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Milk producer marketing groups in Uganda

1. Introduction
2. Background
3. Development of producer marketing groups in Uganda
4. Strategies adopted
5. Producer marketing groups and government dairy sector policy
6. Conclusions

A.A. Okwenye1.
Dairy Corporation; UGANDA.

[¹The author was marketing advisor in two dairy projects in Uganda from 1988 to 1993 (GOU/UNDP/FAO/UGA/84/023/and UGA/92/010)]

1. Introduction

Since the 1960s one of the most critical problems facing dairy farmers in Uganda has been recognised as that of marketing their milk. This problem has been recognised in the overall context of the importance of marketing considerations not only in stimulating increased milk production but also in raising dairy farm incomes and living standards and improving the nutritional well-being of the population in rural as well as urban areas. Hence, in Uganda the development of milk marketing infrastructure has been inextricably linked with the development of the dairy industry.

Although Government dominated the early initiatives in organised milk marketing in Uganda, a few independent producer marketing groups were established. Notable among the early groups established in the 1960s were Toro and Kigezi dairy co-operative societies.

However, all the development initiatives in the dairy sector got a setback in the 1970s on account of civil disturbances and political instability. It was not until 1987 that a serious programme to reconstruct the national economy was put in place. Accordingly, the Uganda Government prepared the National Rehabilitation and Development Plan for the period 1986 - 1990 which was later extended to 1992. The plan identified the Rehabilitation of the Dairy Industry (Project AG: 13) as a priority programme whose overall goal was to regain self-sufficiency in milk through;-

- restoring production on dairy farms;
- improving milk marketing; and
- strengthening dairy extension services.

The Government programme was the basis for co-operation with many multilateral external donor agencies in the development of the dairy sector in Uganda. To a very large extent, implementation of the programme was co-ordinated by the UNDP funded and FAO executed technical assistance project, UNDP/FAO Dairy Industry Development Project UGA/84/023 and follow-on UNDP/FAO Rural Community Dairy Production and Marketing Project UGA/92/010.

This paper discusses Uganda's recent experience in the development of milk marketing systems with special reference to the promotion of producer marketing groups. It draws examples from work accomplished by the milk production and marketing components of the UNDP/FAO dairy projects. The paper discusses the strategies adopted and makes some conclusions.

2. Background

Agriculture dominates Uganda's economy, contributing about 60% of the Gross Domestic Product (GDP). The Livestock sub-sector contributes about 20% of agricultural GDP. Of the total area of 241,038 sq. km, 197,097 sq. km arc covered by land, most of which is arable. The country has good rainfall (annual rainfall Kampala (1993) 961mm) and low temperature variability (annual mean temperature, Kampala 22.0C). TABLE 1.

The total cattle population is estimated to be 4.2 million [1] out of which 3.4 percent are improved dairy breed types (exotic and cross breeds). The main milk-shed areas are to the south of latitude one degree north extending from Mbale in the east to Kabarole in the west and Kabale in the south. (Fig. 1)


The milk production system range from semi-nomadic pastoralism at one end to zero grazing at the other end. In terms of feeding/management practices, three major systems of production can be identified as:-

1. Pastoral farms with large numbers of (greater than 50) indigenous stock grazing in coarse pasture throughout the year and milked twice a day. No supplementary feeding is provided.

2. Small scale crop and livestock farms close to urban centres using mixed breeds of dairy cows (less than 10).

3. Specialised dairy farms which keep grade or pure dairy breeds (20 - 100) largely on planted pastures, supplemental with commercial feed stuffs.

In 1990/91 total milk production was estimated to be 365 million2 litres per annum. However, more recent estimates made in 1993 put total milk production per annum at 553 million3 litres. Assuming that 40% of the milk is retained and consumed at farm level, 60% is marketable surplus. In Uganda only about 10% of the marketable surplus of milk is marketed through the formal (mainly Dairy Corporation) channel. Hence, producers have to use various informal and unreliable marketing channels to dispose off 90% of the marketable surplus. This is the real magnitude of the milk marketing problem in Uganda. It is the challenge which milk producer marketing groups are attempting to meet.

(2Based on the Pan African Rinderpest campaign 1991 and the Agriculture Sector survey 1986- 1987.) Master Plan for Dairy Sector, Ministry of Agriculture, Animal industry and Fisheries.

