Stakeholder forum on the role of dairy cooperatives in enabling adoption of

climate smart technologies and practices

REPORT

9 May 2018, Kiambu County, Kenya

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Contents List of acronyms ...................................................................................................................................... 3

Background and outline of the dairy cooperatives forum ...................................................................... 4

Objectives of the forum ...................................................................................................................... 4

Structure of the forum ........................................................................................................................ 4

Key highlights of the forum ..................................................................................................................... 5

Setting the pace .................................................................................................................................. 5

Participant profiles .............................................................................................................................. 5

Insights from expert discussions ............................................................................................................. 7

Overview of the status of dairy in the region ..................................................................................... 7

Overview of the Kiambu county dairy sector ..................................................................................... 8

Opportunities in biogas investments for a dairy enterprise – Leading by example ........................... 9

The business of Dairy - Dairy Economics 101 ................................................................................... 10

Opportunities for collaboration and practical way forward ................................................................. 12

Annexes ................................................................................................................................................. 14

1. Powerpoint Presentations ........................................................................................................ 14

2. Evaluation ................................................................................................................................. 14

3. Participants ............................................................................................................................... 15

4. Programme ............................................................................................................................... 16

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List of acronyms

ABPP Africa Biogas Partnership Program

AI Artificial Insemination

ASDSP Agriculture Sector Development Programme

KBP Kenya Biogas Program

BCES Biogas Construction Entrepreneurs

CSA Climate Smart Agriculture

CSDEK Climate Smart Dairy for Ethiopia and Kenya [program]

FAO Food and Agriculture Organisation

KMDP Kenya Market-led Dairy Programme

SNV Netherlands Development Organisation

NAGRIP National Agriculture & Rural Inclusive Growth Project

3R Resilient, Robust and Reliable Programme

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Background and outline of the dairy cooperatives forum Climate change effects on the dairy sector are identified as one of the limitations to dairy sector

development in Kenya. The effects range from reduced fodder, increase pests and diseases leading

to increased use of pesticides, low milk productivity, low profitability and degraded soil in the long

run. The AgriProFocus network has a number of its members working to improve the dairy sector

through various initiatives. Some include the Climate Smart Dairy Project in Ethiopia and Kenya

[CSDEK], 3R Project with a focus on looking at sector competitiveness in terms of the Resilience,

Robustness and Reliability of Dairy, Horticulture and Aquaculture sectors. SNV-led Kenya Market led

Dairy Programme [KMDP] looking at market led solutions. Agriterra is working to professionalise

cooperative societies. Perfometer is a private company that is providing affordable technologies and

approaches to optimise dairy farms.

With this background, AgriProFocus organised a half day forum with dairy cooperatives in Kiambu County to explore their role in enhancing the adoption of climate smart technologies and practices. In addition, county government and service providers and institutions with technologies and practices that support climate smart dairy farming were invited to explore partnerships and share experiences as well as demonstrate available technologies. The forum targeted to bring together executive board members and managers from 7-10 dairy cooperatives in Kiambu County and its environs, the county government, and other key stakeholders in the dairy sector within the county.

Objectives of the forum

The forum aimed to achieve the following objectives:

▪ To explore the role of

cooperatives in facilitating

adoption of climate smart dairy

practices and technologies by

demonstrating the business case

from a dairy economics

perspective.

▪ To provide a platform for

stakeholders to learn about

opportunities for promoting

climate smart technologies and practices

Structure of the forum

The forum was designed to allow for an interactive platform for sharing experiences by the

cooperatives, presentations from a dairy expert on the economics of dairy which also included a

practical session on modelling a profit and loss schedule for an average small holder farmer. The

forum also had a presentation from the county government represented by the ASDSP and product

pitches by biogas service providers who had different models of products as well as services

provided by Perfometer to enhance dairy farm profitability. The following sections give details of the

key outcomes from the presentations, pitches and plenary discussions as well as recommended way

forward.

