Dairying in Asia: Strategic opportunities, challenges

and the response

Vinod Ahuja

Livestock Policy OfficerFood and Agriculture Organization of the UN

Regional Office for Asia and the PacificBangkok

The context• Rapidly growing share of Asia in the

global dairy production. Emergence of East Asia as an important contributor and the share expected to grow in the foreseeable future

• Consumer demand outpacing the production leading to increased dependence on imports

• Declining growth in global milk production but Asia defying the trend

• Tremendous potential for consumption growth

• Reasonable productivity growth since the early 80s but the productivity still below potential

Milk productivity across major regions of the world

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1961 1971 1981 1991 2001 2007

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Africa

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North America

Oceania

World

Milk productivity: Asia and the World

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1961 1971 1981 1991 2001 2007

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The context

• Poor technical efficiency of milk production

• Poor sector organization imposing disproportionate transaction costs on producers

• Cost competitiveness at the production level under threat due to increasing feed shortages and growing imports of feed

• Continuing presence of trade and production limiting diseases and poor infrastructure limits the ability of dairy producers to respond to emerging opportunities

Small producers most important in this process of transition but need institutional and policy support

Poor R&D targeted towards smallholder needs

High prevalence of under-nutrition and underweight children

Enormous growth in the number of milk producing animals putting severe pressure on natural resources and environment

Distribution of milk animals across major regions of the world

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1961 1971 1981 1991 2001 2007

Asia Africa

Europe LAC

North America Oceania

The context

Where do we go from here?

We may draw inspiration from Einstein . .

. . . or build on our own experiences

Some lessons learnt from Asian Dairy experience

• Supportive national and regional policies are critical• Policies that create space for growth and protect domestic

industry from unfair competition• Policies such as certification that enhance trust and reputation of

products coming from small producers• Policies such as tax breaks for private sector that motivate them to

invest in enhancing farm • Policies that target promotion of models linking small producers to

large markets. Some of these include cooperatives, contract farming, dairy development zones, milking stations, producer companies, joint ventures, etc

• • •

Some lessons from Asian dairy experience. .

• Demand side enabling environment and supply side facilitating factors are both equally critical

• Price controls can be counterproductive but quality based pricing can spur investment in quality enhancement

• Investment needs to be supported by technical and managerial training for entrepreneurial dairy producers

• Producer institutions can make a big difference in lowering the barriers to market access for small producers

• Women participation in decision making has tremendous positive benefits

• School milk programs have multiple benefits

• Guaranteed collection of milk at pre-specified time and place (within the village). This requires organizational models that are able to optimize necessary coordination along the supply chain

Some lessons from Asian dairy experience. .

• Successful smallholder dairy models have minimized transactions costs of milk collection, processing and marketing so as to return a larger share of the value to primary producers.

• Transparent and simple methods to measure milk quality and simple easy to understand pricing formulae linking farm gate milk price to milk quality

• Transparent record keeping and easy access to records of physical and financial transactions at the level of PMOs

• Professional management of processing and marketing function such as product branding, pricing, and composition of product portfolio, and

• Producer participation/representation in decision making at all levels of the value chain to ensure their interests are protected

Learning lessons is a continuing process . . .

. . . but it must lead to ‘action on the ground’

Enhancing market access for small producer

School milk programs

Experience sharing and networking to promote

cooperation and promotion of shared interests

Active leadership and participation of women

at all levels

Minimizing adverse natural resource and environmental consequences

Technical and managerial

capacity building

Investment in productivity enhancing measures

The action agenda

The partners

FAO

CFC

APHCA

National Govern-ments

Milk producers

Dairy Asia Network

Project funding

TCP on School

milk

Project implementation

support and leadership

Elements of the CFC proposal

• Country coverage• Thailand, Myanmar and Bangladesh

• Three components• Milk Production Enhancement • Milk Marketing Enhancement• Capacity Building and Information

Dissemination • Duration: 4-5 years

• Budget : USD 2.5-2.7 million

Elements of the FAO TCP proposal

• Country coverage• Thailand, Myanmar and Bangladesh

• The components• Review of school milk programmes• Design and/or strengthen school milk programmes with

a targeting of schools in more rural areas • Assess alternative and innovate funding options for

financing school milk programs• Link the development of these local programmes with

opportunities for smallholder dairy participation • Support the development of SMEs for manufacturing

and packaging range of semi value-added dairy products

• Duration: 2 years

• Budget : USD 450,000-500,000

Elements of the APHCA proposal

• Country coverage• All APHCA countries

• The components• Creation of an information and knowledge network• Creation of a demand driven dairying group with a

membership base that included dairy firms, dairy institutions, producer organizations, dairy research organizations, and other concerned regional and international partners

• Duration: 4-5 years

• Budget : Approx $25,000 per year

All three proposals complement each other yet retain their independence

Thank you very much for your attention