OVERVIEW OF THE TURKISH DAIRY SECTOR WITHIN THE FRAMEWORK OF EU-ACCESSION

Transcription

1 OVERVIEW OF THE TURKISH DAIRY SECTOR WITHIN THE FRAMEWORK OF EU-ACCESSION FAO Regional Office for Europe and Central Asia Policy Assistance Branch Ministry of Agriculture and Rural Affairs, Republic of Turkey FOOD AND AGRICULTURE ORGANISATION OF THE UNITED NATIONS Rome, July 2007

2 TABLE OF CONTENTS ACKNOWLEDGEMENTS... 4 EXECUTIVE SUMMARY INTRODUCTION General Background Recent Developments Milk Production and Milk Use Production Conditions in Turkey Characteristics of Dairy Farms Cow Milk Production in Turkey Other Milking Animals Buffalos Sheep and Goats Animal Health Related to Dairy Production Milk Production in the Konya Region Milk production Quality and cost of raw milk DAIRY PRODUCTS AND THEIR CONSUMPTION Product Categories Consumption Habits Relation Between Local Population and Local Production DAIRY PRODUCTS PROCESSING Leading Turkish Dairies Milk Processing in the Konya Region Dairies and milk processing Views expressed by the chairman of the Commerce Exchange Chamber (CEC) Marketing in the Konya Region Street Milk Origin of Street Milk Market for Street Milk Mandras Identification of milk processors Mandras their size and number Situation and future outlook of mandras

3 3.5. Distribution Sector Breakdown of the formal and informal sectors Purchasing power and consumer classification Distribution outlets in Turkey Dairy products distribution Quality Control DAIRY SECTOR SUPPORT SERVICES The Cattle Breeders Association of Turkey (CBAT) Union of Dairy, Meat and Food Industrialists of Turkey (SETBIR) Cooperative development and support The Cooperative Unions Capacity of cooperatives and cooperatives unions Government Policy for the Sector Ministry of Agriculture and Rural Affairs (MARA) State subsidies Credit Credit conditions Subsidies for the Milk Sector Nature of subsidies in the milk sector Subsidies list for 2005 and Impact of Subsidies on milk production Land Issues in Turkey Issue of land for dairy farming Land situation in Turkey TURKISH DAIRY SECTOR Milk Production Milk producers Dairy cattle availability and productivity Extension services Milk collection Seasonal variations Diagnosis of Milk Quality Milk composition Milk quality Milk quality control

4 Milk price Incentives and subsidies Sheep and goat milk Diagnosis of Milk Products Treatment and packaging of liquid milk Liquid milk sector Fresh dairy products (FDPs) Cheese and milk powder The Processing Sector Review of the Turkish industrial sector Consumption habits and ratios Market stratification Informal/street milk Mandras Industrial potential Dairy product marketing FOREIGN INVESTMENT IN THE TURKISH DAIRY SECTOR ANALYSIS BY STAKEHOLDERS AND INTEREST GROUPS RECOMMENDATIONS FOR MODERNIZATION AND RESTRUCTURING Issues to be addressed Dual Structure of agriculture (dairy farming) Milk quality Milk collection Milk processing and dairy products Main Actions Proposed Creation of a national milk council National dairy sector strategy (a milk action plan) Study tours to selected EU countries LIST OF TABLES LIST OF ACRONYMS LIST OF REFERENCES ANNEX ANNEX ANNEX ANNEX

5 ACKNOWLEDGEMENTS This study was commissioned by the Policy Assistance Branch, (REUP) of the FAO Regional Office for Europe and Central Asia (REU). A team of national and international dairy experts led by Mr Denis Caigniet (Dairy Sector Expert) prepared the study. Valuable contributions were received from Professor Koc, Professor Karacabey and Ms Melek Us. The team of experts worked in close collaboration with the FAO Representation in Turkey under the supervision of Mr Raimund Jehle, Policy Officer (REUP). Technical officers in the Ministry of Agriculture and Rural Affairs (MARA), the State Planning Organisation (SPO) and FAO s Animal Production Service (AGAP) as well as a number of stakeholders provided valuable comments. The views of Mr Robert Bambauer, Veterinarian and Team Leader of the EU Twinning project in Turkey (2004 and 2005) relating to the animal health sector were also taken into consideration. The study was revised by Mr Bernhard d Avis and edited by Mr John Tracy-White. The study is based on fieldwork carried out in Turkey between September and December The study methodology was based on interviews with key informant in the agriculture production as well as processing sectors. The interviews covered all the major stakeholders in the Turkish dairy sector, including farmers, processors, traders, retailers, local and national government officials, NGOs, and international development partners. A stakeholder workshop was held in December 2005 at the conclusion of the mission to discuss the initial findings and recommendations of the study and to receive feedback on these preliminary findings. A first draft of the study was presented at a workshop organised by the EC Delegation in Turkey, held on 27 April 2006, with the participation of EC, MARA, and all the relevant stakeholders. The team would like to thank all those who contributed to the study. Special appreciation is expressed to the FAO Representation in Turkey, MARA and other stakeholders for their cooperation and unfailing support. 4

