Jorgen Henriksen and Lusato R. Kurwijila
I: ABSTRACT
The Workshop on the "Market Orientation of Small scale Milk Producers and their Organisations" was held at Morogoro 20 - 24th, March, 1994. It attracted 50 participants including four from Uganda, two from Kenya and one each from Ethiopia, Malawi and Zambia. The rest were from the host country, Tanzania. Participants from Tanzania included expatriate representatives of three bilateral Small holder Dairy Development Programmes operating in Tanzania and several NGOs active in the dairy sub-sector.
The Workshop was organised in several sessions addressing pertinent issues of dairy Development, namely: Production of Marketable Milk; Producer and Producer Organisations; Milk Processing and Milk Marketing. Altogether 24 papers were presented. Following the oral presentations of the papers and subsequent discussions several issues were selected from each session for further discussion.
Under the Production of Marketable Milk, it was agreed that the key elements in milk production were the Animal, the Farmer, the Land and Technology. Availability of good quality dairy animals, properly trained (oriented) farmers, access to adequate land and technology resources were vital in enabling farmers to produce milk in excess of their subsistence needs. This was deemed to be true irrespective of the farmers' production sub-systems (i.e. whether pastoral, mixed farming, peri-urban and urban milk producers).
Producer organisations were seen to be important in linking producers to milk markets. Efficiency of producer organisations was key to success and that this was affected by weaknesses in management, government interference or wrong policies.
The workshop emphasised that dairy co-operatives have to operate as business enterprises rather than as social or political entities. Enabling policy and legal framework was essential for effective producer co-operative involvement in dairy development. The involvement of key players such as women was seen as being central to success of emerging dairy co-operative ventures as has been demonstrated in Uganda and to some extent Tanzania as well.
Milk processing and Marketing function was being performed at various levels; Parastatal sector had dominated the dairy industry scene in Uganda, Tanzania, Malawi and Ethiopia while private sector and co-operative sector played significant roles in Kenya. It was invariably noted that the parastatal milk processing sector has performed poorly in most Eastern African countries. Under the current Structural Adjustment Programmes (SAPs) in Tanzania and Uganda particularly, more private sector involvement in milk marketing was emerging alongside co-operative marketing organisations.
Although milk collection and cooling was still the most effective way of delivering milk from rural based producers to urban markets, options suitable for small scale processing operations may offer better economic returns and marketing efficiency in particular circumstances. Such methods where available need to be selectively and stepwise applied with gradual scaling up as milk supplies dictate. In the past large plants were set up in anticipation of rapid growth in milk production which never materialised!
It was emphasised that efficient milk marketing and processing need not be very sophisticated as long as it enables milk to reach the consumer in an acceptable form and at affordable price. Marketing of raw milk through private milk vendors provided such an opportunity but measures against adulteration and supply aspects should always be considered.
II. CONCLUSIONS AND RECOMMENDATIONS
Following the group presentations, their draft conclusions and recommendations, the subsequent discussions in a plenary session, the general Workshop conclusions and recommendations are as follows:
1. The indigenous and small holder sector is in most african countries producing the major share of the milk consumed. However, only an insignificant portion of this is going through the formal market (10% in Tanzania and 25% in Kenya). The animals are of low genetic potential, however because of the high number of people and animals in the sector, it represents a huge potential for increase of total milk production and generation of employment. Despite this, the sector has been neglected in the past. It is recommended that more investment is directed towards the indigenous small holder production systems through: infra-structure improvements; assistance to establish milk collection points and access to markets; educational and training programmes; enhancement of women's' participation; establishment of realistic credit facilities.2. Rural milk production can be significantly increased if access to market can be assured. It is a general experience that avenues for marketing the surplus milk provides the needed impetus for increased milk production. The dairy sector is very complex and concerted efforts are needed. It is recommended to establish a body, that can coordinate and promote dairy development. The body should be autonomous and represent all stakeholders in the dairy sector from the small holder, through the private middleman and vendor, to the large scale dairy plant. The National Dairy Development Board of India was presented as an excellent example of such a body.
3. Producer co-operatives or associations are identified as being essential to dairy development. Dairy farmers need to organise themselves to overcome the problem of collection, transport, processing and marketing of milk. Organisation is also important to enhance the bargaining power of the individual small holder to achieve a strong economical and social influence to ensure a full exploitation of the profitability in their dairy enterprise.