(3Terminal Report GOU/FAO - 1993 AG: DP/UGA/92/010)

Table 1: UGANDA: Facts and Figures.











Land Arca


197,097 Sq. km.

Water and Swamps


43,942 Sq. km

Total Arca


241,038 Sq. km.

POPULATION (1991 Census - Final Results)



To al Population




Kampala City





Minimum (above sea level - Albert Nile)

620 Metres


Maximum (above sea level - Mt. Rwenzori)

5,110 Metres



Kampala: Annual Mean Temperature


22.0 °C


Kampala: Annual Rainfall; Average (Pre-1970)

1,180 mm



961 mm



GDP growth rate (in 1991 prices)


4.0 %


GDP per capita (current prices)


226,866 shs.

EXCHANGE RATES (at end of September 1994) - Shillings per US dollar


Interbank Forex Market - mid rate Sept. 1994 Provisional)



Free Market - mid rate Sept. 1994 (Provisional)



Source: Ministry of Finance and Economic Planning.

3. Development of producer marketing groups in Uganda

Types of groups

In Uganda four types of milk producer marketing groups can be identified: -

(i) Producer marketing groups which operate as independent legal entities but sell a substantial portion of their surplus milk to the state-owned Dairy Corporation. Examples - Toro and Kigezi dairy co-operative societies.

(ii) Producer marketing groups which are completely dependant on Dairy Corporation for marketing their milk. Examples - Rubaare, Rugarama, Ibanda co-operative societies.

(iii) Producer marketing groups which operate completely outside the Dairy Corporation in milk surplus areas. Examples - Kamuli and Nakago co-operative societies.

(iv) Producer marketing groups operating in milk deficit areas but outside Dairy Corporation's milk collection system. Examples - Mbale and Lambuli dairy co-operative societies.

The period before 1987

Immediately after Uganda's independence in 1962 attempts were made to establish milk producer marketing groups. Accordingly, a few groups were established notable among which were Toro, Kamuli and Kigezi milk producer marketing groups.

One important feature in the formation of these early groups was that the initiatives for their formation came from organised milk markets. In the case of Toro Dairy Co-operative Society, it was the management of nearby Kilembe Mines Ltd which prompted the society's formation. Kilembe Mines Ltd was a big copper mining complex in Western Uganda employing thousands of workers in the 1960s. A small pasteurisation plant with a capacity of 6,000 litres per day was installed by the society in Fort Portal with Kilembe Mines financial support. All the milk produced was brought by the mining company.

It was therefore not surprising that when the copper mines subsequently closed in the 1970s the society's operations also came to a standstill.

In the case of Kamuli producer marketing group the initiative for its formation came partly from the Jinja based Madhvani Group of Companies. When in the 1970s the Asian owners of the Madhvani Group were expelled from Uganda resulting in the closure of many of their operations, the small Kamuli plant was completely abandoned. Kigezi Dairy Co-operative Society fared a little better in that it was able to operate albeit poorly during the 1970s. The big difference between Kigezi Dairy

Co-operative society and the other groups was in the fact that the society was well patronised by its members and to a large extent owed its establishment to the dairy farmers themselves.

The period after 1987

The period after 1987 was marked by a serious effort by the Uganda Government to rehabilitate and develop the dairy industry. This was also the period that old producer marketing groups were revived and new groups established. All these activities were made possible by the implementation of two main dairy projects, viz, Government of Uganda/UNDP/FAO Dairy Industry Development Project UGA/84/023 and GOU/UNDP/FAO Rural Community Dairy Production and Marketing Project UGA/92/010. Substantial support was received from World Food Programme, DANIDA, ADF, USAID and other donor agencies. By 1992 overall external donor commitment to Government Programme as a whole was US $ 55.1 million.

In 1986 there about 30 registered milk producer marketing groups out of which only one was operating. However operations of Toro, Kigezi and Kamuli societies were revived after 1987 with assistance from the project and seven other groups were established. These societies were:-Mbale, Lambuli, Kyagukuuju (Rubaare), Rugarama, Ibanda, Nakago and Mpigi dairy co-operative societies. Other societies and groups were also established during the same period although they did not work directly with the UNDP/FAO dairy projects. These groups included:- Masaka, Mityana and Iganga dairy farmers' associations. By 1993 there were over 50 registered dairy co-operatives, associations and companies handling about 1% of the total marketable surplus of milk.