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Key highlights of the forum Setting the pace

The morning session started with a welcome note from AgriProFocus who introduced the

stakeholders to the network. As a network, our key role is to facilitate multi-stakeholder

partnerships between its members who are drawn from different groups – government and

government agencies, private sector, research and academia, development partners and farmer

organisations. AgriProFocus Country Coordinator, Maureen Munjua also expounded on the four

themes that the network is focussed on: inclusive agribusiness, climate smart agribusiness, nutrition

and circular economy. She then shared the ambition of the network to facilitate continuous dialogue

and collaboration between stakeholders in Kiambu County to enhance the growth and development

of the dairy sector.

Victor Esendi the Business and Partnership Manager at AgriProFocus followed by setting the pace for

the discussion by zeroing in on how the sector has been affected climate change and how the sector

can cope by adopting climate smart technologies and practices. He reiterated that a lot of

knowledge and technologies have been developed but little information is known of them and their

usage, leading to limited adoption. He welcomed the participants and especially the cooperative

leaders to share their experiences and practices and to explore together how to champion for

climate smart dairy practices and technologies at cooperative level among their members.

Victor also emphasized the

need to understand the

business case for climate

smart technologies which

was later demonstrated well

through a practical session

with the participants on the

various scenarios of a profit

and loss account for an

average dairy enterprise.

Participant profiles

Following a short introduction, participants were asked to give a brief profile of their organisations.

In total the forum attracted 31 participants of whom, 42% were female and 58% were male. The

participants were drawn from different stakeholder groups representing farmer organisations which

were represented by the executive board members of the cooperatives and the managers, private

sector companies, and the county government. An overview of the stakeholder groups and profile of

cooperatives is shown below. A comprehensive participant list can be found in the annex section.

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Name Stakeholder group Profile

Limuru Dairy Farmer

cooperative

Established in 1963

Membership: 10,000 registered [Active 3,000 – 5,000]

Capacity: 30,000 litres:

Activity: Bulking and chilling with plans to revive processing soon

Gatamaiyu

Dairy

Farmer

cooperative

Established in 1963

Capacity: In 2012 was 20,000 litres but currently doing 4,000 litres.

Activity: Bulking and chilling and have the ambition to start

pasteurising

Kiambaa Dairy Farmer

cooperative

Membership:5000 registered but only approximately 3000 active

Activity: Pasteurising and packing

Ndumberi

Dairy

Farmer

cooperative.

Established: 1963

Membership: 5670 and active 1200

Capacity: It is currently doing 1,400 litres of milk

Activity: Bulking and chilling but partially processing yoghurt and

pasteurised milk

Kikuyu Dairy Farmer

cooperative.

Membership – 400

Activity: Bulking and planning to start pasteurising

Gikambura

Dairy

Farmer

cooperative.

Membership – 400 with 150 active

Capacity: Over 1000 litres

Activity: Bulking and planning to start pasteurising

ASDSP County

government

A program that supports the development of the agriculture sector

and has been devolved through the county governments. ASDSP

support capacity building of stakeholder in the agriculture sector

including farmers and farmer organisation.

Kenya Biogas

Program [KBP]

Development

partner

The Kenya Biogas Program is a program being implemented by a

consortium between HIVOS and SNV to promote the use of biogas as

clean energy but further improve agriculture productivity by use of

bio slurry.

Perfometer Private sector Perfometer is a dairy consulting company that supports the

establishment and running of profitable dairy farms. Some of their

services include farm benchmarking for existing dairy farms, Cow

barn design and installation, Dairy Managers Academy, Dairy

Investors Academy, Dairy Master Plan for start up farms among

others.

Takamoto Private sector These are all companies providing different solutions for biogas. The

Kenya Biogas Program is working with these companies to provide

renewable energy solutions to households across the country.

Kenbi

Enterprises

Private sector

Sistema.Bio Private sector

SimGas Private sector

Bio Esline Private sector

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Outlook of sector actors – processing and marketing Only about 10 percent of the total milk produced is processed ▪ 42 registered dairy processors in the country ▪ About 25 of the processors are actively producing a

wide range of products including fresh milk, yoghurt, ghee, cheese, and milk powder.

