vii.dairy farming vca and potential for expansion of...

307

VII. Dairy Farming VCA and Potential for

Expansion of Processed Milk Industry

308

VII.1. Dairy Farming and Milk Processing Analysis: Objectives

The purpose of the dairy analysis is to assess the current competitiveness of the subsector

and the main opportunities for maintaining and increasing competitiveness in the future.

To do this, a typical product (production of milk) is analyzed in the following manner:

Examine important issues and trends in the world agribusiness and food market;

Review the structures of the Ethiopian, Tanzanian, Zambian, Chinese and

Vietnamese dairy markets;

Assess the key features, strengths and weaknesses of the existing supply chains

for dairy in Ethiopia, Tanzania, Zambia, China and Vietnam;

Assess the overall economic efficiency of domestic milk production in relation to

world prices (as reflected by production prices in China) using alternative cost

projection scenarios to establish current and medium term competitiveness;

Taking the economic efficiency result as a starting point, analyze the dairy

farming value chain to identify key strengths, weaknesses and opportunities or

needs for investment, expansion or contraction to maintain and increase

productivity and competitiveness of the dairy farming sector at the business

strategy and business process levels; and

Provide possible policy options and recommendations to help stimulate growth

and improve competitiveness in the sector.

VII.2. Product Selection Method

Following a review of the first product screening in which 40 products were selected for

consideration for the value chain analysis and feasibility study, the World Bank (WB)

and Global Development Solutions (GDS)/HQ teams immediately agreed on seven out of

the ten products needed for the analysis. The seven products selected by the teams were

as follows:

1. Apparel:

a. Polo shirt; and

b. Underwear

2. Agribusiness:

a. Milk; and

b. Wheat milling

3. Leather:

a. High-end sheepskin loafers

4. Wood:

a. Windows/French windows and frames

5. Metal:

a. Padlocks.

309

To finalize the selection of the remaining products from the wood, metal and leather

sectors, based on the Africa Competitiveness: Phase 1.1 - Preliminary Product Screening

in Ethiopia report (July 2010), the WB and GDS/HQ teams chose six products as

potential candidates to be included in the list of the final ten products to be the target

products for the value chain analysis and feasibility study. The six products included the

following:

1. Wood products:

a. Wooden doors; and

b. Wooden chairs (not upholstered).

2. Leather products:

a. Leather golf gloves; and

b. Sports footwear of leather.

3. Metal products:

a. Metal doors, window-frame (security window frame); and

b. Aluminum doors and windows.

In order to screen the final six products, a product screening survey was developed which

revolved around six factors:

1. Whether these products are currently produced by companies with less than

50 employees;

2. If companies identified in #1 above can be set up with less than US$100,000

in investment capital;

3. The minimum level of skills and know-how required to produce the products;

4. Whether the products produced by the companies in #1 are being exported;

5. Whether products produced by companies in #1 are consolidated by brokers

or other intermediaries for exports; and

6. Whether companies identified in #1 can readily access raw material inputs in

the market to produce the products.

These questions were posed to the wood, metal and leather sector associations in both

China and Vietnam. Following interviews with sector associations, additional interviews

were conducted at the firm level to identify specifically the level of investments and

minimum level of technical skills required for an entrepreneur or existing SMEs to set up

a production operation. These questions were posed to existing operators in China and

Vietnam to identify whether:

Barriers to market entry, particularly from a financial and skills

requirement, were sufficiently low to allow entrepreneurs and SMEs in

Ethiopia to easily establish operations; and

These products are currently being produced by SMEs in China and

Vietnam, and are effectively being sold in local and export markets.

310

The product screening survey identified the following products as viable candidates to be

targeted for the value chain and feasibility analysis.

1. Wood product:

a. Wooden chairs (soft wood); and

b. Wooden door (semi-solid).

Although French windows and their frames made of wood had originally been

preselected for analysis, a decision was made to opt to analyze both wooden

chairs and wooden doors. This decision stemmed from the fact that French

windows require glass thus introducing an outside factor that could influence

the manufacturing of the final product. Wooden doors (without glass) and

wooden chairs (without upholstery) are more representative of wood

processing exclusively.

2. Leather products: Leather golf gloves or sports glove of comparable structure

and weight.

3. Metal products: Both the pre-selected products (security window frame; and

aluminum doors and windows) were screened out of the selection due to

various factors including high initial investment requirements. As a result,

further analyses of products identified during the preliminary product

screening were conducted. Interviews with metal sector associations and

enterprises currently operating in China and Vietnam, as well as interviews

with existing operators in the fabricated metal products sector in Ethiopia

identified crown corks (bottle caps) as a viable candidate to be targeted for

value chain analysis. Crown corks currently are produced in four of the five

countries, but Ethiopia continues to import substantial volumes of this product,

including imports from China. As a result, crown corks have been chosen as

the final fabricated metal product to be the focus of a value chain analysis in

the target countries.

VII.2.1. Respective Government Definitions of Small, Medium and

Large Enterprises in Ethiopia, Tanzania, Zambia, China and

Vietnam

Ethiopia: For Ethiopia, the classification of enterprises into small, medium and large

scale depends on a number of variables such as level of employment, turnover, capital

investment, production capacity, level of technology and subsector. Accordingly, the

following scales are referred to the classification of enterprises in the Ethiopian context

(Table 175).

311

Table 175: Company Size Classification Structure for Ethiopia

Small Scale Medium Scale Large Scale

Textile and Apparel 5-9 10 – 49 above 50

According to the Central

Statistics Agency (CSA)

Leather 2-10 21 – 50 above 51

Diary 2-10 21 – 50 above 51

Wheat 2-10 21 – 50 above 51

Wood Processing 2-10 21 – 50 above 51

Metal 2-10 21 – 50 above 51

According to Federal

Medium and Small

Enterprise Development

Agency (FeMSEDA)

Sub-sector Remark

Number of Employees

Source: Ethiopia CSA and FeMSEDA

Tanzania: For Tanzania, the classification of enterprises into small, medium and large

scale depends on a number of variables such as level of employment and capital

investment in machinery. The classification cuts across sectors and subsectors of the

economy. Accordingly, the following scales refer to the classification of enterprises in

the Tanzanian context (Table 176). Note that the small enterprise type is most

appropriate for all sectors studied in this analysis.

Table 176: Company Size Classification Structure for Tanzania

Category Employees

Capital Investment in Machinery

(TZS million) Remarks

Micro enterprise 1 - 4 Up to 5 Majority in the informal sector

Small enterprise 5 - 49 5 - 200 Most in the informal sector

Medium enterprise 50 - 99 200 - 800 Most in the formal sector

Large enterprise 100+ 800+ All in the formal sector Source: Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA)

Zambia: Zambia classifies enterprises as micro, small, medium and large based on

several factors including number of employees, annual revenue and capital investment.

The capital investment category is further delineated by whether the firm is engaged in

manufacturing or if it is a trading/services firm. For microenterprises, the minimum

revenue and investment requirements are kept intentionally low in order to encourage

registration, although few microenterprises actually register.