6 EXECUTIVE SUMMARY Turkey s application to join the European Union (EU) dates back to 1959 when it first applied for associated membership. The Council of the European Union decided that accession negotiations would start on 3 October Therefore Turkey would benefit from EU preaccession support in its efforts to adjust to the acquis communautaire and to prepare for the implementation of the Common Agriculture Policy (CAP). To enable the programming for the pre-accession support, the EC requested the Government of Turkey to analyse different agricultural sub-sectors. Particular emphasis was to be given to those sectors considered as constraints to the development of agriculture or had a potential for further development. In this context, FAO undertook a milk sector study to review the sector and to provide an analysis of the challenges and constraints in the sector, and the possible measures that would need to be undertaken to prepare Turkey for EU membership. The agriculture sector in Turkey provides employment for 66 percent of the population, of which 35 percent live in rural areas. One-third of the agricultural activities relate to livestock farming, involving some 2.5 million enterprises and farms. Turkey is among the 15 largest milk producers in the world with a total annual milk production of 10 billion litres. About 90 percent of this production is cow milk, with marginal amounts of goat, sheep and buffalo milk. Production conditions vary considerably between the western and the eastern parts of the country. Climatic conditions are more favourable in the western Mediterranean regions, allowing the development of commercially oriented dairy farming. In contrast in the eastern and northern parts of the country extensive smallholder dairy farming prevails - characterized by subsistence farming and a lack of a professional approach to production, with consequential problems related to appropriate feeding, animal health and low productivity that result in high collection costs and rather low quality milk. The presence and utilisation of different cattle breeds reflects the geo-climatic conditions: local native cattle are mostly to be found in the central Anatolian, Marmara and Aegean regions. Purebred cattle are more dominant in the western regions. Milk yields vary according to breed and 2004 statistics indicate: 3,881 kg per lactation for pure-breed cattle; 2,711 kg per lactation for crossbreed; and 1,317 kg per lactation for native breed. The national average lactation yield is 1,700-kg per lactation period. 1 Sheep, goat and buffalo rearing has a long tradition in Turkey, but this activity is currently declining due to out migration from the traditional grazing areas, degradation of pastures, lack of extension support and an almost total lack of a viable marketing and processing system for the milk. Limited public support in the form of a premium to encourage sheep and goat farming is available, but the importance of small ruminants and buffalos in a rural development context is not as yet fully appreciated by the concerned government authorities. In addition to the support 2 provided by MARA, mostly directed to smallholder dairy farmers, there are a number of professional organisations that provide support to the sector, i.e. assistance for the import of live breeding animals, provision of imported semen for artificial insemination (AI) and for channelling bilateral assistance to the sector. The Cattle Breeders Central Association is the largest source of support in the field of cattle breeding and is present in 65 provinces. SETBIR, the Union of Dairy, Meat and Food Industrialists is the only dairy association in Turkey that provides assistance to its 21 members by: (i) promoting the 1 State Statistical Office 2 Planned to reach an annual amount of YTL622 million (or US$46 million) for the years 2005 to 2010 to cover the animal husbandry sector (including small amounts for aqua- and apiculture). 5

7 upgrading of processing plants to comply with EU standards, (ii) supporting networks within the sector; and acting as an intermediary between government and industry. In recent years, the Government has supported cooperatives that assist milk producers in the supply of production requirements. Some have merged and have formed unions with either a multi-purpose support orientation, or, like the Central Union of Animal Cooperatives, focussing support on animal production. The cooperatives and the cooperative unions offer support that ranges from milk collection, provision of cooling tanks, milk quality control and the sale of milk to other processors. Other services include input procurement, provision of veterinary services, the supply of animal feed, seeds and training/education. Others have built up considerable processing capacities and some are involved in milk production. The cooperative sector, supported by MARA, is undergoing restructuring which will result in a decrease in the number of staff and activities. Dairy products have an important role in Turkish diet. Very little liquid milk is consumed; the most common form of consumption is yoghurt, followed by white cheese (feta type) and ayran, a liquid salted milk drink. Kashkawal is a yellow cheese of little taste that forms part of almost any meal during the day. Annual per capita of milk and milk products consumption amounts to 132 litres, a figure that is low compared to other European countries. Of the total production of about 10 billion litres of milk, 3 billion litres are used by farm families for their own consumption or processing, 1 billion litres are handled by the street sellers, over 2 billion litres are processed by mandras (small, simple processing units) and well over 3.5 billion litres are processed by medium-sized and SETBIR dairies. These figures indicate that more than 6 billion litres of milk are handled outside any formal quality control, unpasteurised and unpacked. Dairies find it difficult to obtain sufficient quantity of high quality raw milk. Collection and quality control increase the cost of raw milk for processors by between ten to 15 percent. The resulting consumer prices for dairy products and processed milk are high, which is the reason that large part of the population turning to the informal sector to obtain their supply. The modern large dairies appear to develop without any public support. Some of them produce in line with EU standards and face considerable price pressure from large supermarket chains. However for the sector to adjust to EU standards, government will need to review its support policy and introduce measures to diminish the informal sector s role. The dairy situation in the Konya province has been given particular attention in as much as it could represent a development option for those areas where dairy industry has not reached a EU compatible level. The main characteristics of the dairy situation in Konya are that the leading dairies evolved from mandras and there is a strong cooperation amongst dairies to solve common problems. However, they also face the problem of securing sufficient quantities of high quality raw milk. The dual structure of agriculture in Turkey small family farms without any economic orientation and large private farms specialised in milk production - impedes a rational development of the dairy sector. Based on the diagnosis and findings of the study, the following s issues will be need to be addressed: There is a need to elaborate a national dairy sector strategy under the auspices of MARA. This strategy will need to investigate all aspects of the dairy sector, preferably with a view to EU accession and will need to devise a milk action plan that will indicate, in practical terms, the steps that need to be taken to modernize the dairy sector in order to allow it to meet the challenges of a globalised competitive situation in the region and to meet the needs of the Turkish population in terms of adequate supply of dairy products at competitive prices; 6

