Raise of food standards: new challenges for the Kyrgyz dairy industry

Based on the results of work in Chui, Naryn and Talas Provinces during the elaboration of a joint FAO-EBRD dairy sector study and the design of the IFAD-funded investment “Access to markets” from September 2015 through June

2016 Inna Punda, Agribusiness Specialist, FAO Investment Centre

19 October 2016, Bishkek

Setting the sceneThe Kyrgyz dairy industry is:

17% of GAO 11% of agrifood exports USD 73 Million-worth market Net exporter 200-250 g of dairy a day for 6 million

of Kyrgyz 380 thousand of milk producers 1.6 million tonnes of raw cow milk

per year 45 dairy plants 65 thousand tonnes of dairy

products (in milk equiv.) Important for the economy, but also

rural development and environment/biodiversity conservation

Opportunities Used and … lostInformal marketing channel (40% of sales) is shrinking Modern retails dictates its standards (+convenience and variety)Since May 2014 the competition became tougher

+65%

Export milk flows11% of agrifood exports or $12 million. but - 80% of exports is liquid milk for further processing (value addition).Border closure damaged national dairy industry

Dairy processor. Can’t plan.Irreversible changes after border closure: decreased output, lost export markets…

… still great potential: cheese-making, organic, wealth of pastures and efficient management mechanism, compact landscape, close to big markets, non-cattle milk …

… and what do we bring in? $11 million whereby 46% are yoghurts and other fermented drinks, 35% are powder and condensed milks (of quantities)Subsidized products, but most importantly not always clearly identified and labelled (i.e. vegetable fats)

Growth point: cheese

… lagging behind on raw material 98% of cow milk is produced by farming households. In most of the cases, this is only in spring and summer, in winter there is virtually no liquid milk

1.5 million tonnes of milk per year BUT:

Almost all the milk is produced by smallholders

800 thousand cows with low genetics Real yields << official data Low commercialization rates Rough competition for raw milk

compromising public health

Dairy plants starve for raw milk… stringent biosecurity, better productivity of animals and impeccable food safety must be assured

Compete = complyTo be competitive : optimize the cost of production + improve quality

«Food safety» TR EAEU 021/2011«Milk and dairy products safety» TR EAEU 033/2013«Safety of packaging» TR EAEU 005/2011«Labelling of food products TR EAEU 022/2011»

Please meet the farmerNeed knowledge in simple

form on: Feed production Feeding Breeding Hygiene

98% - households, 3-10 heads of cattle, largely self-consumption Rudimental knowledge on dairy farming Not aware of the TR requirements Genetics is a results of the natural selection Inadequate feedingLacking trust towards the buyer (trader)Disconnected from markets (remote areas)

Please meet the processor Work in one team: marketing manager, technologist and milk procurement

Hundreds and thousands of suppliers Mainly households, but some have

potential to become farmers Processor can’t develop without its

suppliers, invest in farmers Should educate discipline and create

incentives for quality (premium price)

Needs of upgrade: HACCP Modernization (facilities and

equipment) Plant-driven MCC network Service Centres

Powder milk

Robust VC = robust linkagesLoyal supplier is a developing supplier

Перечень стандартов 1. Responsible agribusiness can

easily lose its suppliers unless direct linkages are established

2. Government has to assure the compliance with the technical regulation in force by all processors and milk traders!

Time to act! To comply with the technical regulation the entire VC needs to be upgraded

1. Dairy plants struggle with insufficient quantities of quality raw milk

2. Final products safety and quality is the responsibility of the processor, not of milk trader

3. Direct link plant-supplier (farmer, household) is crucial

Smallholder + dairy plant = sales up

Value chain upgrade

Establish and undertake accreditation of a laboratory

Conduct TR compliance inspection regularly and efficiently (along the entire VC)

Apply TR requirements to imported foodstuff

Suggest revision of TR on labelling of dairy produts

Official state bodies, i.e. State Veterinary and phyto-sanitary Service, Gosstandard of Kyrgyzstan

The time has come

Thank you for your attention

Data used in this presentation have been provided by the National statistics committee of Kyrgyzstan and the Global

Trade Atlas (foreign trade data)