Table 177: Company Size Classification Structure for Zambia

Classification Employees

Annual Revenue

(ZMK million)

Capital Investment for Manufacturing

Firms (ZMK million)

Capital Investment for Trading/ Services

Firms (ZMK million)

Micro < 10 < 20 < 10 < 10

Small 10 - 50 150 - 250 80 – 200 150

Medium 51-100 300 - 800 200 – 500 151 - 300

Large > 100 > 800 > 500 > 300

Source: Zambia Development Agency

312

China: The China government is challenged in defining sizes of firms. Temporary

definitions have been used for the past several years, and the government promised to

revise the standard in 2010. The definition from the National Bureau of Statistics of

China is complex. The definition was published in 2002 jointly by the Ministry of

Finance, National Bureau of Statistics of China, State Economic and Trade Commission

(no longer exists), and China Planning Commission, which has since split and exists as

the State Development and Planning Commission (SDPC) and the National Development

and Reform Commission (NDRC). A simplified presentation of the company size

classification is shown in Table 178. Note that the Industrial type is most appropriate for

all sectors studied in this analysis.

Table 178: Company Size Classification Structure for China

Type Index Unit Small Medium Large

Employee person Less than 300 300-2000 More than 2000

Revenue million RMB Less than 30 30-300 More than 300

Asset million RMB Less than 40 40-400 More than 400



Asset million RMB Less than 40 40-400 More than 400











Lodging and

Catering services

Industrial

Construction

Wholesale

Retail

Transportation

Post services

Source: National Bureau of Statistics of China

Vietnam: A small firm has less than 50 laborers, while a medium-size firm has 51-200

laborers. Within the small-size and medium-size classifications, there are some detailed

categories depending on the purpose of research and management. For instance, a firm

with less than 10 laborers is called a super small-size firm. Such a regulation is in line

with Social Insurance Law.141

VII.2.2. Product Technical Specifications

Following the identification of products to be targeted for the value chain and feasibility

analysis, a detailed technical profile of each product with an accompanying diagram or

141

Information garnered from

http://laws.dongnai.gov.vn/1991_to_2000/2000/200004/200004280005_en/lawdocum

http://laws.dongnai.gov.vn/1991_to_2000/2000/200004/200004280005_en/lawdocum

313

photograph was complied and sent to the field teams to help ensure that product data

collection in the field focused on products with similar - if not identical - technical

specifications. Table 179 below provides the product technical specifications for all ten

products for which product data are being collected.

Table 179: Product Technical Specifications

Material

Product WeightUnit of

measureUnit of measure

1 Golf gloves 85 - 141 grams Men's medium Sheepskin

Loafer 780 grams Heel Width Insole

Size US = 8 EU = 7 2.5 10 30

3 Padlock* 760 grams 7 7 NA* cm Brass

Thickness Diameter Height

0.24 31.9 6.6

Width Depth Height

45 45 75

Width Depth Height

80 4 210

Protein Lactose Ash Vitamins Fat content

3.5% 4.7% 0.8% B1, B2, C and D Full

Type (German) Type (French) Ash Protein Moisture

550 55 <0.65%approx.

11%<14.5%

9 Polo shirt 250 - 270 grams 100% cotton

10 Underwear 80 - 100 grams80% cotton/

20% spandex

* Overall height is 14 cm with a 2 cm shackle diameter

** The weight of the cover (plastic sole made from PVC) in the internal surface of the cap is 290 mg

Source: Global Development Solutions, LLC

Pine

Wheat or rice

Dimension

All purpose flour

cm

Refer to diagram

Weight

cm

mm

cm

tin free steel

(tfs)

Sheepskin

Pine

mg

kg

kg

liters

Refer to picture

Crown cork

(metal bottle

cap)**

Wooden chair

Wooden door

Milk

Milling

290

6.5

12

0.5

2

4

5

6

7

8

VII.3. Global Dairy Market

Milk, cream, butter, yogurt, whey, cheese, curd and other fats and oil derived from milk

are major traded items of dairy products. As per the International Trade Center statistical

classification, bird eggs, natural honey and edible products of animal origin also are

categorized under dairy products. However, in line with the objective of this project,

only milk and items derived from milk are discussed in the global context.

Market Trend (dairy products): Global dairy products exports attained the highest value

of almost US$66 billion in year 2008 and declined by 23 percent to US$51 billion in

2009 due to the global economic crisis. Germany, France, the Netherlands and New

Zealand are the leading exporters of milk-based dairy products taking 14.8 percent, 12.3

percent, 10.4 percent and 10 percent share of the global export market in 2009,

respectively. The top 15 leading exporters of dairy products are depicted in Table 180

below.

314

Table 180: Leading Exporters of Dairy Products (US$000)

Exporters

Exported

value in 2005

Exported

value in 2006

Exported

value in 2007

Exported

value in 2008

Exported

value in 2009

World* 41,735,244.00 44,216,956.00 57,116,930.00 65,916,347.00 50,705,779.00

Germany 6,460,539.00 6,694,985.00 8,701,813.00 9,478,290.00 7,546,085.00

France 4,976,386.00 5,166,797.00 6,407,499.00 7,379,108.00 6,222,644.00

Netherlands 4,575,071.00 4,783,913.00 5,839,885.00 6,907,739.00 5,291,299.00

New Zealand 3,636,970.00 4,019,908.00 5,522,132.00 6,562,975.00 5,039,892.00

Belgium 2,331,576.00 2,342,068.00 3,152,309.00 3,451,169.00 2,854,797.00

Denmark 1,896,231.00 1,913,751.00 2,182,325.00 2,569,032.00 2,231,401.00

Australia 1,824,027.00 1,793,304.00 1,991,550.00 2,207,709.00 1,649,985.00

United States of America 1,104,548.00 1,291,545.00 2,216,986.00 2,994,458.00 1,600,284.00

Ireland 1,346,874.00 1,485,011.00 2,011,706.00 2,096,018.00 1,518,627.00

United Kingdom 1,171,677.00 1,182,222.00 1,467,952.00 1,459,051.00 1,128,983.00

Poland 1,067,661.00 1,090,347.00 1,514,884.00 1,717,809.00 1,005,814.00

Belarus 482,180.00 604,159.00 907,082.00 1,091,214.00 1,005,546.00

Spain 761,572.00 732,879.00 988,990.00 983,409.00 795,668.00

Czech Republic 410,201.00 515,450.00 736,702.00 820,539.00 620,657.00

Uruguay 244,576.00 256,495.00 330,791.00 427,099.00 367,050.00 *The world aggregation represents the sum of reporting and non reporting countries

Source: Compiled by Global Development Solutions, LLC based on COMTRADE statistics

With regard to the import of milk-based dairy products, the global import value registered

in 2008 was the highest, attaining US$63.5 billion of which 10.6 percent was taken by

Germany. Global imports declined to US$50 billion in 2009, of which 10.8 percent was

attributed to Germany. Following Germany, the leading importers of dairy products are

Italy, United Kingdom, France, Belgium, the Netherlands and Spain (Table 181 below).