8 To facilitate this task it is recommended that a national milk council be established to oversee the preparation of the sector strategy, ensure appropriate stakeholder consultation and act as a clearinghouse for all proposals and recommendations regarding the dairy sector. Specific points that need to be addressed in connection with the elaboration of a dairy sector strategy are: Milk collection the dispersed location of production units in much of the country is the reason for a very costly and inefficient collection system of milk. A more rational system of milk collection could be achieved through the development of cooperative unions that follow the pattern of cooperation of the recent union formation of the industrialized dairy units in western Turkey. In addition to milk collection, these unions could also provide advisory services to milk producers, which at present is under-funded and not particularly focussed; Quality of raw milk this is considered one of the most important problems of the sector. A system of payment for milk deliveries based on quality considerations needs to be established. This however, depends very much on the rationalisation of the milk collection, which would allow a system of quality control conducive to the reduction of costs to the processors; Current high price of raw milk two issues emanate from this. On one hand this situation feeds into the street milk sector, where uncontrolled, unpasteurised and low quality milk is delivered to consumers at a low cost; on the other hand the processors are not able to produce dairy products at a cost that is affordable to the common consumer and be compatible in the European context. The resolution of this issue is closely related to a solution to the previous point on milk quality: The current production and distribution systems keeps a large number of persons employed and the necessary modernisation of the sector will have to take into consideration the employment aspect of this process; Reorganising the dairy sector will have to consider the production of sheep/goat/buffalo milk with a view to building up a niche market for these products - that certainly would have a market in Turkey and potentially in Europe; and Efforts to adjust to EU conditions should be supported through maximising contacts with dairy sectors in the EU. Of particular relevance would appear to be contacts with Poland and Portugal, two countries that had to recently go through similar adjustment processes. 7

9 1. INTRODUCTION 1.1. General Background Turkey first applied for associate membership in the European Union in The application resulted in an association agreement in 1963 whereby Turkey and the EU would, in principle, gradually create a customs union by 1995 at the latest. Turkey applied for full membership in The EU response was that accession negotiations could not be undertaken at the time because the EU was engaged in major internal changes, and matters were further complicated by developments in Eastern Europe and the Soviet Union. On 6 March 1995, it was agreed during an Association Council meeting in Brussels that a customs union would be created between Turkey and the EU as of 1 January 1996, to be fully phased in by During the December 1999 meeting in Helsinki the European Commission (EC) reached a breakthrough in Turkey-EU relations: Turkey was officially recognised as a candidate state for accession, on an equal footing with other candidate countries. The result was the creation of an accession partnership with the EU, which means that the EU is working together with Turkey to enable it to adopt the acquis communautaire, the legal basic framework of the EU. In contrast to other candidate countries, Turkey did not receive a timetable for the accession process. On 17 December 2004 the European Council decided that accession negotiations with Turkey would start on 3 October As a result, Turkey will benefit from pre-accession support of the European Union, which will be included in the financial programme within in the framework of the Instruments for Pre-Accession (IPA) and its rural development component, the Instruments for Pre Accession for Rural Development (IPARD) Recent Developments Agriculture is expected to be one of the difficult aspects of the accession negotiations of Turkey with the European Union. The difficulty will not only be based on the specific status of the Turkish agriculture but also the change of the overall agriculture and rural development policy of the European Union during the time of accession. The EC and the Turkish Government, the Turkish Ministry of Agriculture and Rural Affairs (MARA) in particular, have in the meantime started with the identification and definition of priority areas for IPARD. IPARD s main objective is to support Turkey in policy developments to prepare for accession. This involves preparing the country for implementation and management of the EU s Common Agriculture Policy (CAP), implementation of the acquis and, more broadly, ensuring that Turkey has a sustainable agricultural sector in which producers are able to compete with European Union producers after accession. In this context it is necessary to analyse the overall agriculture sector, as well as particular sub sectors, to determine the needs for assistance under the IPARD programme. Agriculture in Turkey has kept its role as a major employer and contributor to the GDP through the last two decades. Turkey is endowed with rich natural and human resources, but is full potential for rural growth went largely unrealised in the period between 1980 and 2002, because increasingly inefficient rural development policies focused too much on selfsufficiency in key individual product - to be brought about by increasing yields and production levels through the subsidisation of agriculture inputs and credit and though the expansion of cultivated land with heavy public investment on irrigation. In addition, agriculture incomes increased by emphasising output price support policies. 8

10 Although employment in agriculture is declining both in absolute and relative terms, Turkey s agriculture sector still employs 33 percent of the national workforce. Agriculture is the major source of employment in the rural areas accounting for about 70% of the total rural employment. The livestock sector in this context is a major source of income for the rural population, but continues to suffer from declining cattle inventories and a restrictive import regime that increases feed costs. Import of dairy and beef breeding stock is allowed, though subject to high tariffs of between 67 and 150 percent, depending on the product. Milk production plays an important role in Turkish agriculture. Turkey is among the largest global milk producers, but at the same time, has a very large informal sector for which little reliable information exists. The main purpose of this study was to provide further information on the milk sector in Turkey with particular view to production and processing. The report should provide valuable information for the programming of IPARD by the Government and the European Commission. 9

