Dairy VC Assessment Group, Task Progress for Day 1 and Day 2

Dairy VC Assessment group, Task Progress for day 1 and Day 2

Day 1- 8/5/2012

Actor contacted: Iskufilan Milk Cooperative Committee members

1.  Fatuma Idriss, Chair Woman

2.  Fatuma Yussuf, Vice Chair woman

3.  Ido Adan, Member

Introduction

The team has started its field duty from Mullie woreda of Shinille zone, as per its assessment schedule. After wrapping up day 1 activities it undertaken in Mieso and Mulli, the team preceded its day 2 activities in DireDawa to contact commercial dairy farms and other actors in the town.

Methodology used:

·  Very interactive discussion with less structured interview

·  information gathered from secondary sources such as Cooperative & Agriculture offices at woreda level

Overview of the Milk Value chain: This milk cooperative has 15 female members & engaged in collection and aggregation of milk.The cooperative collects milk from pastoralists around Mulli, mostly from kebeles Kulmiye, caramodobe, Kulkadobo,Jejeba, Nimcale, carmale and Tuleydi. It has made an efficient mechanism of collection in which a single member is responsible to collect the milk atleast from ten suppliers around her village. As per this arrangement, they approximately collect the product from 150 producers at a price of 7 birr/litre during the rainy season and 9 birr/lit during the dry season. The amount of milk they collect is estimated to 400 and 200 litres/day in the wet and dry season respectively.

Iskufilan cooperative sells their milk to Gashew; a small milk processor in Awash who as a collection center at Mieso market. Gashew and Iskufilan cooperative have entered into written formal agreement and have been materializing the transaction since then. The cooperative has been supplying the product to Gashaw small milk processor at Mieso; his collection center as per the agreement.

The team realized that Iskufilan Coop transports the milk by isuzu to Mieso( a car which comes often to the area for another purposes) and Gashew transport it from Mieso to Awash where he processes the milk.

Thecommittee members mentioned that price is determined by the processor and currently there is a misunderstanding between the two parties on this, because the effect of price fluctuation solely harms the cooperative, due to the fact that producers periodically adjust price to the changing costs, which is not possible for the cooperative to do , because the business deal would become delicate once they become stringent to their only client, Gashaw. Though the cooperative has tried to bargain on the price fixation issue several times, especially during the dry season when producers increase price, the counterpart refused to accept it. From the phrases of the Iskufilan milk cooperative committee members, we understood that there is no genuine partnership between the contracting parties due to low bargaining capacity of the cooperative.

Challenges Encountered by the Cooperative

·  low productivity because of low and unpredictable rainfall

·  Poor infrastructure and inaccessibility of roads during/after heavy rainfall/ flooding

·  poor market integration between the actors and lack of market information

·  Quality problem- hygiene and sanitation is very poor while collecting milk from primary villages/producers

·  In appropriate use of milk containers; most o f the equipments are not easily portable by human labor

·  Lack of appropriate means of transportation- forces them to use the Jerkins because the transportation they are using is ordinary car (which the merchants use for multi-purpose transportation), & is unfavorable to transport milk with Aluminum containers

·  Lack of utilities such electricity at the collection centre

·  Lack of skills to negotiate/bargain among the cooperative management

Day 2: 9/5/2013

Location: Diredawa

Firm i: Handayle dairy farm.

Person contacted: Dimraile Hamdayle- 0923202377

General Overview and assessment

The farm was established before 20 years, with 50 Holliston Frisian( breed) cows which gradually grown to 400 cows of the same breed.The product produced at the farm includes pasteurized milk, yoghurt, butter, ice cream and cheese.

The farm’s scale of operation was very big with an intention of covering the milk demand of Diredawa town and gradually expands to other markets such as Addis Ababa and Djibouti.The farm had demonstrated the capacity of covering the market dd in Dire Dawa and start new market in Addis but unable to do the second because of difficulty in the transportation cost. Due to the aforementioned challenge it decided to limit its operation in Diredawa & continued production and distribution of the products in different forms. But it had been operating in lose Since the last six years due to the fact that it was operating under economy of scale.

The company reported that productivity of the first 50 cows was exceptionally high; which is about 70 litres/day & after inbreeding was practiced among the existing and newly born off-springs, gradual productivity reduction was observed; to 20 litres per day and then 7-10 litre/day. Decline in productivity together with high feed cost brought serious challenge to the farm to continue as a profitable plant. The farm as a pioneer commercial dairy farm in DireDawa, it used to take the by-product of Diredawa food complex with out any competitor, but lateron obligued to be exposed to tough competition when newly established dairy farms enter into the market as food complex started to bid out the feed through its formal bureaucratic procedure.

The manager of this company is expressing the comparison analysis of feed cost in a parallel way with that of sales price per liter of milk as follows:

Year Feed cost Sales /litre

1993 40 ETB/Q 3 ETB/Lit

2008 190 ETB/Q 7ETB/Litre

2012 >400 ETB/Q 14 ETB/Litre

Change over the period > 10 * 5 *

To cope up feed shortage problem and tough feed price competition, Hamdayle dairy farm had started its own feed farm which was developed under mixed mechanism of sprinkled irrigation and rain fed . Due to Erratic rain fall & irregularity of water availability, the farm had experienced repeated feed crop failure/damaged.

Though the company has tried several mechanisms to rescue the farm, it was ended up its operation with lose until the last six months & finally opted to shut down the firm to avoid unnecessary overhead costs. Now the farm has switched its business to poultry & Gibson, panting factory since November 2012.

