Improved market access and smallholder dairy farmer participation for sustainable dairy development (CFC/FIGMDP/16FT)

Asia-Pacific Smallholder Dairy Strategy Workshop Chiang Mai, Thailand : 2529 February, 2008

Selected smallholder dairying experiences from Bangladesh and Mongolia

Muhammad Mustafa Hussain General Manager Grameen Motsho O Pashusampad Foundation Bangladesh Tsetsgee Ser-Od Director National Dairy Programme Mongolia

Brian Dugdill Dairy Development Consultant FAO

Presentation outline
Background: why Bangladesh & Mongolia? Innovative features of selected smallholder dairying models:
milk production market access Bangladesh Bangladesh

Comparative lessons

Brian Dugdill (February 2008)

Geography overview 2 very different countries?

Bangladesh
Climate: hot, humid, tropical, high rainfall Flat, rich alluvial soil, abundant water, 3 rice crops/yr Disaster risk: high -regular flooding & periodic tsunamis Population : 140 million (25% urban)
population density : over 1,000/km2 48% - below MDG income poverty line ($1/day) 30% - under-nourished

Mongolia (land locked)

Climate: cold, semi-arid, extreme continental, low rainfall Vast rolling steppe grassland (70%); <1% settled/crops Disaster risk: medium-high - periodic droughts & dzuds Population : 2.5 million (urban 1.3m rapidly increasing)
population density : < 1.6 / km2 30% - below MDG income poverty line ($1/day) 20% - under-nourished

Overview 2 very different countries?

Bangladesh:
verdant land of orange sunsets as signified by its flag

Mongolia:
land of the blue sky it may be cold for most of the year but more than 300 sunny days

Both have dairy sectors dominated by smallholders FAO recently involved in smallholder dairying in both countries!

Milk production
Bangladesh:
smallholders dominate (often landless) 15m households produce more than +95% of milk cows & buffaloes milked (24 million) stall feeding (land scarce) producer orgs: village co-ops & village groups smallholders dominate (herders/peri-urban households) 85,000 produce 90% of milk, but more intensive dairy farms growing rapidly cows, yaks, mares, camels, goats, sheep milked (40 million) extensive grazing (land plentiful) herder-extended family groups

Mongolia:

Main constraints to improved productivity & profitability at the smallholder level are basically the same:
enhancing feeding shortage of improved stock insufficient knowledge for raising management skills

Mongolia Dairying snapshot - market access

Milk availability: 134 kg/capita/yr (rural=200kg : urban=50 kg) Market:
95% informal traditional products very important formal market growing rapidly (imports dominate formal market) State collective farm-collecting-processing system self-sufficient in milk & dairy products

Pre-1990s:

destroyed dairy sector

Post-1990s: transition from state-run to market economy very nearly

State collective dairy farms & milk processing combinats collapsed cheap dairy imports, both finished products & reconstituted sold as local produce - until very recently swamped urban market tax system favoured imports 10 buying domestic milk 2 with business models - recombining SMP & veg. oil into UHT milk Mongolia-China joint ventures (?)

Today (2007) - 12 milk processors:

Mongolia dairy industry revival

The problem
Industry collapsed following transition from state-run to market economy in 1990s Imports soaring in urban areas - 95% formal market

The solution
Support from Japan & FAO to kick start rebuilding the dairy industry The Mongolia dairy food chain model

Dairy sector revival strategy agreed

based on:
complete sector-wide dairy food chain approach cow to consumer careful selection of partners & collaborators for cost-sharing the model dairy demonstration units consistent with current Food & Agriculture policy & Government National Plan of Action taking advantage of the key opportunities available to the Mongolian dairy industry to overcome the present constraints
Mongolia-Japan-FAO/UN Dairy Food Security project (GCSP/MON/001/JPN)

Implementation (Oct. 2004 - Sep. 2007)

- organised into three thematic programmes
1) Milk Production Enhancement
- profitable cows, clean milk

2) Milk Marketing Enhancement 3) Dairy Training Programme Focus:

(incl. collection & processing) - quality, affordable milk & dairy products

- establishing a national Dairy Training Centre - updating skills & knowhow

on innovation, milk quality & capacity building in a commercial setting by demonstrating modern technologies new equipment vocational short course & outreach training at NDTC & in the field
Mongolia-Japan-FAO/UN Dairy Food Security project (GCSP/MON/001/JPN)

Flexible, integrated dairy chain model with practical & affordable investment packages (modules) for each stage of the dairy food chain: 6 modules 16 in operation (2007) 1 2 3
Herder/dairy farmer Milk producer -herder groups Dairy Service Centre + dairy cow breed scheme quality Quality Control Milk collector

consumer

quality

quality Milk Cooling Centres

6 5
One-Stop Dairy Sales Centre Milk processing

quality

Mongolia-Japan-FAO/UN Dairy Food Security project (GCSP/MON/001/JPN)