▪ 128 registered mini-dairies ▪ 173 cottage industries. ▪ Informal milk traders are the single most important

marketing actor, controlling over 85 percent of milk market

▪ 200 Milk bulking/cooling centres

Insights from expert discussions The forum comprised of 3 insightful presentations from sector experts as well as plenary discussions.

The three presentations covered various aspects including:

▪ An overview of the Kiambu county dairy sector. This presentation made by the ASDSP officer

in charge of dairy explored the gaps and opportunities that exists within the sector that if

addressed would spur the growth of the sector.

▪ An overview of the dairy sector in Kenya with an in-depth look at the business of dairy –

Dairy Economics by Mr Dominic Menjo a dairy expert.

▪ The opportunities in biogas investments for a dairy enterprise – Leading by example. This

presentation inspired and demonstrated the benefits of investing in biogas and bio slurry

and the effects on the profitability of a dairy enterprise.

Overview of the status of dairy in the region

Dairy sector is among the critical sectors in sub-Saharan Africa with very high potential for improving

food security & welfare. In the East African region 70-80% of milk produced is by small holder

farmers. The demand for milk and milk products is estimated to grow by an average of 3.2% due to

improving purchasing power and middle class, urbanization and population growth. Unfortunately

the growth in production doesn’t seem to match this demand in a region where over 90% of dairy

products is serviced by extra regional

markets with 80% of this being sourced

from Denmark, South Africa, Canada,

USA, France, New Zealand, Australia,

the Netherlands and Poland. Kenya

imports in excess of KES. 2.5 billion due

to failure to meet high quality locally.

While Kenya is currently self-reliant in

milk production, production will fall

short of demand by 61.3 million liters in

2017 and 381.6 million liters in 2022.

The sector’s potential in transforming livelihoods and spurring economic growth is high. Dairy is the

single largest Agricultural enterprise contributor to the national GDP at over 4% representing 14%

agricultural GDP. The sector has over 750,000 people in formal employment along the dairy value

chain plus more than 500,000 in support service industry. In addition the sector generates about 1.8

million in income for farm families/households directly through dairy farming either through sale of

milk and/or breeding stock. 80% are small to medium holder dairy farmers.

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Most of the milk being processed in

Kiambu County is imported from

neighbouring counties. How can

stakeholders in the sector take

advantage of this opportunity and

promote the growth of the sector?

Overview of the Kiambu county dairy sector

According to the economic review of agriculture 2015, Kiambu County was identified as one of the

highest milk producing counties in the country. Within the ASDSP program, there are three priority

value chains that the county has identified to develop. These are dairy, banana and indigenous

chicken. The county government is also very keen to look at how the county can be more climate

resilient in its approach to developing the agriculture sector.

Through the ASDSP program, the county staff capacities to support the dairy sector have been

enhanced. However the sector is faced with some infrastructural and capacity challenges. These

include: diminishing agricultural land sizes, high cost of breeding services, existence of only few

organized milk marketing channels handling less than 20% of the total marketed milk, fluctuating

fodder supplies and poor quality feed, high % of milk rejects with low utilization of existing installed

cooling capacity, lack of organizational capacity of actors along the value chain, poor waste disposal

methods on farm and low adoption of modern technology.

To address some of these challenges the ASDSP has

established several platforms to engage with the different

stakeholders. A country forum for dairy managers in the

county is a forum that engages the dairy managers of the

cooperatives in the county. The program has also

established in the past a quarterly forum in collaboration

with the meteorological department a platform for

disseminating weather information to farmers. In addition,

the program has established a county based dairy value chain that brings together other

stakeholders working in the sector within the county. These include apex associations, producers,

researchers, financiers, transporters, processors, traders and other non-state actors. This platform

has been used to lobby the county government especially on disease surveillance and prompt

vaccinations. It was noted that Githunguri dairy has been successful in implementing comprehensive

disease surveillance with its members.