11 MILK PRODUCTION IN TURKEY 1.3. Milk Production and Milk Use Total annual milk production in Turkey amounts to 10 billion litres, placing the country among the 15 largest milk producers in the world after the Netherlands and before Australia 3. This total includes 90 percent cow milk, 2 percent goat milk and 8 percent sheep milk. In the last 15 years the share of cow milk has increased constantly, while buffalo, sheep and goat milk are on the decline. Buffalo milk has become marginal and represents only 0.4 percent of the total milk production as shown in Table 1. Table 1: Milk production in Turkey (tonnes and percent) Year Cow Buffalo Sheep Goat Total Tonnes % Tonnes % Tonnes % Tonnes % ,960, , ,145, , ,603, , , , , ,594, , , , , ,790, , , , , ,675,800 Source: Turkish Statistical Institute (TURKSTAT). The range of production of milk varies between 10.6 million tonnes and 9.5 million tonnes. Family or farm consumption ranges between 28 percent and 35 percent respectively. These figures do not make a distinction between human consumption and animal feeding. Figures relating to the production undertaken by mandras 4 vary widely. FAO estimates, on the basis of the sample surveys, that the mandras process about 18 percent of the total milk output. Furthermore, there is no other data source available that indicates the number of these small processing units. Their share in total production is estimated to be around 9 percent Production Conditions in Turkey The highest and the lowest temperatures from TURKSTAT, based on meteorological station records for years, were C and C, respectively. In the eastern regions of Turkey due to heavy snowfall between November and March, all pastures are covered by snow. Pastures become productive only between May and July. Furthermore, in these regions both the share of irrigated land and arable land is small and there is only one harvest per year. Local breeds with a very low productivity are the predominant regional livestock. The lactation period is very short resulting in an acute seasonality of milk production. During the summer season, the cows are grazing on public pastureland, whereas in winter there is a lack of high quality feed; only poor quality hay and straw is available. The situation is aggravated through overgrazing of pubic pastures by village s herds of cows, sheep and goats, leading to serious deterioration of traditional meadows, and the significant conversion of former meadows into semi-agricultural land during recent decades. It should be noted that cattle breeding in central and eastern Turkey is a reflection on the subsistence orientation of the farming system. 3 Compare in Annex 1, Table 1. 4 Small, labour-intensive milk processing units with usually less than ten labourers. 10

12 Production conditions in western Turkey differ considerably. In the provinces located in the coastal regions Mediterranean climatic conditions 5 prevail and the temperature falls under 0 C only during a few days during the winter months. On the other hand, during the summer season, especially in the southern and western regions, temperatures can increase to over 40 C with a rather high humidity. In the western regions it is possible to obtain two to three harvests on irrigated land. Between December and May, the period with high rainfall, pastures are very productive. This is also the time of year for reproduction of livestock, particularly cattle and sheep. The remainder of the year is rather dry and pastures are not very productive. Dairy farms in western Turkey often produce their own forage and purchase concentrate feed from outside. In some cases the larger dairy farms cover the greater part of their feed needs through purchases from outside, which increases their production costs, yet leaves them within their break-even point Characteristics of Dairy Farms In Turkey, it is estimated that about 35 percent of the population live in rural areas and about 66 percent is dealing with or is employed in the agriculture sector. According to the results of General Agricultural Census in 2001, Turkey has 3,1 million farms of which around 2,1 million are raising cattle. Farm size is determined by structural characteristics such as area of farmland, number of animals, labour and capital. Graph1: Classification of farms by land size (in percent) Classification of farms by land size in percent 16, 8% 35, 18% < 2 ha < 5ha < 10ha > 10ha 84, 41% 65, 33% Source: MARA. Table 2: Classification of farms by number of head of cattle Head per farm Percentage From 1 to 9 head From 10 to 19 head From 20 to 49 head 3.73 > 50 heads 0.56 Source: MARA. 5 For detailed description of the geographic regions and production conditions see Annex 2. 11

13 As can be seen from Table 2, the average number of cattle per farm is 4.7 heads. Small-scale family farms are the predominant form of cattle production of Turkey. The production system is not oriented to meet market demands; its main objective is to ensure self-sufficiency. This system is not conducive to facilitate quantity and quality control of the resulting products. The low number of cattle per farm is a result of the poor quality of the farmland and the resulting low intensity of land cultivation. Considerable differences exist between the different regions and availability of irrigation has a marked influence on cattle keeping. To sustain one cow a minimum of two to five hectare of farmland is required for intensive forage production. Turkish Cattle Breeders Provincial Associations were established in Membership was conditional to keeping at least five heads of purebred cows. The support provided to members by the associations comprised improved breeding material, AI and subsidies for milk and forage production. This has resulted in recruitment of new members and a considerable increase in farm size. The support and credit provided for the modernisation of the dairy farms have enabled larger farms to concentrate on dairy related aspects of their operation. The establishment of some large intensive dairy cattle farms in different parts of Turkey can be attributed to the activities of the provincial associations. Total membership of the associations amounts to about 50,000. However, the number of farms with more than 100 head of cows is by now more than 100. A figure that is insignificant compared to other European countries Cow Milk Production in Turkey The native cattle breeds of Turkey are the Native Black, East Anatolian Red (EAR), South Anatolian Yellow-Red (Kilis and Native Yellow), Steppy Grey and Zavot cattle. Native Black breed spreads out to central Anatolia and the Black Sea regions, the EAR breed is present in the east Anatolian region, South Anatolian Yellow-Red cattle is kept in the Mediterranean and south-eastern Anatolian regions, Steppy Grey in the Marmara and Aegean regions and Zavot cattle can be found in the north-eastern Anatolian region. However, the native breeds share in the total cattle population has decreased and many breeds are under threat of extinction. Milk production per cow is kg for Native Black, EAR and Native Yellow, 1,000 kg for Steppy Grey, 1,750 kg for Zavot and 2,000 kg for Kilis. Purebred cattle raised in Turkey comprise Holstein-Friesian, Brown Swiss, Simmental and Jersey. Although Holstein-Friesian cattle are present in all regions of Turkey, it is more strongly represented in the Marmara and Aegean regions. Brown Swiss cattle can be bred in all regions of Turkey, however this breed is generally to be found in the internal parts of the Aegean region, central region and East Anatolian region. Simmental cattle are raised in the inner parts of Aegean, east Anatolian and Black Sea regions, whereas Jersey cattle are bred mostly in the Black Sea region. The regions where most of the cattle is purebred are Marmara, Aegean and central-southern regions. While these three regions contain about 30 percent of the total Turkish cattle population, about 63 percent of this cattle population are purebred animals. The lowest percentage of purebred animals can be found in northeastern Anatolia (5.3 percent) and in southeastern Anatolia (6.71 percent). The percentage of native breeds in these two regions amounts to 65 percent. The two regions percentage in the national cattle herd is 27 percent. The average milk yields for registered Holstein Friesian cattle population in Turkey was about 5,600 kg, whereas yields of Brown Swiss, Simmental and Jersey breeds were reported to be 12

