAngus,Hereford,Simmental(AustralianandAmericanselection),Limousin,Charolais,Blonded’ÀquitaineandPiemontese.BeefcattlebreedsaremainlyconcentratedinVolyn(28%),Zhytomyr(14%),Rivne(9%),KirovogradandChernigiv(7%).
Structural changes in cattle numbers and milk production
Asmentionedabove,duringlast twoyearsthecattlepopulationdecreasedby6%,and11%respectively,comparedtothepreviousyear.Animportanttrendisthechangingproportionsofcattleproductionbetweenagriculturalenterprisesandprivateholders.Theagriculturalenterpriseshavereducedtheirshareofthecattlepopulationfrom35%in2000to22%in2008(Figure4).Thelargeagriculturalfarmshavebeentryingtocutlossescausedbylow-profitactivitiessuchasmilkandbeefproduction,whileruralresidentshaveretainedafairlystablenumberofcattle,inordertomaintainorimprovetheirstandardofliving.Asaresult,themajorityofcattleisnowkeptbysocalledindividualhouseholds.Individualhouseholdsandsmallfamilyfarmsareanimportantsupplierofdairyandmeatproductstoinformalmarketsandtotheprocessingindustry.Theconsiderableexportpotentialofthedairysectormayonlybefullyrealisedaftermeasurableimprovementsinproductivityandinthequalityofrawmilkanddairyproductsareachieved.Theseconditionscanbestbemetbylarge-scalemilkproduction.
Imported breeds5%Adapted breeds
16%
Breeds and types selected using foreign
breeds79%
Domestic breeds0%
Figure 3. Thestructureofcattlebreedsproducedonlargescaleholdings(milkanddualpurposebreeds)(MinistryofAgrarianPolicy,2008).
The�cattle�sector�in�Central�and�Eastern�Europe
106
Milk production by agro-enterprises
Structure of the cow population across farms
Improvementsinprofitabilityofmilkproductionoccurredmainlyonlargescalefarms,whichalreadyoperatedeffectivelyandtheyfurtherincreasedtheirscaleofproduction.Thelargestimprovementswereobservedincompanies,whichalreadyhadmorethan1000cows.Theselargescalecompanies,specialisingindairyproduction,increasedtheirnumberofcows(Table1).
Dairy cow productivity
Agro-enterprisesstillneedtoincreaseproductivityfurther.AsFigure5shows,comparedtowesternstandards,theproductivityofcowsislow.Ontheotherhand,asalsoshowninFigure5,somedairyfarmsarecapableofachievingagoodlevelofproductivity.Itisimportanttonotethataveragefigures
0
2,000
4,000
6,000
8,000
10,000
12,000
2000 2001 2002 2003 2004 2005 2006 2007 2008
1000
hea
ds
Number of cattle in agroenterprises Number of cattle in householdsFigure 4. NumbersofcattleinUkraine(StateStatisticsCommitteeofUkraine,2008).
Table 1. Structureofcowpopulationacrossfarms(datafor1Januaryeachyear)(basedonthedataoftheStateStatisticsCommitteeofUkraine,2008).
Numberofagro-enterprisesinthecategory
Change2006to2008(%)
Totalnumberofcowsbycategory(×1000head)
Change2006to2008(%)2006 2007 2008 2006 2007 2008
upto10 1,380 1,295 1,138 82 6.3 5.7 5.0 7911-49 1,668 1,383 1,013 61 45.2 36.8 26.8 5950-99 1,174 969 742 63 82.7 68.7 51.9 63100-199 1,291 1,118 948 73 180 155.6 131 73200-499 1,202 1,017 900 75 355.4 305.4 274.3 77500-999 247 230 215 87 155.5 148.1 139.3 90morethan1000 32 31 36 113 41.1 43.7 50.2 122Total 6,994 6,043 4,992 - 866.2 764 678.6 -
� The�cattle�sector�in�Central�and�Eastern�Europe
107
canbemisleadinginsuchaheterogeneoussector.Whiletheaveragemilkyieldfordairyfarmsandhouseholdsin2007was3.7t,themajorityofagro-enterpriseshadyieldsnohigherthan2t.Theaveragemilkyieldforagro-enterpriseswas3.1twhilethatforhouseholdswas3.8t.Thenumberofenterpriseswithanannualherdmilkyieldabove6,000litresisconstantlygrowing.In2006,thenumberofsuchcompanieswas181andin2007itwas195(Table2).Theshareofsuchcompaniesinthedairysectoris3.6%ofallholdingsbuttheirshareofmilkproductionis13%.Thegeneraltrendsinagro-enterprisesarearapiddecreaseofcownumbersandasteadyincreaseofmilkyieldpercow(Figure6).
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
< 1,00
0
1,001
–2,00
0
2,001
–3,00
0
3,001
–4,00
0
4,001
–5,00
0
5,001
–6,00
0
> 6,00
0
Milk yield (kg/cow)
Num
ber o
f agr
o-en
terp
riese
s
Figure 5.Milkyielddistributionbyagro-enterprises,2007(StateStatisticsCommitteeofUkraine,2008).
Table 2. Dairycowproductivitydistributionamonglargeandmediumenterprises1(StateStatisticsCommitteeofUkraine,2008).
Productivity(kg/cow)
2006 2007Numberofagro-enterprises
Grossmilkyield Numberofagro-enterprises
Grossmilkyield
Number Shareintotal(%)
×1000t Shareintotal(%)
Number Shareintotal(%)
×1000t Shareintotal(%)
<1000 1,019 16.2 35.1 1.5 1,008 18.7 34.9 1.71,001–2,000 1,820 28.9 251.9 10.8 1,470 27.3 218.8 10.52,001–3,000 1,632 26.0 473.7 20.4 1,323 24.6 388.3 18.73,001–4,000 934 14.8 546.9 23.5 759 14.1 430.0 20.74,001–5,000 480 7.6 459.7 19.8 428 8.0 438.7 21.25,001–6,000 229 3.6 298.1 12.8 200 3.7 292.2 14.1>6,000 181 2.9 257.9 11.2 195 3.6 271.2 13.1Total 6,295 100.0 2,323.3 100.0 5,383 100.0 2,074.1 100.01>100halandor>50employees.
The�cattle�sector�in�Central�and�Eastern�Europe
108
Grazing system and/or confined
InUkraine,year-roundindoormanagementandpartlyindoor-grazingmanagementaremostcommon.Inmostholdings(98%),cowsarekeptintie-stanchionsandtherestarekeptloose-housingsystems.Forbeefcattle,bothtie-stanchionandloose-housingmethodsareequallyused.
Specialisation
Amongagriculturalenterprises,whichhavemorethan50employeesandoperatemorethan100hafarmland,specialisationincattlebreedingcanbedescribedasfollows:on40%ofenterprisesmorethan60%ofthetotallivestockkeptarecattle,whileon10%offarmscattleaccountfor40%to60%ofalllivestockkept.Pigscomprisetheothersizeableshareoffarmlivestock.Duringtheperiod2005to2007,thenumberofagri-enterpriseswithmorethan41%ofthegrossincomederivedfrommilkincreasedwhilethenumberwithalowermilkrevenuesharedecreasedconsiderably(Table3).
Slaughtering of cattle
Inrecentyears,thenumberofcattlesoldforslaughterhasfallenconsiderably.Asaproportionoftotallivestockproduct,cattleaccountedfor47%in2001butdecreasedto33%in2007,andto30%in2008.Itisevidentthatmeatproductionfrompigsandespeciallypoultry,hasanincreasingmarketshare.Themeatsupplyoriginatingfromagriculturalenterpriseshasalsodecreased,accountingforonly30%in2007.Youngcattle,cattleofaveragefatnessandcattleofhighfatness(bullsover400kgandcowsover350kg)arethecommonslaughtercattleandpricecategories.Theaveragelive-weightbeforeslaughterofcowsisabout170-180kgdependingontheseasonofslaughter,itishigherinautumn.InUkraine
1908
1100
313130832952
2475
204321992071
1588
764866950
140216751851
2476
5019
0
1,000
2,000
3,000
4,000
5,000
6,000
1995 2000 2001 2002 2003 2004 2005 2006 2007
Productivity, kg milk /cow/year Number of cows, Tsd. heads
Figure 6.Dairycowproductivityandnumberofcowsbyagro-enterprises(StateStatisticsCommitteeofUkraine,2008).
� The�cattle�sector�in�Central�and�Eastern�Europe
109
therearehardlyanyqualitypaymentdifferencesbetweenbreedsatslaughter,aconsequenceofthepoordevelopmentofmeatproducingcattlebreedsandproductionsystems.
Dairy supply chain in Ukraine, its weaknesses and possibilities
MilkproducingfarmsaremostlyconcentratedintheNorth-Central-WestpartofUkraineanddairyplantstofollowthesamepattern.Accordingtotheofficialstatistics,in2007Ukrainehadabout600
Table 3. Milkproductionspecialisationonlargeandmediumenterprises1(calculationsbasedonthedataoftheStateStatisticsCommitteeofUkraine,2008).
Shareofmilkinthetotalrevenue(%)
2005 2007 Change2005to2007(%)
Numberofagro-enterprisesincategory
Shareinthetotal(%)
Numberofagro-enterprisesincategory
Shareinthetotal(%)
1-10 2,166 46 1,339 41 6211-20 1,327 28 758 23 5721-30 792 17 524 16 6631-40 424 9 339 10 8041-50 162 3 171 5 10651-60 75 2 89 3 11961-70 23 0.5 34 1 14871-80 6 0.1 9 0.3 15081-90 2 0.0 5 0.2 250>90 0 0.0 3 0.1 -
Total 4,677 100 3,271 100 701>100halandor>50employees
0
5
10
15
20
25
30
35
40
45
50
Cattle Swine Poultry Other
%
2001 2007 2008
Figure 7. Shareofcattle,swineandpoultryinthetotalstocksoldforslaughter(liveweight)(StateStatisticsCommitteeofUkraine,2008–UCAB’sestimation).
The�cattle�sector�in�Central�and�Eastern�Europe
110
dairyplants,mostofthemprivate,andabout3,700milkproducingagriculturallargeandmediumenterprises(>100halandor>50employees).However,thesefarmsproducedlessthan20%ofthetotalnationalrawmilk(Figure8).
Efficiency of ago-enterprises
ThedairychaininUkrainehassomedistinctweaknesses,whichstartwiththelowefficiencyandqualityofmilkproductionintheagro-enterprises.Toevaluatetheefficiencyofagro-enterprisesweusedtheDataEnvelopmentAnalysis(DEA)methodandmadecalculationswithaprogramDEAP2.1(createdbyTimCoelli).Atotalof870enterpriseswereselectedinwhichtheshareofmilkinthetotalfarmincomewasmorethan30%.Theaveragetechnicalefficiencyoftheseenterpriseswas36.6%(ofthepossiblemaximumfortheresourcesdeployed),showingthehugepotentialforefficiencyincreasesthatexistatproductionlevelwitharequirementforonlyminoradditionalresources.Theefficiencyofcattlebreedingwas21%and28%in2005and2006,respectively.
Feed production for dairy sector
FeedproductionfordairycowsonUkrainianfarmsgenerallytakesplaceonaveryextensivebasis,whichresultsinlowfeedqualityandhightotalfeedcosts.Feedandforagesaccountforabout50%-75%ofthecostsofcattleproduction.Thedeclineinthecattlepopulationsince1990hasledtoareductioninthedomesticdemandforforagesforbothagriculturalenterprisesandhouseholders.Asaresult,thereweresomechangesinlanduse,namelyareductionofnaturalmeadowsandcultivatedpastures.Therewasalsoareductionintheproductionofforagetubersandmelons,sugarbeetforforage,andmaizesilage.Asaresultofthesechangestheforagecropareadecreasedfrom4mhato3.1mhasince1990.
Figure 8.DairysectormapofUkraine(Nivievskyiet�al.,2007).
� The�cattle�sector�in�Central�and�Eastern�Europe
111
Productionofhay,foragetubers,melonandsugarbeetforcattlefeedingisgenerallyconcentratedinprivatefarms,whilemaizesilageandhayproductionismainlypracticedinagriculturalenterprises.Ukrainehasabout2.4mhaofhayand5.5mhaofpastures(StateCommitteeofUkraineforLandResources,2007),butyieldsarerelativelylowat1.3t/hahayand4.7t/hagreenmass.Thisareagives2.1mtofhayor1.1mtfeedunits3.Potatoesandvegetablesarealsousedforfeed.Thetotalvolumeofsuchfeedisabout2.5-2.7mtfeedunits.Mostofthefodderisproducedon-farm.Feedadditivesaremostlyimported.Ukrainealsoimportsproteinrichagro-industrialby-productsandmealssuchasmeatandbonemeal,fishmealandsoybeanmeal.Thesehavebetterproteinqualitythansunflowermeal.Ukrainehasgreatpotentialtoexpanddomesticfeedproduction.Itisalreadyexportingfeedgrains,sunflowermealandsiftingsbutpricesobtainedfortheseproductsarelowincomparisonwithworldmarketprices.ThetotalsupplyoffeedresourcesinUkraineisestimatedat39-40mtfeedunits,including23-24mtfeedunitsofconcentratefodder.About38%(ca.14mtfeedunits)ofthetotalfodderstockisusedformilkproduction.Concentratesandcompoundfeedsareconsumedmostlybypoultryandpork(about74%).Productionofmixedconcentratesforcattle,asforotherkindsofdomesticanimals,isincreasing,butitsshareoftotalconcentrateproductionisdecreasing,mainlyduetotheconsiderableexpansionofthepoultrysector.In2005,theconcentratefeedsforcattleconsistedabout599,000t(19%),andin2006itwasabout650,000t(17%).TheproductionwasconcentratedontheenterprisesintheSumy,Donetsk,Kharkiv,PoltavaandRivneregions,whichproducedmorethanhalfoftheconcentratefeedsforcattle.
Extension service and access to market information
Animportantagencyinthedevelopmentofthedairysectoristheextensionservice.ThereareonlyafewextensionservicecentersinUkraine.Forexample,IFChasadairyprojectinVinnytsia.Dairiesandotheragro-businessoperatorsareprovidingforthegrowingdemandforspecialisedextensionservices.PrivateextensionhasalsobeendevelopinginUkraine.However,publicextensionhasshownverylittleprogress,despitethefundingofsuchactivities.Onthenationallevel,thereisnoofficialsupplyanddemandstatisticsavailableforextensionservices(NivievskyiandStrubenhoof,2007).InmostEuropeancountries,theextensionservicesnotonlyprovidetechnicalinformation,butalsoassistinbusiness-planning,andprovideconsultancyonthepreparationofofficialdocumentsforbudgetsandsubsidyapplications.ThedevelopmentofextensionservicesinUkraineiscontrolledbylegislation(LawofUkraine‘Onagriculturalextensionservices’No1807-IVon17.06.2004).Suchservicesmaybefinancedfromthepublicbudgetaswellasdonorprojects.ThecurrentleveloffinancingoftheextensionservicesinUkraineisquitelow.Besides,Ukrainianservicesoftenprovideandmakeconsultationsonlyongeneralissues,mostlyinsocialandprivatesmallbusinessinitiatives.
Pedigree�Cattle
Thecurrentsupplyofpedigreecattlefromthenationalselectionschemesisfarbelowthedemandfromdairyproductionenterprises.Thereareseveralwaysofsourcinghighqualitypedigreecows(withproductivityof8-12tmilk/year):
31feedunit=1kgofoat,5kgofgreenmass,1-0.8kgofgrain;500kgcowneedsatleast5feedunitsperday.Usuallytoget1kgofmilkacowneeds0.5feedunitsoffodderabovemaintenance.Thus,for20kgofmilkacowrequires15feedunitsonaverage.
The�cattle�sector�in�Central�and�Eastern�Europe
112
• Importationfromabroad:threeproblemsexist(a)importprocedures,(b)mustdealinlargeconsignments,suitableonlyforlargefarms,(c)itisalikelythatfarmerswillnotobtainmaximumyieldsbecauseofpoorpracticesandinsufficientknowledge.Themoreproductiveacowis,themorecareitrequires.In2007,importsofcattleincreasedby64%to3,638headcomparedtothepreviousyear.Theoriginsofimportedpedigreecattlewere:Germany60%,Hungary39%,therestwerefromDenmark.TheimportedcattlefromHungarywere6%cheaperthancattleimportedfromGermany.Theaveragepriceperheadofpedigreecattlein2007wasUS$2,585.
• Fromdomesticbreedingorganisations:theproductivityoftheseiscomparativelylow.Thereareabout90pedigreedairybreedingcattlefarmsinUkraine.MostareinKyivandCherkasyregions–17and12farms,respectively.
• Inseminationofdomesticcowswithimportedsemenfrompedigreebulls:theproductivityoftheoffspringobtainedwouldbelowerthanthatofimportedcows(ca.9vs.12tmilk/year).Howeverthecostwouldalsobelower.
Logistic�and�infrastructure
AnotherimportantfeatureoftheUkrainiandairysupplychainisthatlogisticsandinfrastructure(milkcollection,storageanddistribution)areunderdevelopedandexpensive.Milkcollectioninmostofcases,isdonebydairiesbutsometimeslocalauthoritiesorcooperativesmayberesponsibleforcollection.Usually,dairiesuseoldtruckswith5tmilktanksmadefromaluminum,inwhichitisdifficulttomaintainmilkquality.IngeneralthemilkcollectionsysteminUkraineisheterogeneous,asalargeshareoftherawmilkisboughtfromhouseholds.
Raw�milk�quality
Theprevalenceofhouseholdsinthetotalrawmilksupplyandthelowqualityofrawmilkaddscoststotheproductionchain,makingitlesscompetitiveintheworldarena(Niviewskyiet�al.,2007).Moreover,theUkrainianqualitystandardsarefarfromWesternstandards(Table4),whichlimitstheexportpossibilitiesforthedairiesmostlytotheformerSovietrepublics.Milkfromhouseholdsusuallyclassifiesasmilkof2ndgradeaccordingtotheUkrainianstandard.IntheEUandUSAsuchmilkisnotusedforfoodproduction.Atthesametime,about80%ofallmilkdirectedforfurtherprocessingissuppliedfromhouseholds.Thesituationlooksbetterindairyfarms,whichdelivermostly1standhighergrademilk(Table5).Thus,adeclarativelystrongstandardssystemdoesn’tsimulatemilkqualityimprovementinUkraine.Themajorweaknesseswhichdetermineefficiencyofthedairysupplychainare:lackofinvestmentsindairyfarmingmainlyduetotaxationofinputs(seeds,agrochemicals,machinery,etc.)viatariffandnon-tariffimportbarriers,excessiveregulation(e.g.certification),alackofamarketforfarmland,alackofmarketinginformationandinfrastructure,andanacuteshortageofhumancapital.Thepronouncedseasonalpatternofrawmilkproductionbyhouseholdsanddairyfarms,andverylowproductivityofcowsperlactation,addsproblemsandcoststodairyprocessors’operations.
Table 4. RawmilkqualitystandardsforfoodproductioninUkraineandEU(EC,1992;USFDA,2003).
EU UkraineExtragrade Highergrade 1stgrade 2ndgrade
Platecount30°C(×1000perml) ≤100 ≤100 ≤300 ≤500 ≤3,000Somaticcellcount(×1000perml) ≤400 ≤400 ≤400 ≤600 ≤800
� The�cattle�sector�in�Central�and�Eastern�Europe
113
Production and consumption of dairy products and beef in Ukraine
ImprovementsofallthedairysupplyandbeefproductionchainsinUkrainehasbecomeurgentasthereisscopetoexpandproductionandthereisunderusedprocessingcapacity.ThedistributionofdairyproductsforUkraineisshowninFigure9.Theper-capitaconsumptionof,andtheexportopportunitiesfor,dairyproductsandbeefarecurrentlycomparativelylowbutarelikelytoriseinthenearfuture.Milkandmilkproductsconsumptionpercapitahasgrownsince2000(Table6).Thesmalldecreasein2007wascausedbyaconsiderablepriceriseformilkproducts.Dairyproductsconsumptionin2007was11%greaterthanin2000,withregionalvariationsof2%to44%.ThehighestconsumptiongrowthwasobservedintheCentral,EasternandSouthernregions.Thatcorrelateswiththehigherincomeintheseregions.Inspiteoftheconsiderableincreaseinconsumptionofmilkproducts,thelevelisstillmuchlowerthanthebiologicalnormofca.300kgperyear(thelevelofconsumptiondefinedasoptimumforbalancednutrition),andislowerthaninseveralEuropeancountries.Wholemilkisthemostpopularofalldairyproductsconsumed.Inmonetarytermsabout40%ofthevalueofalldairyproductsconsumediswholemilk,about30%ischeese,about15%isbutterandspreads,andtherestisdividedbetweenice-cream,cannedmilkandmilkpowder(11%,4%and2%,respectively)(Figure10).WiththegrowingpurchasingcapacityoftheUkrainianpopulation,andtheavailabilityoffavourableopportunitiesforexport,thereissizablepotentialforexpandingproduction.Withregardtobeef,bothproductionandconsumptionhavedecreasedsignificantly,andthesaleofcattleforslaughterhasalsodecreased.Comparedto1990,productionofbeefin2007haddecreasedby70%mainlybecauseofreducedproductionbyagriculturalenterprises,eventhoughhouseholdersdoubledbeefproductioninthesameperiod.Theshareofbeefinthevalueofallmeatimportsisonly5%.BeforetheRussianrestrictionsonUkrainiandairyandmeatproductsthemajorpartofbeefexportswenttoRussia.PercapitaconsumptionofbeefinUkrainewas10.8and10.2kgin2006and2007,respectively.Becauseoftheshortageofbeefforthemeatprocessingindustry,andreductionsofimportdutiesafterWTOaccession,anincreaseinimportsofbeefisexpected.
Table 5. Qualityofmilksoldbyagro-enterprisestoprocessorsin1sthalfof2008(DSTU3662-97)(StateStatisticsCommitteeofUkraine,2008).
Quality Milksold×1000ton Shareintotal(%)Extragrade 0.5 0.1Highergrade 236.9 27.31stgrade 554.1 63.82ndgrade 63.4 7.3Offal(nonvarietal) 13.3 1.5
Table 6.ProductionandconsumptionofmilkanddairyproductsinUkraine(StateStatisticsCommitteeofUkraine,2008).
2000 2001 2002 2003 2004 2005 2006 2007 2000to2006(%)
Production(mt) 12.7 13.4 14.1 13.7 13.7 13.7 13.3 12.3 97Consumption(kg/year) 199 205 225 226 226 225 235 220 111
The�cattle�sector�in�Central�and�Eastern�Europe
114
642792 859
10631213 1259
153130
159
181213 186
103127
168
224
274 217
95107
111
117
126 120
6268
81
104
110 100
11780
91
123
143 131
0
500
1,000
1,500
2,000
2,500
2001 2002 2003 2004 2005 2006
Dairy products from whole milk Butter and spread CheeseIce-cream Canned milk Milk powder
Figure 9.ProductionofdairyproductsinUkraine(×1000t)(StateStatisticsCommitteeofUkraine,2008).
776906 965
1170 1230 1288
111116
130
150162 165
8399
109
130150
173
95108
111
115123
119
56
6272
7890 83
29
3135
4059
43
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2001 2002 2003 2004 2005 2006
Dairy products from whole milk Butter and spreadCheese Ice-creamCanned milk Milk powder
Figure 10. ConsumptionofdairyproductsinUkraine(×1000t)(StateStatisticsCommitteeofUkraine).