4. Strategies adopted

Since milk-sheds in Uganda cover a vast area, and because of limited personnel and financial resources at the disposal of the dairy projects, the pilot scheme strategy was used to achieve objectives in the milk production and farmers' groups components of the UNDP/FAO projects. Ten farmers' groups were eventually selected. These groups selected represented different agro-ecological and farming systems throughout the various milk-sheds of the country, involving about 800 farms.

The primary objectives of promoting producer-marketing groups were:-

(a) increases in milk production per animal and per unit area at selected farms through appropriate technical interventions, training and demonstrations provided to farmers in organised groups.

(b) increased income for selected small scale and medium scale dairy farms through increased sale of surplus milk arising from organised marketing.

A model for field advisory (dairy extension) services and promotion of producer marketing groups was developed. It has now been adopted for use by the animal production department of the ministry of Agriculture, Animal Industry and Fisheries. This model is a package of integrated activities that includes:-

(i) Identification of dairy farming groups and carrying out of a baseline survey to identify constraints that stand on the way to increased milk production and improved marketing.

(ii) Group formation

(iii) Training, demonstration and advisory and other services provided at the farm level.

(iv) Technical assistance in milk marketing.

(v) Demonstration of small scale milk processing methods

(vi) Training in management of group projects

(vii) Provision of credit.

The model also includes a team of 5 field extension officers. The team is led by a Dairy Advisor and includes a veterinary officer, an artificial inseminator and two animal husbandry officers. The five officers however, also assist other types of farmers i.e. beef, poultry, pig, etc found in the same area. The team also continually co-opts other specialists from various departments who assist in conducting specific training courses and field demonstrations.

Identification of dairy farming groups

Where no producer-marketing group already exists in an area the first step is the characterisation of the milk production system in physical, biological and socio-economic terms. If this information is not readily available from documented literature, it is imperative that a quick baseline survey be undertaken before any intervention is undertaken. Such a diagnostic survey not only describes the system as it exists, but also helps identify training needs and the technologies and production inputs required to overcome the constraints.

The experience of the UNDP/FAO dairy projects in Uganda has been to select a group size of about 120 small and medium dairy farms scattered in an area of about 15 miles radius from a Dairy Corporation milk collecting centre or a major milk market. Ten such groups were identified.

Group formation

After the initial identification of a dairy farming group in an area, there is need to educate members of the group about the benefits of working. together. At the beginning members of the group may prefer to work together in some form of an informal or loose association. This is necessary because the farmers themselves must be convinced about the necessity of working together in order to solve their common problems.

It is also important that at this stage farmers arc exposed to the different forms of associations so that when it becomes necessary they can intelligently choose the type of association which is suitable to them.

Training, demonstration, advisory and other services provided at farm level

Depending on the constraints to milk production identified earlier, a series of relevant technical interventions need to be developed and implemented especially in feeding, breeding, disease control, management of dairy herds, regular veterinary and Al services to these farms. These interventions are carried out through training, demonstration and advisory services.

During the life of UNDP/FAO project in Uganda, these activities were co-ordinated by two regional extension advisors each working with five groups in south-western, central and eastern parts of the country. As mentioned earlier in this paper, each group was assisted by a team of five extension officers.

Non-residential training was often conducted at very low cost in locations within the group areas. Some demonstrations were carried out on members' farms while in some cases study visits to other areas were organised. A farm records system was introduced and farmers were taught to maintain these records as part of an integrated herd management scheme.

Technical assistance in milk marketing

Each group was provided with technical assistance in milk marketing. Each group was introduced to the advantages of collective milk marketing. They were encouraged to aim at satisfying demand in the neighbourhood towns and villages before delivering the surplus milk to more distant markets. They were taught the basics of running a milk collection centre. The groups which were managing milk collection centres were - Kamuli, Nakago (Nabuka), Toro and Kigezi co-operative societies.

One of the strategies suggested was for dairy co-operation societies to take over the running of the milk collecting centres presently owned and managed by Dairy Corporation.

Demonstrations of small scale milk processing methods

One of the ways of over-coming marketing problems facing the rural farmer in Uganda was identified as small scale processing of milk to improve quality and to develop other products for consumption and sale in the neighbourhood markets. At farm level, demonstrations were conducted to acquaint farmers with simple cost effective ways of producing ghee from surplus milk which could not be absorbed by the market.