Table 181: Leading Importers of Dairy Products (US$000)

Importers

Imported value

in 2005

Imported value

in 2006

Imported value

in 2007

Imported value

in 2008

Imported value

in 2009

World* 41,230,318.00 44,360,533.00 56,785,335.00 63,560,431.00 50,076,141.00

Germany 4,371,232.00 5,109,350.00 6,239,325.00 6,780,742.00 5,399,677.00

Italy 3,429,134.00 3,522,257.00 4,344,569.00 4,530,316.00 3,757,446.00

United Kingdom 2,803,634.00 2,971,422.00 3,258,023.00 3,701,589.00 3,104,112.00

France 2,282,771.00 2,496,713.00 3,238,226.00 3,352,358.00 2,994,652.00

Belgium 2,561,186.00 2,655,454.00 3,391,395.00 3,519,763.00 2,863,168.00

Netherlands 2,479,985.00 2,594,766.00 3,294,395.00 3,189,479.00 2,415,336.00

Spain 1,683,609.00 1,742,003.00 2,371,870.00 2,627,416.00 2,050,562.00

United States of America 1,524,925.00 1,495,084.00 1,611,553.00 1,679,550.00 1,431,660.00

Russian Federation 940,481.00 858,756.00 1,151,955.00 1,464,038.00 1,160,979.00

China 458,110.00 558,261.00 743,989.00 861,703.00 1,027,992.00

Mexico 1,093,826.00 968,964.00 1,576,319.00 1,402,875.00 989,451.00

Greece 742,246.00 778,363.00 981,625.00 1,121,257.00 927,876.00

'Saudi Arabia 989,371.00 1,020,373.00 1,253,144.00 1,326,422.00 821,379.00

United Arab Emirates 389,714.00 478,440.00 571,197.00 814,572.00 803,263.00

Czech Republic 271,778.00 335,252.00 471,411.00 528,708.00 476,414.00 *The world aggregation represents the sum of reporting and non reporting countries


The aggregated export and import value of LDCs accounted for 0.11 percent and 2.5

percent of the global market in 2009 respectively.

315

In 2009 the total aggregate value of LDC dairy products exports was US$58.8 million, of

which Yemen, Senegal and Zambia were the leading exporters, exporting products worth

US$17.9 million, US$12 million and US$12.4 million, respectively (Table 182).

Table 182: Leading Exporters of Dairy Products of LDCs (US$000)

Exporters

Exported value

in 2005

Exported value

in 2006

Exported value

in 2007

Exported value

in 2008

Exported value

in 2009

World* 41,735,244.00 44,216,956.00 57,116,930.00 65,916,347.00 50,705,779.00

Least Developed Countries

(LDCs) Aggregation 37,411.00 24,098.00 53,677.00 43,321.00 58,855.00

Yemen 10,359.00 10,465.00 15,449.00 22,453.00 17,942.00

Senegal 7,489.00 10,167.00 8,252.00 6,822.00 12,798.00

Zambia 8,143.00 269.00 2,145.00 1,405.00 12,388.00

Nepal - - - - 1,764.00

Togo 6,722.00 - 4,756.00 676.00 1,008.00

Uganda 236.00 305.00 638.00 4,616.00 671.00

Bangladesh 226.00 42.00 730.00 66.00 651.00

Malawi - 20.00 24.00 145.00 329.00

Burkina Faso 9.00 - - - 212.00

Afghanistan - - - 177.00 157.00

United Republic of Tanzania 437.00 355.00 529.00 1,738.00 154.00

Ethiopia 74.00 106.00 68.00 97.00 123.00

Mozambique 21.00 8.00 38.00 45.00 93.00

Guinea 23.00 - 7.00 110.00 82.00

Guinea-Bissau - 3.00 16.00 - 57.00 *The world aggregation represents the sum of reporting and non reporting countries

Sources: Compiled by Global Development Solutions, LLC based on COMTRADE statistics

The aggregate value of milk-based dairy products imported stood at US$1.25 billion.

Yemen, the leading importer of dairy products among LDCs, imported a total of

US$186.7 million, which is 14 percent of the LDCs‘ aggregate import total in 2009.

Angola, Senegal, Bangladesh and the Sudan are the other leading importers following

Yemen (Table 183 below).

316

Table 183: Leading Importers of Dairy Products of LDCs (US$000)

Importers

Imported value in

2005

Imported value in

2006

Imported value

in 2007

Imported value

in 2008

Imported value in

2009

World* 41,230,318.00 44,360,533.00 56,785,335.00 63,560,431.00 50,076,141.00

Least Developed Countries

(LDCs) Aggregation 817,818.00 907,863.00 1,068,265.00 1,284,822.00 1,249,463.00

Yemen 177,270.00 150,958.00 208,473.00 223,821.00 186,721.00

Angola 68,281.00 122,972.00 110,094.00 169,933.00 144,614.00

Senegal 87,834.00 100,370.00 113,093.00 146,857.00 138,497.00

Bangladesh 89,515.00 89,424.00 149,046.00 122,432.00 122,295.00

Sudan 48,499.00 62,202.00 - 50,256.00 93,226.00

Democratic Republic of the

Congo 32,788.00 43,583.00 47,634.00 48,955.00 48,616.00

Haiti 27,559.00 46,391.00 42,249.00 54,895.00 43,745.00

Mauritania 13,615.00 - 58,189.00 58,167.00 42,921.00

Cambodia - - - 2,657.00 36,135.00

Myanmar 51,105.00 36,056.00 49,136.00 54,644.00 32,325.00

Maldives 13,852.00 17,078.00 18,938.00 24,254.00 21,683.00

Mali 16,912.00 29,920.00 27,225.00 33,575.00 27,351.00

Mozambique 19,932.00 29,945.00 46,137.00 19,407.00 21,812.00

Djibouti 19,348.00 20,454.00 20,942.00 20,900.00 19,237.00

Lao People's Democratic

Republic 9,617.00 9,496.00 13,114.00 15,592.00 17,020.00 *The world aggregation represents the sum of reporting and non reporting countries


VII.4. Comparative Sector Profile: Dairy Sector

Key Indicators: China is a major producer of dairy products, particularly as the country

faces rapid change in dietary habits especially among urban consumers. In general, urban

consumers in China have increased the share of calories in their diet that comes from

animal fats and proteins, and decreased their intake of carbohydrates. This shift in

dietary habit is reflected in the steady growth of the dairy sector, which now produces

over US$29 billion worth of dairy products. In the top 10 percent income bracket in

China, fresh milk consumption has increased over 300 percent in the past decade.

As for Ethiopia, the country has one of the largest livestock populations in all of Africa

and also is a major exporter of cattle to the Middle East. In 2008, Ethiopia exported

nearly 300,000 live animals (primarily cattle), as well as over 6,000 tons of meat products

(US$56 million). In some respects, the revenue potential of the livestock and meat export

subsector is undermining the development of the dairy sector, particularly among

smallholder dairy where farmers place emphasis on the number of marketable animals

rather than the milk producing potential of the herd. This generally is reflected in the low

male-to-female cattle ratio in Ethiopia (<1.2 in Ethiopia as opposed to >6.5 in China).