� The�cattle�sector�in�Central�and�Eastern�Europe
115
Some aspects of dairy policies and producer support in Ukraine
Fixed agricultural tax
Agriculturalproducersmayavailofspecialtaxationbenefits.AccordingtotheUkrainianlaw‘OnTheFixedAgriculturalTax’,itispossibletochangethetaxorderforagriculturalproducersfromanordinarysetoftaxes(varioustaxesincludingprofittax)to‘afixedagriculturaltax’(FAT)(UkraineGovernment,1998).AgriculturalenterprisesareeligibletopayFATifagriculturalproductsaccountforover75%oftheirrevenues.Thisspecialtaxregimereplacesprofittax,landtaxandsomeothertaxes.ThebaseforFATisthenormativevalueofafarm’sagriculturalland4.Thetax�rates�arespecifiedforthreetypesoftheagriculturalland:(1)0.15%oflandvalueperyear,forarablelands,meadowsandpastures,(2)0.09%ofthevalueofperennialplantations,and(3)0.45%ofthevalueofwaterresources.FATispaidmonthly,butthepaymentratesvarysothat10%ofthetotalpaymentisdueinthefirstandsecondquarters,while50%and30%aredueinthethirdandfourthquarters,respectively.Inaddition,thereisaspecialregimeforthetaxationofagriculturalproducerswithvalueaddedtax.In2008,thefollowingmainarticlesoftheLawofUkraine‘OnTheValueAddedTax’(VAT)remainedinforce(UkraineGovernment,1997).Theircontentsaresummarisedbrieflyasfollows:• Article6.2.6:VATequalszeroforproducersofmeat(inliveweight)andmilkwhoselltheir
productsdirectlytoprocessingenterprises.• Article11.21:VATamountstobepaidbymeatandmilkprocessorstothestatebudgetare
redirectedtomeatandmilkproducersasasubsidyproportionaltothedeliveredrawmaterials.• Article11.29:VATamountsfromsellingagriculturalproducts(exceptmeatinliveweight,and
milk)remainontheaccountsofagro-producersandmaybeusedforoperationalneeds.TheFATwillstayinforceuntil2010.Meanwhile,thespecialorderofVATpaymentsareprolongedfortheyear2008.Thus,thefirstandthebiggestsubsidyelementforrawmilkproducerscomefromVATcollectedfromthedairyprocessingindustry(alreadymentionedabove).VATreceivedbydairyprocessingenterprisesfromsellingdairyproductsisretainedonaspecialaccountandpaidtoagriculturalproducerssellingtheirunprocessedmilktoprocessingenterprises.AnimportantaspectofthesesubsidiesisthattheydonotcomplywithWTOrequirements,sincetheyaredomesticsupportmeasures(WTO,1994;Nivyevskyiet�al.,2008).TheVATregimeformilkandmeatproducerswillchangewithWTOaccession(mostlikelybeginningof2009).
Special regime of Pension Fund payments for agricultural enterprises
FATpayerspaytothePensionFundatspecialrates(19.38%in2008)with20%annualincreaseuntilthecommonratewillbereached(32.3%)(UkraineGovernment,2004).Theninafewyears,FATpayersareexpectedtopaythefullpaymentratetothePensionFund.
Subsidy for cattle grown and sold
Cattleof390kgminimumliveweightforagro-enterprisesand330kgforhouseholdsaresubsidisedat2.9UkrainianHryvnia(UAH)/kg(€1=7.4UAH;US$1=5.8UAH).
4Landvalueisdeterminedaccordingtoqualityandpotentialproductivityand,therefore,canvarysubstantiallyfromfarmtofarm.TheaveragelandvalueinUkraineforFATpurposesonthe1stJanuary2008is9,179UAH/ha,rangingfromamaximumof12,708UAH/hainARofCrimeatoaminimumof6,664UAH/hainZhtomyr(excludingKievcity,SevastopilandCrimea).
The�cattle�sector�in�Central�and�Eastern�Europe
116
Special subsidy for heifer livestock
Aspecialsubsidyforbreedingheifersfromsuckler-cows,whichareboughtfromhouseholdstoincreaselivestocknumbersispaidtoagro-enterprisesatarateupto5UAH/kg.
Special subsidy for livestock
Aspecialsubsidyispaidforbeefcattleifthemeat-productivityoftheanimaliscorrectlyidentified.Producersofeco-testedmilkdeliveredtodairyprocessingfactoriesforproducingbabyfoodobtainasubsidyattherateof500UAH/tmilk.
Partial interest rate compensation
Agriculturalenterprisesmayreceivecompensationforinterestratesforshort-termcreditobtainedinnationalorforeigncurrenciesforcoveringproductioncosts(e.g.purchasesoffuel,feed,spareparts,fertilisers,pesticides,insurancepayments,etc.),andforlong-termcreditobtainedinnationalorforeigncurrenciesforfinancinginvestmentsinfixedcapital.
Partial compensation of agricultural machinery costs
Underthisscheme,theGovernmentcompensates30%ofthepriceofdomesticallyproducedagriculturalmachinerytoagriculturalproducersandenterprisesofthefoodprocessingindustry.
Partial compensation of insurance payments
Farmsreceive50%compensationforinsurancepayments.ItiswidelyacceptedthattheUkrainianproblemisnottheleveloftaxesbutthecomplexityoftaxmanagementandtaxcontrol.Todate,thereislittletransparencyintheperformanceofthelocaltaxadministrations,especiallyregardingVATcompensation.Inthisway,taxauthoritiesmayprolongtermsofexporters’examinationbeforerewardinganexpectedcompensation.Agriculturalexportersarealsoveryfamiliarwiththispractice.
Conclusions
Thelivestockandmilkproductionindustrieshaveconsiderablepotentialtoincreaseproductioncapacity,expandmarketsandadopttechnologiesforproductionandefficiencyimprovementsatalllevelsoftheproductionchain.Demandfordairyandlivestockproductionwillfurtherincrease.Simultaneously,exportswillgrow.FollowingtheprohibitionofdairyandlivestockproductstoRussiain2006,moreandmoreproducersarenowreceivingindividualexportlicensesafteraseriesofinspectionsbyrepresentativesoftheRussianauthorities.Inaddition,livestockanddairyproducers,togetherwithgovernmentalbodies,areworkingintensivelytoachieveaccesstoEuropeanmarketsfortheirproducts.ThisrequiresfurtherharmonisationofdomesticandEuropeanqualitystandardswithmoredistinctboundarysettingatthelegislativelevelbythecentralqualitycontrollingbodies,qualityimprovementsofdairyproducts,andimprovementofstorageandtransportationsystemsforallstagesofproduction.Foragriculturalenterprises,thereisademandforimprovementsinproduction,optimisationofavailableresourceuse,increaseinefficiencybyintroductionofnewtechnologies,improvementoftheskillsoftheemployeesofthefarms,improvementsinmanagement,furtherrestructuringoftheindustry,andfinallyanincreaseinforeignmarketsharebyindividualenterprises.Areasnear
� The�cattle�sector�in�Central�and�Eastern�Europe
117
dairyplantsthathavebeenmodernised,haveahigherproductivitygrowth,mainlyduetoenhancedtechnologicalprogress.Processorsrequiringadependablesupplyofhighqualityrawmilkassistfarmstomakethenecessaryinvestmentsforequipment,productionresourcesandotherneeds.Themaindrawbackstothestateprogramsofindustrysupportareinstabilityinthefinancingpriorities,thenecessityforannualre-approvalforfunddistributiontogetherwithinsufficientinformationandconsultationwithagriculturalproducers.Besides,forthestabilisationoflivestockandmilkproduction,thereisaneedforastabletaxsystem,transparencyanduniformdistributionofstatesupport,anddecreasesinthetimeframesforinvestmentsreturns.
References
EuropeanCommission(EC),1992.CouncilDirective92/46/EECof16June1992layingdownthehealthrulesfortheproductionandplacingonthemarketofrawmilk,heat-treatedmilkandmilk-basedproducts.OfficialJournaloftheEuropeanUnionL268:1-32.
Nivyevskyi,O.andStrubenhoff,H.,2006.BarrierstoinvestmentintheagricultureandfoodsectorinUkraine.IERPolicyPaper.Availableat:http://ierpc.org/ierpc/papers/agpp5_en.pdf.
Nivievskyi,O.,Ilienko,I.andRyzhkova,M.,2007.DairysupplychaininUkraine:bottlenecksanddirectionsfordevelopment.PresentedattheIAMOForum,Halle(Saale),Germany.
Nivyevskyi,O.,VonCramonTaubadel,S.andBrümmer,B.,2008.SubsidiesandtechnologychangeofUkrainiandairyfarms:spatialdependenceinthecomponentsofproductivitygrowth.PresentedattheVthNorthAmericanProductivityWorkshop25-27June2008,New-York,USA.
StateStatisticsCommitteeofUkraine,2008.Websiteavailableat:http://www.ukrstat.gov.ua/.UkraineGovernment,1997.Ukrainianlaw‘OnTheValueAddedTax’(VAT)–No.168/97-BPasofApril03,1997.
Availableat:www.rada.gov.ua.UkraineGovernment,1998.Ukrainianlaw‘OnTheFixedAgriculturalTax’(FAT)-No.20-14asofDecember17,
1998.Availableat:www.rada.gov.ua.UkraineGovernment,2004.Ukrainianlaw‘Onamendmentstosomelawsontaxationofagriculturalenterprises’–No.
2287-IVasofDecember23,2004.Availableat:www.rada.gov.ua.USFDA,2003.Grade‘A’pasteurizedmilkordinance2003revision.UnitedStatesFoodandDrugAgency,CFSAN,
USA.Pressreleases;DSTU3662-97.Availableat:http://www.cfsan.fda.gov/~acrobat/pmo03.pdfWTO,1994.UruguayRoundAgreementonAgriculture.Availableat:http://www.wto.org/english/docs_e/legal_e/14-
ag.pdfZubets,M.andMelnychuk,D.,2004.PresentationongeneticresourcesofUkrainiancattle.Ukrainianacademyof
agrariansciences.
� The�cattle�sector�in�Central�and�Eastern�Europe
119
Cattle sector and dairy chain development in Slovakia
M.�Stefanikova
Slovak�Association�of�Dairy�Farmers,�Výstavná�4,�949�01�Nitra,�Slovakia;�[email protected]
Abstract
ThispaperpresentsthecurrentsituationandaperspectiveofthecattlesectoranddairychaindevelopmentinSlovakiaundertheimpactoftheCommonAgriculturalPolicyoftheEuropeanUnion.Thefirstsectionisdedicatedtodairyfarming,includingdataoncattlenumbers,productionunitnumbers,cattlebreeds,milkyields,milkproduction,dairyfarmernumbers,milksales,milkquotas,milkpricesandsupportpolicy.Thesecondsectiondealswiththemilkprocessing/dairysectorincludingthenumberofdairies,productionofmilkanddairyproducts,andmilkbalance.Thethirdsectiondealswithissuesofconsumptionandpromotionofmilkanddairyproducts.ThefourthsectionpresentssomeresultsontheeconomicefficiencyofmilkproductioninSlovakiaandinEuropeanDairyFarmers(EDF)countries.ThefifthsectiondiscussesissuesofthedairysectorintheEUincludingthe‘HealthCheckoftheCAP’,soft-landing’andtheSlovakpositiontotheproposedmeasures.
Keywords:�cattle�breeds,�cattle�sector,�dairy�farmers,�milk�prices,�dairy�products�consumption,�Slovakia
Introduction
TheSlovakcattlesectorhasundergoneimportantdevelopmentsinrecentyears.Thefollowingsectionshighlightthedevelopmentsin(milk)productionandprices,themilkprocessingsector,consumptionandmarketingofdairyproductsandeconomy.
Production and prices
Numbers of cattle and production units
Since1989thecattlepopulationhasdecreasedby65%,fromapproximately1.5millionto0.5million(Figure1).Themainreasonsforthislargedecreaseincattlenumberswerepolitical,economicandsocialchanges.ThetransitionperiodandaccessionofSlovakiatotheEuropeanUnionwerethemostimportantmilestonesinthisdevelopment.Bigchangesoccurredinthecattlesectorintermsofstructure,ownership,producerandcattlenumbers.Improvementsinhousing,feedingandmilkingtechnologies,butalsoingeneticsandnutrition,positivelyinfluencedmilkyields.Ontheotherhand,dairyfarmershadtoinvestheavilytocomplywithstricthygienicandenvironmentalrequirements.Bigchangesoccuredalsointheproductionvolumeandintheoverallrelationshipsamongthoseinvolvedinthedairychain.Negativeimpactsonthecattlesectorstartedwithenormousincreasesofinputpricesatallproductionlevels.Inputpricesledtoinceasesofconsumerprices,whichhadanegativeimpactonconsumptionofmilkanddairyproducts.Atthesametime,especiallyaftertheEUaccession,thevolumeofimporteddairyproductsincreased.Allthesecircumstancesledtoexcessiveover-production,whichhadanegativeimpactonfarm-gateprices.Manydairyfarmers,mainlythosewithlowproductivity,graduallyceasedmilkproduction.
The�cattle�sector�in�Central�and�Eastern�Europe
120
AccordingtothefiguresoftheStateBreedingInstitute(Table1),therewere519,584cattleinSlovakiaattheendof2007,managedinapproximately11,500productionunits(includinghouseholdsproducingmilkforownconsumption).Over44%ofallcattleareinherdsof>500head.Theaverageherdsizeis45head/productionunit.Butifherdsizesbelow10areextended,thentheaverageherdsizeis258.
Cattle breeds
Fleckvieh(Simmental)andPinzgauerweretraditionalSlovakbreeds.Nowadaysthesebreedsarecharacteristicof,andmainlyconfinedto,mountainousareas.Fleckviehcattledecreasedby29%andPinzgaucattledecreasedby4%.PrevailingbreedsforintensivemilkproductionunitsinlowlandconditionsareBlackorRedHolsteinwhichcomprise56%ofallcattle.Othermilkingbreedsrepresent<18%.Meatbreedsrepresent8%,and3%ofthecattlehavenobreedclassification(Table2).
1563.1
1396.6
1202.7
993 916.2 928.7892
803.4704.8
680 646.1 644.9 607.8 593.2540.1 527.9 507.8 501.8
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
(in thousand heads)
Year
Figure 1.Cattlenumbers(×1000)in1990-2007(SlovakAssociationofDairyFarmers,2008).
Table 1.Numberofcattleandproductionunitsin2007(dataprovidedbytheStateBreedingInstitute).
Category(herdsize) Cattleproductionunits CattleNumber % Number %
1-10 9,518 82.6 19,474 3.811-20 326 2.8 4,688 0.921-50 248 2.2 8,187 1.651-100 207 1.8 15,640 3.01101-200 327 2.8 48,308 9.3201-500 588 5.1 193,083 37.2over500 313 2.7 230,204 44.3Total 11,527 100.0 519,584 100.0
� The�cattle�sector�in�Central�and�Eastern�Europe
121
Beef breeds
Therewere39,270beefcattleat theendof2007, representing19beefbreeds.ThemostcommonbreedsareCharolais45%,Limousin34%,Simmental6%,Blonded`Áquitaine3%andPiemontese3%.
Milking cows
Thenumberofmilkingcowsdroppedfrom542,800in1990to180,600in2007,adecreaseof67%in19years(Figure2).Thatdecreaseisstillcontinuingwithadeclineof6%or11,900headin2007.DuetothecurrenteconomicandpoliticalsituationintheEUdairysector,acontinuedreductioninmilkingcowsisexpectedinfuture.Accordingtopresentdevelopmentsitisestimatedthattherewillbefurtherdropofapproximately5%,or9,000milkingcowsin2008.
Average milk yields
Lastyearannualmilkyieldreached5,951kg/cow.Whilethisrepresentsacontinuingincrease,itisneverthelessstillratherlow.In2007,milkyieldincreasedby5%or281kg/cow.Continuousimprovementinmilkyieldisexpectedinfutureduetoimprovementsinhusbandrytechnologies,
Table 2.CattlebreedsinSlovakia(dataprovidedbytheStateBreedingInstitute).
Breeds TotalFleckvieh(Simmental)
Pinzgau BlackandRedHolstein
Othermilkbreeds
Meatbreeds Otherbreeds
Head 151,956 18,326 295,924 3,626 39,270 17,900 527,002% 28.83 3.48 56.16 0.68 7.45 3.4 100
3537
2887 2888 29533175 3292 3316
36033970
42514467
47935045 5179 5235
54425670
5951
542.8528.7
460.8
411.3
363.7 349.8 339.3309.7
287.6 274
243.2 239.5226.1
211.9 199.7 198.5 192.5 180.6
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Milk
(kg
milk
/milk
ing
cow
/yea
r)
0
100
200
300
400
500
600
Milk yield Number of dairy cows
Num
ber o
f dai
ry c
ows
(ths.
head
s)
Year
Figure 2.Numberofmilkcowsandmilkyields(1990-2007)(SlovakAssociationofDairyFarmers,2008)
The�cattle�sector�in�Central�and�Eastern�Europe
122
housing,feedingandherdmanagement.Theestimateofthatimprovementisapproximately250kgmilkpercow(+4%p.a.)infutureyears.
Milk yields of cattle breeds
Holsteinisthemostcommondairybreedandhasthehighestmilkyieldreaching7884kgofmilkpercowin2007(Table3).SlovakSimmentalandPinzgauerhaveahigherfatcontentandthereforeareusuallyusedincrossbreedingprogrammes.
Suckler cows
Therewere35,400sucklercowsattheendof2007.Since1997,thenumberhasincreasedalmostfourfoldfrom10,100(Figure3).
Table 3. Milkyieldsofcattlebreeds(DataprovidedbytheStateBreedingInstitute).
Breed Number(head) Milk(kg) Fat(%) Protein(%)Holstein 25,640 7,884 3.9 3.2Holsteinwithcrosses 75,931 7,198 4.0 3.2SlovakSimmental 25,045 5,223 4.1 3.3Pinzgaeru 1,072 4,323 4.0 3.3Pinzgauerwithcrosses 4,553 4,534 4.0 3.3BrownSwiss 147 6,414 4.0 3.3Allbreeds 113,175 6,517 4.0 3.2
10,100
18,600
23,700
28,700 28,10029,500
30,800 30,900 31,00033,600
35,400
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Number
Year
Figure 3.Numberofsucklercows(1997-2007)(SlovakAssociationofDairyFarmers,2008).
� The�cattle�sector�in�Central�and�Eastern�Europe
123
Milk production
Thelargereductionindairycowshadaprofoundimpactonmilkproduction.Whilein1989morethan2mtofmilkwereproduced,nowadaysitisonlyhalfthat(1,074mtin2007).During2007milkproductiondecreasedby2%(Figure4).
Number of milk producers/dairy farmers
Atpresentthereare680milkproducers/dairyfarmersinSlovakia(Figure5).Duetounfavorableconditionsinthedairysector,mainlyincreasesinofinputprices,stagnationofmilkprices,andabsenceofsupport,146dairyfarmers(18%)stoppedmilkproductionduringthelast4years.Ifthepresenteconomicandpoliticalconditionscontinue,itisexpectedthatthenumberofdairyfarmerswillcontinuetodecrease.
Figure 4.MilkproductioninSlovakia(1989-2007)(SlovakAssociationofDairyFarmers,2008).
Figure 5.Numberofmilkproducers/dairyfarmers(2005-2008)(SlovakAssociationofDairyFarmers,2008).
The�cattle�sector�in�Central�and�Eastern�Europe
124
Sale of milk
In2007,Slovakmilkproducers/dairyfarmerssold974millionkgofrawcowsmilk(Figure6).Thisincludesbothdeliverytopurchasersanddirectsales.Therehavebeenonlysmalldifferencesintheamountofsalesinrecentyears.Thedifferencebetweenthelasttwoyearswasonly0.4%(4mkg).Inthelasttwoyears95%ofthemilksoldwasclassifiedasQ–superiorandI.classquality.
Milk sales
Theseasonalandmonthlydistributionofmilksalesfrom2004toJune2008isshowninFigure7.Basedonthisanalysisitisestimatedthatthevolumeofmilksoldthisyearwillbesimilartolastyear.
1035 1008951 975 970 974
300
400
500
600700
800
900
1,0001,100
2002 2003 2004 2005 2006 2007
Figure 6.Salesofmilk(2002-2007)(SlovakAssociationofDairyFarmers,2008).
50
60
70
80
90
100
2004 76.3 72.4 78.7 80.4 86.8 82.3 82.8 81.2 76.5 74.5 68.2 77.1
2005 79.654 73.127 76.051 84.612 91.199 90.578 84.735 81.021 75.741 78,554 74.761 77.963
2006 79.539 73.249 83.084 82.609 88.23 84.918 84.165 82.823 77.286 76,563 72.225 77.008
2007 79.821 73.74 83.632 82.925 86.316 82.472 83.894 82.597 78.555 77,999 73.806 78.432
2008 80.614 77.50 83.691 82.195 84.569 80.674
I. II. III. IV V VI VII VIII IX X XI XII
Figure 7.Deliveredmilk(2004-2008)(SlovakAssociationofDairyFarmers,2008).
� The�cattle�sector�in�Central�and�Eastern�Europe
125
Milk purchase
Atpresentthereare48dairyprocessingcompaniespurchasingmilkandregisteredbytheAgriculturalPaymentAgency.Ofthese,19areproductionandtradecooperativesand29aredairiesandbusinesscompanies.
National Reference Milk Allocation - milk quota
AsaresultofthenegotiationprocesswiththeEU,theinitialmilkquotawas1,013,316mkgstartingin2003/2004andcontinuinguntil2005/2006.Forthequotayear2007/2008,anadditional27mkgwereallocatedasasocalled‘restructuringreserve’,increasingthenationalmilkquotato1,041,788mkg.AftertheapprovaloftheCouncilRegulationthiswasfurtherincreasedby2%toanationalquotaof1,061,603mkg.TherearenoregionalquotasinSlovakia.Thenationalmilkquotaisdividedintoamilkdeliveryquota(99%)andaquotafordirectsaleofmilk(1%).Thereferencefatcontentis3.71%.
Milk�quota�fulfillment�-�quota�years�2004-2008
Theproportionofthenationalmilkquotafilledinsuccessiveyearswas:95%in2004/5,97%in2005/6,93%in2006/7,and95%in2007/8.Withregardtomilksales,itisestimatedthatthecurrentmilkquotawillbefilledtoapproximately96%inthe2008quotayear.Therefore,SlovakiaisopposedtothecurrentproposaloftheEuropeanCommissiontoissueadditionalmilkquota.
Milk�quota�administration�
Themainstakeholdersinquotaadministrationare:• MinistryofAgricultureSRastheStateAuthority;• AgriculturalPaymentAgencyastheCompetentExecutiveAuthority;• 680milkproducers/dairyfarmers;• 48milkpurchasers.
Main�features�of�milk�quota
• milkquotaisbound/tiedtothecompanyandtocows;• milkquotaisnotsubjecttofreetrade(selling/buying),neitherisitsubjecttorent;• milkquotaisnotincludedintothecompanyestate;• milkquotaisasubjectofallocationfromnationalreserveorquotatransfer.
Main�administration�procedures�of�milk�quota
• newmilkquotaallocation;• additionalmilkquotaallocation;• milkquotatransfer.
New�milk�quota�allocation
• itisallocatedtonewdairyfarmersfromthenationalreservebasedonapplication;• maximumofnewmilkquotais50,000kg/applicant.
The�cattle�sector�in�Central�and�Eastern�Europe
126
Additional�milk�quota�allocation
Additionalmilkquotaisallocatedtoexistingdairyfarmersfromthenationalreservebasedonapplication.Eligibleapplicantsaredairyfarmerswhofilledtheirexistingmilkquotatoatleast95%.Applicantscanapplyforadditionalmilkquotatoamaximumof15%basedontheexistingmilkquota.(PaymentAgencyconsiderstheapplicationandallocatestheapplicantsrequestsaccordingtotheavailablemilkquotainnationalreserveequally/accordingly)
Milk�quota�transfer
Transferofmilkquotaispossibleonlythroughpurchaseorrentingofthewholefarmorpurchaseofmilkingcows
Milk prices
Figure8showstheaveragemilkpricefrom2004untilJune2008.CalculatedusingthemonthlyexchangeratebetweentheSlovakcrownandEuro,themilkpricewasapproximately€33.25/100kginJune.FromJanuarytoJunethepricedroppedby15%.SlovakiaisscheduledtojointheEurozoneon1stJanuary,2009.DuetothestrengtheningoftheSlovakcurrency,therehasbeenanunusualdevelopmentinthepricecomparisonanditscalculationinSlovakcrownsandinEuro.WhilethepriceinSlovakcrownsdecreasedinrecentmonthsthepriceinEuroincreased.
Milk price comparison in EU member states
Figure9showstheaveragemilkpricefor2007inthe26individualEUmemberstates.TheaverageSlovakmilkpricewas€28.97/100kg.Itwaslessthanthemilkpricesinsurroundingcountries–especiallyCzechRepublic,Austria,andPoland.
9.00
10.00
11.00
12.00
13.00
2004 9.36 9.38 9.48 9.43 9.23 9.30 9.32 9.34 9.43 9.62 9.73 9.80 9.45
2005 9.97 10.02 9.99 9.80 9.79 9.68 9.55 9.52 9.65 9.64 9.75 9.81 9.76
2006 9.70 9.67 9.74 9.55 9.52 9.51 9.38 9.38 9.56 9.60 9.70 9.74 9.59
2007 9.80 9.76 9.86 9.59 9.58 9.52 9.54 9.62 10.04 10.70 11.20 11.61 10.07
2008 12.15 12.03 11.94 11.30 10.88 10.39
I II III IV V VI VII VIII IX X XI XII pr.
Figure 8.MilkpricesinSlovakia(2004-2008)(SlovakAssociationofDairyFarmers).
