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The Smallholder Dairy Revolution or Smallholders and the Livestock Revolution?

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Title: Trade Liberalization, Domestic Market Reforms and Competitiveness of Indian Dairy Sector Author: IFPRI IFPRI Last modified by: TLore Created Date – PowerPoint PPT presentation

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Title: The Smallholder Dairy Revolution or Smallholders and the Livestock Revolution?


1
The Smallholder Dairy RevolutionorSmallholders
and the Livestock Revolution?
  • Steven J. StaalInternational Livestock
    Research Institute
  • IFCN Dairy Conference, May 2003

2
Research Centers of the Consultative Group on
International Agricultural Research (CGIAR)
3
Issues
  • Small scale dairy farms dominate production in
    most developing countries
  • Why?
  • Can they compete internationally?
  • Can they compete with that larger farm down the
    road?
  • What factors influence competitiveness?
  • (What is competitiveness??!)

4
Outline of presentation
  • The Livestock Revolution
  • Milk markets and consumption in developing
    countries
  • Characteristics of smallholder dairy production
  • Nutrients for the land
  • Nutrition for the family
  • Competitiveness
  • Economies of scale
  • Non-market benefits
  • Opportunity costs of labor
  • Comparing large vs small scale systems

5
The near future the Livestock Revolution
  • Expanding populations, incomes and urban
    households across developing countries
    particularly in Asia
  • This is driving greatly increased demand for
    livestock products, including milk
  • Much greater demand growth than for most crop
    products

6
Predicting the Livestock Revolution
  • Recent study by C. Delgado et al, IFPRI/FAO/ILRI
    (1999, 2001) examined the trends for livestock
    demand and production to 2020
  • Uses IMPACT model, global food model of 18
    commodities including 7 livestock, 37
    regions/countries, and annual iterations to 2020
  • Market clearing prices, and levels of production,
    consumption, and trade

7
Percentage Increase in Total Demand for Livestock
Products 1993 2020
increase in demand
8
The continuing Livestock Revolution projected
growth in milk demand
Million MT/yr
Kg/capita/yr
1997
2020
1997
2020
SSA
17
35
30
37
China
10
23
8
16
India
60
132
62
104
Developing C
194
372
43
61
Developed C
251
276
194
203
Adapted from Delgado et al., 2001
9
Implications of the Livestock Revolution for milk
production in DCs
  • Model predicts that deficit countries will
    generally import feed rather than livestock
    products
  • Increase in production will thus occur mostly
    near where increase in demand occurs
  • As a consequence, Developing Countries will
    produce 52 of global milk in 2020, up from 32
    in 1993
  • Presents huge apparent opportunities for milk
    producers in Developing Countries (if they can
    compete)

10
Sources of change in cow milk production,
1985-1998
of change in cow's milk production
70
60
50
40
30
20
10
0
China
India
SE Asia
SS Africa
-10
Herd
Milking
Productivity
Interaction
Herd growth likely to mean growth in numbers of
farms, in absence of major structural change
Source ILRI using FAO statistics
11
Informal dairy markets and actors
  • Informal/unorganised
  • Liquid, often raw, milk and traditional products
  • Sometimes formal may pay taxes, licenses
  • Wide variety of actors
  • Direct sales
  • Small-scale traders
  • Traditional processors
  • Small-scale retailers
  • Generation rural/urban employment
  • 2-5 jobs per 100 L daily

12
Informal dairy markets globally
Informal market share SSA Kenya 88 T
anzania 98 Uganda 90 L. America
Mexico 33 Nicaragua 86 Costa
Rica 44 Brazil 44 S. Asia India 85 S
ri Lanka 40 Pakistan 98
  • Primary market for both small producers and poor
    consumers

Sources ILRI Collaborative Research FAO
E-Conference
13
Demand factors driving informal markets
elasticities of demand (Kenya)
Income (expenditure) elasticity of demand
Raw milk
0.13
Pasteurised milk
0.50
Household income level
Price elasticity of demand
Low Medium High
Raw milk
0.12
0.26
0.93
Pasteurised milk
0.70
0.12
0.21
  • Largely driven by low cost and traditional
    preferences
  • Partially driven by relative demand for food
    safety and quality