At group level, the project introduced simple, low investment milk processing technologies on a trial basis at two (2) milk collecting centres; i.e. Mukono and Kamuli in co-operation with the dairy cooperative societies of the two areas. The trials were enthusiastically accepted by the groups.

The trials included pasteurisation (batch heat treatment) of milk using a charcoal stove and an electric boiler. The pasteurisation process using these systems resulted in milk of acceptable quality in terms of bacteriological count and composition.

The packaging of milk in plastic sachets using a simple electric hand sealer was also successfully demonstrated. For the societies, the packaging of milk in plastic sachets made handling and marketing of milk much easier and more hygienic. For the consumer, the packaging was also a much more hygienic presentation and provided insurance against adulteration.

The second series of trials carried out was on product development. These were carried out at the Kamuli Dairy in co-operative with the society. Products tried were cheese, butter, ghee and fermented milk. Pasta Filata and quasso blanco were cheese types tried and they both had good acceptance in larger towns and certain communities.

In view of the success of these activities, the project facilitated Kamuli milk collecting centre operated by Kamuli Dairy Co-operative Society to make it a training centre for small scale milk processing technology.

The project also proposed to Toro Dairy Co-operative Society to establish a mini-dairy plant as a long term solution to its marketing problems. The proposal was taken up by DANIDA who financed the establishment of a mini-dairy plant at a cost of US $ 250,000. The plant now processes pasteurised milk and produces cheese. This has had an enormous and positive impact on the operations of Toro Dairy Co-operative Society.

Training in the management of Group projects

The project realised that the ultimate success of the producer marketing groups depended on their ability to manage their group projects for the benefit of all the members. Groups implementing viable projects had a good chance of succeeding.

Training was therefore organised separately for all the members and for their leaders. Since all the groups working with the project opted to form co-operative societies, the first thrust of the training programme was in basic co-operative principles for the members and co-operative management for the leaders.

The second and equally important emphasis in the training programme was on managing specific income generating projects. Each group selected an income generating project which was financed through a small and medium scale dairy farmers credit scheme developed by the project and funded by the Dairy Development Committee. The different income generating projects selected by the various groups are shown in TABLE 2.

Group leaders were not only introduced to general management principles and accounting but were given instructions on the specifics of what needed to be dune to ensure the financial viability of each project.

Provision of Credit

The project recognised the importance of credit to small and medium scale dairy farmers. Accordingly, a credit scheme was designed to meet the needs of these farmers who normally have very limited access to credit from financial institutions. However, the project was also aware of previous credit schemes which failed mainly because of the numerous problems faced by borrowers and the lending institutions resulting in bureaucracies, high interest rates and a high rate of default in repaying loans,

The new credit scheme was funded by Dairy Development Committee with an initial fund of US $ 140,000 (U. Shs. 167 million). The first beneficiaries of the scheme were the ten dairy co-operative societies that had been working with the project.

The project in close consultation with the co-operative societies helped to develop viable projects for funding through the credit scheme. A list of projects identified and approved for funding arc shown on Table 2.

Table 2: Projects identified and credit financing requested by ten dairy co-operative societies

Dairy Co-operative Society

Project Identified

Credit Required

1. Mpigi

Pasture seed production and Farm input supply shop


2. Nakago

Financing of Building and infrastructual facilities for collective milk marketing.


3. Lambuli

Re-stocking of Dairy Farms


4. Kamuli

Transport facilities for Milk marketing


5. Toro

Transport facilities for Milk marketing


6. Rugarama

Operations of a Milk Cooling Plant at Rugarama


7. Kyabukuju

Operations of a Milk Cooling Plant at Rugarama


8. Kigezi

Farm Supply Shop


9. Ibanda

Farm Supply Shop


10. Mbale

Re-stocking of Dairy Farms



5. Producer marketing groups and government dairy sector policy

After the completion of the first phase of the rehabilitation the dairy industry in Uganda in 1992, Government decided to adopt a total dairy sector approach as opposed to interventions in limited areas. A complete review of official dairy sector policy was undertaken through a comprehensive dairy sector Master Plan study. The findings and recommendations of the dairy sector Master Pan

Study together with those based on UNDP/FAO project experience have formed the basis of a comprehensive Government dairy sector policy published in 1992. The official policy besides endorsing the UNDP/FAO Project model on producer marketing groups clearly emphasises the role these groups are expected to play in the future development of the sector.

