Dairy Value Chain Development In Ethiopia: The Experience of FAO, 2010

National dairy forum, Addis Ababa, Ethiopia, 23-24 November 2010

Emmanuelle GuerneBleich

Livestock Officer FAO/SFE, Addis Ababa, EthiopiaEmmanuelle.guernebleich@fao.org photo M.Bleich

SFE and biosecurity/HPAISFE Sub-Regional Office

SFE-multidisciplinary team/Equipe multidiciplinaire

- Farm Management and Agribusiness/ commercialisation - Land Tenure and Rural Development/ developpement rural - Livestock Sector Development/ production animale - Crop Sector Development/ production vegetale - Policy Assistance/ politiques agricoles - Investment/ centre d’investissement-liens bailleurs - Fisheries/ peches - Forestry/ foresterie - Programme development/food security/ securite alimentaire - Administration/ administration

Mandate to look at regional aspects in a multidisciplinary perspective

Background

• FAO/SFE intervention areas– General intervention areas: food security and the agricultural sector– Active project: Crop diversification and marketing development

project• Promoting economic growth in rural areas of the Arsi zone• Livestock development / intervention areas / dairy production with

the major objective of raising subsistent smallholder production to commercial level

• Major activities– Dairy Value chain actors support from production to consumption– Increase milk production through distribution of crossbred heifers, AI

support and forage development – Improving marketing of milk and milk products / improving milk

quality, marketing system, linking cooperatives with consumers, and providing support to milk marketing cooperatives

• FAO is also engaged in short term fact finding and need assessment studies in the dairy value chain

• Two instances– Improving smallholder marketed supply and market access for dairy

products in the Arsi zone and its surrounding areas. Focus:• Smallholder milk producers, • Dairy marketing coops and • Consumer purchase and consumption patterns

– Innovations, actors and linkages in the dairy value chain. Focus - understand:

• The major innovations in use in the dairy value chain• The actors involved in the dairy value chain• The linkages among the different actors

• Major constraints– Low milk supply– Inefficient AI service delivery system and poor quality semen– Shortage of crossbred heifers/cows– Feed and water shortages– Shortage of skilled manpower– Lack of market information and outlet for milk and milk products

• Limited access to market and market information seasonal ⇨fluctuation of demand and price for milk Economic loss⇨

• Limited animal health and AI services – high turnover of AI technicians due to inadequate incentives

• Absence or very weak linkages among the major actors in the dairy value chain

Major challenges/opportunities

• Inadequate involvement and contribution of higher learning institutions

• Absence of well organized input supply system – business hub• Absence of coordination and a responsible party to create,

develop and sustain linkages among the different actors• Other challenges

– Limited involvement of professionals in the private sector– Limited access to the required resources – lack of capital; when capital

is available, no access to the required facilities– Lack of a functional appropriate policy in place and– Inadequate dairy infrastructure

• Development opportunity– Low per capita consumption level increased milk production and ⇨

market expansion for milk and milk products

• Driving forces of cooperative establishment– Lack of market outlet for milk– Low milk prices/low quantity produced per hhs– High milk price variability– Low producer bargaining power

• Comparative advantages of cooperatives– Reliable and regular outlet for milk– Better dairy farm input supply– Technical capacity building– Cooperative members keep more crossbred cows– Crossbred cows kept by cooperative members produce more milk– Cooperative members produced, consumed and sold more milk– Better bargaining power

Lessons learnt

Attention to - Cooperative or primary collection centres

Dairy Cooperative Limo Bilbilo (Dairy and forage development)

• Technical support needed (cooperatives’ perspective)– Providing Input– Packaging– Record keeping– Financial management– Quality control– Marketing

• 67% of the cooperatives are ready to pay for the services

• Low per capita milk consumption at household level– Milk 4.44 l/m; Ayib 0.41 kg/m; edible butter 0.44 kg/m; cosmetic

butter 0.11 kg/m

• Low per capita expenditure for milk and milk products at household level– Milk 14 birr/m; Ayib 4 birr/m; edible butter 16 birr/m; cosmetic butter

2 birr/m

• Major actors in the dairy value chain– Smallholder producers– Ministry for Agriculture– Relevant regional, federal and international development

partners– Higher learning and research institutions– The private sector– Coops and unions

• Major innovations– Collective action– AI– Improved forage crops– CAHWs– MNB

• Farmers are central to the innovation system• The Ministry for Agriculture interacts the

most with producers and cooperatives

• Other actors are involved in one or more of the following activities– Forage development– Financial support for material and technical capacity building – Market development through encouraging cooperative action and

creating market linkages

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Results

■ Major innovation actors and their involvement

Actors Involvement

1 Producers Are focal points of other development partners

2 MfA Creating linkages; technology transfer; training; follow ups and technical backing: foster cooperative action

3 Coops & Unions Input supply, access to market outlet and improved milk processing

4 Res. Insts. Technology generation; on-farm verification and demonstration; training; availing lab facilities

5 Training Insts. Provide short and long term trainings

6 NGOs and Inter. Devt. Partners

Capacity building (physical, financial and skill); experience sharing; AI service provision; heifer distribution

7 Private sector Milk collection, processing and distribution; farm input supply

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Results

Farmers

Coops.

Training

Private sectors

Extension

Research

NGOs and Development

partners

Two way and fair linkage One way and moderate to weak linkage No or very weak linkage

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Conclusion and recommendationCooperatives under Unions - key actors in the dairy sector:• Cooperative/Union membership / essential determinant factor for the development of the

sector through commercialization as well as providing essential inputs.

• Cooperative unions / vertically integrating producers and cooperatives to local and regional markets / creating market linkages - linking dairy cooperatives with existing milk processing plants and other significant outlets for milk and milk products.

• Low consumption - milk and milk products - an opportunity for increased milk production and expand milk marketing / Dairy unions could also provide credit facilities for group action

• Dairy Unions could establish a simple market information system (demand and supply, price, market location, category of potential buyers…) - appropriate strategy to encourage milk marketing.

Innovations actors and the coordination of the sector:• The dairy value chain is a system involving many actors - important - well

coordinated manner from production to consumption and - to have ‘a responsible and operational party’ in place.

• Despite their strong human resource capacity base, higher learning and research institutions – limited impact in the rural communities. Results of field research works undertaken by PhD and MSc students should be communicated to partners

• ‘Ethiopian Dairy Board’ - very crucial step to assure a proper lead and coordination of the sector’s development as well as mobilizing funds from donor communities -much hoped amongst the majority of dairy stakeholders. The board - aforementioned recommendations into consideration - and functional policy in place.

• FAO hopes that the conclusion of the ‘National Dairy Forum’ will allow the first step of the creation of the ‘National Dairy Board’.

Thank you!