� The�cattle�sector�in�Central�and�Eastern�Europe
127
Support of the dairy sector in Slovakia
SubsidiesorothersupportpaymentshavenotbeenprovidedtothecattlesectorinSlovakiasince2004.ItwasoneofmanybaddecisionsofthepreviousgovernmentthatresultedinlossincompetitivenessofSlovakdairyfarmers.Farmcompanies,specialisedindairying,weremostaffected,leadingtoan18%dropofdairyfarmersduringtheperiod.TheSlovakAssociationofDairyFarmersalwaysdefendedtheinterestsofdairyfarmers,butwithoutanysuccesswiththepreviousgovernment.Afterthenewgovernmentwaselected,agriculturewasdefinedasoneofthenationalprioritiesandsupportforanimalproductionwasintroduced.TheMinistryofAgricultureintroducedmeasuresfortherevitalisationofanimalproductionandsubsequentlythe‘GovernmentRegulationonSupportinAgriculture’byCNDPbasedonpaymentsperLivestockUnitswasapproved(Table4).
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
2007 33.72 27.93 31.68 33.46 26.90 38.59 35.20 31.42 34.59 34.30 41.46 26.18 24.04 35.70 28.50 33.64 33.76 29.56 31.33 28.00 28.97 35.09 32.00 30.21 32.30
BG CZ DN GE EE GR ES FR IE IT CY LT LI LU HU NL AT PL PT SL SK FI SE UK EU
Figure 9.MilkpricesinEUstates(2007)(DGAGRI-AnalysisCirca).
Table 4.GovernmentRegulationonSupportinAgriculturebyCNDPbasedonpaymentperLivestockUnit(SlovakAssociationofDairyFarmers).
Category Coefficient1 De-couplingdateCalvesupto6months 0.2 De-coupling31.March2008Cattle6-24months 0.6 De-coupling31.March2007Bulls,oxenandheifersolderthen24months 1.0 De-coupling31.March2007Sucklercowsolderthen24months 1.0 Coupling15.AprilofactualyearSheepandgoatsolderthen12months 0.15 De-coupling31.March2007
Coupling15.AprilofactualyearMilkquota 0.1998 De-coupling31.March20071Coefficientforcalculationofanimalnumbersforlivestockunitnumbers.
The�cattle�sector�in�Central�and�Eastern�Europe
128
Milk processing sector
Number of processing dairies
Thereare28dairiesprocessingmorethan2mkgmilk,annually.Another31dairiesprocessbetween0.5to2mkg,andfurther61dairiesprocesslessthan0.5mkgmilk,annually.
Production of milk and dairy products
Accordingtothestatisticaldata,dairyprocessingincreasedconsiderablyin2007(Table5).Theindividualproductincreaseswere:skimmedmilkpowder44%,processedcheese18%,butter9%,freshcheese10%,liquidmilk6%,fermentedmilkproducts6%,andwholemilkpowder4%.
Consumption and promotion
Consumption of milk and dairy products in Slovakia
ConsumptionofmilkanddairyproductsinSlovakiahasdecreasedbyalmost100kgpercapitaperyearoverthelast15years,adropof39%(Figure10).WhereastheaverageSlovakpersonconsumed253kgofmilkanddairyproductsin1989,itwasonlyapproximately153kgin2006.Thedecreaseinmilkconsumptionwascausedmainlybythereducedpurchasingpowerofthepopulationandthewiderangeofsoftandenergybeveragesonthemarket.Inaddition,thedairysectorandthepreviousgovernmentsdidnotinvestinadvertisingtoconsumers.Intermsofproductrangeconsumption,therewasadecreaseinliquidmilkandanincreaseincheese(Table6).
Promotion of milk and dairy products
Despitethefactthatmilkproducersandmilkprocessorsfightondifferentsidesofthebattlefield,allfightinthesamewar.Theargumentsoftheprocessorsonhighinvestmentrequirementsandreallystrongpressurefromtheretailchainsthatareforcingdownthemilkpriceareaccepted.ItisalsoacknowledgedthattheappreciationoftheSlovakcurrencyhashadanegativeimpactondairieswithexportactivities.Furthermore,itisacknowledgedthatthefightagainsttheretailchainsislikefightingagainstwind-mills.EffortsareunderwaytoidentifycommonareasofinterestbetweenproducersanddairieswhichmightimprovetheoverallsituationofthedairysectorinSlovakia.Thus,theSlovakAssociationofDairyFarmers–astherepresentativeofmilkproducers/dairyfarmers,andtheSlovakDairyAssociation–astherepresentativeofmilkprocessors,reachedan
Table 5.Productionofmilkanddairyproducts(t)(ResearchInstituteofAgriculturalandFoodEconomy,2008).
Year Liquidmilk
Naturalcheese
Processedcheese
Cream Fermentedproducts
Butterandmilkfatproducts
Totalmilkpowder
Skimmedmilkpowder
Wholemilkpowder
2004 292,712 37,105 11,747 31,190 50,279 13,131 11,550 6,772 4,7192005 246,873 43,447 10,630 34,535 52,263 10,034 12,856 5,801 6,6342006 238,331 47,879 11,595 33,670 51,305 10,689 11,954 5,705 5,5712007 252,279 44,669 13,641 34,619 54,180 11,690 14,285 8,207 5,808
� The�cattle�sector�in�Central�and�Eastern�Europe
129
agreementtwoyearsago.Therearedifferentactivities,butthemostimportantonesarethoseaimedatincreasingmilkconsumption.Duringthelast3yearsseveralsmall-scale,butsuccessfulactivitiespromotingmilkanddairyproductsweredevelopedandimplemented.Theseeventswerelow-costandwerefinancedfromthebudgetsofbothassociationswiththeactivehelpofdairiessupportingtheseeventsthroughtheirproducts.Aftermutualagreement,theassociationsdecidedtoprepareasystemprojectcalled‘PromotionandInformationProgrammeonMilkandDairyProductsConsumptioninSlovakia’.ThisprojectproposalwasapprovedwithintheCouncilRegulation(EC)Nr.2826/2000onInformationandPromotionActionsforAgriculturalProductsontheInternalMarket(EC,2000).ItwillbethefirstprojectimplementedwithinthisEUprogrammeinSlovakia.Thedurationoftheprojectwillbe3yearsandthebudgetwillbeapproximately4millionEuros.TheprojectwillbeimplementedbycommonfundsoftheEU,nationalsourcesandtherestwillbefinancedbySlovakAssociationofDairyFarmers(SZPM)andSlovakDairyAssociation(SMZ)thougha‘Milkfund’.Theobjectiveofthe‘Milkfund’istocollectfinancialcontributionsfromthedairyfarmersandmilkprocessors.Basically,eachdairyfarmerandeachprocessorissupposedtocontributeoneheller(penny)perkgmilktothe‘Milkfund’.
253.2
226.3
211.8
193.8
170.6
165.7
162.4
162.1
161.8
162.5
161.4
160.2
161.8
166.2
158.3
153.3
154.6
152.4
153.3
100
125
150
175
200
225
250
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007*
Figure 10.ConsumptionofmilkanddairyproductsinSlovakia(1989-2007)(SlovakAssociationofDairyFarmers).
Table 6.ConsumptionofmilkanddairyproductsinSlovakia(kg)(ResearchInstituteofAgriculturalandFoodEconomy,2008).
Category 2002 2003 2004 2005 2006 Estimate2007Liquidmilk 67.1 63.9 59.1 55.7 55.9 54.5Cheeseandcottagecheese 9.0 9.3 8.2 9.1 9.5 9.6Milkpowder 1.6 1.4 1.4 1.7 1.1 1.5Butter 3.0 2.8 2.2 2.0 2.0 2.0Cream 2.2 2.4 2.2 2.8 3.0 2.7Yogurt 13.1 12.4 12.6 13.1 12.3 12.6Otherdairyproducts 0.4 0.4 0.3 0.6 1.2 1.7Total 166.2 158.3 153.3 154.6 152.4 153.3
The�cattle�sector�in�Central�and�Eastern�Europe
130
Milk balance
In2007,thetotalmilkbalanceamountedto1,413,964.7t.Thiswascomprisedof973,529tofrawcowsmilkpurchasedfromdairyfarmers,412,757.3tofimportedmilk,andanadditional27,678.4tofthestocks(Table7).Ofthistotal,831,046.2t(ca59%)wereconsumed,550,205t(ca39%)wereexportedand32,713.5tremainedinstock.Thereisapositivetradebalanceofmilkanddairyproductsamountingto2,260mSKK.Accordingtothestatistics,theimport/consumptionratioisjustlessthanhalf(49.7%)whiletheexport/saleratiois57%.
Economic efficiency
Economic efficiency of milk production
TheeconomicefficiencyofmilkproductioninSlovakiaandEuropeanDairyfarmers(EDF)countriesin2007wereanalysed:• EconomicefficiencyofmilkproductioninSlovakia• Averagecostsformilkproduction: 11.02SKK/l• Averagemilkprice: 10.07SKK/l• Economicresult: loss-0.95SKK/lEconomicefficiencyofmilkproductioninEDFcountries• Numberofcompaniesanalysed: 270(from17countries)• Averageentrepreneursresult: loss€2/100kg
Table 7.BalanceoftradedcowmilkinSlovakia(ResearchInstituteofAgriculturalandFoodEconomy,2008).
Indicator Unit 2004 2005 2006 2007Averagenumberofmilkingcows
×1000 206.0 198.5 192.5 180.6
Averagemilkyield kgpermilkingcowperyear
5,235.7 5,541.8 5,670.1 5,951.4
Production t 1,078,625.3 1,099,827.0 1,091,737.2 1,074,655.3Stocksatthebeginningofyear
t 20,000.0 18,880.2 17,596.4 27,678.4
Milkpurchasefromdairyfarmers
t 950,548.0 974,493.0 970,115.0 973,529.0
Import t 140,166.0 301,282.0 351,188.0 412,757.3Totalsources t 1,110,714.0 1,294,655.2 1,338,899.4 1,413,964.7Export t 340,334.0 482,192.0 515,042.0 550,205.0Domesticconsumptionwithoutnaturalconsumption
t 751,499.8 794,866.8 796,179.0 831,046.2
Stocksattheendofyear t 18,880.2 17,596.4 27,678.4 32,713.5Import/consumptionratio % 18.7 37.9 44.1 49.7Import/saleratio % 14.7 30.9 36.2 42.4Export/saleratio % 35.8 49.5 53.1 56.5
� The�cattle�sector�in�Central�and�Eastern�Europe
131
Relationships among milk producers dairies and retailers
TheSlovakAssociationofDairyFarmerskeepscontactwiththedairiesandnegotiateonthemarketsituation.ThecommonplatformisthenegotiationbetweenSZPMrepresentingdairyfarmersandSMZrepresentingdairies.Differentanalysesareconductedtocomparepricesforproducers,processorsandretailersandtherespectivemargins.Forexample,Figure11showsthedevelopmentofproducerpricesper1kgofrawcowmilkincomparisonwiththepricesofprocessorandretailersandtheirmarginfor1kgof1.5%skimmedUHTmilk.Thevolatilepattern,especiallyinthefirsthalfof2008isclearlydepicted.Attheendof2007,theretailchainsimplementedalargepriceincreasefordairyproducts.Thiscausedadropof18%inconsumptionuntiltheendofMarch.Stocksofmilkanddairyproductsincreasedbothatthelevelofprocessorsandretailers.Retailerspusheddowntheprocessorspricesandtheprocessorspusheddowntheproducerprices,butintheend,theconsumerspricesontheshopshelvesremainedmoreorlessthesame.Thegeneralfeatureofrelationswithinthedairychainistheunequalpositionofthedifferentstakeholders.Retailersabusetheirdominantpositionbypushingdownprocessorprices.Additionallytheyforcetheprocessorstopaylistingfees,promotionfeesandotherhiddenpaymentswhicharenotdirectlyincludedintotheproductprice.Alawonequalconditionsonthemarketisbeingframed.ThisEthicCodexisunderthelegislativeprocedureandshouldbeadoptedatthebeginningof2009,butitisunlikelytosolvethepresentsituation.ItislikelythatitwillbenecessarytoadoptacommonEuropeanlawdefiningtherulesforequalpositioninthemarketchainincludingsomespecialrulesforbiddingmarketdistortingpracticesbyretailers.
Farm-gate price Processors margin Retailers margin
Figure 11.Producerpriceof1kgofrawcowmilkandprocessorandretailmarginof1kgof1.5%skimmedUHTmilk(2004-2008)(SlovakAssociationofDairyFarmers).
The�cattle�sector�in�Central�and�Eastern�Europe
132
CAP ‘health check’
Slovak dairy sector as a part of the common European dairy sector
SlovakiaisapartoftheEuropeanandworldmilkmarketandthereforemustanalysethesituationobjectively.Mostofthecurrentproblemsinthedairysectorarecommontoallmemberstates.Oneofthemostrecentissuesofconcernisthe‘healthcheckofCAP’.Themilkquotasystemwasintroduced24yearsago,withinacompletelydifferentsocial,economicandpoliticalenvironment.Milkquotas,ononehandensuredthestabilityofEuropeanmilkproducersincomes,butontheotherhanddestroyedthe‘natural’operationofthemilkmarket.Itisacknowledgedthatitwillbedifficulttoreturnthe‘artificialmilkmarketsystem’backtoa‘naturalmilkmarketsystem’.ItwillalsobedifficulttotaketheappropriateandsensitivemeasureswhichwouldleadtopreservationofasustainableandcompetitivedairysectorintheEUasawholeandintheindividualEUmemberstates.Itisunlikelythatinthecurrentsituation,characterisedbyvolatilemilkprices,anincreaseinmilkquotaistheonlypossiblesolutiononhowtoreacha‘softlanding’onmilkquotas.Itisobvious,thatanincreaseinquotawillbringadvantagesforthe‘bigmilkplayers’thathavethecapacityforexpansion,buttheadoptionofthismeasuremayendanger‘smallmilkcountries’,suchasSlovakia.TheSlovakAssociationofDairyFarmerswillsupportmeasures,whichwillbebasedonthesamebusinessconditionsandwhichwillnotgivepreferencetoeitherindividualproductionsystemsorindividualmemberstates.Milkproducersinthemountainousregionsanddisadvantagedareasshouldbegivenseparatesensitivemeasures.Withregardtothemarketsupportmeasures,theEuropeanCommission,ontheonehand,presentsthegrowingdemandformilkanddairyproductsontheworldmarketasabigchallengefortheEuropeandairysector,butandontheotherhand,itcancelledtheexportsubsidies.Returningtothesituationoflastyear,theincreaseinpricesatalllevelsofthedairychaincausedthebigdropofconsumption.Atthesametime,farmgatepricesincreased.Suddenlytherewasoverproductionwhichaffectedtheinternalmarketandconstantlyincreasedthepressureonthewholedairysector.Finally,thereisaquestion:‘Whowillsupplytheincreasingworldmarketdemand?’TheUSFarmBill,withpaymentsformorecowsanda‘feedcostadjuster’partlysuppliestheanswer.WorldTradeOrganisation(WTO)dealsdefinitelyendangeragriculturegenerallyandparticularlythedairysector.Itisdifficulttoforecastmilkpricedevelopments.Constantlyincreasingcosts(feedstuffs,energy,fertilisers,etc.)makethemilkmarketmorevolatile,whilecrosscomplianceandthebioenergyboomdonotimprovethesituationeither.Thepertinentquestionis‘Candairyfarmerswithstandtheevolvingconditionsandsurvive?’
References
EuropeanCommission(EC),2000.CouncilRegulation(EC)No2826/2000of19December2000oninformationandpromotionactionsforagriculturalproductsontheinternalmarket.OfficialJournaloftheEuropeanUnionL328:2-6.
ResearchInstituteofAgriculturalandFoodEconomy,2008.Websiteavailableat:http://www.vuepp.sk/SlovakAssociationofDairyFarmers,2008.Websiteavailableat:www.szpm.sk
� The�cattle�sector�in�Central�and�Eastern�Europe
133
Cattle sector and dairy chain developments in Georgia, Azerbaijan and Armenia
T.�Kartvelishvili
Georgian�National�Association�for�Animal�Production,�0172�Tbilisi,�Georgia;��[email protected]
Abstract
ThisstudydescribesthepresentsituationintheGeorgiandairysectorandidentifiestheproblemsintermsoflivestockbreedingandforagesupply,milkproduction,itsprimaryhandlingandsubsequentprocessing.BasedoninformationprovidedbytheMinistryofAgriculture,DepartmentofStatisticsandotherorganisations,relevantdataisgiven,including:numberoflivestock(milkingcows),milkproduction(industryandhouseholds),dairyprocessingvolumes(industryandhouseholds),dairyproductconsumption(onanationwidescaleandannually,percapita),export-importindicatorsanddataonongoingandcompletedinternationalprojectsinthedairysector.Thoughitshouldbementionedthatfigurespublishedbystateorganisationsdonotadequatelyshowtheexistingsituationofthesectors,consequentlymakingithardtomakesufficientconclusionsoutofsuchinformation.CurrentmilkanddairyproductionandconsumptionlevelsinGeorgia,aswellasthedomesticself-sufficiencyratioarealsoanalysed.Forexample,therecommendednormforannualconsumptionis330kgofmilkpercapita,whiletheaverageconsumptioninGeorgiawasestimatedin2005at238kgandtheamountproducedbytheGeorgiandairyindustrywasjust184kg.Thedeficitbetweenconsumptionanddomesticproductionispresentlybeingfilledbyimporteddairyproducts.Together,thisdataillustratesboththecurrentunderdevelopmentofthedairyindustryinGeorgiaaswellasthepotentialforstrengtheningandexpansion.Inanalysingtheinformationcontainedinthisdocument,itbecomesclearthatthedairysectorrepresentsacriticalvalue-chaininGeorgianagricultureand,giventhatvirtually100%ofallmilkinthecountryisproducedbyfarmfamilies,onethatisparticularlyimportantforruralfamilyincomesaswellasforruraldevelopment.ThisarticlealsoincludessomeinformationaboutlivestockdevelopmentsinArmeniaandAzerbaijan.Azerbaijanisanancientlivestockcountry.ThoroughchangeshaveoccurredinthelivestockofAzerbaijanduringlast12years.Forthepurposeofcattlebreeds’development,thedistrictsinAzerbaijanaredividedinto3zones:adairy-productionzone,adairyandmeat-productionzoneandameat-productionzone.TheArmenianAgricultureconsistsoftwomainsub-branches:agriculture(plantgrowing)andlivestockbreeding,whichintheirturnaredividedintovarioussmallersub-groups.MostagriculturalproductioninArmeniaisdirectedtowardscrops,whichin2007accountedfor64%ofgrossagriculturaloutput.Themajorityofcattlebreedingintherepubliciscarriedoutbyandbasedonextensivemethods.
Keywords:�cattle�sector,�dairy�production,�dairy�processing
Developments in Georgia
Introduction
Georgiahasavastuntappedagriculturalpotential,infact,somuchthatitcouldincreasefivefolditsvalueofcropproduction.Yet,inordertorealisethispotential,thenationalsofacesvastchallengesthatcanslowifnotactuallypreventtheattainmentofanygoalssetforthesector.
The�cattle�sector�in�Central�and�Eastern�Europe
134
GovernmentofGeorgiahasthreebroadgoalsforthenation–economicgrowth,civilorderandpovertyalleviation.NowourvisionistobecomeanationwhereallGeorgianshaveaccesstoasafe,affordable,nutritiousfoodsupplywherethosewhoprovidefoodandotheragriculturalproductscandosoprofitably,safelyandwithdignityandrespect,wherethebeautyandfunctionofthenaturalenvironmentismaintainedandenhancedandwherenationalsecurity,employment,socialandobjectivesforfoodandagriculturearemet(TheGeorgianNationalFoodandAgricultureStrategy,2006).TheabilitytodevelopGeorgia’sagriculturesuccessfullywillbehighlydependentonthesector’sexternalfactors.Themoreimportantoftheseincludeeconomicanddemographicconsiderations,social-politicalandinternationalfactors,andconsumerandretailtrends.
Economic considerations
EconomicallyGeorgiahasmadeconsiderableprogressoverthepastdecade.Oneofthemostsignificantaccomplishmentsisthat:• realGDPhasnearlydoubled;• therealvalueofexportsisupapproximately150%;• thegovernmentexpendituresincreasednearlyfivefoldinonlytenyears;• inflationisnowundercontrol;• realaveragemonthlysalarieshaveincreased;• allsectorsoftheeconomyseemtobegrowingorhaveatleaststoppedanyfurtherdeclinesfrom
Sovieteralevels(exceptmining);• expendituresoneducation,healthcareandinfrastructurehaveincreasedexponentially.Thereisareasonableoptimismwithingovernmentthattheeconomicprogressoftherecentpastwillcontinueintothefuture.Infact,thegovernmentfeelsthatrealeconomicgrowthinthe5.0-7.5%rangeannuallyisarealisticexpectationforthecomingyears.Nevertheless,governmentforecastsontheeconomicgrowth,budgetaryapproachesandcurrentstructureofeconomyhasproblemfactors.IfthesefactorswillinfluenceefficiencyoftheGeorgianeconomyandthegovernmentpolicythatcurrentoptimisticeconomicprospectitwillnotbeprobabletobecarriedout.TheRussianembargosince2005onfoodandagriculturalproductsfromGeorgiahassignificantnegativeimplicationsforthecountry.UnfortunatelyforGeorgia,becauseoftherelativesizesofthetwoeconomiesandgiventheglobalisationoftheworldeconomy,RussiacantakepoliticalactionswhichaffectthefoodandagriculturesectorofGeorgiasignificantly,butdohaveaminimalornoaffectoneitherthelargercountry’seconomyoronitsconsumers.
Demographic considerations
DemographicallythreefactorsstandoutinGeorgia:• thenationalpopulationhascontinuedtodeclinethrough2005;• thepopulationonaveragehascontinuedtoage;• naturalpopulationincreaseisapproachingzero.Thereisaveryinterestingdemographic-economicphenomenoninGeorgiathatisfairlytypicalofcountrieswithstrongfamilyties,underhighunemploymentandnosocialwelfaresafetynet.Inmanyrespects,thisinterdependencyispositivesinceithelpsprovideasocialwelfaresafetynetaswellasprovidingatleastlimitedcapitaltotheunderfinancedfarmsector.
� The�cattle�sector�in�Central�and�Eastern�Europe
135
Social-political factors
Thegovernmentissupportingruralandremoteareadevelopmentinitspublicpronouncementsanddiscussionswithdonors.However,theseprioritiesdonotseemtobewidelyheldoractivelypursued.Somegovernmentallimitedreactioninareaswhereunemploymentandhighpovertyexiststakesplace,whenanaturaldisasteroccurs.Thesesituationscannottotallybeignored.However,innoneofthesesituationshasacoherentlongertermstrategybeenbuildupforidentifyingandassistingareaswithchronic(butnotcrisislevel)povertyormalnutrition.Todate,theprimaryapproachofthegovernmenttoaddressexistingorpotentialsocialorpoliticalproblemshasbeentofocusontheprivatisationofpublicassets,thedevelopmentoftheenergyandroadssectors,theeliminationofonerouslawsandregulationsandtheincreasedfundingofeducation.Theapparenthopeisthatthispolicywillbesufficientlystimulativesuchthattheeconomicgrowthtargetwillbemet.Thisgrowthinturnwouldhopefullygenerateincreasedemploymentandimprovedincomessufficientlytodampenoreliminateanypotentialsocialorpoliticalunrest.IngeneralthisapproachofGeorgiangovernmentisnotanunreasonableone.Thenationhaslimitedresourcesandvirtuallyunlimitedproblemsorneeds,problemsandneedswhichcannotallbeaddressedequallyandsimultaneously.Withrespecttoagriculturespecificallyandruraldevelopmentingeneral,thegovernmenthasbeentakingarisk.Atthistime,agriculturalonlyreceivesabout1.5%ofstatebudget.Ofthis,roughlyhalfwasprovidedindirectlybytheEUFoodSecurityProgram(FSP)budgetarysupport.Thus,lessthanhalfof1%ofthestatebudget,providedfromGeorgianrevenues,goestoagriculture.Thisimpliesasectorthatcomprises16-20%ofGDPandprovidesover50%ofemploymentdirectly.Whenproductioninputs,processing,wholesaling,transportation,governmentservicesandotherdependentorpartiallydependenteconomicactivitiesarealsotakenintoaccount,pluswhenotherappropriateeconomicmultipliersareapplied,itisnotunlikelythatatleastone-thirdofthetotaleconomyandover55.3%ofnationalemploymentisdependentonagriculture.Whentheeconomycollapsedafterindependence,thelandwasdistributedandleasedingenerallysufficientquantitiestoenoughpeopletoinsurethattherewasnotalargeportionofthepopulationwithanymeansofsupport.Thestructureofagriculturallandownershipunderwentasignificanttransformationinthefirststageoftheagrarianreforms.Afterthelandreforms,aboutonemillionhouseholdsbecametheownersofnearly30%oftotalagriculturalland.Asaresult,overhalftheworkingpopulationcouldsupportitselfatsubsistencelevelthroughfarming.Withoutthispolicy,therewouldlikelyhavebeenamuchlargerunemployedurbanworkforcewithsignificantpotentialforsocialandpoliticalunrestandevenviolence.Itisunclearwhetherthecontinuationofgovernment’sapproachtotheagriculturalsectorwillremainsociallyandpoliticallyviable.
