This working paper presents an analytical and empirical modelling framework which integrates dairy cattle herd growth and economic model for simulating milk production in traditional dairy cattle production systems. The framework allows for assessing the technical and financial performance of dairy production under two conditions: ‘without’ intervention and ‘with’ intervention. The bio-economic simulation analyses of milk production for different cattle production systems for the ‘without’ intervention situation is used to assess and identify potential areas for policy and investment interventions to improve the future performance of dairy cattle sub-sector in Ethiopia.
The baseline assessment of the cattle production systems indicates that the existing traditional smallholders dairy cattle production system is characterized by high mortality rates, low fertility and low commercial milk offtake rates. The average cattle herd size observed is very small, particularly in the mixed crop livestock production system. A bio-economic simulation model for the ‘without’ intervention situation indicates that cattle production in different production systems is growing at annual growth rate of 5–10%. The baseline assessment also indicates that adult female cattle are the most important classes of cattle explaining the various future cattle population growth trajectories.
The observed low level of productivity and reproductive performance in dairy cattle indicates the need to invest in
cattle genetic improvement, health, reproductive management and nutrition. Particularly, the results of sensitivity and elasticity analyses indicate that female cattle fertility contributes only 9–10%, while the annual survival rates of adult female cattle contributes about 59–61% to the cattle herd growth rate.
Thus, under the baseline scenario, it is more important to reduce mortality rate than improve the fertility of cattle to increase cattle herd growth in different production systems. This indicates the importance of identifying the causes of cattle mortality and implementing cost-effective measures to reduce it.
The results of the bio-economic simulation analysis indicate that the combined investment interventions in cattle health, feeding, reproductive and management practices to reduce young stock and adult stock mortality and to improve dairy breed through AI and synchronization is financially viable and enhances Ethiopia’s milk self-sufficiency ratio and has significant impact on cattle keepers income.
To realize the expected milk increases, sufficient feed availability to meet the increased feed demand arising from the improved breeds will be required in the areas where AI and synchronization are implemented. Specialized extension services will also be essential to support and backstop farmers in the intensive management required for the crossbred milking cows.
In addition to fodder, crossbred milking cows will also require concentrate feeds. As dairy cattle population increases, the demand for concentrate feed will also increase. At present there are not enough grain mills and oil processing plants to cater for the present needs of existing dairy cows, much less the anticipated growth. Incentives to promote investments in the agro-processing industries would pay huge dividends in terms of meeting the growing concentrate feed gap.
To sustain a regular, sustained increase in the volume of milk produced and marketed, establishing more processing capacity will be essential. Although there is strong evidence that dairy processors are ready to invest in new and increased capacity, they are often discouraged and hindered by bureaucratic obstacles to investing. Besides having fair access to bank credit, investors will need to be supported in their efforts to create the milk collection and supply chains needed to connect farm milk producers to their processing facilities, through cooperatives or directly. As well, before potential smallholder dairy farmers will make the investments required to produce the amount and quality of milk required by processors, they will need to be assured of a regular, daily market for their milk.
Further, given that there are presently few assured, regular market centres for dairy products in Ethiopia, with the exception of a few major urban areas, poorly functioning markets presently negatively affect investment in dairy production and processing, as well as consumption growth in the country. Milk production and consumption cannot be expected to increase substantially unless well-functioning product distribution and marketing systems, bridging rural supply and urban demand, are also in place. Meanwhile, demand for milk in rural areas is for fresh milk and is currently satisfied by home production or the direct sales of raw milk. The demand for processed milk in rural areas is almost non-existent and this is not expected to change in the near future.
The potential for transforming the dairy industry in Ethiopia is indeed great, yet the challenges should not be under-estimated. For success to be achieved, there will need to be government investment in more effective extension services, AI infrastructure and health services, as well as more conducive policies and laws establishing clear sanitary standards and regulations, together with enforcement. Similarly, investment from the private sector will also be needed and these will only be realized if the government creates a supportive investment climate with reduced bureaucratic obstacles to obtaining land to set up and build dairy agribusinesses. Programs to promote market development and trade by fostering business linkages, by providing technical and business training to all value chain actors, and by promoting technology transfer will also be necessary to achieve the anticipated developmental results shown possible in the dairy investment scenario
Negassa, A., Gebremedhin, B., Nigussie, K., Gebru, G., Desta, S., Shapiro, B., Dutilly-Diane, C. and Tegegne, A. 2015. Transforming traditional smallholder cow milk production systems in Ethiopia: Ex-ante evaluation. LIVES Working Paper 7. Nairobi, Kenya: ILRI.