CHAPTER 2 BACKGROUND AND CONTEXT
2.5 Production models
2.5.1 Commercial dairying model
The commercial dairying model is a remnant of the large-scale commercial dairying subsector.
Current benefactors of this model include emergent black commercial dairy producers and a group of the remaining white large scale commercial farmers. The model is built upon forward supply contracts with established processors and/or integration with individualized processing units within production zones, entities such as Dendairy and Kefalos. This model has all the attributes of contract farming arrangements that include a guaranteed market for the producer’s milk, a pre-agreed upon producer price, guaranteed raw materials for processing units, reduced risk and a win-win situation for both parties. The model also has an advantage of economies of scale, and better opportunities for viability, growth and sustainability.
2.5.2 MCC bulking and supplying to processors model
Under this model MCCs take deliveries of smallholder farmers’ milk, bulk the product and supply the milk to an established processor for development into various milk and dairy products. As with the predecessor mould, the model ensures a guaranteed market; removing marketing hassles for producers. By bulking and supplying to processors, the model reduces risk for MCCs and Milk Producer Association (MPA) members. The model also ensures guaranteed transport and zero financial marketing costs. However, MCCs become price takers under this model given that this normally is a buyers’ market. An assessment of average producer prices under this model have hovered around US$0.45 – 0.65 per litre.
Page 26 of 231 2.5.3 MCC bulking and processing model
Both large scale commercial and smallholder dairying offer opportunities for vertical integration and an improvement of margins by appending value addition to conventional production activities. This, however, depend greatly on the management, efficiency and the level of professionalism of the production and processing units. Experiences on the ground have shown that the average producer price is dependent on overhead costs. Average producer prices are usually higher than prices obtainable when MCCs supply processors. Prices are, This, however, but is highly prone to shocks. Where large markets exist e.g. Gokwe, this model presents better opportunities for adaptation of the inclusive business model.
2.5.4 Dairy Zone (MilkZim) model
The Dairy Zone or MilkZim Model, dubbed the “dairy cow hotel”, hinges on economies of scale emanating from a cluster of producers who bring in animals to a central production environment for common, organized and centralized production and management of a nuclei dairy herd. The model allows for intimate knowledge of each animal within the herd and a breeding strategy easier to plan, implement and manage leading to improved calving intervals. Disease control is easier and leading to reduced mortalities. The model thus guarantees a farmer a return on investment and frees the farmer’s labour to concentrate on other chores. Farmers subscribing to the model are paid a monthly dividend of 20 percent. To ensure effective and efficient management systems, various sub-committees are put in place. Examples include management committees for breeding, fodder production, marketing, and finance.
The model allows for an exit strategy over 5 years with first two years for business building. The model offers subscribers to the model security and investor confidence through shareholding, with risk and potential shocks spread across the entire membership. Key stakeholder interviews, however, revealed that convincing potential subscribers to buy into the model and confidence building takes time. In a lot of the cases, practically implemented models have also shown that there is usually limited space for adequate fodder production, while bought-in feeds or concentrates are expensive. In addition, it is common for subscriber farmers to seed substandard animals, while group dynamics has tended to water down group cohesiveness, effectiveness and
Page 27 of 231 tangible benefits for individual subscribers. This model can be an alternative model for future dairy farming with a difference. There is, however, need for further analysis to determine the model’s feasibility, opportunities for adaptation, scaling-up and the economic viability and the sustainability of the model.
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