The Milk Value Chain - agrilinks.org Milk Value Chain: Generating employment and income and creating...
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![Page 1: The Milk Value Chain - agrilinks.org Milk Value Chain: Generating employment and income and creating wealth while improving nutrition Jim Yazman, Phd Bureau for Food Security](https://reader033.fdocuments.in/reader033/viewer/2022052608/5adafdea7f8b9a52528d9e79/html5/thumbnails/1.jpg)
The Milk Value Chain:
Generating employment and income and creating wealth
while improving nutrition
Jim Yazman, Phd
Bureau for Food Security
Country Strategies and Implementation Office
Washington, DC
202-712-5302
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Key Discussion Points
• Why USAID invests in improving smallholder dairy
value chain performance
• Characteristics of milk production and marketing in
our target countries
• Where we invest to “transform” dairy value chains
• Often overlooked investment and employment
opportunities in transformed systems
• Cross-cutting issues
• Lessons learned
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Why Does USAID invest in Smallholder Dairy Development?
• Proven pathway out of poverty
• Families familiar with cows and value cow ownership and productivity.
• Even in the most conservative of societies, cows and milk often managed by
women and income from milk is managed by women.
• Milk is a familiar food. The market for milk (and meat) already exists.
• Demand for milk and dairy foods go up with urbanization and increased
incomes.
• Milk makes positive contributions to the diet of children, pregnant and
nursing mothers, the elderly and persons with health challenges.
• Cows are ruminants: milk can be produced wherever there is a forage base.
• The milking enterprise complements other agricultural enterprises within a
farming system.
• Attracts private investment: Processing is a lucrative agribusiness and can be
complementary to other food processing enterprises.
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The Dairy Value Chain
Input
suppliers
Producers Transport
services Cooling
centers Processors
Distributors
Retailers
Services
suppliers
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End Markets for Milk
Processed (“chilled”) milk and dairy products
Un-pasteurized (“warm”) milk sold direct to consumers
Milk is “standardized” as to fat level (3% down to skim)
Pasteurization destroys pathogens and extends shelf-life
Processing, distribution and retailing represents huge capital investment and marketing costs
Brand and regulations build consumer trust
Product innovation an important business strategy – availability and convenience
Prices are higher – Generally sold to families with higher levels of income – economies of scale need consideration
Households buy milk un-pasteurized, sometimes chilled, from kiosks or receive it from traders direct at their front door
Milk is not standardized nor certified
Low-investment distribution system – pick-ups, bicycles, used soda bottles, a cooling tank (sometimes)
Personal relationships underpin trust
Prices are lower – Sold to families with lower levels of income but also those where food “tradition” is important
Food safety and public health risk through consumer discretion and “distributed” pasteurization system
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Source: TechnoServe, 2004. Analysis using data from the Tegemeo Institute and other sources
Production
Transport
Retail
Milk $
Share of
revenue
Share of
revenue
Price
26% 0.18
3% 0.20
2% 0.23
3% 0.61
8% 0.67
68% 0.18
32% 0.26
3% 0.22
55% 0.59
Processed milk chain Warm chain
Milk $
Transport &
Distribution
Retailing
Processing
& packaging
Transport
Transport
Bulking &
cooling
Production
100%
100%
Price
13
15
17
46
50
16
45
13
19
$ Ksh $ Ksh
Prices and revenue shares,
Kenya dairy value chain, 2004
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Where Does USAID Invest?
