Small-scale Dairy for Enhancing Income and Employment

Steven J. Staal
International Livestock Research Institute
FAO-APHCA-AGAP Workshop on Small-Scale Dairy
Chiang Mai
Sept 2004

Outline of presentation

• Small scale dairy for food, income and employment

  • Competitiveness and economies of scale

  • Nutrients for the land

  • Nutrition for the family

  • Milk markets and consumption in developing countries

• Comparing large vs small scale systems

• The Joint FAO-ILRI Small Scale Dairy Program

• Lessons for Asia

  • The Livestock Revolution

  • Competitiveness of small-scale producers

  • Issues

Characteristics of small-scale dairy production

• Small scale dairy farms dominate production in most developing countries

  • A few cows, often 2-5

  • Landless, small land holdings, or grazing on larger holdings or on common properties

  • Sometimes intensive, usually low-input low-output

  • Often linked to crops

  • Rely on family labour, but use hired labouras well

Small-scale profitability: Average profit per liter of milk in India

Source: Sharma and Delgado, 2003

Not only family labour: in Kenya
50% of small dairy farms
hire long term labourers

Cattle assets - financing and insurance roles of livestock

• Limited or no smallholder access to formal insurance (health, household) nor to formal credit. Dairy cattle can provide both.

• Financing

  • Sale of animals to meet planned lumpy expenditures

  • Value accrues at sale

• Insurance

  • Keeping of animals to meet emergency expenditures

  • Value accrues daily Milk revenue Sale of animals

Dairy production's role in sustaining mixed small farming

Scarce nutrients - farm and family

• Farm nutrients - problem is nutrient deficits, not surpluses (examples from Kenya)

  • only farms with cattle had positive (small) nutrient balances

  • more than 40% of fodder materials gathered from off-farm - nutrient channel

• Family nutrition - problem is under nutrition, not over nutrition

  • households with cattle have significantly lower % of children exhibiting stunting (height for age) a measure of long-term under nutrition

Traditional dairy markets and actors

• Informal/unorganised

  • Liquid, often raw, milk and traditional products

  • Sometimes formal - may pay taxes, licenses

  • Wide variety of actors

    • Direct sales

    • Small-scale traders

    • Traditional processors

    • Small-scale retailers

  • Generation of rural/urban employment

Informal dairy markets globally

Informal market share %

S. Asia

India

85

Sri Lanka

40

Pakistan

98

SSA

Kenya

88

Tanzania

98

Uganda

90

L. America

Mexico

33

Nicaragua

86

Costa Rica

44

Brazil

44

• Primary market for both small producers and poor consumers

Sources: ILRI Collaborative Research & FAO E-Conference

Large-scale vs small-scale dairy systems

Large/formal/rich

Small/informal/poor

Production profile

Few outputs/objectives, enterprise model

Multiple outputs/objectives, farm-household model

Capital intensive

Labor intensive

Strong economies of scale

Weak economies of scale

Nutrient and nutrition profile

Human over-nutrition, threat to human health (?)

Human under-nutrition, sustaining human health

System nutrient surpluses, threat to environment

System nutrient deficits, sustaining natural resources

Large-scale vs small-scale dairy systems (cont)

Large/formal/rich

Small/informal/poor

Demand and product profile

Value added products, highly processed

Low cost products, traditional processing

High relative demand for food safety/quality

Low relative demand for food safety/quality

Policy profile

Highly regulated and monitored

Largely unregulated, unrecorded

Over-represented: loud voice in domestic and international policy

Invisible: little voice in domestic or international policy

Often subsidized

Few subsidies, may be taxed indirectly

Joint FAO-ILRI Small-scale Dairy Programme

• Focus on small scale and traditional markets for milk and dairy products

  • Employment in small-scale markets

  • Testing implementation of LPS milk preservation technology in Kenya

  • Identification of milk market losses

  • Developing training materials for small scale milk market agents

  • Developing dairy information platforms

ILRI-FAO study on employment in traditional markets

Number of jobs created per 100 litres milk handled daily

No. of direct full-time jobs

Main milk product

Kenya mobile traders

1.7

Liquid

Bangladesh sweet makers

5.6

Traditional sweets

Ghana milk/snack retailer

10.0

Milk snacks

• At least double the no. employed in formal sector

• More women employed than in formal

ILRI-FAO development of training materials for small scale market agents technology/guideline development

• Based on ILRI research identifying quality and risk issues in markets

• Development of appropriate technologies, training and guidelines for small market agents

ILRI-FAO development of dairy information platforms

• Market level information

  • Web-based information platform for FAO Prevention of Food Losses Project

• Farm level information

  • Web-based information and decision support platform for ILRI-DFID Dairy Toolbox

• Exploring options for wider Africa-Asia dairy information platform

Asia now and in near future: the livestock revolution

• Expanding populations, incomes and urban households across developing countries particularly in Asia

• This is driving greatly increased demand for livestock products, including milk

• As a consequence, Developing Countries will produce 52% of global milk in 2020, up from 32% in 1993

Percentage increase in total demand for livestock products
1993 - 2020

Dairy productivity growth in Asia:

Sources of change in cow milk production, 1985-1998

% of change in cow's milk production

Asia productivity growth strong in some regions

Source: ILRI using FAO statistics

Can small farmers compete?
Farm efficiency by farm size in India

Source: Sharma and Delgado, 2003

Impact of opportunity costs of labor:

comparison of typical herd size and rural wage rates, 12 selected countries in SSA, Asia and LA

Issues for small-scale dairy in Asia

• Livestock revolution presents huge opportunities

• Smallholders can compete, and provide multiple benefits

• Traditional markets will continue to play large role in South Asia

• Imports pose threat in SE Asia

Thank you