Thanks to its abundant livestock, particularly cattle, Ethiopia is essentially self-sufficient

in milk; there are no imports. In 2009, 3.28 billion liters were produced valued at US$1.1

317

billion. Domestic demand over the past several years is just shy of production and 100

percent of the balance is exported to Somalia. In 2009, for example, out of the total

production, only 320,122 liters (less than 0.01 percent) were exported to Somalia.

Tanzania has one of the largest livestock populations in Africa after Sudan and Ethiopia.

An estimated 1.7 billion liters of milk are produced each year in the country. At the

going market rate for fresh milk of US$0.27 per liter in 2011,142

the farmgate value of

milk in Tanzania is estimated at US$450 million per year. According to official statistics,

the contribution of livestock in general to Tanzanian economy is an estimated US$800

million to US$1,200 million per year.143

As the production data indicates, the dairy sector is not as well developed in Vietnam

where total production and imports are approximately the same.

Table 184: A Snapshot of the Dairy Sectors in China, Vietnam, Ethiopia, Tanzania and Zambia

Key Comparative Indicators China Vietnam Ethiopia Tanzania Zambia

Total Production (Value) 29,450,322,733$ 530,225,356$ 1,118,518,519$ $453,000,000 NA

Total Imports (Value) 892,667,190$ 539,780,000$ -$ $8,449,252 5,021,905$

Total Exports (Value) 51,402,368$ 156,700,000$ 106,944$ $1,105,951 241,693$

Companies Operating in the Sector 12,903 1,670 151,355 203 6,128

Small 35.0% 43.4% 99.8% 64% 94.6%

Medium 40.0% 55.1% 0.2% 15% 4.9%

Large 25.0% 1.5% 0.0% 21% 0.5%

Est. no. of workers in the sector 9956316 54794.5 697793 43,792 57,200

Male 73.0% 75.5% 77.0% 73% 97.9%

Female 27.0% 24.5% 23.0% 27% 2.1%

Global Development Solutions, LLC; UN Comtrade

Notes for Tanzania:

a. Total production value based on the estimated 1.7 billion liters of milk produced in 2009 valued at an estimated US$0.27/liter.

b. Companies operating in the sector does not include an esimated 150,000 household keeping improved dairy cattle. Number

includes all formal agribusinees/food companies in Tanzania with 10 or more people employed.

Policy and Regulatory Environment: All the countries have a range of tariffs, which are

not particularly restrictive. Vietnam is subject to the Common Effective Preferential

Tariff (CEPT) scheme which on average has come down to as low as 2.3 percent, and

producers in Ethiopia are impacted by COMESA rules, plus import duty that ranges from

18 - 30 percent.

As for taxes and levies, the normal VAT and income tax (depending on the type of

business) exist in all three countries. Perhaps most notable is the rebate structure in

China where milk and cream received a rebate of 15 percent on VAT, but this is

calculated on the total production cost rather than on the raw material.

142

As of February 2011; data on the actual value of marketed milk in the country, at retail prices, is not

collected by authorities in Tanzania. 143

Tanzanian Ministry of Livestock and Fisheries Development, ‗Livestock Development Programme‘,

2010.

318

Table 185: Comparative Policy and Regulatory Environment for the Dairy Sector

Milk, cream, yogurt

(regular) 40%

Milk and cream, not concentrated

or sweetened (Preferential) 15% Import duties (COMESA) 18% - 30% ECA External Tariffs (non-COMESA origin): All dairy 7%

Milk, cream, yogurt

(preferential) 10%, 15%

Milk and cream, not concentrated

or sweetened (CEPT) 5% Customs duty 10 - 30% Wheat 10%

Milk and cream, concentrated or

sweetened (Preferential) 15% Maize 50%

Milk and cream, concentrated or

sweetened (CEPT) 5% Wheat/meslin flour 60%

Buttermilk, yogurt, kephir etc,

flavored etc or not (Preferential) 15%

Cereal flours other than

wheat/meslin 25%

Buttermilk, yogurt, kephir etc,

flavored etc or not (CEPT) 5% Milk 60%

Cream/yoghurt sweetened 25%

Most other processed foods 25%

VAT 3% or 17% VAT 10% Income tax 0 - 35%;30% VAT 18% VAT 16%

Income Tax 25% Income Tax 28% Value Added Tax 15% Income tax 30% Income tax 0%

Other tax 7% Other tax 0% Provident fund Tax 10% Presumptive Turnover Tax 1.1%-3.3%

Business tax 55 ~ 155 USD Salary Tax 0 - 35%

Export tax n.a Excise tax 10 - 100% Export levy (tax) - cashew nuts 15%

Licence fee 1% 2% Surtax 10%

Turn over tax (TOT) 2%, 10%

Dividend tax 10%

Royalty tax 5%

Capital gains tax 30%;15%

WHT (Withholding Tax) 3%

Milk and cream 5% None None None None

Milk and cream

(paid 17% VAT) 15%

Subsidies

Tanzania Zambia

Taxes

and LeviesExcise duties

Wine, soft

drinks,

Tariffs

China Vietnam Ethiopia

Source: Global Development Solutions, LLC

VII.5. Dairy Farming in Ethiopia

Of the 9.9 million milking cows in Ethiopia, more than 30 percent are pastoral and found

in the lowlands of Ethiopia. These cattle and the milk they produce fall outside the

supply chain to the consumer. In many areas, there are social taboos against selling milk.

The majority of the commercially available milk comes from smallholder farms

organized into cooperatives in the highland regions. As seen in Table 186 below, the

local breed has an average yield of 1.3 liters/day, and produces a milk of high fat content

(approximately 4.5 – 5.0 percent).

About 450,000 crossbreed cows with significantly improved yields have been obtained

by artificially inseminating local cows with sperm from imported Holstein-Friesian

bulls.144

For optimal genetics, the calves are bred to have up to 75 percent of the

imported bulls‘ genes. These cows have an improved yield averaging 12 liters/day, and

have lactation periods of up to 300 days compared to 239 for the local cows.

144

Cows courtesy of Land O‘Lakes Ethiopia Dairy Development Program

319

Table 186: Comparison between Local and Crossbred Cows

Attributes Local Cow Crossbred Cow

Fat composition 4.5 - 5.0% 3.5 – 3.7%

Lactation period (days) 239 300

Milk Yield (L/day) 1.3 12 Compiled by Global Development Solutions, LLC

The consumer perception of the quality differences in milk between the local and

crossbred cow is not known, and milk from both cows enters the supply chain without

any differentiation.

VII.5.1. Dairy Cooperatives

The Government of Ethiopia has created several cooperatives, administered by the

Directorate of Cooperatives, to manage the agricultural sector. These co-ops provide

technical and marketing support. The dairy sector is organized into 318 primary co-ops,

whose members are small landholder farmers. Of these, 145 co-ops receive support from

USAID through the Land O‘Lakes Ethiopia Dairy Development Program. The program

trains farmers on feed management and animal husbandry to improve milk yield and

quality. Not all dairy farmers are, however, part of cooperatives, and many sell their milk

directly to households, especially in the cities.