International factors
GeorgiaispresentlypartoftheWTO.Theserelationshipsimposevariousrestrictionsthatmaylockthecountryintounfairagriculturalcompetitionwithexistingmembernations,especiallythosemoredevelopedmemberswithhighlysubsidisedfarmsectors.Georgiadoesnothavetheresourcestoprovidesimilarsubsidies,butitwillnotbepermittedtolevytariffstomitigateagainstsuchsubsidies.Ontheotherhad,membershipinsuchorganisationsdoesprovedcertainprotectionsforGeorgiawhenitistryingtocontrolitsbordersfromdumpingofsubstandardorunfairlypricedproducts.Italsoprovidesameansbywhichitsexportedproductscanmorefairlycompeteandprotectedfrominfringementsabroad.
The�cattle�sector�in�Central�and�Eastern�Europe
136
Yet,regardlessofwhetherGeorgiaisamemberofWTO,theEUoranyothersimilartreatyorinternationalaffiliations,ifithopestocapitaliseonexportmarkets,itsagriculturalsectormustincreasinglybeabletomeetinternationalstandards.LogicallyGeorgiamustrecogniseanddefendsuchlawsandstandardsonproducts,whichitexports.Realistically,thismaynotbesufficient.CertainsegmentsofGeorgia’sagriculturearealreadyhighlydependentonexportmarkets,likemandarins,apples,greens,nuts,wineandmineralwater.Infuture,itisexpectedthatthiswillbecomeincreasinglysoforotherproductsaswell.Withexports,onefacesnotjustmarketuncertainties-butpoliticaluncertaintiesaswell.(e.g.Russia)
Key factors of Georgian agriculture
KeyfactorsforGeorgianagricultureareproduction,nutritionandconsumption,capital,trade,farms,employment,income,agricultureandmarketknowledge.
Production
• Nearly17%ofnationaleconomyisdirectlydependentontheagriculturalsectorandindustry.Duetothemultipliereffect,possiblymorethan30%.
• Afterdecliningsignificantlyfornearlyadecade,therealvalueofthefoodandagriculturalsectorhasbeguntoincreaseslightlyoverthepastsevenyears.
• Livestockproductionhasbeenslowlybutsteadilyincreasingformostcategories.• Cropyieldontheaverageareonly1/3oftheirpotential.• Approximately1/3ofarablelandisnotinproduction.
Nutrition�and�consumption
• Over60%ofconsumerincomeisspentonfood(vs.15-20%intheWest).• Nearly50%ofpopulationconsumeslessthantheFAOminimumrecommendedlevelof2,100
caloriesperday.• Over25%ofpopulationconsumeslessthan1,600caloriesperday,whichisconsiderablybelow
FAO’sabsoluteminimumof1,800calories.
Capital�
• Currentcapitalutilisationinthefoodandagriculturalsectorisestimatedtoexceed600millionGEL(1GEL=0.53EURO).
• Eventualcapitalrequirementsforthissectortoreachitsfullpotentialareexpectedtoexceed2billionGEL,itmeansthatshortfallofnearly1.5billionGEL.
• Duringthenexttenyear,approximately900millionGELwillberequiredforthenationtoattainitsgoalforthefoodandagriculturesector.
Trade
• Thereportedrealvalueofagriculturalexportshasbeenincreasinglyofimportancetothecountry.• Foodandagriculturalimportsare50%greaterthanexports.• ThecountryisoverlydependentonexportstoRussiaforvirtuallyallfoodandagriculture
products.
� The�cattle�sector�in�Central�and�Eastern�Europe
137
Farms,�employment�and�income
• Georgiahas657,542farmswithanaveragesizeof1.48hapriortothenextphaseofprivatisation,afterwhichtheaveragefarmsizewillbe1.70ha;
• Presentlythereare16,000farmsof4haorgreater,buttheserepresent40%ofallcroplandinprivatehands(ownedorleased).
• About55%ofthenationallaborforceispresentlyemployedinagriculturevs.only25%in1990;NowadaysinGeorgiathemostagriculturalproductionisproducedbyhouseholdfarming,whichisorientedonself-provisionandischaracterisedbythelowlevelofproduction(Table1).Householdersaresmallandmediumoutputscaleandfragmentary.Smallhouseholdfarmspredominatethroughoutthelivestocksphere(Table2).Onaverage,farmershave1-9cows,aswellaspigsandpoultry.Todayfarmerspossess1.48hectares,wheretheyproducevegetables,fruitandgrains(maize,sunflower,barleyingeneral)bothfortheirownconsumptionandforsale.Theselandsareprivatisedandareonlyarable.Inthisregardtheuseofsuchlandforpastureisn’tappropriateandproductionofforagegrainsissmall.Livestocktendstograzeonpastureswhicharecommunitypropertyofthewholevillage.Intheevening,theanimalsgobackhomeandthefarmerhastoprovideadditionalfeedbyfromstoredgrain.Veryfewfarmersareabletofeedlactatinganimalsproperly.Duringwinter,especiallyintimesofsnow,animalsarehousedinspecialbarns(usuallyforbetween1-3monthseachyear).Duringthisperiodtheanimalsarefedbyhayandsometimesthedietisenrichedwithwheatbran,sunflower(inKakhetiRegion)orsoy-bean(inSamegreloRegion).Generalanimalhealthsuffersgreatlyduetopoordietduringthewinter.Advanceddairyfarmerspossessmoreanimals.Theseadvancedfarmersdorealisethenecessityofimprovedfeeding,richforageandconcentratesfortheanimalsduringthewinter.Regardlesstheabandonedpasturesandtheshortageofthefoodstocks,developmentandcultivationofthenaturalpasturesarenotyetpracticed.70.7%ofthevalleysand95.3%ofthepasturesarenotprivatisedandareyetunderstateproperty-therefore,theyarenotproperlycaredforanddeveloped.Productionofforageandsilageforwinterisaswelllimitedduetothelackofappropriateinputs.
Table 1.TotalnumberofholdingsanditsstructurebyholdingtypeinGeorgiain2007(StateDepartmentofStatistics,2007b).
Allholdings Familyholdings Agriculturalenterprises OthertypeholdingNumberofholding 657,542 656,247 720 375Structure% 100 99.8 0.1 0.1
Table 2. Numberofholdingsbysizeoffarmexpressedinnumberofcattle(w/obuffalo)inGeorgiain2007(StateDepartmentofStatistics,2007b).
1 2 3-4 5-6 7-9 10-14 15-19 20-29109,513 129,826 106,145 31,938 12,814 6,590 1,399 87030-49 50-69 70-99 100-199 200-299 300-499 500-999 >1000519 191 91 38 7 1 1 -
The�cattle�sector�in�Central�and�Eastern�Europe
138
Agriculture and market knowledge
Historically,Georgiaislocatedinaregionintheworld,wherethemostagriculturallyprogressivecountrieswereseveralgenerationsago.InpresenttimeGeorgiadoesnothaveeffectivenationalresearch,education,extensionormarketinformationsystems.AgriculturalResearch,EducationandExtension(AgREE)systemsarepracticallydisorganisedandtheirexistenceisnotmeaningful.Unfortunately,Georgian’sAgREEsystemhasprogressedonlyminimallytowardsmeetingtheneedsofthenewfarmingsector.Thus,itmustbeexpectedthattremendouschallengeswillbefacedingettingAgREEinstitutionaldevelopmentstartedontherightcourseandoncestarted,inkeepingitontrack.
The cattle sector
Cattlebreedingistheancientandtraditionalfieldofagriculture.InGeorgiatheindicatorsofaverageproductivityofcattlewerelowevenduringthepreviousperiodofcrisisin1989.Theaveragemilkyieldofcowsinallcategoryfarmsofthecountrywas1,275kg,thepopulationofcowswas588,000andatotalof714,000tonsofmilkwasproduced.DuringtheSovietperiodcattle-breedinggavetherepublicmorethanhalfoftotallivestockproduction(incurrency).From1990on,thetransitionfromthecentrallyplannedeconomytothemarketeconomycausedcrisisthat,onitspart,resultedinreductionofthenumberoffarmanimals,lossoftheirproductivityandlossoftheanimalproductionindustry(Table3).Afterthevividdecreaseinnumberofanimalssince1991,therehasbeenalittle,butstableincreaseprocess,whichhasmainlyincreasednumberofcows.InGeorgiathisisconditionedbyarelativedevelopmentofthedairysector,whichisstimulatedbygovernmentsupporttofarmersforimportedcowsfromEUin2007.
Most�important�animal�products
Thefollowingspeciesareutilisedinprimarylivestockproduction:cattle,pigs,sheep,goats,poultry,fishandbees.Cowmilkispredominantinmilkproduction,whileporkandpoultryareequallyrepresentedinmeatproduction.Locallyadaptedbreedsfulfillamuchlargerroleinalllivestocksectorsthanmodernimportedbreeds.Thereasonisthathighproductionbreedsaresimplynotimported.Nevertheless,theproductivityofthelocalbreedsislow,becausethebreedsaredegenerated.Themostimportantprimarylivestockproductsaremeat,milk(Table4),eggs,fishandpoultry.Georgianregionsdifferinrespectofsignificanceoftheseproducts.Theimportanceoftheseproductsrelatestoparticularregions,dependingongeographic,socialandeconomicstatusandmanagementofnaturalresources.Inlastyearstherehasbeenasignificantreductioninlivestockproductsexport,sincewearenotself-sufficientinlivestockproduction(Table5).Socialdifficultiesandprivatisationprocesseshavesubstantiallycontributedtothedeclineinlivestockproduction.
Table 3.ChangesinofcattlepopulationinGeorgiaintheperiod1996till2007(×1000)(StateDepartmentofStatistics,2007a).
Cattle Ofwhichcows1996 2004 2007 1996 2004 2007973.6 1,242.5 1,128.9 551.7 728.0a 571.4aThenumberofcowshassharplyfallenin2005-2006andthenincreasedagain.
� The�cattle�sector�in�Central�and�Eastern�Europe
139
Animal�health
Generallyhumanhealthisdirectlyaffectedbywhatthenationdoesordoesnotdowithrespecttolivestockdiseases.Someofthesecanbespreadwithseverehealtheffectsforhumans,e.g.anthrax,tuberculosis.Mostrecently,anewproblemhassurfacedthatofavianinfluenzaandswineplague.Becauseofthepotentialproblemsforhumanfromtheselivestockdiseases,governmentcannotsimplytakeapassiverole-cannotrelysolelyonindividualfarmerstotaketheproperstepstomonitor,treatfororeradicatesuchproblems,farmerswhogenerallyhavelittlemoneyformedicinesorvaccinesoreasyaccesstothem.Inaddition,evenwhenproducers,suchascommercialpoultryfarmerscanactuallytreatcertainlivestockhealthproblems,anotherhumanhealthproblemcanarise.Thisareacannotbelefttotheprivatesectortodoallthatisnecessarytoinsuresuchproblemsdonotsurface.Presentlygovernmenthasasysteminplaceforvaccinationsonlyincattle,butthereisnotrackingandrecordingsystemwherebyitcanbedeterminedwhenthelastvaccinationwasmade.(UnfortunatelytheGovernmentofGeorgiacancelledallstateprogramsrelatedtoepizooticdiseaseslikeFMD,anthrax,rabies,tuberculosis,brucellosis,etc.).Fortunately,whilethereareshortcomingsinthecurrentsystemforcontrollinglivestockdiseasesthatmightaffecthumanhealth,therehavebeennotproblemsofsignificancetodate.Thiscannotbereliedontocontinueindefinitely(avianinfluenzaandswineplagueisaperfectexample).Mostproblemscanbeaddressedbytheaffectedfarmertakingappropriatecontrolmeasures.However,therecanbeproblemsinlivestockwhereon-farmcontrolisnotadequateevenwithpreventivemeasuresbeingtaken.
Food�safety�
In2005GeorgiastillhadaSovietstylefoodcontrolsystemwhichdidnotworktoprotectconsumersorindustry.Ratheritwasappliedmainlyasameanofsupportingalargenetworkofinefficientandineffectiveinspectorsandlaboratories.Thefoodsafetysystemfocusedonendproductcertificationandcontrol.Withinthesystematthattime,inspectors’technicalknowledgeandskillswereoutdated(samesituationtilltoday).
Table 4.LivestockproductioninGeorgiain1996till2007(×1000tons)(StateDepartmentofStatistics,2007a).
1996 2000 2004 2007Meat 117.8 107.9 109.2 111.2Milk 530.3 618.9 780.4 857.6Eggs1 350.2 361.4 496.6 383.2Wool 3.0 1.9 2.2 2.21Numberofeggs×1,000,000.
Table 5.ShareoflivestockinagriculturaloutputinGeorgiain1996till2007)(StateDepartmentofStatistics,2007a).
1996 2000 2004 2007Livestockin%oftotalagriculturaloutput 0.45 0.52 0.50 0.52
The�cattle�sector�in�Central�and�Eastern�Europe
140
ThelawonFoodSafetyandQualitywasadoptedinDecember2005byParliamentofGeorgia(MinistryofAgriculture,2005).ThenewlawestablishesalegalframeworkconsistentwithWTOrequirementsandtheEUacquis�communautaire.Thelaunchofthereforminthefoodsafetysystemcoincidedwithamajordrivebythenewgovernmenttoderegulatetheeconomy,whichheavilyinfluencedtheprocessastowhatwasperceivedastheappropriateextentandnatureofofficialcontrolandregulation.ComponentsintheFoodlawdraftrelatingtolicensingoffoodestablishmentsregardinginternalsafetycontrolsystemsandtraceabilitywereconsideredtoprovideopportunitiesforcontinuedlawfulextortionof‘fines’fromfoodbusinesses.ApprovalofthelawonFoodandQualityisjustthefirststepinthereformprocess.Thereisnovaluetothelaw,nomatterhowgood,unlessitisproperlyimplementedandenforced.AccordingtodecisionoftheParliamentofGeorgiathelawissuspendedtill1January2010.Thus,thereisstillaconsiderabledistancetogobeforeGeorgiawillhaveanacceptableleveloffoodsafety.
Farm animal genetic resources
NowadaysthegeneticresourcesoflocalcattleinGeorgiaarerepresentedbythreebreeds:GeorgianMountainCattle,MegruliRedandCaucasianNutBrown,andalsoGeorgianbuffalo(SaghirashviliandKarttvelishvili,2006;Saghirashviliet�al.,2006)
Georgian�Mountain�Cattle
Thisbreedisoneoftheoldestbreeds,firstofallfortheproductionofmilk.Itisalsousedasbeefcattleanddraughtforce.DuringSovietperiodthenumberofGeorgianMountainCattleinthesocialsectorcomposed16.2%ofthecattletotalpopulation.PresentlyitispreservedontheSouthernslopesofCaucasusmountainrange.Theextensionzonesofthisbreedarerichofriversandbrooksheads,werarelymeetplains.Inthemostzonesofextensionthebentofpasturesreaches30-35°andothercattlecouldnotuseit,exceptGeorgianMountainCattle.GeorgianMountainCattleisverysmall,theheightinwitherofthecowisonaverage98-100cm.Itischaracterisedbylowmilkyieldintheconditionsofprimitivefeeding,butinthecaseofimprovedfeedingandcare-keepingthemilkyieldincreasesonaverageto2,000kgwith4.2%butterfat(fatness).Duringtheincreaseofmilkyield,GeorgianMountainCattlemaintainsfatpercentagecompositioninmilk.Ithasahardconstitution,endurance,milkbutter-fatandhighculinarypeculiaritiesofmeat.Themostpartofmilkproductionisrealisedduringthepasturageperiod,butaftertakingthecowonstationaryfeeding,milkyieldreducesquicklyandstops.
Megruli�Red�Cattle�
MegruliRedCattlerepresentsthebreedofuniversalusage.Itisraisedwiththecompletionoflocalsmall-bodycattlebyfarmersin60sof19thcentury.MegruliRedcattlespentsummerinalpinezonesofmountains,butinwinteritispasturedinKolkhetibogswithoutstationaryandsupplementaryfood.Innomadicconditionsthemilkyieldofthesecowswasincreasingfrom2-3to7-10liter.Thisbreedispermanentlyintheopenair,sothisfactorconditioneditsadaptabilitytowardslocalconditions,healthendurance,hardconstitutionandgoodworkingpeculiarities.Theconstitutionofthisbreedismostlytowardsthemilkproductionherd.
� The�cattle�sector�in�Central�and�Eastern�Europe
141
Caucasian�Nut�brown�(grey)�breed�
Thisbreedisoneofthemostsignificantachievementsofthezoo-technicalscienceinthe20thcentury:itmeanttheestablishmentoftheCaucasianNutBrownbreedonthebasisofjointworkoftheCaucasiancountries’scientists.ThisbreedisraisedbycrossingofGeorgian,Armenia,AzerbaijanandDagestanlocalcattlemainlytotheSwissBrownbreed.Unfortunately,consequentlytotheminimumleveloffeedandcare-keepinginintensivefromwasachievedinGeorgia,itwaspracticallyimpossibletoraisemoreproductivebreed.TheCaucasianNutBrownbreedcomposedmorethan90%ofthetotalcattlelivestockpopulationinGeorgiaduringtheexistenceofsocialfarms:thebreedwaseconomicallyjustified.Forexample:therewas1.1millionlivestockaccordingto1990data,ofwhich330,000cows.Theannualmilkyieldwas2,400-2,800kgintheconditionsofaveragefeedingwith3.8-4%fatness.Withimprovedconditionsoffeedandcare-keepingmilkyieldreached3,500-4,500kg,whilethemaximummilkyieldwas8,789kg,whichindicateshighgeneticabilitiesofthisbreed.NowadaystheamountofCaucasianNutBrownbreedexceeds95%offromthetotalcattlepopulationinGeorgia,buttheirproductiveindicatorsdonotcorrespondtobreedstandards.Thisiscausedbythefactthatbreedingfarmsdonotfunction,zootechnicalregistrationisoutoforderandartificialinseminationdoesnotexist.Therearezerobreedingfarmsinthecountry,whichfinallywillcausethedegradationoftheCaucasianNutBrownbreed.Accordingtoourdata,ananalogoussituationconcerningtheCaucasianNutBrownbreedexistsinArmeniaandAzerbaijan.
Georgian�buffalo
BuffalobreedinghasalonghistoryinGeorgia.InSouthCaucasianCountries,in1960buffalopopulationwasmorethan500,000,butthenitdeclinedandin2007wasfixedat29,541inGeorgia.Themainpartofmilkproductionisreceivedduringpasturageperiod,butaftertakingthebuffalo-cowonstationaryfeeding,milkyieldreducesquicklyandstops.Buffalobreedingisdirectedtowardswork-dairy-meat.Forthedairypartit’snearlythesameasforthelocalcattlebreeds.Thebuffalogives1,300-1,500kgmilkwithnearly7,8%fatness.Buffalodairyproductivityhasthepotentialof3,000kg.GeorgianbuffaloisliketheArmeniaandAzerbaijanbuffalosinconstitution,whichiscausedbytheclosenessoftheirextensionarea,commonoriginandsimilarityofcare-keepingconditions.
Dairy production and processing
Milk�production
CattlehusbandryismainlyconcentratedinprivatefarmsthroughoutGeorgia(Table6).Accordingly,99.9%ofthemilkproductionfallsinthissector.Enhancementofquantity,qualityandenergeticpropertiesofanimalfeedwillstimulatetheproductionofalllivestockproducts,includingmilk.Georgiahasamorethansuitablenaturalandclimateconditionsforcattlehusbandry.Todaythemilkproductionvolumeissteadilyincreasing,althoughthedatavariesbyregionandgenerallylowproductivitypercowisstillamajorproblem(Figure1).Improvementstoincreasetheproductivityoflivestockbreeds,meadowsandpastures,stimulatecultivationofthefoodcrops,introductionofeffectivetechnologyrelatedtoanimalindoorfeeding,willfurtherincreasethestableproductionofhigh-qualitymilkduringsummerandwinter.
The�cattle�sector�in�Central�and�Eastern�Europe
142
Dairy processing industry (Millennium Challenge Georgia Fund, 2006)
Owingtothepositiveeconomic-politicalstatus,appropriateinvestmentpolicyandsimplificationofthetaxsystem,thelocalproductionofmilkproductshasbeenincreasedduringthelastfewyears.In2005theprocessingvolumeofmilkandmilkproductswasestimatedat98,616tons.DairyprocessinginGeorgiaisdoneonthreelevels:• farmers/householdsprocessingmilkfromtheirownherds;• smallscalecheeseproducersprocessingfreshmilkcollectedfromadjacentfarms;• largescaleindustrialdairies,processingpredominantlyimportedmilkpowderaswellaslocally
collectedmilk.ItiscommonforGeorgianruralhouseholderstoprocessmilkathomeandsellsvariousdairyproductsintheregionalorcentralmarkets.In2005ruralhouseholdsproduced89,251tonsofdairyproducts.Mostoffreshmilkistransformedintocheeseormatsoni(yoghurttype)bythefarmersintheirhouses(Table7).Transformingfreshmilkintocheeseandmatsoniextendsthemarketingwindowforthedairyproductsandallowsfarmerstotradewiththevalue-addedgoods.Mostcheeseissoldasunbrandedlargeblock.Theretailerscutthematthetimeofsale.Thereissomelinkagebetweencheesemakersatthevillagelevelandtraders,buyinglargequantitiesatthefarmgateoratthemarketplace.However,ingeneralthedairysectorischaracterisedbyitslackofformalstructureandoftheobviouschannelsoffarmertodairyanddairytoretailoutlet.
Table 6.MilkproductivityandmilkproductionbyfarmsofallcategoriesinGeorgiain2004till2007(StateDepartmentofStatistics,2007a).
2004 2005 2007Totalmilkproduction(×1000t) 780.4 787.7 857.6
Byhouseholds 779.6 786.7 856.8Byagricultureenterprises 0.8 1.0 0.8
1,033 kg
1,048 kg
1,196 kg
2005 2007 2004
Figure 1.MilkproductionlevelinGeorgiafrom2004till2007(averageannualyieldpercowinkg)(StateDepartmentofStatistics,2007a).
Table 7. DairyproductsprocessedbyhouseholdsinGeorgiain2005(StateDepartmentofStatistics,2005b).
Matsoni Sourcream Cottagecheese Cheese Curd ButterTotal(tons) 34,587 256 1,508 49,095 4,372 2,433
� The�cattle�sector�in�Central�and�Eastern�Europe
143
Thereareanumberofsmall-scalecheeseproducersthroughoutthecountrywiththecapacityofprocessingonetofivetonsofmilkperday.Theycollectmilkfromtheirneighbours;produceSulgunicheese(Mozzarellatype)inabasementofavillagehouseadjustedtosuchprocessingoperationandsellcheeseinTbilisiorinacentraltownoftheregion.Thesesmallprocessorsusuallyemploy5-8people;howevertheyareoperatingwithoutproperregistrationandcertification.Theirproductionissubjecttoseasonalfluctuationandstopsorsharplydropsinthewinterseasonwhenmostofcowsdryoff.Shortageofmilkstimulatesanincreaseofitspriceandmakescollectionmoreexpensive.Atthesametime,thesefactorsdrivethecheesepriceup,sothatthoseprocessorswhostayinoperationduringwinterseasoncanmaintainviability.Thesmalldairyunitsusuallyhaveafewpigsandfeedwheytothem.Thisisanadvantageoverthecentralisedlargerdairieswhichwastewheyandarerequiredtoconductitsadditionaltreatmentbeforedischargingitintoasewagesystem.Itisnoteworthythatin2003thedatarelatedtoprocessedmilkanddairyproductsdidnotexceed5,559tons.In2005theproductionofmilkanddairyproductshadgoneupto9,365tons(Table8).RegardlessthenumbersofproblemsexistingwithintheagriculturalsphereofGeorgia;productionofindustrialfoodproducts(milkanddairy)hasincreasedby1.7times.Today,anumberofsmallandmedium-scaleenterprisesandseverallarge-scalemilkprocessingplantsarefunctioninginGeorgia.Largeandmedium-scaledairyplantsarelocatedinTbilisi.Theyhavemadeconsiderableinvestmentsintotheirprocessingandpackingequipmentandkeeptheproductqualityhigh.Thelackoftheappropriatecoolingtanksandrefrigeratedtrucks,poorconditionofruralroadsandthefragmentationofdairyfarmsinhibitthecollectionofrawmilkfromregionstotheprocessingplants.Products,principallymatsoni,milk,sourcreamandcottagecheese,aresoldtosupermarketsandsmallshopsmainlyinTbilisiandothercities.Dairyfactories’productionismainlybasedonreconstitutedpowderedmilk.Onlyfewofthemareprocessingrawmilk,althoughsignificanteffortsaremadebysomeprocessorstoincorporatelocalnaturalmilkintheirproducts.Thistendencyisfurthersupportedbyeconomicconsiderations.Asprocessorsspecify,productionondrymilkcostsmorethanpurchaseandtransportationoffreshmilktheremoteregionsinthesummerwhichareontwo-threehoursdrivedistancefromTbilisi.Milkcollectiondropsinwintertimewhenmostofcowsdryoffandthosewhodon’t-dropmilkyieldsbyhalfduetopoorfeedandtemperaturestress.Reducedsupplyofrawmilkdrivesthereforemostoflargedairyplantsceaserawmilkcollectioninwinter.PursuanttodatafromtheDepartmentofStatistics(inyear2005),thelargestshareinmilkproductsrepresentedimportedmilkandmilkproducts:cream,concentratedmilkandmilkpowder.