14 lower than those of Holstein Friesian 6. Referring to figures provided by CBAT, yields for Brown Swiss and Simmental breeds are about 5,000 kg and 4,500 kg respectively. An overview of milk yields for different breeds is given in Graph 2 below. (Further information concerning cow milk production and number of milking cows according to breed is presented in Annex 1, Table 3). Depending on the regions and season, the price for milk paid to the farmer per litre in 2005 ranged from YTL 0.30 to YTL The upper range price is almost the same as the average price paid for milk in the EU. Graph 2: Cow milk yields (kg/lactation) , ,898 3,108 2, ,947 2, , Year Pure breed Cross-bred breed Native breed Source: Turkish Statistical Institutes (TURKSTAT) Other Milking Animals Buffalos Contrary to the situation in central, eastern and southern Asia, there is no longer an interest in raising buffalo in Turkey. This explains the sharp drop of the herd size during the past decades: 255,000 heads in 1995 and 103,000 in MARA specialists believe that the decline of the buffalo herd will continue in the future. The main reasons for the decline identified by MARA staff are the low milk yield and the long calving period. In addition, there is virtually no extension support for buffalo keeping. The Research Centre of Afyon that worked on buffalos has been closed down and the Centre s staff has been transferred to the Marmara Research Centre. 6 See Akman et al.,

15 Another reason for the decline of buffalo milk is the fact that it is not exploited commercially. There is no buffalo milk collection, no processing and consequently no marketing of buffalo milk products. The milk is exclusively consumed on the farm. Traditionally buffalos were used as draft animals; however, with the increase in mechanisation this draft power is no longer needed. Buffalo are now only being kept by some small-scale farmers to assist in working the fields. In contrast to Turkey, a number of Asian countries have significantly increased their buffalo herds and developed milk production. In doing so, the countries capitalise on the positive aspects of buffalo keeping such as disease resistance, composition of the milk in proteins and fat, flexibility in feeding and their capacity for adaptation to environmental conditions Sheep and Goats The number of farms raising small ruminants amounts to 529,402. The average number of animals per farm is 46.8 heads; 366,082 farms raise less than 50 heads, 163,320 farms keep more than 50 heads. Since 1990 the number of small ruminants has drastically decreased. Most of the sheep and goat production is based on pastures. The production areas are far from the cities or towns. All sheep and goat milk is produced by hand milking and processing of the milk follows a traditional artisanal system. No modern technology for sheep and goat milk processing is available. Due to the lack of milking equipment as well as cooling tanks and not applying modern hygienic rules the quality of the products is rather low. About 25 percent of the sheep milk is produced in six agricultural regions (mostly the South-East) and over 50 percent of the goat milk is produced in four of the Mediterranean regions. The decline in milk production is proportional to the reduction in numbers of head of animals. The number of sheep in 1995 amounted to 33,791, whereas in 2004 there were only 25,201 head of sheep. The respective figures for goats were 9.15 million in 1995 and 6.61 million in Poor feeding conditions are probably the most important reason for the exceptionally low yields. Whereas the yield of the Awassi breed is 400 kg at the state farms, the same animals produce not more than 120 kg when kept by individual farmers. Table 3 indicates milk yields for sheep, goat and buffalos for 1990, 2003 and Table 4 presents comparative milk yields price indications for sheep and goats in France. Table 3: Sheep, goat and buffalo milk yield (kg/lactation) Year Buffalo Sheep Goat Source: Turkish Statistical Institutes (TURKSTAT )7. Table 4: Comparative milk yields of sheep and goats in France Sheep milk yield in the Roquefort region Sheep milk yield sheep in Corsica Average price per litre 250 kg/300 kg 100 kg/150 kg 0.84 /YTL Other information sources cite goat milk yields in specialized farms in Turkey to be around 250-kg/400 kg. 14