The laudable goal of the co-ops and Ethiopia Dairy Development Program is to improve

yield and increase production of high quality milk, thereby improving the income of

farmers. As seen in Table 187, the average yield of Ethiopian cattle (combination of

local and crossbreed) is among the lowest in the world. The efforts of the co-ops are

directed at training farmers in feed management and access to veterinary and artificial

insemination services.

A typical co-op can have around 1,000 farmers, with only about a third being active in

milk production at any given time. Depending on the geographical region, and spread of

the farmers, a co-op owns and operates about 15 - 20 milk collection centers staffed by 1

- 3 technicians who determine the quality of incoming milk using a lactometer and then

disburse payments to farmers. 145

The distance between the farmer and the collection

center can range from 2 to 20 km. The average distance between the collection center

and the co-op is about 3.5 km.

145

Lactometer is used to measure the specific gravity of milk, which indirectly measures the amount of

milk solids (fat, sugars and protein) and any dilution of the milk with water. Readings on a lactometer

range from 15 to 40 and correspond to the 2nd

and 3rd

decimal of the specific gravity. For example, the s.g.

of unadulterated milk at 4C is 1.032 and a lactometer would read 32. The higher the reading, the greater

the solids content. Milk that is diluted with water will have a lower reading.

320

Table 187: Average Raw Milk Yield per Cow146

Country Kg/year

Canada 9,500

United States 8,235

Japan 7,400

European Union 6,000

Australia 4,906

New Zealand 3,700

Mexico 1,397

India1 750

Ethiopia2 390/3,600

Tanzania 200/3,600

Zambia3 300/>5,0001 More than half the yield is from buffalo2 Indigenous cows yield approx 1.3 kg/day; Improved crossbred

cows yield 12 kg/day3 Indigenous cows (smallholder cattle keepers) yield approx

1 - 1.5 kg/day; friesian (commercial farms) yield up to 18 kg/day Compiled by Global Development Solutions, LLC, based on data from Global Dairy Trade and Land

O’Lakes Ethiopia

Milk is collected in 50-liter aluminum jugs and transported un-refrigerated. The total

time from milking at the farm to the point of final sale to a consumer or processor ranges

from 2 to 5 hours. Some co-ops have cold storage and additional dairy processing

capability to pasteurize milk and produce butter, cheese and yogurt. Co-ops market the

milk and dairy products to supermarkets, dairy processors, retailers, schools, households

and other commercial establishments. In addition, the co-ops provide other services as

seen in Table 188. Table 189 presents membership and sales figures for a typical

cooperative.

Table 188: Services Provided by Dairy Cooperatives

Milk Collection and Sales

Artificial Insemination Service

Animal Health Care and Veterinary Services

Feed Supply

Male Calves Fattening Program

Training on Farm Management

Training on Saving and Credit System

Compiled by Global Development Solutions, LLC

146

300 milking days assumed.

321

Table 189: Representative Dairy Cooperative, Debrezeit

Total Members 998

Active Members 300

Milk Collected (liters/day) 6,100 – 8,500

Distance from Addis Ababa 45 km

Milk Price at Collection Center (ETB/liter) 5.00

Milk Sales Price (ETB/liter) 5.75 for 3,000 liters to preferred dairy

6.5 for all other customers

6.25 for direct sales from co-op


VII.5.2. Supply and Demand of Milk

One of the challenges faced by dairy cooperatives is the inability to sell all the milk

produced by farmers. The reason for this is twofold – fluctuating demand over seasons

and sub-par milk quality.

While much is being done to increase the supply of milk and improving overall quality,

very little is done on the demand side. Ethiopia ranks among the lowest in the world in

per capita dairy consumption of raw milk (see Table 190) and value added products such

as butter, cream and cheese.147

Dairy is not an integral part of the cuisine (with the

exception of the local cottage cheese, ayib), and approximately 200 days of the year are

fasting days during which Orthodox Christians (about 60 percent of the population) do

not consume dairy products.148

147

World Health Organization recommends individual consumption of 200 liters/yr. 148

Among Ethiopian Orthodox Christians, ―fasting‖ is the term used to denote abstinence from all meat

product (including dairy) consumption. Only plant-based foods are consumed by observing Christians

during these days.

322

Table 190: Milk Consumption around the World

Country/Region Kg/capita/year

Europe 318

US/Canada 284

Oceana 195

Latin America 128

Asia 48

Africa 25

China* 26.8

Ethiopia 17

Tanzania** 41

Vietnam* 6

Zambia* 5.8

* 2007 data from FAOSTAT. Ethiopia listed as 14.1 kg/capita/yr

** Tanzania Dairy Board (19.1 kg/capita/yr according to FAO)

Source: Global Dairy Trade, FAOSTAT, Tanzania Dairy Board

Unfortunately, in neighboring Kenya, with an advanced dairy sector, poor management

of the supply chain has resulted in surplus milk production in early 2010 without the

demand to absorb it. Nearly a million liters of milk and ten metric tons of milk powder

were wasted. The net result has been a drop in the price of raw milk.

The lesson for Ethiopia is that development of the dairy sector cannot be one-sided and

supply heavy. A multi-pronged approach is needed to increase consumer awareness of

the nutritional benefits of milk, thus creating demand for milk and dairy products. The

same can be said for Zambia. As seen from Table 190, Zambia‘s per capita consumption

is less than half that of Ethiopia. Raw milk supply is available but demand is not

adequately high. As such, large processors are cutting out many of the smaller producers.

These small producers are selling their unprocessed, raw milk directly to consumers for

direct consumption.

VII.5.3. Milk Quality

The quality of milk available is affected at two stages: 1) cattle health and comfort during

lactation and 2) quality maintenance from the farm gate to the end-user.

VII.5.3.1 Cattle Health

In Ethiopia, there are only two or three large scale farms with industrialized operations.

These farms presumably have the best cattle care. A small landholder dairy farmer can

have as many as 25 cows cramped in small quarters, although the typical farmer has

about 2 - 5. Managing the cows‘ living environment is very important for cattle health

and producing milk of good quality.

323

When a cow is not standing comfortably, she will be stressed. Stress factors include flies,

slippery floors, bad ventilation, small stands and a restless milker. Cow reactions to

stress include kicking off the milking cluster, defecating or refusing milk let-down. Good

milking starts with a consistent milking routine within a well ventilated, comfortable and

safe parlor.

In addition to stress, poor parlor conditions make the animals susceptible to bacterial

infections from contagious pathogens. A high proportion of Staphylococcus aureus

indicates several chronically infected cows. The presence of any Streptococcus

agalactiae results in a mastitis problem.149

With the exception of a few large-scale dairy

processors, no microbial testing of incoming milk is conducted. A lack of awareness and

poor access to veterinary services has led to cows with mastitis continuing to be milked.

The net effect is the loss of nutritional value of milk and a high somatic cell count.150

Mastitis results in several changes in milk composition that affect the quality and value of

milk.

Lactose (milk sugar) synthesis is decreased.