Besides ASDSP, there are other projects and programmes that are supporting the sector

development. These include National Agriculture & Rural Inclusive Growth project [NAGRIP] by the

World Bank that is looking to support hardware in addition to capacity building as opposed to

ASDSP. Other stakeholders of interest include FAO through local value chain development with a

focus on youth engagement reduce the distress of migration. Caritas implemented Kiambu dairy

project in line with priority action plan and addressed the high cost of Artificial Insemination [AI]

through training of AI service providers and linked them to farmers in Gatundu north and south.

As a take way for the cooperatives and stakeholders in the forum, the county government is ready to

engage with them to develop the dairy sector. However stakeholders were also challenged to be

more organised and coordinated in their efforts to effectively engage with the county. It was noted

that the ASDSP program sees the cooperatives as a good entry point for the program to benefit dairy

farmers in Kiambu. There was emphasis that the cooperatives need to plug into the various forums

more proactively and actively in order to link to other stakeholders.

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▪ How can we mobilise biogas champions as leaders

within our cooperatives? Can we lead by example?

▪ How can adoption of climate smart technologies and

practices be used to increase the competitiveness of

our dairy enterprises and cooperatives?

Opportunities in biogas investments for a dairy enterprise – Leading by example

One of the challenges raised by the farmers within the audience was the poor state of waste

management on their farms especially now in the rainy season. Poor waste disposal mechanisms

also affect the quality of milk that is produced and delivered to the cooperatives. Therefore it was

important to get solutions to waste management. It was also noted that the dairy enterprise is a big

contributor to greenhouse gas emissions thus solutions and opportunities to reduce these emissions

through adoption of climate smart practices and technologies need to be explored more.

The Kenya Biogas Program [KBP] offers

such a solution through biogas. KBP is

working with stakeholders in agricultural

value chains to promote the uptake of

biogas for energy security and use of bio

slurry to increase farm productivity.

In the context of a dairy enterprise, the bio slurry use on fodder will enhance fodder production and

promote fodder security which is a big challenge for farmers all year round. KBP is an implementing

agency under the Africa Biogas Partnership Program [ABPP] being implemented in 5 countries

namely Kenya, Uganda, Tanzania, Burkina Faso and Ethiopia. To date 55,000 plants have been

installed of which 18,400 are in Kenya and a majority of those are actually in Kiambu County. More

than 1200 masons have been trained and there are at least 200 active Biogas Construction

Enterpreneurs [BCEs] who are producing more than 10 plants/month. It was commendable that

Kiambu County is leading in terms of biogas production and investments.

The program is promoting the biogas marketing hub model which interconnects all the relevant

service providers to ensure a business case that promotes quality, reliability and affordability for all

stakeholders including the client. In Kiambu for instance the program has partnered with K-Unity a

leading financial institution in Kiambu County to provide affordable credit for farmers. In other

regions it has partnered with Sacco’s and micro finance institutions. Below is an overview of the 23

marketing hubs across Kenya as at 2016, 16 of which are with Dairy affiliated Saccos and 7 with

micro finance institutions.

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The business of Dairy - Economics 101

Several bottlenecks were identified within the dairy industry that affects its competitiveness as a

sector. These were categorized as follows:

▪ Productivity – low production per cow with an average being 5 litres per cow per day.

Productivity is a factor of many other variables including animal genetics, feed quantity and

quality, management practices among others. It was noted that 80% of farmers who have

invested in a dairy enterprise are telephone farmers while the farm is managed in most cases by

unskilled workers. Service provision is also uncoordinated within the sector. Ideally if one

variable was to be changed for instance improving the animal breeds, other variables such as

feed should be improved and further up the value chain the processing capacity should be

improved in the anticipation of the changes in productivity downstream. But this is not the case.

▪ Quality – the quality of milk begin with the environment of the cow on the farm. As mentioned

earlier one of the challenges on farm is waste management thus you find that a lot of times the

milking environment is muddy and unhygienic. Other factors affecting milk quality include the

milking and transport containers used on farm. In most cases plastic is used as opposed to

stainless steel buckets and transport containers. Feed, breed and animal health are a big factor

especially when it comes to the level of antibiotics and aflatoxin found in milk as this is

contributed through the feed quality and treatment of the animals. Another big contributor to

milk quality is the chilling process [post milking] where in most cases it takes between 3-6 hours

post milking to get the milk to the chilling centres and the equipment used - farm tanks as

opposed to chilling tanks which are more effective in achieving the required temperatures

faster.