Table 8. DynamicsofdairyproductionindustryinGeorgiain2003till2005(tons)(StateDepartmentofStatistics,2005a).
2003 2004 2005Freshandprocessedliquidmilkandcream 721 940 1,067Cheeseandcurds 323 412 559Butter 284 682 1,159Matsoniandotherproducts 1,643 2,190 3,075Othermilkproducts 2,588 3,256 3,505Total 5,559 7,480 9,365
The�cattle�sector�in�Central�and�Eastern�Europe
144
Milk�and�dairy�products�consumption
Georgiahasonlynowobtainedthepossibilitytoproducemoreproductthanitisconsumedlocally.Neithertheappropriateinputnorthevaluechains(startingfromtheagriculture,passingthroughtheprocessingandtradecyclesandaddressingtothefinalconsumer)areavailableyet.Inadditiontothat,thequalityandsafetylevelofthefoodproductdoesnotcorrespondtothestandardsthataredesiredbytheprocessingindustryandthefinalconsumer.Theseproblemsarestillpainfulduetoshortageoffunds,unavailabilityoftheproductioninput,etc.Theseobstacleshinderthedevelopmentoftheagriculturalsector.Incomparisonwiththepreviousyears,in2005theconsumptionofmilkandotherdairyproductsdecreasedduetoanincreaseinpricerangingfrom50%-150%(Table9).Itshouldbealsonotedthatpercapitaconsumptionofmilkanddairyproductshasbeendecreasedfrom242to238kgduring2003-2005(Figure2).Duringthesameperiod,thelocalpercapitaproductionofthedairyproductsamountedto176to184kg.Theself-sufficiencyrationvariesbetween71%and75%accordingly.Accordingtothephysiologicalnorms,therationalpercapitaconsumptionofmilkanddairyproductsshouldtotalto330kilogramannuallyinGeorgia.Therefore,itwillbethebesttostimulatetheproductionandconsumptionoftheseproducts.
Table 9. MilkanddairyproductsconsumptionbyhouseholdofGeorgia(intons)(StateDepartmentofStatistics,undated).
2003 2004 2005Freshandprocessedliquidmilkandcream,milkpowder 230,800 228,600 228,600Cheeseandcurds 46,300 45,100 42,900Butter 7,000 7,200 7,200Matsoniandotherproducts 37,200 37,700 39,300Otherdairyproducts 5,300 5,400 5,500Intotal 326,600 324,000 323,500
73 71 75
176 181 184
238 242 242
2007 2004
2006
Consumption, kg
SSR %
Production, kg
Figure 2. Dairyproduction(kg),consumption(kg)andself-sufficiencyratio(SSR)(%)(StateDepartmentofStatistics,undated).
� The�cattle�sector�in�Central�and�Eastern�Europe
145
Import�of�products
Tosatisfythehighandsteadydemandonrangeofhigh-qualityanddiversedairyproducts,mostoftheseproductsareimportedtoGeorgia.Toimprovethecattlebreeds,8,000headsofcattlearedeliveredintothecountryin2004-2008(Custom’sDepartmentdata).Importofmilkanddairyproductssince2003isincreasing(Figure3).
Export�of�products
InlinewiththedataretrievedfromtheStateDepartmentofStatisticsasof2008,theshareofcattleexportisveryinsignificantwithintheoverallexport.In2006and2007theshareequaledtozero.Milkanddairyproductsexportislessascomparedwiththedataof2004(Figure4).
05,000,000
10,000,00015,000,00020,000,00025,000,00030,000,00035,000,00040,000,00045,000,000
2004 2005 2007
Import
kgUSD
Figure 3. DairyproductimportintoGeorgiain2004-2006(kg,US$)(Custom’sDepartment,2006).
2005 20072004
01,000,0002,000,0003,000,0004,000,0005,000,0006,000,0007,000,0008,000,0009,000,000
10,000,000Export USD
Kg
Figure 4.DairyproductsexportfromGeorgiain2004till2006(kg,US$)(Custom’sDepartment,2006).
The�cattle�sector�in�Central�and�Eastern�Europe
146
International projects
DuringthelastfewyearsseveralinternationalprojectswereimplementedinGeorgia.Theprojectssupporteddevelopmentofmilkandmilkproductionsectorandexploredthestablemarketsthereof.Themostimportantwasthe3-yearprojectimplementedbySIDAthatwascompletedinOctober,2005.Undertheproject,thespecialtrainingswereconductedtorefinetheskillsoffarmersandmilkproducers,finallyleadingtostimulationofmilkproductionandcollection.Duringthecompletionperiod,theprojectwasmainlyorientedonmilkqualityandproductionsystem.Undertheproject,theinformationalandmarketingserviceswereprovided.DuringtheimplementationperiodofScanagriproject‘Fromcowtoconsumer’,twomilkcollectioncentreswereestablishedinEastGeorgia.Theprojectalsocarriedoutamarketingprogramwhichincludedfarmerstraining,capacitybuilding,raisingofpublicawarenessaboutmilkconsumptionthroughadvertisingcampaign,etc.Despitementionedresults,uponthecompletionoftheprojectterms,sometasksoftheprojectremainedundonewhichplayedthedecisiveroleintheselectionofOPTOInternationalastheimplementingorganisationofthesecondphaseofSIDAassistanceinGeorgiandairysector.From2005,OPTOInternationalisdeliveringtheproject‘DairysectorsupportinGeorgia’intodifferentregionsofGeorgia.Theprojectsupportsthesmallandmedium-scalemilkproductionenterprisesanddairymarket.Asoftoday,sixmilkcollectionandtwomilkproductionenterprisemainlyfocusedonproductionofcheeseandMatsonihavebeenfoundedundertheproject.Theprojectwillprovideassistanceintermsofoverallequipmentandoutputsale;namely,OPTOhasanagreementwiththelarge-scalemilkproducerenterprisesonpurchaseofthemilkfromthecollectioncenters.Todaytheequippingprocessisunderway.Inadditiontothat,theprojecthasestablishedamilkcollectioncentreinSouthOssetia.
Conclusions for Georgia
Pursuanttothetrendsdescribedabove,fordevelopingthedairysectoritisnecessarytofocusonthefollowingfactsanddirections(advicespartlyderivedfrom‘Dairy�production�and�processing�in�Georgia,�2006.�Millennium�Challenge�Georgia�Fund’):• Nearly17%ofnationaleconomyisdirectlydependentontheagriculturalsectorandindustry;
duetothemultipliereffect,possiblymorethan30%.• Afterdecliningsignificantlyfornearlyadecade,therealvalueofthefoodandagriculturalsector
hasbeguntoincreaseslightlyoverthepastsevenyears.• Livestockproductionhasbeenslowlybutsteadilyincreasingformostcategories.• Cropyieldontheaverageareonly1/3oftheirpotential.• Approximately1/3ofarablelandisnotinproduction.• Improvementstoincreasetheproductivityoflivestockbreeds,meadowsandpasturesareneeded:
stimulatingcultivationoffoodcrops,introductionofeffectivetechnologyrelatedtoanimalindoorfeeding,andincreaseofastableproductionofhigh-qualitymilkduringsummerandwinter.
• Thereisahighandstabledemandonmilkanddairyproductsinthecountry.• Thesectorhassolidpotentialofdevelopmenttoreplacetheimporteddairyproducts.Intotal
323,500tonsofmilkandmilkproductsareconsumedinGeorgiaannually,whileproductionoftheindustrialoutputtotalsto98,616tons,therefore,tosatisfythelocaldemandanadditional224,884tonsofmilkanddairyproductsarerequired.
• Thesmallandmedium-scalelivestockfarmsshouldbeconsolidatedandenlargedandthepackaging-storagefacilitiesshouldfunctioninordertoexploreandobtainstablemarketsformilkanddairyvalue-addedproducts;moreover,newtechnologiesshouldbeintroducedandtheenterprisesmodernised.
� The�cattle�sector�in�Central�and�Eastern�Europe
147
• Acentralisedmarketingnetworkshouldbecreatedthusassistingthefarmersandentrepreneurstouninterruptedlysupplythemilkanddairyvalue-addedproducts.
• Milkcollectionfrommanysmallfarmersisassociatedwithhugeexpenses,thusmakingthepriceuncompetitivefortheproducers.Therefore,processorsprefertodealwiththelarge-scalefarmsand/orutilizeimportedmilkpowder.Establishmentofthemilkcollectioncenterswillbenefitnotonlythesmallfarmersbutthevalue-addedenterprisesaswell.
• Theprocessingenterprisesshouldbeestablishedinthedistrictsspecializedindairyfarming.• Intermsoffoodsafety,thedocumentationconfirmingtheappropriatequalityshouldbeattached
totheproduct.Inordertoproduceasoundproduct,theveterinaryservicecentersshouldoperateineachregion.ThebestscenarioisiftheywilloperatewithintheFarmServiceCenters.Themilkanddairyproductsshouldpassthelaboratoryanalysis.
• Thevaluechainshouldbeformedinsuchawaythatitstartsfromthebasis(farms),passesthroughtheprocessingindustryandtradeandisaddressedtothefinalconsumer.
Developments in Azerbaijan
Introduction
OneofthemaingoalsforAzerbaijantodayistoreducethedependencyoftheeconomyonoilandassureanexpansionofeconomicdevelopmenttotheruralareas.BeingthethirdbiggestsectorintheAzerbaijanieconomyafteroilandconstruction,agriculturepossessesthebiggestshareofemployment(in2006,39.1%oftotalemployedpopulationwasworkinginagricultureandonly1%intheoilsector).Agriculturehasalsoahugeinfluenceonpovertyreductioninruralareas.Asresultoftheagrarianreformsimplementedsince1995,marketrelationshavebeenestablishedinthedomesticeconomy,landandpropertyareeffectivelyused,thefieldstructureoftheagrariansectorhasimproved,entrepreneurshiphasimproved,andtheappearanceofvillageshaschanged.Todaythenumberofagriculturalproducersis1,208.700,ofwhich99.98%iscomprisedofprivate,and0.02%ofpublic,farms.Inaddition,thereare78,648cottagefarmsdealingwithproduction,processingandsaleofagriculturalproducts.Intotal,66.8%ofspecialisedagriculturalproducersarefamily-villagers,32.8%arehousekeepersand0.2%arefarmers.In2007,agriculture,huntingandforestryaccountedfor7.1%ofgrossdomesticproduct(GDP).In2007Investmentinagriculture,huntingandforestryincreasedby42%comparedwith2005.Thebudgetallocationtoagriculture,fisheryandforestryincreasedby3.5%incomparisonwith2005to37.2%.Thetotalareaoflandownedandrentedbyagriculturalproducersis2,324,200ha(69.3%family-villager,11.4%housekeepingand2%farming).Eachagriculturalproducerhasonaverage1.92haoflandarea.Notwithstandingthepositiveresultsofthelastyear,therearestillseveralproblemsintheagrariansector,suchasinthefieldofcattlebreeding(weakartificialinseminationstationslow-levelofsupplywithequipment,seed,liquidnitrogenandspecialvehicles).Fundamentalactionsareneededtoimprovethefeedbase,tominimisethedelayinimplementationofasetofactionstoimproveprivatepoultryfarmsandpoultryfactories,toassureproperveterinarycontrolofanimalproduction,processing,procurementandinimportofanimalproducts,andimprovingthereproductiveefficiencyofanimals.
Cattle sector
Azerbaijanisanancientlivestockcountry.Atpresent,99.5%ofcattleand100%ofpoultryareinfarmers’andcooperatives’handsandonly0.5%ofcattleisintheownershipofthestatecompanies(Figure5).
The�cattle�sector�in�Central�and�Eastern�Europe
148
Aftertheagrarianreformshadtakenplace,asteadilygrowingnumberofcattleandpoultrycanbeobserved.Theproductionofalltypesoflivestockincreasedappreciably.On1January2008,therewere2,512,000cattleintheRepublic,including1,215,000cowsandbuffalos(Table10).Therelativedensityofbreedingherdsis47.8%fromgeneralstock,whereasintheSovietperiodthisparameterdidnotexceed26%.Now,thenumberofcattleandsmallruminantsconsiderablyexceedeventhehighestnumbers,inprevioustimes.Todaythereareonaverage2.3cattle,including1.1cowsand7.5sheepineachfamily.Lastyear,productionamountedto294,000tofmeatliveweight,1,341,000tofmilk,and871mofeggs(Table11).AccordingtotheFoodSafetyprogram,thepercapitaconsumptioninAzerbaijanwas,onaverage,22kgmeat,179kgmilkand97eggs.Ofcourse,thisisfarbelowtherecommendednutritionallevelofconsumptionoflivestockproducts.Thegrowthofproductionoflivestockbasicallyhappensinanaturalway.Thenumberofcattlehasincreasedsomuchthattherearegreatdifficultiesinmaintenanceofpasturesbecauseofovergrazing.Milkyieldpercowisalittleover1,130kg.Duetoproductionproblemsfrom1990son,breedingofcattledeclinedconsiderably.Duringthetransitionalperiodofagrarianreforms,thecattlebreedingsystemwasletdriftandnootherworkwascarriedon.Forthepurposeofcattlebreeds’development,thedistrictsinAzerbaijanaredividedinto3zones:adairy-productionzone,adairyandmeat-productionzoneandameat-productionzone(GeneticResourcesInstituteofNationalAcademyofSciencesofAzerbaijan,2006).
Private holding
State breeding enterprises
Figure 5.StructureofholdingsinAzerbaijanin2007(AnGRNC,2008b).
Table 10.ChangesinofcattlepopulationinAzerbaijanintheperiod2004to2007(×1000)(AnGRNC,2008b).
Cattle Ofwhichcows2004 2006 2007 2004 2006 20072,293.6 2,445.2 2,512.2 1,007.5 1,184.1 1,215.7
Table 11.LivestockproductioninAzerbaijanin2006and2007(×1000t)(AnGRNC,2008b).
2006 2007Meat 274.2 294.5Milk 1,300.6 1,341.2Eggs1 761.6 871.0Wool 13.6 14.01Numberofeggs×1,000,000.
� The�cattle�sector�in�Central�and�Eastern�Europe
149
Farm animal genetic resources
Thereare27breedsofcattleinAzerbaijan,twoofthemarelocalbreeds:CaucasianNutbrown(grey)breedandRedKazakhcattle,besidesthereare2breedsofbuffalos(oneofthemislocal)andlocalbreedofzebu-AzerbaijanZebu(GeneticsResourceInstituteofNationalAcademyofSciencesofAzerbaijan,2006).
Red�Kazakh�Cattle
Thisistheproductoflocalselection.Itscolorisgolden-red,sometimesdark-red.Kazakhcattlearerobustandareofgoodconformation.Theudderhasaregularshape,andtheanimalisresistanttovariousdiseases.Ithasgoodstamina,istoleranttoharshlocalconditionsofmanagementandhasrelativehighfertility.Themilkyieldofcowsperlactationis1,900-2,000kgwithafatcontentof4.2-4.6%.Theaverageliveweightofcowsreaches380-400kgandbullsweigh450-500kg.Calvesgiveover50%meats.
Azerbaijan�Zebu
TheAzerbaijanZebuisoneoftherarespeciesofanimalsfoundintheRepublic.Itscolourisblackanddark-brown.Youcanseeahunchonitsback.Azerbaijanzebuanditshybridsareveryrobustandsuitedtolocalmanagementconditionsandresistanttodiseases.Theyarewelladaptedtolocalmanagementconditionswhichhavereinforcedandperfectedcertainbiologicalfeaturesincludingtheirprecocity.TheAzerbaijanZebureaches300-350kgliveweightandgivesabout58.8-60%ofitsweightasmeat.TheZebucowgivesover500kgofmilkperlactationwith5-6%offat.
Azerbaijan�Buffalo
Asaresultofalongandintensivegeneticselectionandlivestockbreedingprocess,togetherwiththecreationofgoodandbeneficialconditionsforfeedingandmanagingthecattle,theAzerbaijanbuffalo’squalitypotentialhasbeensignificantlyimproved.Theproductionofafemalebuffalois1,300-1,500kgmilkperlactationwith8-12%fat.Theaverageliveweightofthebuffaloreaches400-500kgforcowsand800-1000kgforbulls.
Conclusions for Azerbaijan
• CattlehusbandryisthemostsignificantfieldofagricultureinAzerbaijan.• InAzerbaijanthepurposefulagriculturalreformshavecreatedarealpotentialforreorganising
thepedigreelivestocksectorinconformitywiththeneweconomicalconditions.• ThelivestockproductioninAzerbaijanmeetpeople’sdemandintheinternalmarket.• InAzerbaijan,thewelladaptedbreedstolocalconditionandrationalbreedingbythefarmers
arestrongpointsforagooddevelopmentofthecattlesector.• Aweaksystemofartificialinseminationisabigprobleminthecattlebreedingsectorin
Azerbaijan.
The�cattle�sector�in�Central�and�Eastern�Europe
150
Developments in Armenia
Introduction
AgricultureiscarriedoutmainlyinthevalleysandmountainsidesofArmenia’suneventerrain,withthehighestmountainpasturesusedforlivestockgrazing.Only17percentofthecountry’slandissuitableforfarming,whichseverelylimitsagriculturalproduction.Fertilevolcanicsoilallowscultivationofwheatandbarleyaswellaspasturageforsheep,goats,andhorses.Despitethelimitationsofthissector,agricultureprovidesthelargestsourceofincomeforArmenia.Agricultureinpost-SovietArmeniareflectstheresultsoftheprivatisationofcollectivefarms,thedistributionofthatlandtotheworkers,andthelargeunemploymentresultingfromclosedfactories.Grossagriculturalproductionhasnotchangedmuchsince1990.Arablelandandorchards,previouslyfarmedasaunitdedicatedtoonecrop,nowproduceavarietyofproducts.LandholdingsbyruralArmeniansrangefromonetothreehectaresonaverage,oftencomprisedofsmaller,non-contiguousparcels.Asaresult,farmingthesesmallplotsisveryinefficient.Onthebrightside,Armeniaisblessedwithmultipleagronomiczones,conducivetoproductionofarangeofcropsandanimalproducts.Thereareextensivehighmeadowssuitableforgoatsandsheep,whichcansupplythemilkforavarietyofgoodcheeses.Agriculturalproductionisheavilybiasedtowardcrops,whichin2007accountedfor64%ofgrossagriculturaloutput.TheagriculturalsectorremainsanimportantcontributorinArmenia.Notincludingfoodprocessing,whichisfactoredintoindustrialoutput,theagriculturalsectorprovides30-35%ofGDPinanaverageyear.IncludingfoodprocessingwouldraisethetotalsectorcontributiontoGDPtonearly45%.Thesectorisalsoamajoremployerwithover40%ofthepopulationdependentontheagriculturalsectorforemployment.However,accordingontheUSAID,USDAandMinistryofAgricultureofArmenia(2006)teamreporttherearesignificantconstraintstothedevelopmentoftheagriculturalsectorinArmenia.Theseimpedimentstoathrivingandefficientagriculturalsectorinclude:• lackofadequatetransportationandthehighcostfortransportation;• structuralfinancialmarket impedimentscausinga lackofsuitablefinancial instruments:
insufficientcreditavailableforlongterminvestmentsandhighinterestrates;• therelativehighcostofinputsatboththefarmandtheprocessinglevels;• shortageofexperiencedmanagers;• lackofgovernmentalsupport(includingalackofappliedresearchinformation);• smallfarmsresultinginlittleornoefficiencyofscale.
Cattle Sector
InArmeniaatpresent,ahighpercentageofcattleareinfarmers’andcooperatives’hands.From1990on,thetrendsofreductioninnumberofanimalsonafarm,lossoftheirproductivityandlossofthemanufacturingindustryofanimalshavebeenstopped.Aftertheagrarianreformshadtakenplace,asteadilygrowingnumberofcattleandpoultrycanbeobserved(Table12),comparabletoasimilartrendintheothertwosouthCaucasiancountries-GeorgiaandAzerbaijan.Mainanimalhusbandryproductsmanufacturedintherepublicaremilk,beef,chicken,pork,eggsandhoney.Woolandleatherareregardedasimportantrawmaterial.Theseproductshavedifferentsignificancefordifferentsocialsegments.Populationinthealpinezonesisengagedinlivestock(cattleandsheepbreeding);inlowerzonespigandrabbitbreedingandapicultureareaddedtothem.Fowlsareraisedmainlyinareaslocatedintheproximitytourbanareas.Productionofmeat,woolandmilkaresupportedbylocalconditionsandwelladjustedbreeds,whileproductionofeggsandpoultryisbasedonhighlyproductivebreedsoffowls,intendedforgivingchickenmeatandeggs.
� The�cattle�sector�in�Central�and�Eastern�Europe
151
Livestockproductionin2007reached66,800tonsofmeat(slaughterweight),620,000tonsofmilk,and464millioneggs.Butonlymilkproductionincreasedsignificantlyduringthepost-Sovietperiod.
Farm animal genetic resources
ThemaincattlebreedinArmeniaistheCaucasianGrey/NutbrownBreed(thesameasinGeorgiaandAzerbaijan).Secondly,thereisalsotheBlack-and-Whitebreed(Rukhkyanet�al.,2005).
Black-and-White�cattle
Importofthisbreedwasdictatedbythenecessityofmovinglivestocktostationaryconditions,whichoccurredparticularlyinregionscloselylocatedtourbanareas.From1970on,manyfemalespeciesofthistypewerebroughtintoArmeniaandmanyBlackandwhiteherdswerefounded.Theyhaddifferentproductivityindicesthanlocalcattle.Underfavourableconditionsoffeedingandcaretheirmilkproductivitywasbetween4,000and5,000kg,butitwentdownunderunfavourableconditions.Thereforeraisingthisbreedisnotexpedient.Nowthisbreedisconsideredassecondimportantcowbreedinthecountry.Theydonotadjustwelltomountainouspastures’conditions.Ruralfarmerswishingtoacquirethistypeofcowshouldhaveinmindthattheyshouldbekeptinstationaryconditionsorinpasturesclosetohouseholds.Onlyfemaleheiferscanbetakentomountainouspasturesgiventheyarenotstony.TheiraverageliveweightinArmeniais480kgatfirstcalving,520kgatsecondand550kgatthird.Milkyieldin305daysin1st,2ndand3rdlactationis3,250kg3,600and4,000kg,respectively.Fatis3.6%andproteinis3.2%.SemenofbullscanbeobtainedfrompedigreefarmsinRussiaorstationsspecialisedinartificialinsemination.InordertoraisetheefficiencyofthistypeofcowstheyarecrossbredwithHolsteinbreedbulls.Thenewbreedisnoteworthyforitsincreasedliveweight,highmilkyieldandproductivityinconditionsofindustrialraising.ButtheuseofsemenofHolsteinbullscannotbeefficientifthedevelopedgenerationisnotkeptwithcareandinfavourableconditions.
Conclusions for Armenia
• AgriculturewillremainaveryimportantagriculturesectorinArmenia.Agriculturewillnotbetheengineforgrowthoverthelongterm.Armenia’sagriculturalproductioncapacityislimited.
• LivestockproductsproducedinArmeniacannotmeetthenationaldemand.• AmainprobleminthelivestocksectorinArmeniaistheweakcattlebreedingsystem.
References
TheGeorgianNationalFoodandAgricultureStrategy,2006.FoodandAgricultureNationalStrategy2006-2015,Tbilisi,GroupofExperts,ThirdProject,2006.
MillenniumChallengeGeorgiaFund,2006.DairyProductionandprocessinginGeorgia.AgribusinessDevelopmentActivity(ADA).Availableat:www.ada.ge/files/103_137_652293_DairyProductionEng.doc
Table 12.ChangesinofcattlepopulationinArmeniaintheperiod2004to2007(×1000)(AnGRNC,2008a).
Cattle Ofwhichcows2004 2006 2007 2004 2006 2007397.1 478.7 483.3 220.9 262.1 277.5
The�cattle�sector�in�Central�and�Eastern�Europe
152
Saghirashvili,G.,Kartvelishvili,T,Kishmareishvili,N.andTsurtsumiaE,2006.DevelopmentsofcattlehusbandryinGeorgia,farmmanagementandextensionneedsinCentralandEasternEuropeancountriesundertheEUmilkquota.In:Kuipers,A.,Klopcic,M.andA.Svitojus(eds.),EAAPTechnicalSeriesNo8,WageningenAcademicPubishers,theNetherlands.