It is recommended that establishment of producer organisations are promoted and strenghtened; that the efficiency of producer organisations is upgraded through training and educational programmes with particular emphasis on the involvement of women, provision of credit facilities and institutionalisation of appropriate policy and legal framework aiming at facilitating co-operators' operations rather than controlling them.
4. Availability of dairy animals, including bulls, is a major constraint for dairy development in new areas as well as for significant increase in production where dairying has already been introduced. A national breeding programme is essential for a sustainable development of the dairy sector.
It is recommended that the availability of dairy animals should be increased through the combined efforts of government, NGO's, large scale milk producers, private individuals and farmers organisations on commercial terms accompanied by the provision of credit facilities to farmer groups where appropriate. It is further recommended that each country make every effort to prepare a sound breeding programme to cover the needs of the present farming systems.
5. The sale of raw milk in urban centres can be an appropriate way of providing milk to the low income group of consumers at low cost. However, in order to safeguard the health of the consumers, it is recommended that private milk vendors should be incorporated in the formal milk marketing through licencing and institution of simple milk quality control measures, between producers and consumers e.g. instructions to boil before consumption.
6. State run milk processing industries were in most cases oversized leading to plant capacity underutilization and low efficiency. It is recommended that a stepwise upgrading or scaling up of processing technologies should be considered from quantities of below 100 to over 1000 litres per day. This has to be a combination of appropriate processing equipment and type of products to be made and marketed by processing units.
7. There is a lack of consumer information on their consumption habits and preferences for dairy products. This aspect has aggravated milk marketing bottlenecks, when producers are not aware of the demand for milk, neither in quantity nor in quality. It is recommended that a simple system of data collection and dissemination is initiated for marketing of dairy products. Promotion and dairy development should also, in the future focus on promotion of milk marketing and consumption through consumer education and consumer studies.
Ill: BACKGROUND INFORMATION
The Workshop on "Market Orientation of Small Scale Milk Producers and their Organisation" was to a great extent a result of Recommendations of the FAO Seminar held in Harare 1993, under the theme "Dairy Development Policy and Implementation: sharing of Experiences between Africa and Asia" which concluded that:
The issues for future approach to Dairy Development should be:
· Market oriented activities with a fair pricing policy· Strengthening of farmers' organisations and gearing support programmes towards small · holder production systems
· A supportive environment for the introduction of small scale milk processing where applicable to give the producer access to a wider share of the market.
· To create new and strengthen existing networks for the exchange of information, experience and training facilities.
The Workshop programme was thus structured in such a way as to address the above issues. A background paper forwarded to potential participants before the Workshop required examination of the following specific issues:
Overall objective of Dairy Development
Objective of dairy development policy should be to promote economic growth and to satisfy the rapidly growing demand for dairy products from domestic resources - hence market driven dairy development based on participation of farmers and their organisations is an important pre-requisite.
A: Producer and Producer Organisation
It is important to consider:
i) Effect of Food Policy:
Subsidised low world market prices coupled with high imports and its effect on domestic production and development could have negative effects on dairy development. FAO/WFP pricing mechanism for importted milk products, if properly implemented is designed to ensure that recombined milk is not sold at prices lower than producer prices for local milk.
ii) Production system (s) differ in their potential for commercialization / production of marketable milk/ to supply milk and other dairy products to the urban centres The following production systems arc relevant for most of sub-Saharan Africa:
· Pastoral community production
- What is the potential for improvements within the traditional production system based on local cattle?.- Seasonal milk production and its implication for processing, storage and marketing; Mini dairy concept where small seasonal surplus of milk is available for processing and marketing may be more appropriate.
- Joint venture undertakings with private dairy processing companies could obviate the need for direct farmer involvement in milk processing.
· Small holder dairy production (mixed farming, peri-urban, urban milk producers
- Is access to markets a problem too for this group of producers; in which way are their problems different?
iii) Producer supply response.
How are farmers responding to market demand and to factors affecting milk supply? Farm gate price; quality and price of input supply and services; reduction in risk; safe outlets (timely payments, all weather transport and roads available) Producers ability for supplying the market with the range of products demanded by the consumers
iv) Local solutions to local problems
- Effect of different production support systems on production and farmer profit- Farmers organisation/ Co-operatives/ Associations Management What level of Specialization and/or Commercialization is required to meet output goals and farmer objectives?