Government emphasis in the promotion of producer-marketing groups is most evident in the policy on the privatisation of the state owned Dairy Corporation. According to official policy, privatisation of the Dairy Corporation will be undertaken gradually from the top as well as from the bottom of the Dairy Corporation structure. From the bottom, farmers' associations and co-operatives have already begun the process of purchasing or leasing Dairy Corporation cooling and collection centres. Hence, Dairy Corporation's operating milk collecting centres which by end of 1994 numbered 50 will each be owned and managed by a producer-marketing group, thus the number of producer marketing groups will double by 1996.

The second area of emphasis in the official dairy sector policy concerns the provision of support services to dairy farmers. According to Government dairy sector policy, Government support services will be rehabilitated and concentrated on milk-sheds selected on the basis of comparative advantage. Where the service benefits the dairy sector and the nation in general, the Government will fund the service. Where the service directly benefits individuals or groups and where they are willing and able to pay, e.g. Al services, the users will fund the service through user charges. Veterinary services will be privatised.

With regard to research, the policy clearly states that research will address practical problems faced by dairy farmers in Uganda and research priorities will be established in close co-operation with the farmers.

The new dairy sector policy also includes the establishment of a Dairy Board to regulate, co-ordinate and promote development in the dairy sector. Farmers will be strongly represented on the Board. The policy also introduces a unified extension service.

6. Conclusions

The experience of Uganda in the establishment and promotion of milk producer-marketing groups since 1987 shows that:-

1. Any attempts to promote producer-marketing groups must be based on the co-operation and enthusiasm of the dairy farmers themselves as a first step.

2. There is need to have an integrated approach to such efforts. The approach should address production as well as marketing, processing, management and credit issues.

3. The success of producer-marketing groups can only be guaranteed if an enabling official dairy sector policy is in place.

4. Implementation of policies aimed at promoting producer-marketing groups should be a gradual bottom-up process.

5. Provision of credit to small and medium scale dairy farmers is best directed through groups that farmers themselves have participated in creating. Group lending introduces the role of peer-pressure in disciplining an individual to pay back his/her loan if the loan is made to an individual in the group. The risk of loan default in loan repayment is considerably minimised if the credit used is for group projects whose feasibility and viability have been studied and verified.

6. The question of what legal form each producer marketing group should adopt should best be left to the farmers themselves. They should however be exposed to the merits and demerits of each legal form of organisation so that they guard against legal associations that enhance dominance of a few farmers over the group, thus reducing group participation and democratic control. They should also avoid loose forms of organisation which may limit their access to credit from financial institutions.


1. Key Economic Indicators, 19th issue: November 1994. Statistics Department Ministry of Finance & Economic Planning

2. Background to the Budget. Ministry of finance & economic planning, Uganda

3. Dairy industry development project, Uganda Project Findings and Recommendations AG:


4. Rural Community Dairy Production and Marketing Project UGA/92/010 TERMINAL REPORT GOU/FAO - 1993 AG: DP/UGA/92/010

5. Master Plan for the Dairy Sector, Ministry of Agriculture, Animal Industry and Fisheries, Uganda 1993

6. National Rehabilitation and Development Plan 1987 - 1992 - Ministry of Finance and Economic Planning, Uganda

7. White Paper on Government Dairy Sector Policy (Memorandum by the Minister of Agriculture. Animal Industry and Fisheries, Uganda 1992


Q. Dr. Ghamunga Sudi

Formation of milk producer marketing groups on integrated production. How do those groups integrate crop production conjunction and land use systems in conduction with dairying. How do you avoid competition on land utilization?


Our groups are specific on dairy fanning but these do not exclude them from belonging to other associations, life coffee production or any other crops. Dairying can not be run as an independent activity it has to be integrated and we provide courses on proper management of animals including crop integration. We also add social and economic issues.

Q. Abiliza Kimambo

Comment. Promotion of milk and milk products consumption is lacking in the marketing of milk. What should we do?


Yes, there is a need of social marketing for milk consumption. The question is who should do it.

Q. De Wolf

What is the linkage and coordination with Uganda National farmers Association and other projects like EEG, HPI.

Who is initiating the groups the project or farmer themselves.


Uganda National farmers Association and a big number of NGO have different objectives. There is coordination under the Ministry of Agricultural and Fisheries and Livestock.

Outcome from the rehabilitation plan for the dairy rector Diagnostic survey was done which resulted in farmer groups.

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