Dairy policies and sector planning

Implementing an effective dairy development planning process

Many countries around the region have designed dairy development plans and strategies with many including a dairy focus within a broader livestock sector plan, such as Bangladesh (2007), Nepal (2007), Pakistan (2007) and Sri Lanka (2007). Some had designed dairy-specific plans, including the Philippines (2008) and Assam, India (2008). While some are operational, others, despite good intentions, are not being implemented because of a lack of strategic planning in the development process and a lack of consistent focus on implementation requirements, such as financing.

To provide better policy guidance to governments and dairy stakeholders in the region, participants at the 2008 technical meeting identified the following good practices in sector planning:

1. A stakeholder driven process that involves consultation and political dialogue and engagement. The diverse nature of stakeholders along the dairy chain and their differing priorities needs to be considered when identifying and prioritizing strategic goals and objectives for sector development.
2. The setting of clearly articulated measurable objectives within the longer-term vision and goals for the sector. While the vision in many countries is focused on the development of an enterprise-based sector, it can also, depending on the context, recognize different production and marketing systems and include a pro-poor focus. Strategic objectives need to be prioritized and identified as those focused on short-term outcomes and those that require long-term planning.
3. Private sector-led orientation that encompasses a focus on the entire value chain. This builds private sector buy-in to the process, thus ensuring viability and sustainability. But it also necessitates a good public perspective that draws into the process development priorities such as poverty reduction and environmental sustainability.
4. Consistency with previously agreed national plans and policies.
5. A clear focus on implementation challenges, with mechanisms built into the process to identify quick wins and to ensure that adequate resources are attached to various objectives. It also builds in a clearly articulated and time-based monitoring and evaluation system.
6. A recognition that many of the specific solutions to constraints to sector development are outside the mandate of stakeholders, including policy-makers, in the livestock sector. This includes policies influencing international trade flows, banking regulations, allocation of research and development funds, etc. These policies and regulations need to be analysed in terms of their impact on stakeholders in the dairy sector and advocacy needs to be developed to influence those policies.

Participants in the 2008 technical meeting also devised a generic approach for sector planning (Figure 1). They agreed that broad stakeholder participation, including input from smallholders, was needed to identify a sector vision and goals that are credible and achievable and generate support among the private sector.

Figure 1: A generic approach for dairy development planning

Policy objectives, the mechanisms for implementation and their impact

Participants along the dairy chain often have conflicting interests and objectives. Consequently, the planning process needs to be supported by considerable knowledge about stakeholder concerns as well as a broad understanding of available tools and their ability to achieve policy objectives.

An assessment of stakeholder priorities generates a series of policy objectives. These are specific statements detailing the desired accomplishments or outcomes of a development plan. Whereas the goal of a dairy development plan might be to “contribute to national economic development by commercially, qualitatively and competitively developing the dairy sector for employment generation and poverty reduction with the participation of government, cooperatives and private sector” (Nepal, 2007), the development objectives would be more specific.

Specific examples of development objectives for the dairy sector could include: i) a reduction of imports; ii) increasing on-farm productivity and ensuring food safety; iii) enhancing nutritional status of children through milk consumption; iv) raising on-farm incomes; v) reducing post-harvest losses; and vi) ensuring fair prices for quality milk products. The effectiveness of plans that incorporate these types of objectives, assuming the availability of well-designed baseline studies, can be measured. This contrasts to more vaguely worded goal statements, such as enhanced food security, sustainable development, poverty alleviation, etc.

The key distinction: the goal is a statement of intent and an objective describes an achievable and quantifiable target or deliverable. Good objectives should:

• be impact-oriented, measurable, time-defined, specific and practical;
• relate to the expectations and requirements of all major stakeholders;
• cover a balanced variety of expectations – economic, social, cultural and environmental.

When assessing the objectives to be achieved through a dairy plan, the menu of options for implementation or the policy tools/measures need to be considered. In most developed countries, the policy objectives of very complex programmes and plans are quite simple: to support milk producer prices and/or incomes. The mechanisms for achieving these objectives, however, can be extremely diverse, with the selection of policy measures having i) differential impacts on the many stakeholders along a chain; and ii) cost implications, particularly as consumers and the government typically finance these interventions.