B: Milk processing.
i) Traditional processing methods and their possible improvements and commercialization
Processing methods for small scale units with simple technology - are they available ?; what are the constraints for their expanded use? Technology bottlenecks? Organisational problems or financial constraints?
Full range of processing facilities. Product quality depends on the quality of the raw materials and the skills of the manufacturer and not on the sophistication of the equipment.
ii) Educational programmes and training aspects
Many examples show that the modern large scale dairy plants have failed to: promote small scale/ commercial milk production; exchange imported commodities for recombination with domestically produced milk; develop a viable system; fully utilise the capacity in supplying the urban markets with high quality dairy products. Can this situation be improved? Are the large scale units necessary and/or appropriate?
iii) Adoption of technology for dairy processing.
It is important to consider appropriateness of available or potentially available technologies; The guiding principle should be: Local solutions to local problems
Problem of Milk quality: both hygienic and nutritional aspects are important. It is important to consider in particular, Adulteration: where do they occur in the marketing chain: -farmer level; -middlemen; -distribution;
Public health implications of raw milk sale in towns and cities: enforcement of pasteurization well justified - or ill advised?
Health problems in raw/ unpasteurized milk marketing - relative to the general health standard in the community. Should the possible hygienic/ health related problems be solved by expensive milk processing and marketing systems that will increase consumer milk price and reduce consumption/demand. Of course there is important sanitary and hygienic related issues to consider, however, there is a need for a flexible and decentralized approach.
C: Marketing constraints and dairy marketing efficiency (what are measures of success?)
Management and operation of the many market functions: constraints and bottlenecks.
Effect of different market systems on production and farmer profit is important in identification of marketing problems and their solution
Traditional market systems, short marketing routes and low cost offer opportunity for involvement of middlemen; door to door sales of fresh milk; small processing units; processed products like soured milk.
Consider conflict between seasonal milk production but relatively constant milk consumption. Does this have an influence on producer/consumer milk pricing?
Pastoral community milk production; is integration in formal milk marketing system possible? what are the requirements for commercialisation? improved production methods versus low cost production/low output. Consider the Dar es Salaam-Chalinze experience. What sort of interventions are required?
Milk quality regulations and their enforcement. A far cry or a justified necessity? Consider pros and cons. how stringent should it be?
Consumers preference and consumption of milk and dairy products related to price, packaging, income, season and living place (urban - rural).
The importance of the development of provincial towns (decentralized urbanisation). The rapidly growing smaller towns could provide a valuable opportunity for more widespread dairy development further away from the major urban centres where Village milk processing would be important.
Village level milk processing will require:
- suitable transport system for collection and distribution;
- appropriate processing technologies and equipment;
- suitable packaging or bulk vending.
Rural marketing; improvements and innovations. Economics of rural marketing.
Rural demand and consumption pattern
Urban - rural;
Formal - informal;
Close/local and known - distant/different demand and quality criteria marketed - not marketed milk;
Pricing of milk - Policy on price and marketing;
Formal and informal marketing system: Antagonistic or is coexistence possible and -in fact- desirable?.
The formal market is in many East African countries of less significance than the informal. Should the informal market be regulated?
Impact of milk marketing on gender issues;- food security;- human nutrition; and implication for calf nutrition and survival
Private entrepreneurs
Interventions: production,- collection;- processing and product development;- sales and distribution
Decentralized urbanisation creates secondary urban centres and therefore stimulating markets closer to smallholder rural areas; shorter market chains; lower product prices/ higher farmer profit; transaction costs - market linkages
IV. ISSUES RAISED DURING THE WORKSHOP AND DISCUSSION IN THE GROUPS.
In the course of the Workshop it became apparent that:
a) URBAN CENTRES are MILK DEFICIT AREASb) Indigenous production and production systems provide 98 % of total milk production (example from Tanzania and Ethiopia)
However, the 2 % from the large scale producers has so far got most attention and more investment than the 98 % locally produced milk which has been neglected.c) The dairy industry has been directed towards the large scale 2% -plus imported commodities for supplying the major cities.
d) The objectives of small holder dairy development programmes are in many cases not clearly defined. Heifer supply schemes: are they generally aiming at production of marketable milk or production of milk for home consumption?