Cheese making, collection & marketing model

(a) natural fresh Gouda, Cheddar & Yak chesses (b) processed cheese

Cheese making & collection from herder groups out on the steppe

Remote areas

Mongolia-Japan-FAO/UN Dairy Food Security project (GCSP/MON/001/JPN)

Mongolia models: key lessons & innovative features

public-private sector partnerships & investments, tax incentives dairy cow genetic and breed improvement scheme, AI using imported Simmental semen from young tested bulls retail outlets where processors join to sell their products, including certified raw chilled milk and traditional products at one-stop milk sales centres, generic milk branding, labelling & advertising public-private sector partnership school lunch programme based on local milk, supplied by local dairy enterprises working with the food standards and inspection authorities to set realistic but safe standards and to train and certify milk inspectors, dairy operators and traders. permanent & commercial National Dairy Training Centre at the Food Technology College in Ulaanbaatar, which provides practical, vocational and outreach/field training for each of the modules. Dairy Steering Group of Mongolian Food Processors Association to represent & promote the dairy industry

Generic milk branding, labeling & marketing Mongolian milk for health & wealth!

Educating consumers about the difference between: Quality fresh Mongolian milk Imported old milk Focusing on next generation milk consumers - children

Progress

(at Dec. 2007)

& outlook to 2010

Formal dairy market (million litres LME)

90 80 70 60 50 40 30 20 10 0 1990 2003 2004 2005 2006 2007 2008 2009 2010
Mongolia-Japan-FAO/UN Dairy Food Security project (GCSP/MON/001/JPN)
Source: MOFA and FAO project

--------------------------- actual -----------------------------

------ target --------

domestic milk

imported milk

Bangladesh Dairying snapshot : market access

Milk availability: 19 kg/capita/yr Market:
95% informal traditional products important formal market growing rapidly (imports = 50% formal market)

1980s/1990s huge imports of cheap milk/dairy products (from subsidized production in the west)
helped develop market set back development of domestic dairy industry as local milk could not compete

Today (2007) milk processors:

20: - 18 since mid-1990s 3 with business models based on recombining SMP & veg. oil into SCM (sweetened condensed milk)

have long been development partners in the dairy food chain

1974-1988: setting up the Milk Vita dairy co-operative model (with LGRD & DANIDA) 1999-2005: setting up the CLDDP integrated fish-croplivestock dairy model (with Grameen Bank) 2002-2005: setting up the vocational Dairy Training Centre at Savar (with DLS/MOFL) 2005-2006: updating National Livestock Policy (with DLS/MOFL) needs long-term commitment from all stakeholders & partners

Bangladesh: UNDP & FAO

Milkshaw distributor coops

MilkMilk Vita model Vita coop Bagharbarighat Dairy

Lesson: smallholder dairying

Find coops pic

Milk producer coops

GMPF-UNDP-FAO Community Livestock & Dairy Development project (BGD/98/009)

Bangladesh: CLDDP model the constraints & the solution

Grameen Motsho (Fish) Foundation in 1998
Not-for-profit sister organisation of the Grameen Bank Inland fish farming with poor people since 1980s Works through grass roots Village Group/Village Centre system Profits from fish sales shared 50 : 50 How to increase Village Group Member (VGM) earnings from fish? (USD 70 p.a.) How to improve productivity of fish ponds? How to improve nutrition & involve more women? Livestock to provide products for home consumption & sale Livestock to provide dung to fertilise fish ponds to improve productivity Livestock to shift the focus on women UNDP/FAO project support introduction: Community Livestock & Dairy Development Project (CLDDP) (1999-2006)

The problems

The solution? Add livestock to the fish farming system

In 2003 GMF became GMPF Grameen Motsho O Pashusampad Foundation the Peoples Fish and Livestock Foundation
GMPF-UNDP-FAO Community Livestock & Dairy 18Development project (BGD/98/009)

Grameen Bank CLDDP Model Community Livestock & Dairy Development model
VGM-Smallholder Livestock-based Enterprises Village Groups Community Livestock Services Community Feed Mills Rural & Urban Consumers
GMPF-UNDP-FAO Community Livestock & Dairy Development project (BGD/98/009)

Village Centres

Community Credit Services Community Dairy Enterprises

Grameen Bank CLDDP Livestock Loan packages

VGM-smallholders select loans from 9 package menu

GMPF-UNDP-FAO Community Livestock & Dairy Development project (BGD/98/009)