16 Goat milk yield Average price per litre 600 kg/800 kg 0.50 /YTL0.82 Source: Mission Estimate The current situation concerning sheep and goats is somewhat contradictory as there is a considerable interest amongst the Turkish population in sheep and goat meat as well as in sheep and goat milk products. Thus, there is simultaneously a significant market demand and a marked national production decline. Different factors explain that situation: For angora sheep farmers, the price for wool has declined in the world market so much that production is no longer profitable. In addition, there are no domestic traders to purchase the wool. The eastern regions have experienced a substantial out migration, particularly of young people, to urban centres, thus leaving large parts of the countryside inhabited by older persons who are not able to engage in small ruminant keeping. This implies a decrease in the number of workers and consumers, leaving the aged to look after the reduced number of animals. An additional reason for the decline in sheep and goat population is the reduction of available pastures for grazing. This concerns in particular the eastern regions, whereas in the Aegean and the Marmara regions this is not a problem. During the last ten years, the pasture surface has decreased from 24.0 million hectares to 12.5 million hectares. The land, formerly under pasture was converted to agricultural land, but not necessarily used for agricultural production. This situation requires some explanation: the basis for this development was a legal decision. Farmers, who could prove that they had cultivated state land for a period of ten to twenty years, became automatically owners of the land. It is evident that land occupation was often based on the evidence given by several witnesses of convenience. Apart from this position of semi-legal landownership there is also serious overgrazing and impoverishment of the remaining pastures - that are often the only source of feed for large parts of the ruminant population. The total absence of organised production, processing and a marketing chain is another explanation for the depressed state of goat/sheep milk production. This is characterised by a highly dispersed milk production, with prices paid for the milk, if bought at all, which are far below the normal market prices. Only some mandras collect and process sheep/goat milk, with the result that most of the milk in processed at homes into cheese that is sold in local markets. It is evident that organising the milk collection is a critical factor for the rehabilitation and revitalisation of the goat/sheep milk sector. Government is aware of these problems and sees a need to act with a view to addressing development issues such as the stabilization of population groups in rural areas, particularly in the eastern regions. Measures undertaken to stem the decline of the goat/sheep herd are the strict control of pastures and their rehabilitation. In addition, incentives are provided to milk producers, specifically a premium to farmers who deliver their milk to processors. Cooperatives unions with more than 50 members receive support for their members in the form of credit for the purchase of 25 animals at favourable conditions, i.e. very low interest rate and a grace period of two years. With these measures it is expected to curtail the current decline of the sub sector. General conditions are quite favourable as there is a demand for sheep (lamb) and goat meat and the respective milk that serves as a basis for cheese making and ice cream production. There is another issue that requires government attention, namely the illegal import of sheep from Iran (a country that has become the largest producer of sheep in the world). The situation is particularly severe for farmers in the eastern regions, as they do not have any alternative source for increasing their stock. 15

17 Animal Health Related to Dairy Production The dairy production sector is directly affected by the animal health situation in Turkey. It is very difficult to estimate the cost and benefit of Bovine Tuberculosis (BTB) in Turkey. There is no relevant data available or studies on production losses due to BTB in Turkey. Inspected animals, as reactors in slaughterhouses, do not represent BTB prevalence in Turkey. BTB infected animals are assumed to have lower reproductive efficiency: a reduction of 1 percent in overall calving rate of BTB infected animals is used in calculations (69 percent compared to 70 percent). These factors result in a reduction in annual milk output of 158 kg. At 0.26 Euro per kg this represent loss of 41 Euro per infected cow. A 1 percent increase in mortality results in a mortality rate change from 15 percent to 16 percent for calves born to BTB infected cows. Due to congenital infection and the reduction in calves born per year due to lower reproductive efficiency the annual calf output is reduced to 0.02 calves per infected cow, which that means 1 percent of calves of 250,000 infected cows (2,500 calves) might be congenitally infected - as a result of which they may die or need culling at an early stage of life. The loss of value is 100 Euro per calf. In addition 2,000 adult animals (500 EUR each) may die from TB each year. Production life is shortened by 1.5 lactations, which at a calving interval of 425 days, represents, 1.75 years. This increases the farmer s requirement for replacement of heifers by about 0.1 heifers per cow per year, at a cost of 54 Euro (in this calculation the cost of the heifer is taken as its slaughter value as a surplus animal). However, reduced productive life of cows increases the annual output of culled cows by about the same amount as the increased requirement for heifers. Having accounted for a slightly higher mortality and lower carcass weight in BTB infected cows, the increased income from cull cows is about 38 Euro per infected cows. This gives a net loss per infected cow of 16 Euro. The total annual loss to the dairy farmer is therefore estimated as 61 Euro per infected cow, 65 percent of which is due to lost milk production, 28 percent to shortened productive life and 7 percent to reduced calf output Milk Production in the Konya Region Milk production In the Konya region, the average daily production amounts to 2,200 tonnes of cow milk. There are around 35,000 farmers/villagers in the region that are involved in milk production. Seasonal variations in the milk output are as high as 40 percent. The average daily production during the autumn-winter season is around 1,800 tonnes and during the summer months this amount can be as high as 2,600 tonnes per day. Some companies that do not have their production areas in the region i.e. Sütas and Pınar buy part of the raw milk produced in the region. In contrast, around 360 tonnes/day of raw milk is bought by companies in the region to be processed locally. Daily quantities are in the following range per location: Isparta 75 tonnes, Aksaray 85 tonnes, Içel 50 tonnes, Kayseri 30 tonnes, Sivas 15 tonnes, Nigde 30 tonnes, Burdur 30 tonnes and Karaman 40 tonnes. The producers are small and scattered over the region, which results in low raw milk quality and extra costs for collection. In the Konya region, farms have not developed as much as in the Marmara and Aegean regions. However, there are around ten producers in the region whose production is above one ton/day and around 20 producers with a production above