e) Market oriented dairy development has to be based on farmers having cows for producing marketable surplus milk. Milk price is often high compared to purchasing power and there is little willingness to pay for quality. Is the price too high and can the price be reduced to increase consumption.
f) Co-operatives have to be business organizations, that make profit for the members. The only objective of a dairy cooperative should be to make as good a profit as possible by handling milk delivered from the members. A dairy cooperative is not a social institution. It is a organization with the aim of generating profit for the members and their families
g) Information about milk demand, price, seasonal fluctuations, etc is necessary for more efficient development of the dairy sector.
h) Lack of heifers - is that a major constraint for dairy farmers? Or is it lack of bulls constraining the possibility that more heifers could be produced from the existing herd?
i) Step wise approach to milk processing is important if redundant milk processing capacity is to be avoided.
j) More favourable market conditions for small holder milk production? -where? and how??
k) Positive policy environment very important! But what is a positive environment or enabling official/national dairy policy?
l) Concerted efforts needed - integrated approach at all levels: at farmer level and institutional level. What will be the role of government in liberalised milk markets and divesture from direct production?
m) Development of co-operatives are too slow and they are too weak. PROBLEMS WITH LEADERSHIP AND COMPETENCE IN CO-OPERATIVES. What to do about it? A dairy cooperative should concentrate on dairy and not divert the limited resources into other activities. (transparency; accountability; are important issues for survival and success). It is necessary to stress the difference between co-operative committee and the employed management: members committee is checked to employ and control the management and decide on policy issues: the management employed and is responsible for the day to day running of the processing and business transactions.
n) Promotion and encouragement of private individuals to enter into the dairy industry is important. Who is to do it and how?
o) Is productivity of indigenous stock a major constraint in dairy development?. In the indigenous herd the genetic potential is low. Is there still a potential for increased production through improved management; selection of the best animals; improved reproduction; etc. The indigenous stock represents a high potential. Is the potential for production of marketable milk fully exploited in the indigenous herd?. Cost of milk production/ processing/ transport/ marketing: low production cost - high marketing costs - high consumer price
n) Lactoperoxidase system for milk preservation. Acceptability by local communities may be a problem. What can be done to enhance its use?
p) Selection of contact farmers for promotion of improved technologies and production systems. What is the key intervention?.
q) How can quality be offered at reasonable costs. Marketing of the collected milk directly from collection and cooling centres before it is transported to the processing plant. Transformation from parastatal monopoly to private collection, processing and marketing . Will it work?
r) Marketing - should include promotion of milk consumption. This is lacking in many dairy development programmes. Do we have real milk surpluses in the producing areas or people do not simply drink milk. Training and public education could be considered as part of a promotion programme.
V: DISCUSSIONS and RECOMMENDATIONS
VA) PRODUCTION OF MARKETABLE MILK.
It was agreed that production of marketable milk has four elements:
The animal:
The good dairy animal (male or female) for milk production.
The farmer: Training and education for orientation of the farmer to produce marketable milk.
Technology: Technological know how of producing marketable milk. This necessitate the need for training of farmer in animal husbandry.
Land: The problem of land is significant and has to be addressed both in terms of utilization and management.
It was noted that production of marketable milk had to be based on the promotion of small scale milk producers and that heifer supply schemes could be of several activities through the following measures:
i) Emphasis should be put on training to improve smallholder production. Training of farmers should be done prior to eventual heifer reception but the time between the farmers training and heifer reception should be short.ii) There should be a deliberate efforts of enhancing breeding, heifers and bulls marketing. Each unit should act as a heifer/bull source to a neighbour in need of a heifer or bull.
iii) Increased heifer supply to farmers (dairy heifers) through Government, commercial marketing etc.
It was noted further that in most of the East African Countries, 98% of the milk is produced by the traditional system (example of Tanzania and Ethiopia). However, only 2% of the marketable milk is from this sector (except from Kenya (25%) and Zimbabwe (50%).
It was recommended that the following interventions were required in the traditional sector:
1. Provision of milk collection centres to be managed by either private entrepreneurs or producer co-operatives2. Improve the husbandry skills in this traditional sector (Nutrition, Health, Milk hygiene)
3. Improvement of local cattle by appropriate breeding programmes.
Large scale dairy production was still dominated by the state in Tanzania and Ethiopia but current government policies encourage private investment in commercial dairying. The workshop recommended the promotion of privately owned large scale farms. These should help in supply of good quality heifers and bulls to alleviate shortages.