Grameen Bank Community Livestock & Dairy Development Project (CLDDP) model
milk collection point milk collection point

homesteads

homesteads
community livestock centre (services/inputs)

milk collection point

Community dairy Community feed mill -consumers -markets

homesteads
litre

GMPF-UNDP-FAO Community Livestock & Dairy development project (BGD/98/009)

Pasteurised Milk

Grameen Bank CLDDP model selected outcomes & benefits (1)

VGM-smallholder numbers:
Increased from 3,500 (1998) to 9,000 (2007) 85% new VGMs are women taking outreach (field) training programme to villages makes the training more accessible for women

Change in VGM status (1998/2005)

net earnings up 650% : $388 (2005) v $70 (1998) - excluding sale of animals 71% VGMs now select dairy cows/heifers, because returns highest pay off loans quickest value of household assets up 145%

Dung is used three times:

to produce energy (bio-gas) for cooking & lighting to fertilise fish ponds to fertilise crops

Grameen Bank CLDDP model selected outcomes & benefits (2)

Milk consumption by VGM households
1998 2004 nil >0.5 litre (78%); 1.0 litre (22%)

VGM Households reporting having sufficient food

1998 2004 58% 98%

Milk quality:

processing dairies pay premium for CLDDP milk, because compositional and keeping quality reliable

Grameen Poor Peoples Fish-Crop-Livestock Farming System

Feed Mills Crop residues Weeds Eggs Meat

Livestock Feed

Poultry/ Duck feed

Fodder Paddy Horticulture

Pest Control

Draught Duckweed / Aquatic Weeds Manure Fertilizer

Poultry --------Ducks Loan packages Outputs

Cattle ------Goats

Sludge

Bio- digester

Pond

Simple vision Well integrated Complex execution

Meat

Milk

Cooking Fuel

Lighting

Fish
GMPF-UNDP-FAO Community Livestock & Dairy Development project (BGD/98/009)

GMPF-UNDP-FAO Community Livestock & Dairy Development project (BGD/98/009).

Both countries have school milk programmes

Bangladesh
Pilot programme Based on imported milk powder, centrally recombined & distributed (packed in UHT containers) potential to distort local markets? national programme -300,000 children (piloted 2006/started 2007) public-private sector partnerships local milk provided by local herder-smallholders Locally processed & delivered

Mongolia

What next?
Scaling up: both countries have large locally funded programmes to scale up the models
Bangladesh: largely through NGOs & private sector, incl. Grameen-Danone social dairy ventures Mongolia: under National Dairy Programme (2007-2015)

Improved dairy stock: both countries receiving support from small FAO TCP projects:
Bangladesh: will start 2008 Mongolia: started Jan. 2008

Dairy cow feeding & capacity building:

Largely through outreach training under both National Dairy Training Centre programmes

Dairy development coordination

(strategies, policies, programmes)
Bangladesh:
Government, NGOs & private sector pursue separate agendas Government supervises dairy cooperatives (Milk Vita) NGOs and private sector left largely to own devices Bangladesh does not have a dairy policy, plan or programme Government-private sector partnership Government policy facilitates: legislation, standards, inspection, tax incentives Private sector lobbies & implements through Dairy Steering Group of Mongolia Food Producers Association Mongolia has 10-yr dairy development programme (20072016)

Mongolia:

Comparative lessons
If smallholder dairying works in such harsh & different environments, it should work in most between situations where markets demand quality products & smallholders produce milk competitively & access markets! Success came from: building on existing structures & involving private & NGO sectors adapting and tailoring modern dairy technologies and systems to the local situation adopting a complete cow to consumer strategy : focusing on quality & profitability for each link in the chain having public-private/NGO sector partnerships to fine tune the model & spread the risks associated with innovation & start-up using the success to influence policy & having a plan for sustainable scaling up In these processes, committed people (stakeholders) are more important than geography, climate or polictics

More information?
Bangladesh: Muhammad Mustafa Hussain
FAO Terminal Report (published 2007): www.fao.org Also lists all the key documents, guidelines, manuals etc, including the CLDDP model Lessons Learned Study: Bangladesh - smallholder milk producers, nutrition, incomes, jobs (2007)

Mongolia: Tsetsgee Ser-Od

FAO Terminal report (published 2007): www.fao.org Also lists key documents, guidelines, manuals etc, including the Mongolia dairy chain model Lessons Learned Study: Mongolia - small milk producers, the key to dairy industry revival www.mongolia-dairy.mn

Asian milk for health and wealth!

healthy people wealthy smallholders
Mongolia

Bangladesh

Dhonabhad

Bayaar Laa
Brian Dugdill (February 2008)

Thank you!