30 October 2010

3 minute read

NB: This article is taken from the study, Status and Prospects for Smallholder Milk Production: A Global Perspective 2010.

Dairy development policies and programmes promoted in different dairy regions can have a significant impact on dairy sector development. However, policy-makers, development practitioners and farmers often find it difficult to select the policy or programme(s) that best satisfy their interests and economic and social needs. The situation is usually even more complicated for small-scale farmers owing to their limited access to resources.

First, two main indicators of programme outcome were chosen: (i) household per capita income (as indicator for family livelihood), and (ii) cost of milk production (as indicator for dairy competitiveness and thus enterprise sustainability).

Second, the most frequent farm type (MN-3, a three-buffalo farm) was selected for an ex ante assessment of the likely impact of major dairy development programmes and other potential interventions for dairy development in the district of Mahboobnagar (Andhra Pradesh) in India.

Third, data on and estimates of the consequences for the selected farming system to participate in each of the 45 proposed dairy development programmes was elicited from a panel of dairy experts. And, fourth, the results were validated and ranked by the expert panel.

Impact of family income (livelihood indicator)

Current situation: The MN-3 household currently earns a total income of US$0.8 per capita/day. Dairy activities contribute US$0.13, or 16 per cent, to total household income. With this income from dairying, the household cannot meet its daily living needs without off-farm income.

Impact: The dairy development programmes assessed have the potential to increase household per capita income by as much as 27 per cent above the current level.

Impact on production costs (dairy competitiveness indicator)

Current situation: The full economic costs of milk production are US$24 per 100 kg of ECM, while the milk price received stands at only US$16.5.

Impact: Except for four of them, all programmes decrease the cost of producing milk by as much as 33 percent below the current level.

Ranking of programmes: The most promising programmes are those in which (a) the farmer has access to more fodder from public land; (b) he attends a drought-relief cattle camp; and (c) he increases his herd to five well-managed grade buffaloes. On the other hand, the estimated cost of milk production increases when the farmer purchases (costly) livestock life insurance; when it takes him a long time to access veterinary services; and when he/she is member of a cooperative (which means he/she obtains a lower price for his/her milk).

Conclusions

Two main conclusions can be drawn from these simulation results:

Given its assets, resources and the dairy development programmes assessed, an MN-3 type household would not be able to reach an income of US$1 per capita per day. This is because of the low share of dairy income (only 16 per cent) in the total household income.

However, some of the assessed dairy development programmes could lift this predominant farm type to the competitiveness of a five grade-buffalo farm, a degree of dairy competitiveness that is as strong as the best farms in India, and even worldwide.

In general, while the assessed programmes may render the family dairy enterprise highly competitive, total household income would not increase significantly. One alternative would be for some farms to increase their dairy productivity and expand in size, while others would remain the same or eventually exit from the dairy sector and rely on off-farm income.

Interestingly, the option of fodder sales shows a potential alternative for farming households that may wish to quit dairy farming (and thus earn more off-farm income) but specialize in supplying fodder to other households in a position to increase their dairy herd. A prerequisite for this scenario would be organised local fodder markets. The ranking shows widely different impacts for different programmes.

Fodder sales (and an organised fodder market) may create a highly lucrative alternative that would encourage both farm specialisation and intensification in the dairy sector.