Casein (primary milk protein) proteolysis leads to poor curdling, lowered

cheese yield and bitter taste due to the production of peptides.

Milk Fat – Enzymatic susceptibility of fat causing oxidation and off-flavors.

Using the Wisconsin Mastitis Test,151

the Ethiopia Dairy Development Program found

that the quality of incoming milk at the cooperatives it supports varied widely with a

somatic cell count between 150,000 and in excess of 1.5 million. The milk with high

somatic cell count should be discarded and the cows treated with antibiotics, but in

Ethiopia, poor quality milk continues to slip into the supply chain.

149

Mastitis is the inflammation of the mammary gland (udder) as a reaction of mammary tissue to injury

produced by physical force, chemicals introduced into the gland or most commonly from bacteria and their

toxins. 150

The concentration of leukocytes in cow's milk, also called somatic cell count (SCC), is the best

indication that a cow has mastitis. This is part of the inflammatory process that occurs in the tissue during

infection and is transferred to the milk. The SCC can be determined crudely as used on-site by

veterinarians or other herd health consultants (for example, the Wisconsin Mastitis Test) or by analyses on

milk samples sent to an authorized laboratory. 151

The Wisconsin Mastitis Test is used by milk receiving plants and at milk production sites to measure the

quality of milk. A WMT reading of 8 mm suggests that there are probably very few cows in the herd with

subclinical mastitis. If the WMT reading reaches 20 mm or more, most plants will run a direct microscopic

count to obtain an accurate somatic cell count. If the somatic cell count is 1,500,000 or greater, the farmer

is notified and assistance provided to correct the problem.

324

VII.5.3.2 Milk Quality in the Supply Chain

A very common practice world-over is to dilute milk by the addition of water, thereby

increasing overall yield. Due to the poor quality of water supply, this adds another point

of contamination of milk, while also diluting its nutrition value. Testing with a

lactometer and educating the farmer easily overcome this. Dairy cooperatives and

processors currently do this in Ethiopia.

The average time from milking to processing or consumption is 3 hours, and can be as

high as 6 hours. Milk generally is collected in aluminum cans and transported in open

pick-up trucks exposed to the sun. Without refrigeration below 5C, the microbial load

doubles for every 10ºC rise in temperature, resulting in curdling of milk, off-flavors and

production of toxins from pathogenic bacteria. Chilling tanks at milk collection centers,

and refrigerated transport is needed to maintain the quality of milk from the farm gate to

the consumer.

The capital expense for a new chilling unit (tanks and auxiliary equipment) with a

capacity of 5,000 liters is about US$70,000. Used chilling tanks in good repair could be

obtained for as low as US$25,000.

VII.5.4. Cost of Milk Production

Poor management by small landholder farms and high dependence on commercial animal

feed, compounded with low milk yield, results in the cost of production in Ethiopia being

among the highest in the world as seen in Table 191 and Table 192.

Table 191: Average Cost of Production per Kg of Milk152

Country US cents/kg

New Zealand 13.5

Australia 16.0

India 18.9

United States 26.7

European Union 28.9

Ethiopia 37.0153


Table 192: Price of Animal Feed in Ethiopia

Provider Price ETB/100 Kg

Market 400

Co-operative 230

Compiled by Global Development Solutions, LLC based

on data from Global Dairy Trade and Ethiopian dairy farmers.

152

Not adjusted for fat and protein level. 153

Farm gate price ETB5/liter. Exchange rate assumed 1 US$ – 13.5 ETB.

325

VII.5.5. Premium Payments for Quality Milk

Currently, farmers receive a flat price – on average ETB5 per liter – for the milk they

produce. Most cooperatives and processors set a minimum standard for lactometer

reading that the milk must meet. Milk that does not meet the standard is rejected.

However, milk that exceeds the standard is not rewarded either.

Farmers are not incentivized to take better care of their cows and produce milk of higher

quality. As seen in the previous sections, there are many factors that influence the overall

quality and nutritional value of milk produced. By offering premium payments for low

somatic cell counts and high solids content (fat and protein), the farmer will see a direct

benefit in investing (operation costs) to manage his farm better, and thus earn a higher

income. This will include feed, living conditions of the animals, and access to health care.

An enterprising dairy processor in Addis Ababa has already instituted a system for

premium pricing that has resulted in an increase in milk yield for the producers, and

higher retail demand for the milk and dairy products (cheese, yogurt, cream and butter)

due to high quality.

Table 193: Milk Quality Differential Pricing

Lactometer

Reading

Price of Milk

ETB/Liter

26 4.00

27 4.5

28 5.00

29 5.75 Compiled by Global Development Solutions, LLC

based on data from Ethiopian dairy farmers.

VII.6. Dairy Farming in Tanzania

Roughly 70 percent of the 1.7 million liters of milk produced each year in Tanzania

comes from 1.6 million households holding an estimated 18.5 million traditional mixed

cattle. The balance of the milk is produced by an estimated 130,000 households with

improved dairy cattle.

About 700,000 improved dairy cows (typically crossbreds) with significantly improved

yields exist in the country. These cows have an improved yield averaging 12 liters/day

(up to 20 liters per day reported from some farms), and have lactation periods of up to

300 days compared to 230-250 for the local cows.

326

According to Tanzania Dairy Board, milk consumption in Tanzania is 41

liters/capita/year – over 100 liters per days for Massai pastoralists and under 10 for

drylands.

VII.6.1. Supply and Demand of Milk

As can be seen from Figure 58, the key feature of the Tanzanian dairy market supply

chain is that up to 95 percent of all marketable milk is marketed through informal

channels. Typically, farmers rely on thousands of informal traders (locally referred to as

hawkers) to market their milk.

Trading through informal traders is preferred over the trade through formal collectors

(such as village collection centers or dairy processing plants) because:

1. Informal traders pay in cash upon delivery/reception of milk as opposed to, for

example, 30-day payment delays when dealing with formal dairy processors.

2. Informal traders (equipped with two canisters and bicycles which are sometimes

motorized) generally accept to buy milk even in the most remote areas whereas

formal traders generally buy milk in set collection centers along main roads.

3. Informal traders generally offer farmers higher prices for fresh milk. Even

though milk prices fluctuate widely during dry/wet seasons, informal traders are

reported to pay fresh milk prices as much as 50 percent higher than those of

formal buyers.154

154

Based on author‘s limited sample survey in Morogoro and Dar es Salaam in February 2011. Also for

price and margin variations between traders and urban vs. rural market price differential refer to Market

Mechanisms and Efficiency in Urban Dairy Products Markets in Ghana and Tanzania, International

Livestock Research Institute, Research Report 19.

327

Figure 58: Dairy Market and Institutional Support Structure, Tanzania

Formal processors report that the volatility of the milk supply (peak in the wet season and

trough in the dry season) is one of the key bottlenecks in the supply chain. Another

bottleneck is the inability of formal collectors/processors to compete for fresh milk with

the informal traders. Informal traders are able to offer farmers higher price for fresh milk

than formal processors/collectors because of three interrelated consumer market trends in

Tanzania:

1. Raw milk is by far the most popular milk in Tanzania. According to official

surveys, unprocessed fresh milk represents 63 percent and unprocessed sour milk

represents 21 percent of all milk regularly purchased and consumed in

Tanzania.155

While formal processors incur significant post-harvest handling

costs for collecting/cooling, processing and packing milk, informal traders and

vendors can sell fresh and sour milk alike without incurring any major costs other

than transportation. As a result, informal traders/vendors are able to offer higher

purchase prices to farmers.