Saghirashvili,G.andKartvelishvili,T.,2006.Georgiannativedomesticanimalbreeds.Custom’sDepartment,2006.Yearbook.GeorgiaCustomsDepartment.StateDepartmentofStatistics,undated.Websitieavailableat:http:///www.statistics.ge/index.php?plang=1StateDepartmentofStatistics,2007a.GeorgiaAgricultureStatisticalAbstract2007.GeorgiaStateDepartmentof
Statistics.StateDepartmentofStatistics,2005a.GeorgiaAgricultureStatisticalAbstract2005.GeorgiaStateDepartmentof
Statistics.MinistryofAgriculture,2005.ThelawonFoodSafetyandQuality.Availableat:http://www.maf.ge/?class=3StateDepartmentofStatistics,2007b.AgricultureCensusofGeorgia2007.GeorgiaStateDepartmentofStatistics.StateDepartmentofStatistics,2005b.HouseholdsofGeorgia2005.GeorgiaStateDepartmentofStatistics.GeneticResourcesInstituteofNationalAcademyofSciencesofAzerbaijan,2006.Nationalreportonthestateof
theanimalgeneticresourcesinAzerbaijan.GeneticResourcesInstituteofNationalAcademyofSciencesofAzerbaijan,Baku.
AnGRNC,2008b.ReportofAnGRNCofAzerbaijan.Conferencematerialfor:MonitoringforfutureeffectivemanagementoffarmanimalgeneticresourcesinCaucasusregion/Armenia,Azerbaijan,Georgia/andKazakhstan.EuropeanRegionalFocalPointforAnimalGeneticResources(ERFP)&GeorgianNationalAssociationforAnimalProduction(GNAAP)bysupportGeorgianStateAgricultureUniversity,Bazaleti,Georgia10July,2008.
AnGRNC,2008a.ReportofAnGRNCofArmenia.Conferencematerialfor:MonitoringforfutureeffectivemanagementoffarmanimalgeneticresourcesinCaucasusregion/Armenia,Azerbaijan,Georgia/andKazakhstan.EuropeanRegionalFocalPointforAnimalGeneticResources(ERFP)&GeorgianNationalAssociationforAnimalProduction(GNAAP)bysupportGeorgianStateAgricultureUniversity,Bazaleti,Georgia10July,2008.
Rukhkyan,L.,Gasarjyan,N.andChitchyanT.,2005.CountryreportonthestateoftheArmenia’sanimalgeneticresources.MinistryofAgriculture,Armenia,Yerevan06June2003.
USAID,USDAandMinistryofAgricultureofArmenia,2006.ArmeniaAgricultureAssessment.TeamReport.
� The�cattle�sector�in�Central�and�Eastern�Europe
153
Cattle sector and dairy chain developments in Poland
J.�Fałkowski1,�A.�Malak-Rawlikowska2�and�D.�Milczarek-Andrzejewska1�
1University�of�Warsaw,�Faculty�of�Economic�Sciences,�Długa�44/50,�00-241�Warsaw,�Poland;�[email protected];�2Warsaw�University�of�Life�Sciences,�Faculty�of�Agricultural�Economics,�Nowoursynowska�166,�02-787�Warsaw,�Poland
Abstract
InthelastdecadethedairysectorinPolandexperiencedthoroughanddynamicchanges.Considerableinnovationswereobservedwithrespecttoproductionandmarketingpracticesatallstagesofthefood-supplychain.Theinstitutionalenvironment,inwhichalleconomicagentsoperate,changedaswell.Allthisaffectedimportantrelationshipsbetweendairyproducersandprocessors.Againstthisbackground,thispaperbrieflypresentsthemaindevelopmentsandadjustmentsthattookplaceinthelocaldairysector.Theanalysisisbasedontheresultsofqualitativeandquantitativeresearchconductedin2006and2007,respectively.
Keywords:�dairy�sector,�Poland,�vertical�coordination
Introduction
Theoverthrowofthecommunistsystemin1989andtheadjustmentstoamarketeconomydrasticallyaffectedthesocio-economicenvironmentinPoland.Theagriculturalsectorwasnoexception.Particularlyspectacularchangestookplaceinthedairysector.Thisisillustratedbythefactthat,sincethebeginningof1990’s,thenumberofdairyfarmsdecreasedbymorethanonemillion.Otherchangesincludedecreasesinthenumberofprocessingenterprises,necessaryqualityimprovementsandincreasedefficiencyofmilkproduction.Importantchangesoccurredalsointheinstitutionalenvironment,inwhichalleconomicagentsoperate.Thesecomprisedchangestobothinternationalregulationsanddomesticpolicies.Asanillustrationoftheformer,onecanmention,forinstance,decisionsmadeundertheauspicesofWorldTradeOrganisationorregulationsadoptedwithintheEuropeanUnion.Asfarasdomesticpoliciesareconcerneddecisionsconcerningformsandamountsofsubsidies,orthegeneralapproachtotheagriculturalsectorandruralareas,serveasexamples(Wilkinet�al.,2006).Takingintoaccounttheabove-mentionedphenomena,thispaperaimstodescribeindetailthemaindevelopmentsthatoccurredinthedairysectorinPolandinthelastdecade,thechangeswithintheproductionsphere,andresultsofananalysisofthedairysectorfromthedairysupplychainperspective.Specialattentionispaidtomilkmarketingandcooperationbetweendairyprocessorsandmilkproducers.Theinformationpresenteddrawsonseveralsourcesofdata.First,itusesdatacollectedbythePolishStatisticalOffice.Second,ittakesadvantageofqualitativeresearchconductedin2006(Wilkinet�al.,2006).Thisresearchincluded36semi-structuredinterviewswithexpertsandrepresentativesofallstagesofthedairyfoodchain.Inaddition,itdrawsontheinformationcollectedduring5focusgroupmeetingswithfarmers.Third,thepaperusesquantitativedatafromasurveyconductedamong397farmsin2007(Milczarek-Andrzejewskaet�al.,2007).Boththeseresearchinitiativeswerefocusedontworegionslocatedinnorth-easternPoland,namelyWarmińsko-MazurskieregionandPodlaskieregion.Theseregionswereselectedasstudysitesbecauseoftheirrelativeimportancefortherestructuringprocessinthedairysector.Thoughonehastobecautious
The�cattle�sector�in�Central�and�Eastern�Europe
154
whengeneralisingabouttheresultsobtained,itisreasonabletoexpectthatregionsthatarelessadvancedintermsofrestructuringwouldfollowthepathchosenbythosetworegions.Thepaperisorganisedintofivesections.Thefirstsectionhassetoutthebackground.Thesecondpresentsthemaintrendsformilkproductionandmilkconsumptionusinga‘macro’perspective.Thethirdtakesacloserlookatcharacteristicsofhouseholdsproducingmilkandchangesthattookplaceintheprocessingindustry.Thefourthdiscussestheresultsofeconometricanalysesassessingthemaindeterminantsoffarmmodernisationaswellastheimpactofdairysupplychainmodernisationonhouseholds’incomes.Finally,thefifthsectionsummarisesthefindingsanddrawsmainconclusions.
Milk production and consumption during transition
Thissectionpresentsthemaindevelopmentswithregardtonumberofdairyproducers,dairycowherds,trendsinmarketedproduction,anddemandfordairyproducts.
Milk production
Production�trends
Themainchangesinmilkproductionfrom1989to2007areshowninTable1.Severalinterestingtrendsmeritmention.Duringthefirstsixyearsaftermarketreform,thedairyherddeclinedbyabout28%andmilkyieldpercowdecreasedbyover4%.Thesechangesresultedinseriousnegativeconsequencesformilkoutput.Milkproduction,adjustedtorealdemand,droppedby28%toreachitslowestlevelof11.3mtin1995(GUS,variousyears).Since1996,aftertheshockoftheearlierperiod5,thesituationhasstabilised.InthattimetheAgriculturalMarketAgency6openlyintervenedandpurchasedbutterandskimmedmilkpowder,andintroducedthefirstmeasurestoprotecttheinternalmarket.Realmilkpricesthenstartedtoincrease,andsodidmilkproduction(IERiGŻ,2005).DuringtheEUpre-accessionperiod,therestructuringofthedairysectoraccelerated.TheachievementofEUstandards(especiallysanitaryandveterinarynorms,andmilkqualityrequirements),aswellastheimplementationoftheCommonAgriculturalPolicy(CAP)instruments(mainlypreparationstoimplementthemilkquotasystem),stimulatedproducerstostartmodernisingtheirprocessesandtoincreasetheirscaleofproduction.Investments,financedfromfarmers’ownresources,loansgrantedbybanksanddairyprocessingenterprises,andpre-accessionsupport,resultedinanenormousimprovementinmilkquality.Intheperiod1999-2005,theshareofextra-classmilk(accordingtotheEUstandards)intotalmilkdeliveriesincreasedfrom35%to92%.FordairieswithanEUcertificate,thissharewasevenhigher,andaccountedfor98%ofmilkdeliveries(IERiGŻ,2005).Thesestrictqualityrequirementsalsobroughtnegativesocialconsequences,however.Manymainlysmall,inefficientproducerswerenotabletoadjust,andweretherebyforcedtoeitherquitmilkproductionorchangetosemi-subsistencefarming.By2005,eventhoughtherewere712,000farmswithdairycows,onlyabout48%ofthemweredeliveringmilkormilkproductstothemarket(seeTable2).Itisimportanttonotealsotherelativeabsenceofchangeindairyfarmingintensity.Thenumberofanimalsper100haofagriculturallandhasfluctuatedaround33-35withnosignificantdeviationsfromthisvalueinthelastdecade(GUS,2006).
5During1990-95periodnominalmilkpurchasepricesincreasedbyabout11foldwhilenominalfarminputpricesincreasedabout38foldandthepriceofconsumergoodsincreased35fold.Realmilkpriceindexonlyamountedto32percent,whichresultedinasignificantdecreaseintheprofitabilityofmilkproduction(IERiGŻ,2005,p.55).6TheAgriculturalMarketAgencyisaninterventionagencyforagriculturalmarkets.Itsmainroleistomanageallthegovernment’sinterventionmeasures.
� The�cattle�sector�in�Central�and�Eastern�Europe
155
Tabl
e 1.
Characteristicsofm
ilkproductioninPolandfro
m1989-2005(IER
iGŻ,variousvolum
es;G
US,variousvolum
es).
1989
1990
1994
1998
2000
2001
2002
2003
2004
2005
2006
2007
Num
berofdairycow
s[1,000heads]
4,994
4,919
3,863
3,471
3,098
3,005
2,873
2,897
2,796
2,795
2,824
2,787
Index%
100
98.5
77.4
69.5
62.0
60.2
57.5
58.0
56.0
56.0
56.5
55.8
Milkyields[litres/cow
/year]
3,260
3,151
3,121
3,491
3,668
3,828
3,902
3,969
4,083
4,200
4,200
4,300
Index%
100
96.7
95.7
107.1
112.5
117.4
119.7
121.7
125.2
128.8
128.8
131.9
Milkproduction[millionlitres]
15,926
15,371
11,866
12,178
11,494
11,538
11,527
11,546
11,478
11,600
11,633
11,750
Index%
100
96.5
74.5
76.5
72.2
72.4
72.4
72.5
72.1
72.8
73.0
73.8
Milkdeliveries[millionlitres]
11,385
9,829
6,269
7,070
6,583
7,025
7,219
7,316
7,997
8,831
8,419
8,380
Deliveriesintotalm
ilkproduction%
71.5
63.9
52.8
58.1
57.3
60.9
63.2
63.4
69.7
76.1
72.4
70.9
Tabl
e 2.Num
berofdairyfarmsin1990-2005(IE
RiGŻ,variousvolum
es;G
US,variousvolum
es).
1990
1996
2002
2003
2004
2005
2007
1.Num
berofproducers[x1000]
1,831
1,309
876
810
735
712
657
Index%
100
71.5
47.8
44.2
40.1
38.8
35.9
2.Num
berofproducersdeliveringtoprocessing[x1000]
835
560
376
356
312
294
247
as%oftotalproducers
45.6
42.8
42.9
44.0
42.5
41.3
37.6
3.Num
berofproducersdeliveringdirectlytothemarket[x1000]
n.a.
n.a.
n.a.
n.a.
7650
27.5
as%oftotalproducers
--
--
10.3
7.0
4.2
n.a.:N
otassessed.
The�cattle�sector�in�Central�and�Eastern�Europe
156
TheaverageherdsizeinPolandisrelativelysmallcomparedwithWestEurope.Nevertheless,aconsiderableincreasehasbeenobserved.Theaverageherdsizeincreasedfrom2.7in1990to3.9in2005(GUS,variousvolumes).In2005,thetotalnumberofcattle(beefanddairycows)was5.4mhead.Dairycowsaccountforroughly50%oftotalcattleandthissharehasremainedmoreorlessstableduringthelastdecade.
Inputs�
Significantincreasesininputpriceshavebeenobservedforallrelevantcommodities(i.e.fertilisers,pesticides,energy,machineryandseedgrain).Itisnoteworthythatinthelastdecade(1995=100)thepricescissorsindex(i.e.anindexofpricerelationshipofmarketedagriculturalproductstogoodsandservicespurchasedbyprivatefarms)hasgraduallydecreased,andin2005reachedthelevelof69,4(GUS,variousvolumes).Therespondents,askedduringthequalitativeresearchproject,agreedunanimouslythattherehavebeenenormouschangesintechnologyandforageuseduringthepastdecade.Onefarmersaidthat,‘tenyearsagoIdidnoteventhinkthatIwouldeverhavea‘western’tractor’.Allourrespondentshadcoolingtanksontheirfarmsandlargerproducershadstartedtothinkaboutbuyingmilkingmachines.Asforforage,producershadswitchedfromhaytohay-silage.Althoughitismoredemandingintermsofmachineryandthusinvolveshigherexpenditure,itismucheasiertomanageandcertainlypaysoff.Oneoftherespondentsdescribedthischangeas‘[Itislike]movingfromacarriagetoacar’.Greenfeedismainlyproducedonthefarm,andconcentratesareboughtinthemarket.Thelargertheproducer,themoreforagethatisneeded.Asfarascontactbetweenfarmersandinputsuppliersisconcerned,forbothtechnologyandforage,farmershavenoproblemapproachingasupplier.Itisalsoworthmentioningthatsometimesthedairiesnegotiatewiththeinputsuppliersonbehalfofthefarmers.Thiscertainlyimprovesthefarmers’position.Ourrespondentssaythatthisisnotverycommon,however.Itismorecommonforcontactsbetweenfarmersandinputsupplierstotaketheformofcashlesstransactions.Inputsuppliersgettheirmoneyfromthedairyandfarmerspaythedairiesfortheirinputsuppliesviamilksales.Itseemsthatthistypeofarrangementhasnoeffectonthepowerrelationshipsbetweenthepartiesinvolved.
Breeds�and�advisory�services
ThemainbreedinPolandisthePolishHolstein-Friesian.Itaccountsforroughly97%ofthetotalrecordedcows7.OtherbreedsincludeSimmental,RedPolish,Jersey,White-back,Montbeliarde,PolishBlack-WhiteandPolishRed-White.DairyfarmsinPolandmaytakeadvantageofseveralsourcesofadvice.Forexample,theymayuseadviceprovidedbythePolishFederationofCattleBreedersandDairyFarmers.ThisorganisationisauthorisedbytheMinistryofAgricultureandRuralDevelopmenttokeepherdbooksfordairycattle.AdvisoryservicestofarmersarealsoprovidedbytheAgriculturalAdvisoryCentreswhicharelocatedineveryregionandhavelocalbranches,andbyalmosteverydairyprocessor.
Milk consumption
Thetransitionperiodwascharacterisedbyasystematicdecreaseinmilkconsumptionper�capita.In2004,theaveragemilkconsumptionper�capitaamountedto174litreswhichwas67litres(28%),lowerthanin1990.Thisdecreasecouldbeattributedtothefactthatalargenumberofhouseholdswithdrewfrommilkproduction.Itmaybeassumedthat,particularlythosehouseholdsformerly
7In2007numberofrecordedcowsamountedto541,307.
� The�cattle�sector�in�Central�and�Eastern�Europe
157
producingmilkmainlyoronlyforsubsistencepurposes,considerablyreducedtheirconsumptionofdairyproducts.Anotherprobablereasonforthedecreaseinmilkconsumptionwastherelativeincreaseindairyproductpriceswhencomparedtopricesofotherfoodcommodities(IERiGŻ,2005).Infuture,milkconsumptioniscautiouslyandoptimisticallyprojectedtoincreaseslightly.
Consumption�patterns
Itisimportanttonotethateventhoughpricesdriveconsumptiondecisions,thepatternofdairyproductconsumptionhasbeenchanging.AccordingtothedirectorofalocalsupermarketchaininWarmińsko-Mazurskieregionpeoplearebecomingmoreawareofwhattheyeatandinthelastfewyearsdemandfortraditionaldairyproducts(i.e.withoutartificialflavours)hasincreasedby20-30%peryear.Allthepeopleinterviewedstatedthatthereisanewtrendinconsumptionpatterns.Consumersarepayingmoreattentiontodairyproductquality.Oneoftherespondentssaid:‘before,consumerswantedtobuyyellowcheese,nowtheywanttobuy,forexampleGouda,andmoreoftenthannottheywanttobuyGoudafromagivendairyprocessor’.Consumersalsolookforfreshproducts,andhavestartedtoavoiddairyproductswithdistantexpirydates.Inaddition,regionalproductshavebecomemorepopular(eveninsomesuper-andhyper-marketchains).Accordingtothoseinterviewed,thiscouldbeamarketoutletforsmalldairyprocessors.Itmightbeworthnotingherethat,includingproductsmadeofgoatandsheepmilk,currentlythereare37traditionaldairyproductsofficiallyrecognisedbytheMinistryofAgricultureandRuralDevelopment.
Dairy farms and dairy processors
Dairy farms
Asnotedabove,asignificantdecreaseinnumberofhouseholdshavingcowswasobservedinPolandsincethebeginningoftransitionperiod.However,thiswasnottheonlyremarkablefeaturecharacterisinglocaldairyfarms.Farmsthatdecidedtostayinmilkproductionspecialisedandmodernised,andinhouseholdshavingcows,dairyproductiondominatedotheragriculturalactivities.Accordingtotheexpertsinterviewed,milkproductionhasrecentlybecomethemainagriculturalactivityinbothsurveyedregions.Althoughmilkproductionhasalongtradition,especiallyinPodlaskie,householdstendedtohavediversifiedagriculturalactivities,includingpigandsheepfarming,andgrowingoftobacco.Today,localfarmersspecialiseinmilkproduction.Intheopinionofourrespondentsthisholdstrueforbothsmallandlargeproducers,butsmall-scaleproducersalsoneedtocombineearningsfromfarmingwithsomeothernon-agriculturalincome,whilelargefarmerscanrelyonagriculturalincomealone.Accordingtoourrespondents,thereareseveralreasonsbehindthespecialisationinmilkproduction.First,thedairyindustryisoneofthefewprocessingindustriesintheseregionsthatsurvivedthetransformationtoamarketeconomy.Second,aftershuttingdownruralcollectionpointsduring1990s,theoutletsforagriculturalproductsotherthanmilkweresignificantlyreduced.Third,farmswithmixedproductionneedaccesstomachinesforspecificworkinthefieldsuchasploughingandharvesting.Thecollapseofcommunismresultedintheliquidationofmanyfarmers’organisationsthathadprovidedsuchservices,sotodaymixedproductionrequiresasubstantialinvestmentinmachines,whichonlyafewfarmerscanafford.Finally,theincreaseinbothinternalandexternalcompetitionforcedfarmerstolookforthemostefficientuseoftheirresources.Boththeseregionshaverelativelypoorqualitylandmoresuitedforgrassland,andhencemilkproduction,thantocropproduction.
The�cattle�sector�in�Central�and�Eastern�Europe
158
Dairy processors
Improvementsinthequalityandrangeofthefinalproductsandtheimprovementinthequalityofrawmilkwerethetwomainchangesintheprocessingsectoroverthepast10years.Theneedforconcentrationintheindustrywasalsoacknowledgedandthishasbeenparticularlyimportantduringthepast5-6years.Thenumberofprocessorsdecreasedinthelastdecadebyabout30%,andin2007amountedto232dairies(IERiGŻ,2005).Largedairycompanieswereoftentheinitiatorsofthisconsolidationprocess.Furthermore,importantchangesoccurredintheprofitabilityofthesectoratthetimeof,andintheperiodfollowing,theaccessionprocess.Afterbeingsomewhatmodestin1990s,profitabilityincreasedintheyearofEUaccession,asaresultofincreasedexportdemandandagoodEuro/Zlotyexchangerate.However,inthefollowingyearsthelevelofprofitabilityprogressivelydecreasedduetoincreasingrawmilkpricesandanincreaseinproductioncosts.Increasedcompetitioninthedairymarketforceddairyprocessorstowardsproductspecialisation.Inlargecompanies,thistakestheformofdividingproductionamongparticulardairyplants,whichallowsthemtoprovideconsumerswithawiderangeofproductstomeetcurrentdemand.Smallerprocessors,withalessdevelopedmarketingsystemandpooreraccesstofunds,havelimitedpossibilitiestointroduceinnovations,andthuscannotquicklyadjusttoconsumer(orretail)requirements.Therefore,notbeingabletocompetewithlargercompaniesintermsofsizeofdeliveriesorvarietyofproducts,smallercompaniesmustfindtheirownnicheandproduceuniqueproductsorproductsforfurtherprocessing,suchasskimmedmilkpowder(SMP).Somesmallprocessorsspecialiseinexports.Intheopinionofbothexpertsandsegmentrepresentatives,themostsignificantfactorsinfluencingchangesintheprocessingindustrywere:(1)thetransitionperiod,whichinfluencedthesituationmainlyinthe1990s,(2)thepre-accessionprocess,whichstartedin19988,and(3)integrationintotheEU.Alltheseaspectsrequiredsignificantadjustmentsforinstitutionsandpolicies.Thenecessarylegaladjustmentswerealsointroduced,andsupportprogrammesforprocessorsandproducerswerelaunchedtoassisttheminmeetingconsumerqualityrequirements.Respondentsalsomentionedthatthetransformationoftheretailsector(togetherwithitsinternationalisationandconsolidation)wasanimportantfactor.Retailexpansionopenednewoutletsfordairyproducts,butatthesametimeimposednewrequirementondairies.Difficultiesanddevelopmentconstraintsattheprocessinglevelareimportant,notonlyfordairies,butalsoforproducersdeliveringrawproducts.Forproducers,thedairyplantisthemostimportantsegmentofthemarketchain.Itwasobservedthatdairyprocessorsnotonlyplaytheroleofmilkpurchaser,butalsoassistinfarmdevelopment,forinstance,byorganisingtraineeshipsorprovidingshort-termloans.Inthiscontext,dairyprocessorscouldbeseenasoneofthemaindriversstimulatingrestructuringatthefarmlevel.Accordingtorespondents,themainproblemsprocessorsfacewhencompetingonthemarketcanbedividedintotwogroups:(1)barriersarisingfromthelegalregulations,and(2)barriersrelatedtotheloweconomicefficiencyofcompanies.Themilkquotasystemisthemostfrequently-mentionedlegalbarrier,bothforthemilkprocessorsandforproducers.Themainproblemswithmilkquotasaretheproduction9ceilingandregionalquotatradingrestrictions.Thequotaisallowedtobetradedonlybetweenfarmerswhohavetheir
8DespitethefactthatthePolishpre-accessionagreementwassignedin1994,themostsignificantarrangementsconcerningmilkmarketregulationtookeffectattheendof1990s.Therefore,restructuringthedairysectorbecamemoreimportant.9Deliveriestoprocessingplantsduringthefirstmilkquotayear(2004/2005)were13%lowerthanquotaassigned.However,duetorapiddevelopmentofmarketedmilkproductionthemilkquotain2005/2006wasexceeded.In2006/2007and2007/2008milkquotawasusedinca.97%.Itshouldbenotedthoughthatintheregionsstudiedmilkquotawasexceededandthereforetheimportanceofthisfactoractingasabarriertofurtherrestructuringisrelativelyhigherthaninotherregions.
