The role and future of informal & traditional dairy markets in Developing Countries

Transcription

1 The role and future of informal & traditional dairy markets in Developing Countries Steve Staal International Livestock Research Institute IGGM&D Dairy Symposium, Rome. 15 th Nov, 2006 Outline Identifying traditional and informal dairy markets Scale of traditional and informal dairy markets Determinants of traditional dairy markets are they going away soon? Role and contribution of traditional dairy markets Milk quality Bridging the Gap; policy approaches to traditional dairy markets 1

2 Informal and traditional dairy markets Informal and traditional dairy markets Liquid, often raw or soured milk and traditionally processed products Direct sales, small traders, small artisanal processors Small, atomized market (often <100l/day) Distinction between traditional and informal is blurred markets are often legal, pay licenses etc Key features are the traditional products and processing, and lack of modern standards dairy markets globally market share % SSA Kenya 86 Tanzania 98 Uganda 90 L. America Mexico 33 Nicaragua 86 Costa Rica 44 Brazil 44 S. Asia India 76 Sri Lanka 40 Pakistan 98 Primary market for both small producers and poor consumers Sources: ILRI Collaborative Research 2

3 markets are not small Comparions of some major dairy markets (Annual LME's) Million MTS (2004) India USA UK, Germany, France & Netherland s Total global dairy product trade 30 Source: FAOSTATS Determinants of traditional markets Low purchasing power tastes Price incentives to both producers and consumer Urbanization Why are most traditional markets also informal? Mis-match between low demand for food safety and public standards and regulations 3

4 Higher income households also buy raw milk SDP/ILRI 2004 Due to tastes and preferences price is not the only determinant Similar results emerging in Andhra Pradesh (CALPI, 2006) Urbanisation favours formal markets Vijayawada, AP Pop. 1.5 Mill Khammam, AP Pop. 170,000 Nairobi Pop. 4 Mill Nakuru Pop. 300,000 62% 38% 88% 12% 35% 65% 76% 24% Driving force is relative prices, which are generally higher in urban areas Ksh per Litre Raw vs Pasteurized Milk Prices in Kenya 32 Nairobi Raw 20 Pasteurized Nakuru 4

5 market mechanisms provide price incentives for farmers and consumers Higher prices to farmers in informal 17 Ksh vs 13.5 (Central Kenya) Lower prices to consumers in informal 25 Ksh vs 41 (Nakuru, Kenya) Same sorts of results seen in many other countries markets still expanding in some cases - Kenya Proportion of farmers Changes nyanza western rift valley central eastern Individuals Traders Private processors KCC Cooperatives Shops/hotels/institutions Baltenweck % farmers selling to traders increased 16.5% to 34% -sales to coops/groups declined from 24% to 7% - direct sales to individuals declined 40.2% to 29.8% 5

6 Summary determinants of traditional markets tastes even wealthier people will pay Low cost associated with low demand for food safety, compared to other needs Price incentives to farmers higher prices due to lower cost margins Urbanisation will reduce traditional market role due to higher costs of mass supply No evidence that increased policing will significantly affect market share No evidence they will disappear any time soon driven by demand Role of traditional markets May stimulate dairy development no evidence to the contrary yet May provide a buffer to trade competition Provide market access in areas with poor infrastructure, long distances Employment generation among urban and peri-urban poor However, formal markets may provide greate reliability, and opportunity to scale up 6

7 Milk marketing in Gujarat 800 HHS surveyed in nine districts of Gujarat (home of Operation Flood) Sales:coops/processors-41%, traders-14%, direct- 14%, rest home-consumed Results: Poor, marginalized farmers more likely to sell to coops Distant farmers more likely to sell to traders appears they can best serve remote areas No evidence found that informal markets will diminish with scaling-up of production Source: Staal et al, 2006 Analysis of trends in dairy development in S Asia and E Africa Statistical analysis of dairy development trends in these two key dairy regions S Asia: 5 countries E&S Africa: 10 countries Associated milk production trends since 1970 with indicators of Economic growth Policies Ag growth ILRI/PPLPI

8 Determinants of change in milk production: parameter estimates for East Africa Variable Milk producer's price/import price Coefficients Openness (Trade as %) of GDP GDP growth Domestic demand (Mt) Share of formally processed milk in total output (%) GDP per capita (2000 US $) Number of TV sets per capita Life expectancy (years) R&D in agriculture per hectare ($) Yield (lt/milking animal) Milking animals, cows and buffalos (heads) -0.24*** 0.23* -0.30*** 0.40*** 0.03** 1.03*** 0.36** market associated with lower dairy development Note: a/ (*), (**) and (***) statistically significant at the 10%, 5% and 1% respectively. Determinants of change in milk production: parameter estimates for South Asia Variable Milk producer's price/import price Openness (Trade as % of GDP) GDP growth (%) Domestic demand (litres) GDP per capita (2000 US$) Number of tractors per hectare Telephone mainlines (per 1,000 people) Share of formally processed milk in total output (%) Milking animals, cows and buffalos (heads) Yield (lt/milking animal) Coefficients 0.733** 0.21** 0.23*** -0.16** 0.19** 0.23** No apparent relationship between main market channel and dairy development Note: a/ (*), (**) and (***) statistically significant at the 10%, 5% and 1% respectively. 8