2. Neither risks from drinking fresh milk of poor quality nor benefits from drinking

clean and pathogen-free processed milk are brought sufficiently to consumers‘

attention in Tanzania. This notwithstanding the fact that most surveys often find

the quality of milk in Tanzanian markets to be quite low. In recent studies,

adulteration with water was found in 20 percent to 60 percent of samples (highest

155

Tanzania Dairy Board, various surveys.

Market structure Institutional Support structure

- Ministry of Agriculture,

Food Security and

Cooperatives

- Ministry of Livestock

Development and

Fisheries

- Tanzania Dairy Board

- Tanzania Food and

Dugs Authority

- Tanzania Milk

Producers Association

- Tanzania Milk

Processors Association

- Veterinary Council of

Tanzania

- Tanzania Society of

Animal Production

- Agricultural and

veterinary colleges

- Micro-finance

institutions

Traditional Mixed

Dairy/Livestock Farm 70% of Milk

1.6 million Households

(18.5 million cattle – mixed)

Dairy

Processing

Plants (46)

Local Market

Cooperative/

Village Collection

Centers (200)

Improved Dairy

Farm 30% of Milk

130,000 Households

(700,000 Cattle)

Household

Consumption

30%

1.7 billion liters/year

Marketable

Milk

70%

Formal Collection

Centers - Processors

Informal Traders

(‘Hawkers’)

(Thousands)

Informal Marketing Channel Formal Marketing Channel

Raw

Milk

Informal

Vendors/Retailers

(Thousands)

95% 3%-5%

Imports

328

in Mwanza) and bacterial counts was similarly high (50 percent-67 percent of

samples, depending on site and season, had unacceptable levels of coliform

counts).

3. Aware of the popularity of fresh milk and unpopularity of processed milk,

informal market agents (retail/wholesale vendors and traders alike) are reported

to engage in milk adulteration which in essence gives them higher pricing power

at the farm gate compared to formal milk traders/processors. Typically, these

agents add water to fresh milk especially during the dry season when milk

supplies fall sharply and prices increase at least twofold compared to wet season

prices.156

VII.6.2. Cattle Health

In Tanzania, calf mortality in traditional livestock farms is 30 percent-45 percent.157

In

poultry, mortality is over 60 percent. According to specialists, a combination of factors

such as poor on-farm management, poor hygiene, and underdeveloped extension service

networks are major contributors to such high mortality rates. High mortality rates not

only reduce a farmer‘s ability to expand farms and/or to profit from farming, but it also

pressures farmers to economically exploit all of the cattle stock independent of the

animals‘ health. For example, marketing milk from cows with mastitis is common.

VII.6.3. Premium Payments for Quality Milk

Currently, farmers in Tanzania receive a flat price – TZS300 and up to TZS700 per liter

depending on season and location– for the milk they produce. Most cooperatives and

processors set a minimum standard of 3.5 percent fat content reading. Milk that does not

meet the standard is rejected. Milk that exceeds the fat-content standard is not rewarded.

Somatic cell count standards are equally skewed towards formal buyers. Informal buyers,

by contrast, generally do not set any standard.

VII.7. Value Chain Analysis: Dairy Farming

The cost of producing milk in Ethiopia ranges from US$0.23 to US$0.47 per liter. At the

lower end, this is competitive with the cost of production in China where the cost ranges

from US$0.23 – US$0.28 per liter. Cost of producing a liter of milk in Vietnam is the

most competitive at around US$0.15 – US$0.29 per liter, whereas the cost in Zambia is

the highest of the five countries with a range from US$0.38 – US$0.45 per liter.

156

See Market Mechanisms and Efficiency in Urban Dairy Products Markets in Ghana and Tanzania,

International Livestock Research Institute, Research Report 19 and Survey on Dairy Products Market in

Tanzania, Rural Livelihood Development Company, 2010. 157

Tanzanian Ministry of Livestock and Fisheries Development, Livestock Sector Development Plan 2010.

329

Key Characteristics: Perhaps the most notable difference between the countries is the

average yield rate per milking cow. Specifically, with proper animal husbandry, cows in

China are producing at a rate of 20 liters per cow, while in Ethiopia, the yield rate falls

from 7 to 15 liters per cow. Yield rate per cow in Vietnam is also low at around 4.2 –

15.9 liters.

Table 194: Benchmarking Key Variables for Dairy Farming

1.0 Farm

1.1 Male-to-Female Ratio 6.5 - 52.3 0.8 - 1.2 10 - 50

1.2 Average yield rate per milking day (liters/cow) 20.0 - 20.5 4.2 - 15.9 7.0 - 15 2 - 20 8 - 23

1.3 Labor absenteeism rate (%) 0% - 1% 0% - 1% 0% - 5% 0% - 3%

1.4 Average salary/wage/month

1.5 Skilled $177 - $206 $30 - $63 $150 - $300 $106 - $340

1.6 Unskilled $118 - $133 $31 - $78 $13 - $41 $50 - $80 $54 - $181

1.7 Days of operation/month 30 21 - 30 30 30 30

1.8 Average age of major equipment 2.5 - 4.0 5.5 - 8 0.5 0 - 20 1 - 15

2.0 Exported Output (finished primary product)

2.1 Direct Export without consolidator/broker 0% 0% 0% 0% 0%

2.2 Indirect Export Through Local Consolidator 0% 0% 0% 0% 0%

2.3 Indirect Export Through Overseas Consolidator 0% 0% 0% 0% 0%

3.0 Domestically Sold Output (finished primary product)

3.1 Direct Sales to Wholesalers/Retailers without consolidator 100% 0% - 100% 100% 0% - 100% 0% -%100

3.2 Direct Sales Through Own Outlets/Shops/Showrooms 0% 0% - 100% 0% 0% - 100% 0% - 100%

3.3 Indirect Sales Through Local Consolidator/Trader 0% 0% 0% 0% - 100% 0%

4.0 Unit production cost ($/liter) $0.23 - $0.28 $0.075 - $0.293 $0.23 - $0.47 $0.20 - $0.40 $0.38 - $0.45

5.0 Avg Selling Price (US$)

5.1 Farm gate $0.27 - $0.32 $0.38 - $0.39 $0.37 - $0.44 $0.23 - $0.47 $0.55 - $0.64

5.2 Wholesale $0.27 - $0.32 $0.36 - $0.37 $0.33 - $0.60 $0.64 - $1.06

Source: Global Development Solutions,LLC

ZambiaChina Vietnam Ethiopia Tanzania Very few milking cows in overall herd -treat cattle as

Low yield

Poor smallholder on-farm management and high dependence on commercial animal feed, compounded with low milk yield lead to high production cost (similarly for Zambia)

Relatively high selling price in ET due to shortage of

Interviews and field visits clearly indicate that dairy farming in China is established as a

commercial operation where large numbers of cows are managed under a single operation.