� The�cattle�sector�in�Central�and�Eastern�Europe
159
holdinginthesameadministrativeregion.Thisresultsinhighquotapricesindairydevelopingregionsandinhibitstherestructuringofmilkproduction.Theothergroupofbarriersrelatestofactorsinfluencingtheloweconomicefficiencyofdairyprocessing.Themainconstraintshereare:• aweakpositioninthechain(exceptforthelargestcompanies)beingsqueezedbetweenproducers’
pressure(especiallythosewithlargedeliveries)forhighmilkpricesandretailpressureforcheapproducts;
• thepoormanagementskillsandloweducationallevelofdairyemployees(especiallyindairyco-operatives);
• lowlabourefficiency,whichnegativelyaffectsdairies’comparativeadvantage;• thelowlevelofconsumptionduelowincomesresultinginpeoplebeingunabletoaffordexpensive
dairyproducts.Smallerdairyprocessorsespeciallyhavetocompeteonthelocalmarketsbyloweringprices.Thisisextremelydifficultwhentheprocessingmarginislow.
Someexpertshavealsosaidthatasignificantbarriertodevelopmentoftheprocessingsectoristheformofco-operativeownership10.Unclear,disaggregatedownershiprightsresultinmoredifficultmanagementandamorecomplicateddecision-makingprocess.Someexpertsmentionedthattheproblemliesintheco-operativelaw,whichhampersflexiblemanagementandrestructuringofdairyco-operatives.Thisformofownershipdominatesandin2005wasresponsiblefor80%ofprocessedmilkand70%ofsalesvalue(IERiGŻ,2005).Large-scaleprocessorsusuallylooktodelivertheirproductstosupermarkets/hypermarkets,wheretheycansupplyalargevolumeofproduce.Forthoseprocessors,large-scaleretailersarealsomorestablepartnersthanwholesalers,buttheydictatestrictertradeconditionsandnegotiatelowerprices.Theimportanceofthelargeretailchannelhasprogressivelyincreasedsincetheendof1990s,whenthedominantformwaswholesale,localcooperativechainsandindependentshops.However,accordingtoourexperts,onlyabout5%ofmilkproduceischannelledthroughsupermarketsandhypermarkets,althoughforfreshmilkproducts(yoghurts),specialcheesesandUHTmilk,itreaches20%.Accordingtoourresearchinbothregions,largedairiessellfrom30%to60%oftheirproductstolargeretailchains,35-50%ischannelledthroughthewholesalesegment,andabout5%isdeliveredtolocalchainsorindependentshops.Forsmalldairiesaswellasindependentshops,thewholesalesegmentisdominantshareofsales.Smallerdairiesusuallyhaveaninsufficientscaleofproductiontodelivertosupermarkets/hypermarkets.ItshouldbenotedthatthePolishdairyprocessingsectorisexceptionalcomparedtoitscounterpartsinothercountriesintheregionregardingtheroleplayedbyforeigncompanies.IncontrasttothesituationcommonlyobservedinotherCentralandEasternEuropeancountries,dairyprocessinginPolandisdominatedbydomesticenterprises.Theimportanceofforeigncompaniesonthemarketismoderatethoughitneedstobestressedthattheirpresencehasindirectlycontributedtotherestructuringprocessbyforcingdomesticcompaniestomaintaincompetitiveness(DriesandSwinnen,2004).
Determinants and benefits of dairy farms’ modernisation
Models
Inordertofurtherexploretheissueofdairyfarmmodernisation,thefollowingsectionhighlightsthemainfactorsstimulatingtherestructuringprocessatfarmlevelandassessesthebenefitsofmodernisation.TheresultspresentedbelowarebasedonthefindingsofMilczarek-Andrzejewskaet�al.(2007).
10Itshouldbenotedhowever,thatthelargestdairycompaniesinPolandaredomesticco-operatives.
The�cattle�sector�in�Central�and�Eastern�Europe
160
Oneoftheremarkablefeaturesofthedairysectorrestructuringwastheevolutionofthemodernmarketingchannel.Traditionally,milkwasdeliveredbyfarmerstocollectionpointsandlatercollectedbydairies.Inthemodernmarketingchannel,milkiscollecteddirectlyfromthecoolingtankatthefarmbyadairytruck.Obviously,joiningthemodernchannelrequiredconsiderableinvestmentsformodernisationatfarmlevel(buyingacoolingtank,expandingtheherdsizetoincreasescaleofproductionandinvestmentstobecomeprofitable).Itisinterestingthereforetoinvestigatewhichfactorswerecrucialindeterminingfarms’capabilitiestomoderniseandadjusttomodernchannelrequirements.Second,itisofimportancetocheckwhetherjoiningthemodernmarketingchannel,andthusundertakingthemodernisationeffort,wasbeneficialtofarmers.Inordertodoso,theincomesituationofmodernchannelfarmersiscomparedwiththatoftraditionalchannelfarmers.Thesecomparativeanalysesareexposedtotwokindsofproblems.First,duetothefactthatthephenomenaunderexaminationarelikelytobeinterdependent,itisdifficulttodistinguishbetweencauseandeffect.Toillustratethis,itcanbearguedthataccesstofinancialcapitalfacilitatesfarmmodernisation,butitcanalsobearguedthatfarmmodernisationmayfacilitateaccesstoexternalfundsthroughitspositiveimpactonfarmcreditworthiness.Similarly,onemayarguethatfarmmodernisationpositivelyaffectsfarmrevenuesbutitwouldbedifficulttoarguethattheoppositedoesnotalsohold.Tosolvethis‘interdependenceproblem’,retrospectivedataareusedtodefineexplanatoryvariables.Forexample,followingthedecisiontomoderniseafter2001,thefarmincomesituationin2006isexplainedbypastdata(gatheredfor2001).Bydoingthis,causeandeffectcanbemoreeasilydistinguished.Thesecondproblemreferstotheso-calledendogeneityproblem.Thisstemsfromthefactthatbothexplanatoryandexplainedvariablescouldbecorrelatedwithunobservedfactors.Inthiscasetheuseofstandardeconometrictechniquessuchasordinaryleastsquares(OLS)isinadequate.Toavoidpotentialproblems,aninstrumentalvariableapproachwasadopted(AngristandKrueger,2001).Threeinstrumentswereusednamelydistancetotheclosestdairy,distancetotheclosestcollectionpoint,andshareofsurveyedfarmsingivenregion11havingacoolingtank.Theassessmentofthedeterminantsforjoiningamodernmarketingchannelwascarriedoutusingasimpleprobitmodel.Themodelassessingtheimpactofmodernisationonfarmrevenueswascomposedoftwosteps.First,theprobabilityofbelongingtothemodernchannelwasestimated.Second,itwasthenusedinthemodelassessingdeterminantsoffarmrevenuesasanexplanatoryvariable(MODERN).TheresultsoftheformermodelarepresentedinTable3,column1,whereastheresultsofthelattermodel(secondstepOLS)arepresentedinTable3,column2.Inbothmodelsthesamenumberofexplanatoryvariableswasused.Variablesaimedatcapturingtheimpactofincentivesfacedbyfarmersincludedaccesstounearnedincome,off-farmjobandcredit.Theyalsoincludedummyvariablesforfarmsthatexperienceddelaysinpaymentfromthedairyandforrefusalofmilkbythedairyduetopoorquality.Farmcharacteristicsincludedphysicalcapitalresourcesnamelyassetsandothermachineryspecifictodairyproduction,herdsize,annualmilkyieldpercowandlandresources(ownedandrented).Householdcharacteristicsincludedageandeducationofthehouseholdhead,labourresources,dummiesindicatingfarmscooperatingwithotherhouseholdsand/orfarmsdeliveringtocooperative,aswellasvariablesapproximatingthefarmer’sattitudetowardsriskandhispropensitytoleavefarming.12Finally,localshiftersaimedatcapturing
11RegionconsideredhereisGmina,NUTS5accordingtotheEuropeanUnionclassification.12Riskvariablestookvaluesfromzerototwo,withzerodenotingriskaversefarmers,onedenotingriskneutralfarmersandtwodenotingrisklovers.Valueswereassignedbasedonthefollowingquestion:‘Providedthattherearenocostsofchangingthedairyyouarecurrentlysupplying,wouldyouchangeittosupplyanotherdairyoffering20%higherprice,havingnoguaranteethatthishigherpricewillholdinthefuture?’.Farmersanswering‘yes’wereclassifiedasrisklovers,thoseanswering‘donotknow’asriskneutralandthoseanswering‘no’asriskaverse.Propensitytoleavefarming,ontheotherhand,wasadichotomousvariableequaltooneifafarmerwouldleaveagriculturehavinganopportunitytofindoff-farmemploymentwiththesameremunerationandzerootherwise.
� The�cattle�sector�in�Central�and�Eastern�Europe
161
theeffectoffarm’slocation,i.e.theregionwhereitislocatedaswellastheextentofdevelopmentofdairyfarmsinitscloserneighbourhood.
Results
Theresultspresenteddrawon323observations,ofwhich218belongedin2006tothemodern,and105tothetraditional,marketingchannels.First,determinantsofmarketchannelchoicearediscussed,followedbyadescriptionofbenefitsofjoiningthemodernmarketingchannel.
Determinants�of�joining�a�modern�marketing�channel
SeveralinterestinginsightscanbeobtainedfromthefiguresinTable3,column1.First,thepositiveandhighlysignificantimpactofCREDITclearlyshowsthataccesstoexternalfundsappearstobedecisiveforkeepingupwithdemandsofthemarketandofdairyenterprises.TheimportanceofexternalfinancialsourcesisfurtherstrengthenedbynonsignificantimpactofOFF-FARMJOBandLABOUR.Thelatterobservationscouldbeindicativeoftwothings.Theymayindicatethatoff-farmjobsaremainlylow-skilledjobs,andthusprovideonlylimitedremuneration,ortheycouldbeindicativeofinefficientuseoflabourresourcesinagriculture.Itisinterestingtonotethatthemarketchannelchoiceappearstobeunaffectedbyinitialphysicalnorlandresources.Onemayarguetherefore,thatbeingrelativelybackwardintermsofphysicalcapitalwasnotpreventingfarmsfromjoiningthemodernchannel.Itneedstobenotedthoughthatthedecisiontoshifttothemodernchannelwassignificantlydependentonhavinglargeherdsandhavingcowbreedsofbetterqualityintermsofmilkyields.AnotherresultworthnotinghereisthenegativeandstatisticallysignificanteffectofCOOPERATION.Thistendstoindicatethatpotentialcostsofremaininginthetraditionalchannel(e.g.lowerprice,higherriskofmilkrefusals,lowerqualitypremiums)maybeoutweighedbybenefitscreatedbycooperation.Thisresultisallthemoreinterestingasitsuggeststhatfarmers’collaboration,commonlyrecommendedasatoolhavinggreatpotentialforstimulatingfurtherrestructuring,doesnotnecessarilyhavethesedesiredeffects.
Effects�of�joining�the�modern�channel�
EstimatesofthemodelassessingdeterminantsoffarmrevenuesarereportedinTable3,column2.Mostimportantly,theresultsprovidestrongevidencethatinclusioninthemodernmarketingchannelcontributestoconsiderableimprovementinfarmfinances.ThisisclearlyindicatedbythepositiveandstatisticallysignificantcoefficientofthevariableMODERN.Thisresultconcurswiththeoreticalpredictionsaswellaswithresultsofotherstudiesexaminingrestructuringoftheagrifoodsupplychain(e.g.Swinnenet�al.,2006;WhiteandGorton,2005).Theeffectofbelongingtothemodernchannelholdsregardlessofherdsize.Therefore,inclusioninthemodernmarketingchannelappearstobebeneficialnotonlyforthelargestfarms,assuggestedbythepositiveandstatisticallysignificantimpactofHERD,butalsoforfarmsofmediumandsmallersize.However,thesituationinthisrespectisslightlydifferentforthesmallestfarmers,withfewerthanfivecows,forwhomjoiningthemodernchannelhasbeenonaverageslightlylessbeneficial.Notsurprisingly,farmrevenuesarepositivelycorrelatedwithmilkyieldsandherdsize.InterestinginsightsareprovidedfromtheanalysisofREFUSALandOFF-FARMJOB,bothofwhichentertheestimatedequationwithnegativesigns.Theformerfindingisasexpectedandreflectsthefactthatfarmshavingproblemswithsatisfyingqualitystandardshadonlylimitedopportunitiestogrow.Thelatterobservation,ontheotherhand,deservesmoreattentionsinceitmightappearcounterintuitive.Inallnormalcases,accesstooff-farmjobopportunitiesisexpectedtopositivelyaffectfarmrevenues.
The�cattle�sector�in�Central�and�Eastern�Europe
162
Table 3.Factorsaffectingtheprobabilityofbelongingtoamodernmarketingchannel(MMC)anddeterminantsoffarmrevenues.
ProbitwithweightsDependentvariable:Marketchannelchoicein2006(1=modern,0=traditional)
OrdinaryLeastSquares(OLS)withweightsDependentvariable:Naturallogarithmoffarmrevenuesin2006
MarketchannelchoiceMODERN 0.236***
IncentivesUNEARNEDINCOME2001 -0.613** -0.067OFF-FARMJOB2001 0.084 -0.089**REFUSAL2001 -0.143 -0.069*DELAYS2001 0.364 0.018CREDIT2001 1.925*** 0.007
FarmsizeandassetsASSETSSPECIFIC2001 -0.082 -0.017ASSETSMACHINERY2001 -0.011 0.021HERD2001 0.328*** 0.012***YIELDS2001 0.001*** 0.000**FARMREVENUES2001 0.498***LANDOWNED2001 -0.008 0.004LANDLEASED2001 0.039 -0.001
HouseholdcharacteristicsAGE2006 -0.029 -0.002EXPERIENCE2006 0.032** -0.002EDUCATION -0.273 0.021LABOUR2006 -0.046 -0.005COOPERATION2001 -1.121** -0.096*OWNERSHIPCOOPERATIVE2001 0.170 -0.017RISK 0.497 0.035LEAVE -0.085 0.047
LocalshiftersNEIGHBOURSMAJORITY -1.120** 0.223NEIGHBOURSFEW -1.095** 0.350*PODLASKIE 0.227 0.133
InstrumentalVariablesDISTANCE_DAIRY_2006 -0.012DISTANCE_POINT_2006 0.339**COOLING_TANK_2001 3.414*
Constant -5.033* 4.873***Observations 323 322R-squared 0.805***,**,*denote1%,5%and10%significancelevelrespectively.Source:Authors’farmhouseholdssurvey,2007.
� The�cattle�sector�in�Central�and�Eastern�Europe
163
However,itisreasonabletoassumethattherurallabourmarketinPolandisheavilybiasedtowardsagriculturalemployment.Underthesecircumstances,undertakingoff-farmworkmightbeanexpressionofseekinganyavailableemploymentinordertomakeendsmeet,ratherthanhavingastableandrewardingjob.Thishypothesisfindssupportinthenegativeandstatisticallysignificantcorrelationbetweenthelevelof2001farmrevenuesandaccesstooff-farmactivities.Interestinglynoneofthevariablesaimedatcapturingtheeffectofhumancapitalappearedtobestatisticallysignificant.Thefollowingaspectsshouldalsobementionedregardingtheeffectsofjoiningthemodernchannel.Comparinghouseholdsalwaysinthemodernchannel(MMC)withthosesupplyingthetraditionalmarketingchannel(TMC)andthosewhomadetheswitchfromTMCtoMMCatsomepointafter2001(CHANGED)revealedseveralinterestingfacts(Table4).First, theaveragegrowthofagriculturalrevenuepercapita(2001-2006)incaseofMMCandCHANGEDfarmerswasca.40%higherthanthatobservedforTMCfarmers.Similardifferenceswerenoticedwithrespecttogrowthratesofrevenuesobtainedfrommilksales.RemarkablealsoisthefactthattheincreaseinherdsizeintheclassCHANGEDwasalmostthreetimesgreaterthanthatobservedforTMC(ca.52%inCHANGEDvs.ca.18%inTMC).Itisworthnotingthat,althoughmilkyieldspercowweregrowingataboutthesamerateinallgroups,outputpercowinMMCandCHANGEDwasca.1000lhigherthaninTMC.Thesedifferenceswerealsoreflectedindifferencesinthemilkpricesobtainedbydifferentgroups.TheaveragemilkpriceincreaseincaseoffarmerswhoenteredMMCwasroughly36%whereasincaseofTMCfarmersitwasonly26%.Theotherstrikingdifferencebetweenthegroupsrelatestothelevelofspecialisationinmilkproduction.WhiletheshareofspecialisedfarmsdecreasedinTMC,itincreasedbyover50%inCHANGED,andby17%inMMC.ItcanthenbeconcludedthatoneofthemostimportantoutcomesofjoiningMMCisspecialisationinmilkproduction.However,thisismainlytrueforlargefarms.
Table 4.Farmdevelopmentasaffectedbythemarketingchannelsupplied.
TMC CHANGED MMC2001 2006 Increase
%2001 2006 Increase
%2001 2006 Increase
%1 Agriculturalrevenuepercapita[PLN]
10,240 16,317 59.3 14,874 30,027 101.9 19,306 37,794 95.8
2 Milksalesrevenue[PLN]
18,676 32,022 71.5 34,152 85,249 149.6 72,306 13,7218 89.8
3 Herdsize[head] 7.9 9.3 17.7 11.1 16.9 52.3 17.9 23.3 30.24 Yields[l/cows] 3,480 3,901 12.1 4,272 4,844 13.4 4,676 5,252 12.35 Averagemilkprice[PLN/100/l]
70.3 88.4 25.7 73.3 99.4 35.6 80.7 100.1 24.0
6 Specialisedinmilkproduction1[%]
47.3 42.4 -10.4 44.0 66.9 52.0 74.9 87.6 17.0
1Milkrevenue>60%oftotal.Reportednumbersareweightedaverages.Source:Authors’farmhouseholdssurvey2007.
The�cattle�sector�in�Central�and�Eastern�Europe
164
Onlyabout5%ofallfarmsdeliveringtoMMCandspecialisinginmilkproductionhadlessthan10cowsin2006.
Conclusions
Inresponsetothedynamicandthoroughtransformationswhichhaveoccurred,andstillaretakingplace,inthePolishdairysector,thispaperhashighlightedthemaindevelopmentsthatwereobservedduringthepastdecade.Moreover,itanalyseddeterminantsofthechoiceofmarketingchannelamonglocaldairyfarmsandinvestigatedthepossibleimpactsofthischoiceonfarmers’financialsituationandbehaviour.Themainconclusionsdrawnfromthisanalysiscouldbesummarisedasfollows.RestructuringofthePolishdairysectorwascharacterisedbyamarketdecreaseinthenumberofdairyfarms,adecreaseinthenumberofdairyprocessingcompanies,andhugeimprovementsinmilkqualityandefficiencyofmilkproduction.Aremarkablephenomenonobservedwastheevolutionofthemodernmarketingchannel,throughwhichmilkisdeliveredfromfarmstodairyprocessors.Enteringthemodernmarketingchannelseemstobeconditionedbyexogenousratherthanendogenousfactors.Accesstofundstopayforthenecessaryadjustmentsisthecriticalfactor,ratherthanhumancapitalorhouseholds’initialphysical-capitalresources.Giventhatfarmfinancialcapitalresourcesarelimited,themarketing-channelchoiceiscruciallydependentonhavingaccesstoexternalfunds.Enteringthemodernmarketingchannelisfacilitatedbyhavingherdsoflargersizeandimprovedbreeds.Nosystematicevidenceforsmallfarmsbeingexcludedfromthemodernchannelwasfound,althoughitseemsthatthesmallestfarms(withfewerthanfivecows)aremarginalisedthroughhavingnoaccesstoexternalfunds,eitherfromabankorfromadairy.Joiningthemodernmarketingchannelpositivelyaffectsthefarmfinancialsituation.Thiseffecthasbeenfoundforallfarmsregardlessoftheirsize.Forthesmallestones,however,theimpactisoflessermagnitude.Inthiscontext,furtherrestructuringshouldbeencouragedsinceitnotonlyimprovesaveragefarmwelfarebutalsohaspotentialtoreducetheincidenceofruralpoverty.Sincethenecessaryadjustmentsobviouslyrequiresubstantialinvestments,thereisaneedtobroadenfarmaccesstoexternalfunding.Thisisespeciallyimportantfortheverysmallproducers.Inthisconnection,ratherthanlump-sumtransfers,microcreditprogrammeswouldprovidefarmerswithappropriateincentivestousealoanefficiently,andshouldbefacilitated.Changingthemarketingchannelalsoinfluencesfarmlevelofspecialisation.Farmsdeliveringtothemodernchanneltendtoconcentrateonmilkproduction.However,thesearemostlylargerfarms(havingmorethan10cows).Smallfarmersandthosewhoremainedinthetraditionalchanneltendtosearchforoff-farmsourcesofincome.Apparently,thisstrategydoesnotallowthemtoreachthelevelofrevenuesenjoyedbylargerfarms.Therefore,thereisastrongneedfordevelopmentofnon-agriculturalincomeopportunitiesinruralareasinordertoimprovewelfareofthesmallestfarmsandtoencourageandenablelessefficientfarmerstoquitmilkproduction.
Acknowledgements
ThispaperisbasedontheresultsobtainedintheRegoverningMarketsproject.Formoreinformationseethewebsite:www.regoverning.markets.org.AuthorswouldliketothankJerzyWilkin,LiesbethDries,CsabaCsaki,JikunHuang,TomReardonandallparticipantsoftheseminarsinWarsawforhelpfulcommentsandvaluablesuggestions.
References
Angrist,J.D.andKrueger,A.B.,2001.Instrumentalvariablesandthesearchforidentification:fromsupplyanddemandtonaturalexperiments.JournalofEconomicPerspectives15:69-85.
� The�cattle�sector�in�Central�and�Eastern�Europe
165
Dries,L.andSwinnen,J.,2004.Foreigndirectinvestment,verticalintegration,andlocalsuppliers:EvidencefromthePolishdairysector.WorldDevelopment32:1525-1544.
GUS,(variousyears).Statisticalyearbooks.GUS,2006.Rolnictwow2005r.(Agricultureintheyear2005),GUS,Warszawa.IERiGŻ,(variousvolumes).Rynekmleka.Staniperspektywy(Dairymarket,Currentstateofaffairsandprospects),
IERiGŻWarszawa.IERiGŻ,2005.Rozwójrynkumleczarskiegoizmianyjegofunkcjonowaniawlatach1990-2005(Developmentofthe
dairymarketandchangesinitsfunctioningduring1990-2005)IERiGŻ,Warsaw,21/2005.Milczarek-Andrzejewska,D.,Malak-Rawlikowska,A.,Fałkowski,J.andWilkin,J.,2007.Farmlevelrestructuringin
Poland.Evidencefromdairysector.RegoverningMarketsAgrifoodSectorStudy,IIED,London.Swinnen,J.F.M.,Dries,L.,Noev,N.andGermeni,E.,2006.Foreigninvestments,supermarkets,andtherestructuring
ofsupplychains:EvidencefromEasternEuropeandairysectors.LICOSDiscussionPapers,165/2006.White,J.andGorton,M.,2005.AcomparativestudyofagrifoodchainsinMoldova,Armenia,Georgia,Russia,and
Ukraine.In:J.F.M.Swinnen(ed.),Casestudies.ThedynamicsofverticalcoordinationinagrifoodchainsinEasternEuropeandCentralAsia.WorldBankWorkingPaperno.42,pp.5-43.
Wilkin,J.,Milczarek,D.,Malak-Rawlikowska,A.andFałkowski,J.,2006.ThedairysectorinPoland.RegoverningMarketsAgrifoodSectorStudy,IIED,London.
� The�cattle�sector�in�Central�and�Eastern�Europe
167
Cattle sector and dairy chain developments in Kazakhstan, Kyrgyzstan and Uzbekistan
T.�Karymsakov1,�A.�Svitoys2�and�K.�Elemesov3�
1Scientific�Industrial�Center�of�Animal�Production�and�Veterinary,�Department�of�Dairy�Cattle�Breeding,�O.�Zandosov�street�51,�050035�Almaty,�Kazakhstan;�[email protected];�2Baltic�Foundation,�S.�Konarskio�str.�49,�03123,�Vilnius,�Lithuania;�3Kazakhstan�Association�of�Animal�Production,�Astana,�Kazakhstan
Abstract
Inthelast18yearsthereformsintheagriculturalsectorsinthethreecountriesaredescribed.Thereweremanybasicchangesthattookplace.Intheyearsofeconomictransformation,thesocialistagriculturalenterprisesraisingscheduledbreedsofcattleweretransformedintovariousformsofprivateenterprises.Thisresultedinthedispersaloflivestocktoindividuals,andonlyinthosecaseswhereherdsaretransferredcollectivelytoprivatepropertywasahighconcentrationoflivestockmaintained.Inlateryears,withadaptationtothemarketeconomyandrigidcompetitionbetweenproducers,someunitsgraduallyincreasedtheirnumbersoflivestock,improvedtheefficiencyofmanagementoftheherds,andincreasedtheirprofitability.Thenumberoflivestockgraduallyincreasedandwillsoonreachthesamelevelasinthehighestyearof1991.Totaloutputofmilkhasalreadyexceededtheearlierhighestlevelwith10.23t.Theincreaseinproductioninrecentyearsisconnectedwithanincreaseinefficiencyofcowsinallcategoriesoffarms.Theincreaseinproductionisalsoduetotheuseofsemenfrombulls,whichareimprovedbyforeigngenetics,leadingtoanincreaseinmilkyieldpercow.Thisway,newbreeds,typesandlinesofcattleareemerging.Followingtheprivatisationofthestatefarmsnoeffectivebreedingprogrammewasretained.Upto70-80%ofthestatefarmshavebecomeoutdatedinmechanisationandthetechnicalequipmentispoorasisthequalityoftheforagereserves.Inthiscontext,ineachcountry,stateprogramsarecarriedoutwiththeobjectiveof(1)creatingastationforartificialinseminationineacharea;(2)trainingyoungexpertsinanimalbreeding;(3)improvingthepedigreestructureofcattleinhouseholdfacilities;(4)managingthebreedingaccountonapersonalcomputer;(5)modernisingtechnicalequipmentandmilkingmachines;(6)modernisingfactoriesforprocessingmilk;(7)increasingfinanceforthesupportanddevelopmentofagrarianandindustrialenterprises;(8)decreasingthevalueaddedtax(VAT)onimportedbreedingcattle;(9)givingspecialequipmentonlease;and(10)givinglong-termcredit.