▪ Competitiveness – It is 37% more expensive to produce milk in Kenya as compared to the region.

Some of the factors contributing include the reliance of the small holder production system

which is marred by low production levels and high production costs like labour costs vis-à-vis the

herd size. Other factors include the high costs of processing energy and production equipment

and the flipside being the low utilization of installed capacities. In essence only 40% of the

installed processing capacity is utilized while 60% is idle. This increases the overhead costs at

processing level. Inefficient distribution networks as well as low production of high value

products also contribute to the competitiveness of the sector.

These bottlenecks present opportunities for stakeholders to explore and improve the sector

together. “The survival of each of us depends on each other” as one co-operative manager

mentioned. Together with the cooperatives, the forum explored how best to position cooperatives

as a driver for the growth of the sector. And it began with Knowing Your Customer [KYC] – the

farmer that supplies milk to the cooperatives. It was important for the cooperatives to understand

the profile of their farmers so as to plan for their own sustainability as farmer organisations.

Through a practical session using a profit and loss tool on a simple excel spreadsheet; Dominic

Menjo took the participants through an exercise on how to ensure profitability of a dairy enterprise

with an example of an average small holder farmer. The tool provides an opportunity to create

different scenarios of a dairy enterprise by changing different variables on the farm and observing

the effect on the profitability. These variables included the herd size, production levels, feed

quantities, adoption of CSA technologies and practices like use of manure or bio-slurry and biogas,

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milk purchase prices to the farmer, insurance among others. From this simple exercise it was clear

that small changes on farm management practices can make a positive effect on the profitability of a

dairy enterprise for a small holder farmer. These changes include:

- Improving the feed rations per cow to increase production. This calls for use of quality feed

as well.

- Increasing the milking herd per farmer

- Adoption of climate smart practices like use of biogas and bio-slurry. These are considered

as opportunity costs for a dairy enterprise and have a significant effect on profitability

Example of current state of a farmer’s finances

A dairy farmer’s vision

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Opportunities for collaboration and practical way forward Co-processing and co-packing

It was noted from the discussions with the cooperatives that there was unnecessary and negative

competition between cooperatives and also between other stakeholders like processors. This is a

characteristic not just unique in Kiambu County but countrywide in the sector. From the profile of

participants in the forum, it was clear that there is an ambition by most if not all cooperatives

present to get into pasteurizing and processing while the sector still grapples with underutilized

processing capacities of up to 60%. Cooperatives are interested in understanding the economics of

this approach and how this would work for each of them and how this can contribute towards the

growth and development of the Kiambu dairy sector. Is co- processing and co-packing an opportunity

that cooperatives and processors could explore to better utilize the idle capacity?

Specialization across the value chain

Another opportunity to explore with the cooperatives is the idea of specialization to meet certain

needs in the value chain. An example that was given was feed where currently Limuru Dairy is

producing quality dairy meal that it sells to its farmers as well as other farmers beyond its

membership. If stakeholders would work together to build the capacity of cooperatives within the

county to provide specialized services like feed, AI, processing etc this may turn around the sector to

profitability and build more sustainable cooperative models.

Co-operative farm model

This was one of the models that were presented of how cooperatives can work towards self-

sustainability as institutions. With diminishing land sizes, real estate development also changing the

small holder farmer landscape and the youth becoming less interested in agriculture, cooperatives

could explore investing in establishment of co-operative farms. Building on its membership,

cooperatives could establish farms where each of its members invests their share [in cows] that are

then managed on their behalf by the cooperative. The farm then benefits form the economies of

scale from production to bulking and processing. Dominic who has been working on this model with

other counties is willing to explore with the cooperatives how this could work in Kiambu County.