18 kg/day. A limited number of new farms have been established in the region but their capacity is rather low, hence they are of little importance for the dairy sector. Milk collectors who have their own trucks and drivers collect raw milk from the producers. There are around 800 collectors in the region. Some of the larger dairies collect their milk direct from collection centres; some have installed cooling tanks on their vehicles, but only on a limited scale. Milk collectors supply the bulk of the raw milk to dairies. The quantity of milk purchased by the dairies varies according to their processing capacity. Dairies with a daily processing capacity of above 50 tonnes might buy up to 1,200 tonnes per day. Livestock statistics indicate for the region 338,685 cows, 255 buffalos, 1.3 million sheep and 143,530 goats (figures are for 2004). Agricultural land is widely available; hence animal feed is produced in the region at a price that is comparatively lower than in other regions Quality and cost of raw milk The quality of raw milk in the region is poor compared to the Marmara and Aegean regions. Total bacteria count is above one million, fat and protein levels are at the prevailing Turkish average. Milk is produced mainly by village units having less than five cows. Special milk collectors collect milk from the farms and villages by trucks with stainless steel tanks. Collection during spring and summer is twice daily and once a day during winter. The larger dairies have collection tanks in the villages, but they are limited in number. Akbel, Enka and Akova have 40, 25 and 40 cooling tanks with a five tonnes capacity each. In addition, there are six collection centres in the region with a total capacity of 70 tonnes/day. The agriculture structure in the region is characterised by small farms. However, there are a total of 35 farm units with an average of 100 cows each. These units have only started production in the past one to two years and their output remains rather limited. High quality farm milk is expensive and hence demand by the region s small dairies for this type of milk is limited. However, for the purpose of special production some larger dairies use only high quality farm milk. Demand from the leading dairies for high quality farm milk is increasing and there are new investments for production facilities. Fifteen new farms are under construction in the region. Also some large dairies have established their own farms. AKBEL has a large farm in Ereğli province with a land area of 530 hectares accommodating 400 cows and 2,500 sheep. Milk output from this farm is used to produce milk products for export. Quality analysis of raw milk is undertaken in loco by the dairies. However, due to prevailing collection methods, the origin of the milk cannot be traced, and hence the question of milk quality remains a major unresolved issue. Since demand for raw milk is higher than the available supply, dairies buy any milk in the area, often of poor quality contaminated with antibiotics and with a high bacteria count. However, some rudimentary control mechanisms are applied and poor quality milk is set aside. According to the figures given by dairies in the region, only 100 tonnes of 2,200 tonnes/day of the local milk is compatible with EU standards (less than 5 percent). Turkish law sets criteria for raw milk quality that is in line with EU legislation, but implementation of the law is very limited. The law stipulates the control criteria for raw milk, however inspections are only undertaken at dairy level, which are held responsible for applying the criteria. The large number of producers makes it virtually impossible to carry out inspection at the level of the origin of the milk. Cost for raw milk in the region is lower for the dairies than in other regions, i.e. Marmara and Aegean regions. The reasons for the lower cost are as follows: 17

19 Raw milk price is lower at YTL0.39 compared to YTL0.43 in Marmara and YTL0.42 in Aegean regions; Use of high quality farm milk, whose price can be as high as YTL0.60 to YTL0.65, is limited in the region; As milk produced in the region is used, transport costs are correspondingly lower. Normally, milk is collected from a radius of about 200 km; and Animal feed is produced locally and, the cost of land is considerably lower than in neighbouring regions. Raw milk produced in the region rarely leaves the area and is very seldom sold to dairies in other regions. There is a tight control over raw milk produced by local dairies. These characteristics, along with the lower price for raw milk that is linked to the lower production costs are distinct features of the milk production and processing situation in the Konya region. 18

20 2. DAIRY PRODUCTS AND THEIR CONSUMPTION 2.1. Product Categories Liquid Milk is mostly consumed in Turkey as full fat milk. In its uncontrolled, unstandardised and unpacked form street sellers deliver it directly to the consumer in the urban areas and suburbs of larger cities. This category of milk accounts for 1 billion litres of the total production estimated at 10 billion litres per annum. Pasteurised milk, processed by the large dairies represents about 10 percent of the industrial production. UHT milk, mostly packed in one-litre Tetra Pak cartons represents some 90 percent of the industrial production or around 650,000 tonnes. The market for this type of milk is growing steadily. Fermented milk or yoghurt is a very popular product in Turkish diet. Two types can be distinguished: Firstly set homogenized yoghurt (>80 percent of industrial production), a plain yoghurt with a 3.5 percent fat content and about 20 percent of dry matter. For yoghurt production the milk is most of the time concentrated under vacuum. The most common packaging in the distribution chain is large preformed cups, sometimes also buckets of a size from one to ten litres. Secondly, there is set non-homogenised yoghurt (20 percent of industrial production) with a fat separation at the top. Similar to the homogenized yoghurt the fat content is about 3.5 percent and dry matter of 20 percent. Here also the milk is concentrated under vacuum as part of the production process. The most common packaging for the distribution chain is large size preformed cups of one to two litres. Ayran is liquid yoghurt containing 1.5 percent fat, eight percent total dry matter and salt content of between 0.5 and one percent. The standard package for Ayran is a preformed cup of 0.2 to one litre. Four categories of cheeses can be distinguished: White cheese (Beyaz Peynir) represents the core of the Turkish cheese production. This type of cheese is processed either industrially or at cottage industry (mandra) level. It is virtually never produced at home. Traditional white cheese, Dil Peynir, mostly processed by the mandras, contains 50 percent dry matter and has a yield of around 7.5 litres of milk for one kg of cheese. Industrial white cheese (Beyaz Peynir) has 40 percent dry matter content and a yield of 6.0 litres of milk for one kg of cheese. The cheese is packed in plastic boxes or cans with a unit weight of between 250 and 500 grammes. There are also large buckets for sale in bulk. The cheese is stored in brine for some weeks or months. The technology is very simple and does not require any substantial investment, especially if the process is unstandardised and unpasteurised milk is used. Poor quality milk is quite suitable for the production of this type of cheese. The acid whey and the high salt content naturally preserve the product. Hard cheeses are mainly yellow cheese or kashkawal (kashar or casher). Raw milk requirements are about 11 litres for one kg of cheese. The ripening period is short and the cheeses generally have a neutral taste. Most of the time these cheeses are of small size, under one kg. Specialty cheeses are mainly made out of sheep milk. In general they are produced by mandras and marketed in the bazaars. Some of these specialty cheeses are similar to Italian mozzarella, twisted cheese and other pasta filata, produced from cow milk. Output of one kg of cheese requires about 11 litres of raw milk. 19