It was agreed that sustainable dairy development required a sound BREEDING PROGRAMME: It was noted that many countries do not have defined breeding policies. It was recommended that each country should strive to have an elaborate breeding programme for the country.
It was further noted that drug supply and extension service can be a constraint to milk production. Government or Farmers organization should support these services.
VB: MILK MARKETING SYSTEMS
In order to establish effective linkages between producers and consumers it was observed that interventions were required to:
i) Do a market study to determine the Market needs and market options because this will determine appropriate marketing systems to link producers and consumes.ii). Undertake market promotion to improve consumption of milk products.
iii). For the Urban/Backyard production system. This system has no problem of Milk Marketing but it is likely to be short lived due to City Regulations and shortage of feeds.
iv). For the other production systems (Peri-Urban, Traditional or remote mixed farming), the farmers must organise themselves into Farmers Association or Co-operatives under existing legal frame work in order to facilitate marketing of milk, input supply and also improve access to Credit. Where necessary milk collection and cooling centres must be developed.
v). For the mixed farming system - remote from city they may need to establish processing facilities depending on the type of products.
vi). Due to implementation of Structural Adjustment Programmes and Market Liberalisation, existing Laws and Regulations related to Dairy Marketing should be reviewed and revised if/when necessary.
In view of the above observations it was recommended that:
1) Government should put in place an appropriate dairy sector policy and effective legal framework to promote efficiency in dairy co-operatives and associations.2) Small holders should organise themselves in order to safeguard their interest.
3) The need to form a co-operative or association should come from the farmers initiatives, however, enhanced through education and promotion campaigns.
4) Co-operatives and farmers associations should operate on commercial basis and be able to compete with the private sector.
5) The co-operative department should be strengthened to enable them implement the cooperative law by providing training and any other required support to the co-operative.
6) There should be a system in place to help the co-operative manage efficiently. There is a need for contracted management under the supervision of the committee members.
7) Participation of women in producer marketing groups should be encouraged.
8) There is a need for an integrated approach where each group should concentrate on their main problems and each activity should be viable.
9) Provision of credit to small and medium scale dairy farmers is best directed through groups which farmers have created.
10) Active participation of members in group activities particularly of women should be encouraged.
VC: MILK PROCESSING
The milk processing group recommended a step wise approach to milk processing ranging from household technologies to small scale, medium and large scale where appropriate.
The aim of traditional processing is to meet the milk immediate requirement of the family and neighbours.
Marketing of raw milk (by private milk vendors) provides a cheap to consumers but in order to guarantee quality, efforts should be made to integrate private milk vendors in the formal marketing system through licensing and quality control at the entry point.
1) Traditional milk processing of less than < 100 l/day.
- Extension workers are urged to ensure and promote more hygienic and economic processing in the interest of the public. This implies proper sanitation, using cheap soda ash or Na hypochlorite, hot water must be available for cleaning.
2) Processing 100 - 500 l/day
It is recommended to use a cheap system which enables heating of milk in water bath making it possible to heat milk in 45 litre cans up to boiling temperature.
Cold water tanks must be available to enable subsequent cooling, such a system is ideally suited to manufacture of cultured milk using mesophillic lactic starter cultures. This milk has a keeping quality of 2-4 days at ambient temperature. If refrigeration facility is available its storage life can be extended to 2-3 weeks.
Availability of small hand operated separators will make it possible to obtain cream which can be converted into butter and ghee. At this scale of operation it is also recommended to avail of simple milk testing equipment such as a Brick's refractometer, facilities for alcohol test. Manual centrifuge with supplementary equipment for butterfat can be introduced.
Manufacture of pasteurized milk implies, the availability of refrigeration and cold storage. Consumers should be made aware of the risk of consuming raw milk without prior boiling.
For processing milk > 500 l/day.
- Refrigeration facilities must be available.- Availability of low pressure steam is necessary.
- Processing quantities - milk intake > 500 litres per day heating by plate heat exchangers could be applicable.
- Solar energy should be looked into as a possible energy source.
- Basic training be given to small holder farmers producing milk for processing.