Examples from developed countries: Achieving dairy policy objectives

Developed countries have a long history of supporting local dairy industries through policy tools that include regulated or administered prices, high tariffs or production controls/quotas, such as those in the EU and Canada that limit production increases. All of these policy interventions are designed to ensure objectives of stable and high producer incomes. The significant support for this sector, relative to other sectors, may be related to the characteristics of the product, such as the perishability of milk and dairy products, seasonable production patterns and need for further processing. In addition, dairy farms in developed countries (and in some developing countries) tend to be less diversified and more dependent on farm income than other farm operations (Economic Research Service, 2004).

Figure 2: The dairy sector in OECD countries is heavily supported

Evaluating dairy policy objectives and possible responses in developing countries

Successfully achieving ambitious policy objectives, as in the case of developed countries, can be hugely expensive – depending on how measures and programmes are implemented. In developing countries, given financial constraints, dairy policies that involve direct support to industries are not so prevalent. The nature of government interventions varies significantly across the Asia region, as revealed in the lessons learned studies. There is strong government support in China and Viet Nam, which have used government-financed credit schemes to encourage the distribution of improved breeds. This has had a significant impact on sector development. However, the success stories are complicated and not widespread. The nature of dairy production provides important sources of daily cash and nutrition to a large proportion of rural producers; in addition, the sector offers important opportunities for employment creation in rural communities. This implies that governments need to be careful and strategic in their intervention selection.

Figure 3: Dairy development planning

Stakeholders along the dairy value chain have very diverse priorities. Table 2 refers to the broad categories of stakeholders; the contextual nature of dairy, particularly in Asia because of its diversity, generates a multitude of different categories of consumers, and producers have different priorities. Whereas a landless owner of a cow in India prioritizes dairy access to milk for his family, a more commercialized farmer in the same region may be concerned about getting a fair price for a quality product.

Table 2: Priority objectives of different stakeholders along the dairy value chain

While there are some commonalities in the objectives of the stakeholders, in many cases the policy instruments used to achieve the objectives can differ in terms of their impact on the stakeholder. For example, a fair price is defined very differently by different stakeholders. Pricing policies that favour one stakeholder over another, such as setting the price of milk without consideration for costs of production for producers, has both short-term implications (farmers will reduce or stop new investments) and long-term impacts (the prices will go up because of supply constraints and shortages of cattle in the long run). This was the case in Pakistan in 2007 when, in the context of rising food price inflation, a milk price ceiling was enforced in Karachi.

The policy instruments

The enabling environment for dairy sector development, particularly one focused on scaling up operations, hinges on clearly articulating policy objectives and on identifying the appropriate tools for achieving them. In developed countries, the use of certain policy instruments has had a differential impact on different stakeholders. Direct support to producers involves government/taxpayer costs, high tariffs on imports raise costs to consumers and supply restrictions limit industries’ ability to respond to changing global demand for dairy products. Similarly, the Karachi case highlights the importance that decisions by governments, in particular the choice of measures or tools that they use to achieve their sector objectives, be implemented with a broader understanding of their direct and indirect impact on stakeholders.

Conclusions

Despite declines in 2008, dairy prices remain higher than historical levels. This has induced renewed interest in dairy development in the Asia, particularly in recognition of the nutritional and livelihood importance of milk in rural communities. Nearly 80 percent of the 247 million tonnes produced in Asia in 2007 was supplied by smallholders.

The test for stakeholders in the region is to foster sector growth, one that is inclusive of smallholders, through the development of an enabling environment. This requires generating a sector-planning process that provides a road map for sector development that has buy-in from the private sector and is representative of the priority concerns of stakeholders, large and small.

Most of the policy measures that could support dairy development are not under the control of a ministry or department of livestock. Rather, they are the responsibilities of other ministries, such as commerce, trade, heath or industry. This implies that in the development planning process, other stakeholders need to be brought early on into the planning process. As well, a host of other considerations need to play into the decisions on how to support sector development. While socio-equity issues can be reviewed, recognizing that there is a diverse set of consumers and producers, the impact of policies on the environment also needs to be considered.

The challenge is to translate the planning process and final strategy document into a vehicle for action. This requires a comprehensive process that explicitly relates implementation modalities to clear action plans with identified responsibilities of selected champions. The more difficult challenge is to identify policy measures that can effectively respond to policy objectives. Limited by financial constraints, dairy stakeholders need to critically evaluate the potential impact (both human and economic) of policy combinations to determine which are acceptable along the chain – while recognizing the overall vision for sector development. Private sector engagement and endorsement of the process is one of the essential ingredients for success in this process.