21 Processed cheese is produced from hard cheese, casein or milk powder, butter and mineral salts. It is a spreadable cheese with a long shelf life not requiring cooling and is mostly eaten by children. Milk powder is produced by powder plants simultaneously as milk powder (0 percent fat for SMP and 26 percent for WMP) and whey powder. EU dairies dry or process either liquid milk or liquid whey, but they never process both, as the production process and conditions are quite different. They use spray driers that are expensive and need to work with a high turnover to justify the investment. This implies that large volumes of milk or whey are available to them to operate economically. In the present case in Turkey, there is a shortage of raw material and the dairy operators use the same equipment for processing of low quality powders and do not derive a value added, while quality of the product is also low Consumption Habits The consumption of dairy products in Turkey has a long cultural tradition and dairy products are part of the daily diet of the Turkish population. Consumption is largely based on very traditionally processed products without significant use of modern technologies. As almost 35 percent 8 of the total milk production is consumed at the farm level, this implies that even the poorest people living in villages and remote areas consume dairy products every day. The population segment with the lowest level of consumption of dairy products are those living in urban areas, particularly in the suburbs of large cities. The high price for milk products is an important deterrent for these people. More than 90 percent of consumption of milk products is composed of: Traditional Turkish yoghurt is very widespread and consumed at almost any time (breakfast, lunch and dinner), either plain or as a sauce, in soups, meat dishes and pastry, mixed with vegetable or with fruit. There is hardly any meal without yoghurt. White cheese (feta type) is particularly consumed at breakfast. Ayran (salted liquid yoghurt) is a drink consumed during the meals but also used as a refreshment drink. Kashkawal (or yellow cheese) is a favourite dish for breakfast but forms also part of other meals during the day. It has no distinct taste and its flavour is in contrast to that of the salted white feta cheese. The Turks also consume significant volumes of ice cream. Liquid milk itself is rarely consumed as a drink. There is no tradition in Turkey to consume milk as a liquid drink, as is common in Western Europe. If liquid milk is consumed, it is mostly by children and young people. In addition, it appears that lactose intolerance is a problem in Turkey. Most of the liquid, full fat milk is processed at home into yoghurt. The main characteristic of Turkish dairy products is that they are mainly simple products not highly processed. Packaging is correspondingly simple. Processing of these products is fairly simple for the households as regards yoghurt and for the mandras regarding white cheese. For a large share of the Turkish population the price of dairy products is more important than their quality due to the limited budget they have available to cover expenses for family food. As a 8 Compare Annex 1, Table 2. 20

22 result, a large segment of Turkish people do not yet benefit from industrial processed milk products. Higher-income groups consume fruit yoghurts, specialist products and desserts since only they can afford the relatively high prices of these products. Consumption ratio: On the basis of national milk production of 10.6 billion litres, minus 10 percent for cattle breeding and waste, the national human consumption would represent 9.5 million litres. With a population of 72 million people the annual per capita consumption amounts to 132 litres. The import and export of dairy products have no real impact on the consumption position. Milk consumption is determined by tradition and traditional systems of production and processing. Although the cultural tradition of consumption of dairy products is quite important, the Turkish population has a relatively low level of per capita consumption compared to other countries. Details are given in Annex 1, Table 5, which shows fresh dairy consumption and cheese consumption for selected countries. Whereas Turkey has a high consumption level of fresh products, consumption of cheese represents only one third of per capita annual cheese consumption of France. Table 4 gives an overview per capita annual consumption of milk products in Turkey. Table 4: Per capita annual consumption of milk products in Turkey (kg/capita/annum) (Predicted) 2006 (Forecast) Drinking Milk Cheese Yoghurt/Butter Milk Butter Milk Powder Ice Cream Total Milk* *All milk and milk products including drinking milk. Source: MARA Relation Between Local Population and Local Production Although the national aggregated figure show a relatively low level of dairy product consumption per capita there are considerable differences between regions as illustrated in Graph 3 (ignoring significant cheese transfers/sales from the East to the West). Nevertheless it shows that the milk consumption per inhabitant is higher in small villages of eastern Turkey than in suburbs of large cities of western Turkey. 21

23 Graph 3: Regional consumption of milk products in Turkey in 2004 (kg/person) Central North Aegean Marmara Mediterranean North East Region South East Black Sea Central East Central South 3.1 Goats milk Sheep milk Cattle milk Source: Mission Estimate - figures obtained by dividing the milk production in 2004 with the 2000 human population census data. S 22

24 3. DAIRY PRODUCTS PROCESSING Most of the dairies operating in Turkey are required to be registered. Nevertheless, there is also a category of unregistered dairies, which are always small size and operate either seasonally or in remote areas. Registered dairies are obliged to issue a capacity report, which indicates the number of machines available and their capacity, the size of the working area in square metres, the raw milk intake and a list indicating the various products and the respective production capacities. In addition, for each production line the dairy must obtain an official authorisation: the production of yoghurt requires one certificate, cream production another etc. On the basis of the capacity report the applicant addresses a request to the MARA Branch for a certificate of production for each production line that is planned. Once this licence is granted the applying dairy can commence the production of those items for which the licence has been obtained. Even though the MARA Branch has the inventory of all products the dairies intend to manufacture, this does not mean that information on total production of milk products is available with MARA. Such a figure would need to take the total milk intake by the dairies into account. According to information provided by MARA (see Table 5 below), some 4,422 certificates of production have been issued. Graph 4: Raw Milk Breakdown Even if dairies are registered, they can operate in the informal market, which means that their milk supply sources are unknown, their production is uncontrolled and their distribution chain is not known either. In most cases these dairies sell their products locally or in the bazaars, thus evading tax payment. The numerous small dairies have only rudimentary equipment. Except for some cheese vats, a lot of the small dairies have no equipment at all and are totally incapable of pasteurising milk. Usually these units produce cheese with no consideration of quality and composition of the raw milk. These small dairies (mandras) have a long tradition in Turkey. 23