CHAPTER 3 LITERATURE REVIEW
3.6 Smallholder dairy farming
3.6.1 International perspectives on smallholder dairying
Page 60 of 231 Thus, the dominant form of assessment and analysis have been economic impact approaches and econometric tools. Ex-ante studies rely mostly on the economic surplus model. Econometric approaches, on the other hand, estimate the empirical importance of different factors explaining adoption (Doss, 2003). They typically have a dependent variable, adoption, being explained by a set of independent variables and include the OLS, Tobit, Probit and Logistic Regression.
Identified limitations include the unavailability of adequate input and output data on the research process and subsequent technical change, the difficulty of attributing past, current or future outcomes to particular research investments, and assigning a value to these outcomes (Alston et al., 1995).
Page 61 of 231 production systems in the tropics into three different types viz: (i) traditional, usually with ad hoc marketing arrangements which is typical of most peri-urban smallholder dairy farms, (ii) cooperatives whose foundations are natural aggregation and/or concentration of farms, and (iii) intensive production systems with herd sizes of up to 200 dairy cows. According to Moran (2005), smallholder dairy systems in the tropics can also be categorized on the basis of physical factors (magnitude of scale, stock type, forage and feeding systems), farm characteristics (land and stock ownership, labour, farm income), and institutional factors (marketing channels, farmer support systems, economic policies). One important feature of all tropical smallholder dairy production systems is their rapid expansion on the backdrop of a growing urban demand and the inherent emerging income generating opportunities present.
Market oriented small scale dairying has the potential to increase household income, reduce losses and generate employment in production, processing and marketing, and thus serves as a viable tool for spurring economic growth and alleviating poverty (Bennett et al., 2006). Existing and emerging opportunities for smallholder dairy producers are pinned on the prospects of sharing in opportunities afforded by rising global demand for milk and dairy products. This is closely related to expanding markets for high-value food products, offering an opportunity to diversify farming systems and develop a competitive and labour-intensive smallholder dairy sector (FAO, 2014). Transitory economies in Asia, Latin America and Sub Saharan Africa are home to a large and rapidly growing population of affluent consumers with either a strong tradition of dairy consumption, or changing food preferences in favour of high value animal products, including dairy products. As an example, milk production in the Asia-Pacific region is estimated at 217 billion litres of liquid milk equivalent, while demand and consumption is estimated at 240 billion litres LME (FAO, 2014).
In most countries, there is also plenty of room for import substitution provided that local products are competitive in quality, safety and price. Moreover, whilst the sustainability of smallholder dairy development initiatives must be rooted on private-sector driven economic development, smallholder dairying also provides opportunities for addressing the persistent problem of rural poverty by transferring income from affluent urban households to their poorer rural counterparts, thereby improving food and nutritional security for both poor rural and urban
Page 62 of 231 households (FAO, 2014). This can also be a panacea for addressing equity issues raised by growing socio-politico-economic attention to widening income disparities between income groups and geographic locations. Technological and environmental efficiencies also suggest that smallholder dairy industries have a higher likelihood of sustainability than the mono-cultural industries of developed countries (Falvey and Chantalakhana, 2001).
However, despite the huge potential, in reality smallholder dairy farming is characterized by low productivity and dodged by viability challenges. In Bangladesh, smallholder dairying is being weighed down by the scarcity of feeds and fodder, high costs of bought-in concentrates and the lack of technical knowhow (Khan et al., 2010). In the Philippines, the farming system, breeding policy and veterinary services were found to have significant roles in production performances between small scale dairy farming households and non farming households (Uddin et al., 2012).
As discussed in greater detail below, smallholder dairying has also been subjected in recent years to increasing strains as a viable source of income generation (Moran, 2005; Khan et al., 2010;
Uddin et al., 2012). FAO (2014), also highlights that some of the long-standing constraints to smallholder dairy development have been declining real prices for dairy products, low prices and profitability, resulting in part from competition from subsidized milk from industrialized countries. Elsewhere, viability challenges on small scale dairy farms in the UK, New Zealand, Canada and the USA are either forcing farmers to exit the sector leading to fewer dairy farms or scale-up driven-up by the need for greater efficiency, economies of scale and financial leverage (Levitt, 2014; Woodford, 2014). The sustainability of intensifying smallholder dairy production systems is also threatened by inadequate feeding and nutrition, derisory infrastructure and marketing opportunities, poor institutional support, lack of adequate disease control measures, lack of appropriate dairy research, and the technology gap between the developed and developing countries (Moran, 2005).
Panacea for identified challenges within the smallholder dairy sub value chain has been equally diversified. Multi-criteria programming of small-scale dairy farms in Mexico established a need for a forage strategy based on alfalfa, ryegrass, and corn silage to meet the nutrient requirements of dairy herds, and an economic advantage in rescheduling the calving season to better synchronize higher demand for nutrients with the period of high forage availability (Val-Arreola
Page 63 of 231 et al., 2006). Building on the Kenyan approach, an initiative to improve milk handling among traders in Assam in India resulted in a new governance institution, increased risk mitigation, improvements in milk quality, higher sales and increased customer satisfaction. The economic impact in the capital district has been estimated at USD 5.6 million annually (Ballantyne, 2014).