9 Comparison of % imports in countries with strong vs. weak dairy traditions % of dairy imported 100% 80% 60% 40% 20% 0% India Countries with strong dairy traditions Kenya Pakistan Somalia Ethiopia Uganda Korea, Rep. Countries with weak dairy traditions Indonesia Sri Lanka Nigeria Thailand Viet Nam Source: FAO data % of dairy imports Implication: imports cannot easily compete with traditional products Employment in traditional markets Number of jobs created per 100 litres milk handled daily Kenya mobile traders No. of direct full-time jobs Main milk product 1.7 Liquid Bangladesh sweet makers Ghana milk/snack retailer 5.6 Trad. sweets 10.0 Milk snacks More than 5 times the no. employed in formal sector Most pay higher than minimum wage FAO/ILRI

10 Impact on farm-level milk price of formal vs informal GIS analysis of milk price formation Significant effects on milk price Variable # of cows (milk volume) Distance - Nairobi (Type 1) Distance - Nairobi (Type 2) Distance - Nairobi (Type 3) Distance - collect center (Type 1) market Informal market not sig - - not sig not sig Staal et al 2000 Implications role of traditional markets Provide apparently efficient market mechanisms for dairy development over time May serve isolated, remote farmers Because traditional products not easily substituted by processed dairy products buffer to imports Large employment generation among poor, including urban However, may not provide as reliable outlets as formal in some cases mixed results 10

11 Milk quality in traditional markets- Andhra Pradesh CALPI General non-compliance with official standards, even in forma - Significant correlation between price and total solids Milk quality in traditional markets- Kenya -Adulteration maybe lower than expected or perceived -Bacterial counts exceed standards -Clearly, milk must be boiled before consumption SDP/ILRI

12 Policies for licensing small market traders: no apparent link between policy and outcomes Summary of cluster analysis comparing milk quality and scale of operation (principal component and cluster analysis) Cluster Large scale Low High SCALE Freq. /Experience quality margin Small: 98 l/d Small: 108 l/d Medium: 840 l/d Large: 4,400 l/d Quality is not a problem for small traders (relatively) Medium-size traders show poorer quality milk, although many are licensed Without training and monitoring, unlikley to increase quality Source: SDP Trader associations can provide forum for increased quality, efficiency Study of role of raw milk trader associations in Kenya (Sinja/ILRI 2006) Reduced spoilage, increased quality Increased share of value added products Group participation increases scale of market participation. Associations can provide a mechanism for market interventions Similar results in Andhra Pradesh 12

13 Bridging the Gap Clearly there is continued important role for traditional markets, which are unlikely to disappear soon Issue: quality and public health concerns continue Question: how to induce traditional markets to improve quality, and formalize Aim: no more informal markets, only traditional and modern Improving Milk Quality and Market Opportunities through Training & Certification: BDS Approach Certification/Licensing Cess fee Milk Traders Training guides Training & certificates of participation in training Regulatory Authority Accreditation & monitoring Reporting Training Service Providers (BDS) 13

14 E Africa region: scaling out and up lessons from Kenya East and Central Africa Program on Agricultural Policy Analysis (ECAPAPA, a network of ASARECA). Produced a series of six harmonized training guides to facilitate certification of small scale milk traders in Eastern Africa. Sept Dairy sector regulators in Rwanda, Kenya, Tanzania and Uganda signed MoU to apply these in regulating and facilitating cross-border recognition of certified traders Extending the paradigm to South Asia Assam market share is 97% (Operation Flood efforts there failed in 1980s) Dairy Dept of Gov of Assam is developing strategy to certify and train local market agents Andhra Pradesh CALPI Dairy Action Research project is also developing training of market agents 14

15 Conclusions Here to stay for a long time Evidence is that traditional markets will continue to play large role Because they are driven by demand Benefits to the resource poor and developing countries Can facilitate dairy production growth, and buffer import competition Provides market alternatives to remote, small scale producers and poor consumers Generates rural and urban employment Can complement the formal processing market Approach Address quality and efficiency issues through training and certification, working with trader groups May apply only in setting where milk is universally boiled 15