Keywords:�state�programs,�livestock�population,�milk�production,�animal�breeding
Introduction
Asiswellknown,somerepublicsofCentralAsia(Kazakhstan,KyrgyzstanandUzbekistan)werepartoftheSovietUnionwhereallagriculturalconcerns,includinganimalproductionhadthestatemarketsystem.Inthesethreecountries,asinallSocialistRepublics,agriculturewasoperatedwithinthestatesysteminKolkhozandSovkhoz.BothKolkhozesandSovkhozeswereinvolvedinbreedingfarmanimals,includingcattle,whichwerebredonthebasisofscientificselectionwithaviewtoincreasingproduction.Thishasledtothedevelopmentofnewdomesticbreedsandadifferentdirectionofproduction.Inthemiddleoflastcenturyinthethreerepublics,morespecialisedcattlebreedsemergedfromcrossbreedinglocalanimalswithmoreproductivebreeds.Theseincluded2dairybreeds,3dairyandmeatbreeds,and5breedsspecialisedformeatproduction.
The�cattle�sector�in�Central�and�Eastern�Europe
168
In1991,thepopulationofcattleinthesethreerepublicsreached15.5m,comprising4.6minUzbekistan,1.2minKyrgyzstanand9.8minKazakhstan.However,afterindependencethepopulationofcattlesharplydeclined.Thiswasconnectedwiththereorganisationofallagriculturalstatesystemsandsomekolkhozesandsovkhozes,becauseoftransitionfromstateownershipintoprivateownership.Afterthis,herdswithahighnumberoflivestockand85-90%oftheindustrial-technologicalcattleholdingswereliquidated.However,someanimalsweretransferredtocollectiveandco-operativefarmswhereeveryonewhohadtheproperty,hadbeenentrustedwithonehead.Afterthis,thesefarmsexperiencedaverycomplexprocessoftransitiontoamarketsystem,resultinginariseinpopulationofcattleandanincreaseincattleproduction.AsummaryofthechangesincattlenumbersandmilkproductionisshowninTable1.Thetrendtowardsanincreaseinthecattlepopulationandthetotaloutputfromcattleinthethreecountrieswasfirstobservedattheendof20thcentury.Ineachrepublic,raisingofcattlewasbasedonacertainconceptionandincreasingeconomicexpectations.
Kyrgyzstan
CattleraisingintheRepublicofKyrgyzstanisoneofthemainbranchesofagricultureItrepresents60%ofgrossoutputoftheanimalindustries.Raisingofcattleisfavouredbygoodclimaticconditionsandsocialfactors.Itoccurson83%offarmland,ofwhich9.6millionhaisinnaturalpastures.Cattlebreedingisoneofthemainbranchesofanimalproduction.Intherepublic,twobreedsofcattlenamelyAlatauandAulietinscexist,andinthehighmountainsyakspredominate.TheAlataubreedrepresentsthedairy-meattypeandwasapprovedin1950.Inhighmountainconditions,thisbreedsurpassesthelocalKirghizcattleondairyandmeatproduction.Nowadays,itisraisedinallregionsoftherepublic.TheAulietinscbreedisadairybreedandwasestablishedasanindependentbreedin1974.ItwasformedbycrossinglocalcattlewithbullsofaDutchbreed.Yaksareraisedinhighmountainousareaswhichareunsuitedtootherkindsoffarmanimals.Thelocalpopulationhasbeenengagedintheraisingofyaksforalongtime,butrecentlythenumbersofyakshasdecreased.Afterindependence,thenumberofyaksdecreasedby39,000intheperiod1991to2000.However,since2001thepopulationhasgraduallyincreasedagain,andin2007ithadgrownby6,100toatotalof22,400animals(Figure1).AscanbeseeninFigure1,thepopulationofcattledeclinedby3.14mfrom1991to1996.From1997on,atendencytowardsanincreasewasobservedandby2007,thepopulationofcattlewas1.21mhead.Milkproductionfellto251,400tintheperiod1991to1996,butfrom1997to2000,milkvolumeincreasedby169,000tandbythenhadreached1.06mt.From2001to2007,volumeincreasedby149,500tandhasnowreached1.21m(Figure2).Thismeansthatthecountryhasextraproductionincomparisonwith1991by42,000t.Theincreaseofmilkproductionhasoccurred,notfromincreases
Table 1.Cattlenumbersandmilkproductionfor1991,2000and2007inKazakhstanан,UzbekistanandKyrgyzstan.
1991 2000 2007Populationofcattle(m) 15.53 10.47 13.89Milkproduction(mt) 9.73 8.36 10.75
� The�cattle�sector�in�Central�and�Eastern�Europe
169
inproductionpercow,butbecauseofanincreaseinthepopulationofcows.Theaveragemilkyieldpercowremainsratherlowat2,118kg.Therearemorethan183farmsinvolvedintheproductionoffarmanimals,including65breedingfarmsforcattleand7foryak.Atthepresentstageofbreedingdevelopmentthemaintaskisimprovingexistingbreeds.TherearetwostatebreedingfarmsfortheAlataubreedandfourfarmerbreedingenterprisesfortheAlatauandHolstein-Friesianbreeds(Figure3).AscanbeseenfromFigure3,thedistributionofbreedingenterprisesshowsthatthemainoperatorspreferbreedingofhighlyproductivecattleformilkandmeatproduction.Now,cattlebreedingisimprovingwiththeassistanceofworkcarriedoutbytheCentralAsianbreedingservice,LTD,whichwascreatedwithsupportfromtheKyrgyz-Swedishagricultureproject‘Helvitos’.Today,30cattlebreedingfacilitiesareoperatingaprogramofgeneticimprovementofqualityofcattleandallareprovidedwithsemenfromSwedishcompanies.Inthelongterm,thedevelopmentoftheanimalindustriesshouldfocusespeciallyonmeatanddairycattlebreeding.
1190
518.8
55.3
876.1
459.9
22.7
1062.6
523.8
16.3
1212.1
584.9
22.40
200400600800
1,0001,2001,400
7002000269911991
Cattle
Cows
Yak
Figure 1.Changeinpopulationofcattlefrom1991to2007(×1000head).
0200400600800
1,0001,2001,400
7002000269911991
Figure 2.Changeinthemilkproductionvolumefrom1991to2007(t).
65
7
48
8
38
512
0
10
20
30
40
50
60
70
Cattle Yak Sheep Goat Horse Poultry Combined
Figure 3.Numberofmanagemententerprisesforvariousfarmanimalspecies.
The�cattle�sector�in�Central�and�Eastern�Europe
170
Uzbekistan
IntheRepublicofUzbekistan,onthemountainandfoothillzones,thereisenoughpastureforprofitablerearingofcattleasitdoesnotincuranycostsotherthanpasture.Inthesezonestherearemanydifferentbreedsandsystemsofcattleproduction:Black-Motley,RedSteppe,Swiss,Bushu,Santa-Gertruda,aswellaslow-producinglocalbreeds.From1991to1995,ascomparedwithotherformersocialistcountries,thepopulationofcattledidnotdecrease,butinfactincreased(Figure4).From1990to1995,thecattlepopulationincreasedby920,000,butfrom1996to2000,itdeclinedby200,000.Thiswasassociatedwithlowproductivityandinadequateforagereserves.From2001onwards,thetrendwasforanincreaseofpopulationeachyearuntil2007whenthepopulationofcattlewas6.82m.Suchahighrateofgrowthincattlenumberswasassociatedwiththeattentiongiventothedevelopmentofpersonnel,andfarmswereamajorfactorinthegrowthofemploymentforthepopulation.Therewereincreasesinincomesandaswholeinthestandardofliving,resultinginasteadysaturationofhomemarketbyvitalfoodstuffssuchasmeat,milkandmanyothers.Specialattentioninthiscontextwasgiventostimulatingincreasesinthepopulationofcattle.Itislegislativelydetermined,thatpeoplewhoraisecattleinapersonalcapacity,andonfarms,qualifyforawork-recordcardandapension.Forthepurchaseofhighlyproductivecattlebythepopulationandleadingfarmenterprisestherewasanexpansionofcreditfacilitiesbybanks,and‘Fundofassistanceofemployment’isaccepted.Realisationoftheacceptedmeasureswillleadtoalivestockpopulationin2010of8.6m,resultinginaconsiderableincreaseinthenumberofthepersonsinvolvedincattleproduction.Thiswillenhancetheleveloftheirmaterialwell-being.
Kazakhstan
TheRepublicofKazakhstanhashugeterritory,differentnaturallandscapesanddifferentclimates.Therepublicisrichinsteppes,densewoods,mountaintops,desertsandsemideserts.Inthiscontextlocalcattlebreedsareraisedwhichareadaptedtothenaturalandclimaticconditions.Thereare5mainlymeatproducingbreedsand4milkplusmeatproducingbreeds.Themeatbreedsare:Auliakol,Kazakh-wait-head,Santa-Gertruda,KalmikandGalloway.Themilkplusmeatbreedsare:Alatau,Simmental,RedSteppeandAuliakol.Afterindependencethecattlepopulationdecreasedsharply,butsince2001anincreaseinlivestocknumbershasbeenobserved(Figure5).From1991to2000,livestocknumbersfellfrom9.76mto4.11m.However,since2001therehasbeenanincreaseinthepopulationoflivestock,andfrom2001to2007itincreasedby982,000.Nowthecattlepopulationis5.85m.
0
1,0002,000
3,0004,000
5,0006,000
7,000
1990 1995 2000 2005 2007
Figure 4.Changeinpopulationofcattlefrom1990to2007.
� The�cattle�sector�in�Central�and�Eastern�Europe
171
Thesametendencywasobservedinmilkproduction.From1991to2000,totalmilkproductiondecreasedfrom5.6mto3.7m(i.e.by1.9m).Milkyieldpercowduringthisperioddecreasedby19kgto1,988kgbutsince2000,ithasincreasedby233kgto2,202kg.Todaythecountryhas461economicenterprisesthatraisefarmanimalsofmanyspecies(Figure6)butthepopulationpreferstobeengagedincattleproduction,mainlydairying.Ofthe166enterprisesengagedincattleproduction,109areengageddairying(Figure7).Ofthe109dairycattleenterprises,16havebreedingenterprisestatuswhichentitlesthemtostatesupportforbreedinganimals,buyingbreedingbulls,anddevelopmentofbreedingstations.Today,aprogramofimprovementforincreasingproductionofmilk-meatbreedsisongoing.ByusingfrozensemenfromHolsteinbulls,workisprogressingonproducinganewtypeofBlack-MotleycattleofKazakhstan.Inthenorthernregion,crossingoflocalRedSteppeandtheRed-DanishcattlebreedsiscreatinganewtypeofRedSteppecattle.Intheeastandinthenorthernpartofthecountry,
9757.2
3368 3998.2
165.9
4106.6
172.5
4293.5
2077.2
4871
2267.3
5853
2600.4
0
2,000
4,000
6,000
8,000
10,000
1991 1999 2000 2001 2003 2007
Figure 5.PopulationofcattleinKazakhstan1991to2007(×1000).
166
143
22
8627
cattlesheep breedingswine breedinghorse bredingcamel breeding
Figure 6.NumberofeconomicenterprisesraisingfarmanimalsinKazakhstan.
0
20
40
60
80
100
120
dairy cattle meat cattle
TotalBreeding farmsBreeding enterprises
Figure 7.Numberoffarmswhichreardairyandmeatcattle.
The�cattle�sector�in�Central�and�Eastern�Europe
172
workisatanadvancedstageonproducinganewRed-Motleytype,basedoncrossingSimmentalandtheHolstein-Red-Motleybreed.Inthesouth-eastbasedonthelocalAlataubreedandSwissbullsofAmericanorigin,anewtypeofKazakhstanbrowndairycattle‘Akirys’hasalreadybeenproduced.Suchtypesofdairycattledifferfromtheirpredecessorsinthattheyhavebetterdairytype,amoredesirableshapeofudder,andmilkproductionthatexceedstheirpredecessorsby1,500-2,000kg.Thepopulationofbreedingcattle(accordingto2007statistics)is253,500,or4.1%oftotal.Workisnowinprogresstoincreasethepopulationofbreedinglivestockandimprovethepedigreestructurewiththeobjectiveofincreasingmilkproduction.Inthiscontext,in2007,1,700cowswereimportedfromCanada.In2008,thenumberofbreedingenterprisesisexpectedtoincreaseto500units.
Part 3 Concluding remarks
� The�cattle�sector�in�Central�and�Eastern�Europe
175
Remarks and recommendations of the workshop
M.�Zjalic
EAAP,�Via�G.�Tomassetti�3,�00161�Rome,�Italy
Cattle sector in Central Europe
InreviewingthesituationandtrendsinthedevelopmentofcattleproductioninCentralEuropeantransitioncountries,theworkshopnotedthattheprocessoftransitionofthecattlesectorfromcentrally-plannedtomarketeconomysystemwascharacterisedbyasharpdeclineinproductionandconsumption,aswellasinthenumberofcattle.Thesedevelopmentshavebeenaccompaniedbychangesinfarmstructuresasaconsequenceofprivatisationandde-collectivisation.Theendofthelastcenturywasmarkedbyfurtherchangesinfarmstructure,herdsizeandproductivity:thenumberofdairyfarmsanddairycowscontinuedtodecline,whileherdsizeandpercowmilkproductionareincreasing.Thetrendofspecialisationofcattleproduction–separationofbeeffromdairyproductionandestablishmentofbeeffarms,introductionofnewbeefbreedsanduseofdairyherdsforbeefproduction–althoughnotevenlymarkedinallcountries,isexpectedtocontinue.Thesystemofmilkquotasandtheadjustmentofagrarianpolicies(throughtheCommonAgriculturalPolicy),whichstartedevenbeforetheaccessionofthesecountriestotheEuropeanUnion,haveimposedtheneedforanewtypeoffarmmanagement.Technologydevelopmentandincreaseinfarmsizecontributedtotheestablishmentofcloserlinksbetweenmilkproducersandthemilkprocessingindustryandtothegradualintegrationofprimaryproductionandprocessing.Horizontalintegration–establishmentofcooperativesandproducers’associations–isdevelopingrelativelyslowly,becausesmallfarmersarereluctanttojoincooperativesafterthenegativeexperiencetheyhadunderthepreviousregime.Insomecountries,producers’associationsplayanimportantroleasrepresentativeorganisationsandpartnersofindustryandadministration.Participantsattheworkshopunderlinedtheneedforregularandcontinuousmonitoringofthestructuralchangesinthesector.Adjustmentsinpoliciesshouldtakeintoaccountmarketdemandandtrendsaswellasthesocialroleofagriculture,particularlyinviewofthelargenumberofsmallsubsistencefarmsinsomecountries.Manyofthesesubsistencefarmshaveapotentialtobecomemarket-orientedproducers,whileacertainnumberofthemwillabandoncattleproduction.Thosewhowillremaininproductionneedsupportandtraininginmoderntechnologiesandmanagement.Participantsconsideredthatthesystemofmilkquotashascontributedtothesurvivalofmilkproductionintheregionswiththelowerproductivityoflandandanimals.Theannouncedgradualabolishmentofmilkquotas(softlanding)wasmetwithsomeunderstandingasameasurethatwouldcontributetothebetteradjustmentofthedairysectortomarketdemand.Ontheotherhand,thespecificpositionofthesectorinCentralEuropeanditslowereconomicpowerandproductivityshouldbetakenintoaccountindesigningfuturepolicymeasures.ItwasagreedthatpartnerswithintheCattleNetworkshouldcontinuetomonitorpolicydevelopmentsoftheCAPaffectingthedairysector,soastobeinthepositiontocontributethroughcompetentbodiestotheassessmentofthesituationandtotheformulationofnewproposals,whenrequired.NotingthatdairyherdsarethebasisforbeefproductioninCentralandEasternEurope,asregularsuppliersofcalvesforfatteninginotherMemberStates,participantsagreedontheneedtomonitortheimpactofthedeclineinthenumberofdairycowsonEUbeefproduction.ThegeneticimprovementofdairyherdsinCentralEuropegreatlycontributedtotheconsolidationofthedairysectorandtoasignificantincreaseinproductivity.Thefuturebreedingobjectivesshouldtakeintoaccountalltraitsrelevanttotheefficiencyandprofitabilityofmilkproductionand
The�cattle�sector�in�Central�and�Eastern�Europe
176
sustainabilityoftheherd,lookingalsoattraitsrelatedtofertility,longevityandanimalhealth.Thegeneticpotentialoflocalbreedsshouldbeincreasedparticularlyintheproductionoflocalproductsandsupplyofnichemarkets,includingorientationtowardsorganicproduction.
Cattle sector in Eastern Europe
Aftertheinitialdeclineinnumberandproductivity,thepresentsituationofdairycattleintheRussianFederationhasbecomemorestableandpredictablethanitwasinthe1990s.Thetotalmilkproductionhasbeenstabilisedwhiletheaveragemilkyieldpercowisconstantlyincreasing,withapotentialforfuturegrowth.Theofficialpolicydocument‘Concept-ForecastforRussia’sAnimalHusbandryDevelopmentuptoYear2010’envisagesthefollowingactions:• Restorationanddevelopmentofthepopulationandstructureaswellaspreservationoftheunique
genestockofbreedinganimals.• Creationoffavorableconditionsforinvestmentpolicyinthissector.• Raisingtheeconomicefficiencyofactivitiespursuedbybreedingorganisationsandenterprises.Toresolvetheseissues,ithasbeendecidedfirstofalltoimprovethenormative-methodologicalaswellaseconomicalandmaterialfoundationofcattlebreeding,whichwillbeaimedat:• Increasingthenumberofbreedingherdsandanimalsunderregistration(identification,maintaining
thedatabasetobeusedasabasisforofficialherdbooksofpedigreeanimals).• Increasingthepaceofgeneticprogressforbreedinganimalpopulationsaccordingtotheselected
characteristicsduetotheintroductionandoptimisationofbreedingprogramswiththepopulationsoffarmanimals.
• Optimisationofthebreedingorganisationsinfrastructure(breedassociations,systemsforfarmanimalsartificialinsemination,independentlaboratoriestoregisterphenotypicalcharacteristicsandestimationoftheanimals’geneticvalue).
• Increasingtheeffectivenessofdistributionofthebestgeneticresources,itsrationaluseandrealisationofthepotentialundertherealconditionsofagriculturalproduction.
• Conductingtheobjectivemonitoringofthebreedinglivestocksector,projectionofitsdevelopmentandoptimisationofbreedingprograms.
• Russia’saccessiontointernationalorganisationsdealingwithpedigreeanimalhusbandry.ImplementationofthesestepsintothepracticeofdairycattlehusbandryintheRussianFederationofferstheopportunitytolookaheadtothefuturewithdefiniteoptimism.InotherformerUSSRcountries,thedairysectoraccountsforupto25%oftotalagriculturalproduction.Animalproductioninthesecountriessufferedseriouslyduringthetransitionperiodinthe1990’s.Forinstance,inUkrainemilkinglivestockhavedecreasedtolessthanhalfin15years,andbytheendof2005amountedtoonly45%ofthe1990number.Afterthatrapiddecreaseinthecattlepopulationandthecorrespondingdecreaseinmilkproduction,agradualimprovementinthesituationhassincebeenobserved.Somecountries,likeBelarus,havestabilisedthenumberofcows,attainedsustainablegrowthinyieldsandtotalmilkproductionincludingasignificantexportofmilkandmilkproducts.Inothercountries,themostimportantproblemsandconstraintsindairysectordevelopmentincludetheprevalenceofsmall-scalefarmsinthetotalrawmilksupplyoftenresultingintheproductionoflowqualityrawmilk,constraintstoaccessingcredit,lowpricesformilk,lackofinvestmentindairyfarming,andunderdevelopedlogisticsandinfrastructuresuchasmilkcollection,storinganddistribution.Theproductionoffeedsandfoddershasdecreasedsignificantlyandpasturesarenotwellmanaged.Theextentofartificialinseminationusehassharplydeclinedascentralisedbreedingfarmshavebeenabandonedandthecorebreedingstockhavebeendistributedtoprivateindividuals,whoareoftennotexperiencedinlivestockbreeding.Thishasledtothedeteriorationofthegeneticcharacteristicsofcattle.Inaddition,thehighprevalenceofzoonoticandtransboundaryanimal
� The�cattle�sector�in�Central�and�Eastern�Europe
177
diseases,suchasbrucellosis,tuberculosis,footandmouthdisease,hinderthedevelopmentofthedairysectorinsomecountries.ThecurrentexternallyfundedprojectsinCaucasiancountries(e.g.severalsmalltechnicalprojectsinGeorgia,FAOprojectonstrategyforlivestockdevelopmentinArmenia)indicatethemainlinesoffuturepoliciesanddevelopments:establishmentofaninstitutionalandlegalframeworkforanimalproduction,establishmentoftechnicalcapacitiesforgeneticimprovement,animalfeeding,meatandmilkprocessing,andtradeinanimalsandanimalproducts.
� The�cattle�sector�in�Central�and�Eastern�Europe
179
Appendix. Short history of the EAAP Cattle Network Working Group
In2003,theEAAPCouncilestablisheditsWorkingGroup‘BusinessSupportInformationNetworkforCattleSector’(CattleNetwork)tofacilitatebusinessandtechnicalco-operationamongcattlebreedersandproducersfromitsMemberOrganisations.TheWorkingGroupwasestablishedafterthesuccessfulcompletionoftheBABROC13projectfundedbytheEuropeanCommissionandimplementedbyEAAPanditsmembersfromtheCentralandEasternEuropeancountries–formercandidatesfortheEUmembership.ThebasicscopeoftheCattleNetworkistheexchangeofinformationtopromoteandfacilitatebusinessoperationsamongbreeders’andproducers’associations.TheNetworkmonitorsanddiscussestrendsinproductionandconsumptionofcattleproductsandpolicymeasuresaffectingthecattlesector.Indoingso,itreliesonstudiesandanalysesproducedbyexistinginstitutionsandorganisations.ActivitiesoftheNetworkarecomplementarytotheexistingrepresentativestructuresatEUlevel(COPA/COGECA),theexistingEuropeanandinternationalscientificandtechnicalentities,suchasEAAP,ICAR/INTERBULLandtheEuropeanbreedassociations.TheCattleNetworkhasestablisheditswebsitehttp://www.cattlenetwork.netasavirtualgatewayofferingacompleterangeofbothmarket-andconsumer-orientedinformationaswellasmoderncommunicationtools.Ithasalreadybecomeanonlinemeetingpointforresearchers,professionals,producersandconsumersinthecattlesector.MeetingsandworkshopsoftheNetworkareheldontheoccasionoftheEAAPAnnualmeetingsandontheoccasionofotherimportantevents,suchasinternationalfairsandimportantcattleshows.Since2003,theNetworkhasorganizedtwomeetingsandfourworkshops:• 2003–1stmeetinginRome:EstablishmentoftheCattleNetworkWorkingGroup.• 2004–2ndmeetinginParis:Workplanfor2004-2005.• 2005–1stCattleNetworkWorkshop‘PerspectiveofbeefproductioninEurope’,Sweden.• 2006–2ndCattleNetworkWorkshop‘Developmenttrendinsmallcattlefarms’,Turkey.• 2007–3rdCattleNetworkWorkshop‘AdaptationandconformationofEUbeefsystemstoCAP
regulations’,Ireland.• 2008–4thCattleNetworkWorkshop‘CattlesectordevelopmentintransitioncountriesofCEE’,
Lithuania.
13‘Supporttotherestructuringandstrengtheningofcattleproducers’andbreeders’associationsasbusinessrepresentativeorganisationsinCentralandEasterEuropeancountries’