Source ILRI 2002
14
Markets and scale of milk production
  • Spatial and household analysis of farm-gate milk
    price formation in Kenya
  • Informal markets charge penalty on higher volume
  • Formal market pay premium to higher volume
  • Market outlet options condition farmers
    incentives for scaling up

Source Staal et al, 2000
15
Dairy productions role in sustaining mixed small
farming
16
Scarce nutrients farm and family
  • Farm nutrients problem is nutrient deficits,
    not surpluses
  • West Kenya only farms with cattle had positive
    (small) nutrient balances
  • Central Kenya - more than 40 of fodder materials
    gathered from off-farm nutrient channel
  • Family nutrition problem is under nutrition,
    not over nutrition
  • Coastal and Central Kenya hhs with cattle have
    significantly lower of children exhibiting
    stunting (height for age) a measure of long-term
    under nutrition (Nicholson et al 2002)

17
Economies of scale in dairy production
  • Can smallholder farmers compete against larger
    neighbors?
  • Several new studies (IFPRI, ILRI) using
    stochastic frontier analysis to examine economies
    of scale (Bangladesh, India, Kenya, Thailand,
    Brazil)
  • Qualifier uses enterprise approach, excluding
    some non-market benefits

18
India (Punjab, Haryana, Gujarat) Average Yield
Per Animal
10
9.7
8.4
7.8
7.6
7.6
7.4
8
6.2
6.3
6
Rs./Lit.
4
2
0
Small
Medium
Large
Commercial
North
West
Source Sharma and Delgado, 2003
19
India Average profit per liter of milk (with
family labor)
0.7
0.5
Rs/litre
0.3
0.1
-0.1
lt20
20-40
40-80
80-150
gt150
Avg.
Farm scale - liters of milk/day
Source Sharma and Delgado, 2003
20
India Mean Farm Efficiency by Size group
0.94
0.85
0.87
0.86
0.83
0.9
0.80
0.7
Index
0.5
0.3
0.1
lt20
21-40
41-80
81-150
gt150
Average
Farm scale - liters of milk/day
Key distinguishing factors information and
credit Does not include most non-market benefits
Source Sharma and Delgado, 2003
21
Capital costs? - financing and insurance roles of
livestock
  • Limited or no smallholder access to formal
    insurance (health, household) nor to formal
    credit. Dairy cattle can provide both.
  • E.g forced savings - lower milk price to
    accumulate payment
  • Opportunity costs of capital - Smallholders may
    also have few alternative inflation-proof
    savings/investment opportunities.
  • Financing
  • Sale of animals to meet planned lumpy
    expenditures
  • Value accrues at sale
  • Insurance
  • Keeping of animals to meet emergency expenditures
  • Value accrues daily

22

Comparisons with and without non-market benefits
Western Kenya
Benefits of finance and insurance are based on
contingent valuation of WTP
US/yr
1400
1200
Increase in profit due to finance and insurance
benefits
1000
18 ?
15 ?
14 ?
800
600
400
200
0
Intensive dairy
Extensive dairy
Semi-intensive dairy
Source Ouma 2003
Without With
Without With
Without With
Total revenue
Total costs
Profits
  • Tested using tobit analysis of age of sale of
    culled cow
  • What is competitiveness?

23
Opportunity costs of labor and herd size
comparison of typical herd size and rural wage
rates, 12 selected countries in SSA, Asia and LA
Source Project on Transregonal Analysis of
Crop-Livestock intensification, ILRI 2002
24
Large/formal/rich vs small/ informal/poor dairy
systems
Large/formal/rich Small/informal/poor
Production profile
Nutrient and nutrition profile
25
Large/formal/rich vs small/ informal/poor dairy
systems (cont)
Large/formal/rich Small/informal/poor
Demand and product profile
Policy profile
Growth and opportunity profile
26
Thank you
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