• Stakeholder organization and strengthening– Policy research and reform, public-private partnerships, building common interest groups to have a voice, driving country ownership
• Input supply and services –Market-sustained access to veterinary services, improved genetics
–Embed training and advise with input supply or cooling services
–Focus more on private sector than public sector
–Integrate ICT into services businesses
• Training smallholders in “dairy as a business”
• Training and financing for milk transporters to upgrade their services
• Producer organization development – Support member-owners with milk cooling and marketing services and access to training, services and input supply
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Collection, Cooling and Marketing of Raw Milk
Processors Consumers
Milk collection and cooling centers
(MCCs)
Producers
Traders
Retailers
Transporters
USAID (other donors) Investment
Warm milk chain
Chilled
milk
chain
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Upgrading Strategies at Key Value Chain Points
Processors Consumers
Milk collection and cooling centers
(MCCs)
Producers
Traders
Retailers
Transporters
•Raise productivity
•Smooth supply
•Improve quality
•Control/reduce costs
•Quality control
•Services
(financing) to
member-owners
•Business
relations with
processors
Education
to build
demand for
quality milk
• Training in
milk handling
• Loans for SS
milk cans
Upgrade traders
as transporters
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Often Overlooked: Opportunities for the Poor in Input Markets
• Forage seed: High demand, more expensive than food staple seed, uses a lot of hand labor, high returns to skilled household labor, global market
• Dairy heifers: In East Africa, F1 HF heifers worth $1200 to $1500 CIF.
• Dairy beef: F1 HF and Jersey crosses grow fast and produce quality beef
• Forage: Larger farms can’t produce sufficient forage. An excellent “crop” for households remote from MCCs. Includes stovers and straws.
• Transport services: Moving milk often pays higher returns to labor than producing and marketing it.
THINK MILK SHED PLANNING!
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Inputs and Services
• Competitive dairy value chains require best, cutting edge technology and services
• Public sector services critical – Extension training, food safety monitoring and control, disease monitoring and control, infrastructure (roads, power, water\sanitation)
• Processors often finance services and inputs to capture supply
• Dairy farms are markets for technology – Cattle genetics, veterinary pharmaceuticals, forage and fodder seed, milk handling equipment
• Training and support often embedded in input sales
• Dairy producers ideal candidates for ICT-based services (call for vet or AI tech, feedback on quality of delivered milk, order feed, etc.)
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Warm milk chain Cool milk chain
We need to trust markets to create employment!
Sector transformation
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What We Often Don’t Think About (But NEED TO!)
• On very good forage, “improved” cows can produce about 10 liters of milk per day. To reach economical levels, supplementary feed required.
• Improper cow management has negative impact on productivity but also milk quality.
• IMPOSSIBLE to produce quality milk without potable water at cowside.
• Milk is highly perishable. Quality starts deteriorating once it leaves the cow’s udder.
• Milk quality begins with what cows eat and what happens INSIDE the cow BEFORE milking.
• “Growing” a herd from one donated cow is expensive and requires a long time horizon.
• Milk is 88% WATER! Cooling, storing, moving water is very expensive.
• Milk can be converted to powder that has long shelf life AND can be transported long distances and can be “reconstituted”.
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What We Don’t (Need to) Think About (continued)
• Climate Smart Dairy Development: Reducing CH4 and C per liter of milk marketed.
• Pathway to lower processed milk prices lies in greater efficiencies all along the value chain.
• Food safety: Milk is an ideal medium for growing bacteria and viruses, including zoonotic species, and for “masking” contaminants (e.g. water, Melamine).
• Quality standards and price competition drives upgrading in milk value chains in the US, Europe, ANZ. Producers in LDCs have not had that experience.
• A competitive, sustainable dairy value chain requires consistent, quality, market-based input supply and services, public as well as private services.
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Lessons Learned
• Producing and marketing milk is very high on the list of successful pathways out of poverty for rural households.
• Smallholder milk production has very high impact on household health and nutrition, education, resiliency – Mostly unmeasured.
• Input markets (forage, forage seed, heifers) may offer higher returns for poor households than producing milk.
• “Warm milk” value chains may offer households access to low-cost milk but at an unknown cost in terms of health risks.
• The warm milk value chain may actually retard overall value chain development and competitiveness and the benefits it brings to the rural poor.
• Building sustainable, competitive dairy value chains that convey safe, low-cost products to consumers takes time and strategic thinking.
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Thanks for your attention!!