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Kiambu Dairy Farmers Forum

Cooperatives proposed the formation of a Kiambu Dairy Farmers Forum which will be driven by the

cooperatives and dairy groups in Kiambu County and shall be the voice of the farmers. They noted

that there are already existing forums but they still do not put the farmers’ voice at the centre. This

forum will be used to:

- Serve as a platform to engage with other dairy stakeholders to reach the farmers in Kiambu

County and champion the needs of farmers to the county government and other actors.

- Serve as a platform to explore issues and set priorities on which links across the value chain

need to be developed further to unlock the sector to profitability.

In conclusion, it was proposed that thorough data collection is necessary at county level to define a

baseline of where the county is with regards to dairy statistics form farm to processing and design a

roadmap of where it want to go and how it will get there. An engagement with all stakeholders

including the county is necessary for this next step.

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Annexes 1. Powerpoint Presentations

Dairy value chains challenges and opportunities.pdf

DAIRY-ASDSP.pdf

Dairy value chains challenges and opportunities by Mr. Menjo Dominic

The ASDSP Programme, Kiambu County

2. Evaluation

An evaluation was conducted at the end of the workshop, to find out from the participants their

feedback regarding the event. They ranked these questions in terms of relevance of information

exchange with other cooperatives, quality of discussions and dialogue, opportunities for interaction

as well as other comments. Overall, they suggested that stakeholder forums of this kind be

organized often.

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3. Participants

No. Name Coop/Org/Company

1. Peris W. Njenga Kiambaa Dairy

2. Daniel Njenga Kiambaa Dairy

3. Lydia Mariga ASDSP Kiambu

4. Francis Mihiu Ndumberi Dairy

5. Martha Kibia Ndumberi Dairy

6. Peter Waititu Ndumberi Dairy

7. David K. Irungu Gatamaiyo Dairy

8. Charles N. Mau Kiambaa Dairy

9. Bedan M. Kamau Limuru Dairy

10. Njuguna Chege Limuru Dairy

11. Moses Ngugi Limuru Dairy

12. Henry Muchane Gikambura Dairy

13. Godfrey Gitau Gikambura Dairy

14. Samuel Kiiru Gikambura Dairy

15. Paul S. Kamau Bio Esline Ltd

16. Josephine Gatonye Kikuyu Dairy

17. John Gitagiah Kikuyu Dairy

18. Teresiah Karanja Kikuyu Dairy

19. Carlette Chepngeno Sistema.bio

20. Daisy Wanja Takamoto Biogas

21. Emma Wangari Perfometer

22. Esther Njiru KENBI Enterprises

23. Dominic Menjo JKUAT

24. Wanjiru Kiuna Sistema Bio

25. Teresiah Njeri KBP

26. Nancy Kanyiri SIMGAS

27. Jonathan Kamau Kiambaa Dairy

28. Tim Mungai KBP

29. Victor Esendi AgriProFocus

30. Maureen Munjua AgriProFocus

31. Dorina Prech AgriProFocus

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4. Programme

Time Activity Responsible

8.30 – 9.00 am Arrival and registration Maureen, AgriProFocus

9.00 – 9.20 am Context of the forum; why climate smart

technologies and practices?

Victor AgriProFocus

9.20 – 9.30 am Overview of dairy sector in Kiambu

County

Lydia Mariga, ASDSP

9.30 – 9.45 am Status of Kenyan dairy industry Dominic Menjo

9.45 - 9.55 am Pitch from Kenya Biogas program &

partners

Tim Mwangi

9.55 - 10.15 am Feedback session All

10.15 - 10.30 am Networking tea and interaction with

Biogas service providers

All

10.30 – 11.30 The Business of Dairy: Dairy Economics

101

Dominic Menjo

11.30 – 12.30 Brainstorming on value chain

opportunities ;

● Production level

● Processing

● Marketing and quality

Moderator

12.30 – 1.00 Brainstorm on what needs to be done to

ensure steady growth of dairy

cooperatives in Kiambu County.

Moderator

1.00 -2.00 pm Group photo, lunch and departure Dorina, AgriProFocus