Furthermore, the ratio of male-to-female is much higher in China (6 to 52 milking cow

for every bull in China and between 0.8 – 1.2 milking cows for every bull in Ethiopia),

which increases the overall farm output of milk when compared the total expenditure for

feed. This is a dramatic contrast against small scale dairy farming in Ethiopia where the

farmer must feed many more bulls without the benefit of milk output. This is particularly

the case in Ethiopia where livestock and meat trade overshadows the relevance of milk

production.

In addition, the scale of operations between dairy farms in Ethiopia, China and Vietnam

is substantially different. Specifically, the average dairy farm in Ethiopia – as well as in

Tanzania – has less than ten animals, while in China the dairy farms profiled for the study

have hundreds of cows under a single operation. In Vietnam, the average size of dairy

farming operations profiled for the analysis are generally medium in size with less than

200 animals.

330

In Zambia, scale ranges from farmers with several cows (the majority of entities are these

smallholders) to large commercial farms with hundreds of milking cows. Regardless of

size, all sell to processors in Zambia. In early 2011, however, some processors were

reducing their number of suppliers due to supply surplus.

Despite these issues, given the low labor input for dairy farming in Ethiopia, the labor

productivity rate (measured in liters of output per person per day) is competitive with

China and certainly with farms in Vietnam. Tanzania and Zambia, however, both show

high ends of productivity to be well beyond that of the other three countries (refer to

Table 195 below) and thus possess high potential for substantially increased milk

production.

Table 195: Benchmarking Key Variables for Dairy Farming (cont.)

China Vietnam Ethiopia Tanzania Zambia

6.0 Avg Spoilage & Reject rate: List different types (3)

6.1 Product rejection at point of delivery 0% - 1% 1% - 2% 5% - 50% 0% - 5%

6.2 Product rejection at factory 1% - 2% 0% - 50% 0% - 3%

7.0 Avg Waste & losses: List different types (% of total )

7.1 Losses due to handling and home consumption 1% 5% - 50% 0% - 1.5%

7.2

8.0 Electricity

8.1 On grid (Cost/kWh) $0.15 $0.41 - $0.54 $0.04 $0.035 - $0.07

8.2 Off grid (Cost/kWh) - self generated $0.03

8.3 % of time off grid/month 0% - 3% 0% - 100% 0% - 12% 0% - 100%

9.0 Water (m³) $0.37 $0.25 $0.12

10.0 Fuel & Oil (liter) $0.77 $0.03 - $0.83 $0.81 $1.15 $1.49

11.0 Productivity and Efficiency

11.1 Labor productivity: liters/person/day 23.5 - 53.1 2.5 - 3.9 18.5 - 71.5 10 - 100 19 - 179

11.2 Electricity usage: On-grid (kWh/1,000 liters) 4.92 - 5.26 126 - 221 107 - 116 - 62.7 - 308

11.3 Electricity usage ($/1,000 liters) $0.67 - $0.78 $6.87 - $9.14 $4.10 - $4.46 7.41$ $2.17 - $10.76

11.4 Water usage (m³/1,000 liters) 2.64 - 5.12 0.55 - 1.67 24 - -

11.5 Water usage ($/1,000 liters) $0.97 - $1.89 $0.03 - $0.41 $2.96 1.85$ -

11.6 Fuel & oil usage (liters/1,000 liters) 1.32 - 3.18 $0.63 - $1.63 5.18 - 5.98 - 6.78

11.7 Fuel & oil usage ($/1,000 liters) $1.01 - $2.44 $0.04 - $0.78 $4.22 39.26$ $8.91 - $10.10

11.8 Transport ($/km-ton) $0.12 - $0.35 $0.14 - $0.16 $0.03 - $0.25 $0.04 - $0.37

Source: Global DevelopmentSolutions,LLC

Labor productivity well within competitive range even with informal nature of daily farming

Competitive Africa: The Value Chain and Feasibility Analysis Module – Draft 4

Not for Circulation

331

Figure 59: Raw Milk Value Chain Diagram, Ethiopia

Figure 60: Raw Milk Value Chain Diagram, Tanzania

Raw Milk Tanzania Unit production cost 0.33 $ per liter

Raw Material Animal Husbandry Milking

Collection/D elivery Admin/OH

49.9% 25.7% 1.7% 9.1% 13.6%

Fodder 100% Labor 39.6% Rent 62.3% Vet/Medicine 13.5% Financing 33.3% Fuel/oil/ water 34.2% Other 4.4% Other 12.8%

Global Development Solutions, LLC

Raw Milk Sululta Ethiopia Unit production cost 0.29 $

Male-to-Female Ratio 0.9 Liters/milking day 7.0 Number of animals 13.0

Raw material Animal Husbandry Milking Collection/ Delivery Admin/OH

27.7% 17.2% 16.4% 19.8% 18.9%

Animal feed 100% Labor 83.6% Prof services 6.0% Fuel/oil/ water 5.1% Admin OH 88.6% Electricity 5.5% License/ certificates 5.4%

Global Development Solutions, LLC Fuel/oil/ water 5.1%


Not for Circulation

332

Figure 61: Raw Milk Value Chain Diagram, Zambia

Figure 62: Raw Milk Value Chain Diagram, China

Raw Milk Guangdong China Unit production cost 0.20 $ per liter Male-to-Female Ratio 19 Liters/milking day 20.5 Number of animals 300

Raw material Animal Husbandry Milking Collection/ Delivery

Admin/OH

79.8% 5.9% 1.7% 7.1% 5.6%

Feed 80.6% Raw material 54.1% Labor 8.1% Feed supplements 14.5% Labor 19.5% Fuel/oil/ water 8.8% Minerals and vitamins 4.8% Fuel/oil/ water 14.2% Transport 75.0%

R & M 8.4% Other 8.1% Global Development Solutions, LLC

Raw Milk Central Province Zambia Unit production cost 0.39 $ per liter Male-to-Female Ratio All female Liters/milking day 23 Number of animals 1,827

Raw material Animal Husbandry Milking Collection/Delivery Admin OH 60.8% 5.2% 1.8% 4.4% 27.7%

Feed 100.0% Labor 60.3% Admin OH 94.8% Prof services 39.7% R & M 2.7%

Global Development Solutions, LLC Electricity 2.0%


Not for Circulation

333

Figure 63: Raw Milk Value Chain Diagram, Vietnam

Raw Milk Binh Duong Viet Nam Unit production cost 0.21 $ per liter Male-to-Female Ratio All female Liters/milking day 11.0 Number of animals 150

Raw material Animal Husbandry Milking

Collection/ Delivery

Admin/OH

67.2% 17.4% 11.4% 3.9% 0.2%

Feed 56.8% Raw material 12.6% Labor 91.4% Feed supplements 40.8% Labor 74.9% Electricity 8.6% Global Development Solutions, LLC

vii.dairy farming vca and potential for expansion of...

Documents