Challenges encountered & factors led the farm to shut down

·  High temperatures and erratic rain fall hindering feed production at own farm & local level

·  Slow pace of Milk consumption habit among the HHs to develop the mkt

·  Low availability and high price of commercial feed

·  Low selling price of pasteurized milk( 3birr/ at the beginning, and then 7 birr and now 14 birr- however these price doesn’t compensate the cost of production)

·  Less accessibility to improved Breed

·  Low managerial and entrepreneurial capacity to product dev’t , positioning and marketing strategies( self estimation of the team)

Dairy Farm ii. Hafkath Dairy Farm

Contacted person: Yismashewa ZemedAgenehu, Manager

Mobile: 0915-015-600

It was established before 19 years with few fresian breeds and gradually grown to 61 cows currently. Its products are mainly sold to HHs on contractual basis solely fresh milk and in certain cases Yoghurt. Th e manager has expressed that demand is ever growing from the HH, retailers and café/restaurant.During the rainy season a cow in the farm produces 20 litres of milk / day which reduces to 14-16 lit/day in the dry season. Though the demand is sharply growing, the company is being challenged by feed price fluctuation as there is no traceable feed supplier in the area. To cope up with this, the company has started production of alpha alpha and elephant grass on its own plot of land, using well constructed in the farm. However the farm is trying to solve feed availability problem in such a way, it still negatively affects profitability of the enterprise, as it boost up operation cost due the labor cost incurred in the feed production.

As the other coping mechanism the company is using diversification of business ( construction ) with in the same farm such as machinery rental and construction businesses to augment the least profitable businesses, like the dairy farm in this case.

Recommendation from Hafkath Dairy farm manager

·  Government and other stakeholders should engage to promotion of feed business development, through motivating new businesses to enter the feed business

·  Government should encourage privatization of Vet services

·  Dairy farmers should find their own feed production to cope up with the shortage.

·  Encourage stakeholder platform and nurture dialogues among different actors(PP)

·  Government Subsidy and tax exemption as a motivating factor for new entrants to the feed business

Challenges

·  Tough and uncalculated feed price Competition among actors

·  Feed shortage/ inconsistency in the supply

· 

Airy Farm iii. DPRIMO Dairy farm:

Ato Menelik Owner and General Manager, M- 0911603096

Introduction.

The company was started Before six years with four cross breed cows(one 85% exotic, and three 50% exotic cows). Currently the company has 19 lactating ,20 non lactating and 12 heifers. The products of the company are fresh milk, pasteurized milk, butter and yoghurt and cheese. When feasibility is evaluated cheese is more feasible, according to the manager; 10 litres of fresh milk is sold for 140 ETB, whereas a kilo of cheese which is made of ten lit of milk is sold for 180 ETB. If not for the benefit of the HHs, cheese marketing is more profitable for the company than the fresh/raw milk. Interference of local government officials is one of the challenges the company currently has. The assessment team has surprisingly asked the manager how the local gov’t interferes in private business decision making. According to the manager, the plot of land that the company currently uses belongs to kebele, which means the company has no confidence to make market decisions by its own; rather compromise marketing decisions to prevent unnecessary stress might occur from the local government. The dairy farm produces 370 litres per day in own farm, and collects 280 litres from other dairy farmers

The suppliers of this company are previously 10 in number from around DD, and 6 of them are being rejected by the company due to adulteration problems; Hurso military camp is one among others. The company uses lactometer for quality check.

It buys the milk from the producers at 14 birr/litre and sells at 20 birr/litre, but in certain circumstances it is forced to sell to the neighboring HHs at 14 birr due to the command from kebele administrators. The maximum & minimum sales volume of the company is 800 and 200 liters/ day, respectively, which also shows the peak and slack period.

Primo Dairy farm provides transportation services to the producers/ suppliers and uses his own aluminum containers for transportation. It also gives vet. Extension services to the milk suppliers and uses Ice-box while it distributes the milk to its sticky customers such as cafeterias HHs who take on contract.

To overcome the stress might be happen to the cows due to high temp, the company prepared air conditioners in the barn and also is under planning to prepare spraying for cooling purpose .

The farm is working towards ensuring balanced feed ration formulated by professionals, using chopping & milling machines, as it belied that quality feed contributes to increased production. With this understanding the company is bringing feed additives from Adama and Metahara sugar

One interesting practice the team observed in this company is that it permanently ( every month) assess market information, which mostly focus on price information and customer needs. Continuous customer feed back is also gathered by telephone survey.

we have realized that the company hasn’t get any financial/loan services, due to lack of legal personality from the local gov’t. Availability of private premises, which is also a precondition to secure legal personality, is the main reason why this company is unable to access to finance.

The owner and general manager of this company, Ato Minilik is very conscious about climate vulnerability and responded to the group that his company is undertaking various adaptation mechanisms. As part of this his company started to grow its own feed, use conditioner for his cows and preparing sprayer for his cows.

Seasonal calendar:

·  During fasting- the demand goes down, which implies price goes down ( 10 birr/litre)

·  During Rainy season ( milk consumption) prices goes down because the surplus production from nearby pastoralists become a lowering force for price.

Challenges

·  Long Legal process to get legal personality &low support from the local government.

·  Poor Quality-&adulteration practices from some customers

·  Poor storage/ container among th esuppliers

·  Irregularity of Utilities/ electricity, water, telephone

·  Poor artificial insemination services

·  Feed availability

Recommendation

·  Facilitation of development actors to link dairy farmers with improved & quality breed.

·  Encourage Private AI providers- import high quality Pedigree???? To be confirmed and see them in Addis

Day III

Visit 1- Alnasir Milk Cooperative in Gursum Somali

Contacted people:

1.  Ato

2.  W/ro

3.  W/ro

Business of the cooperative: Collection and Sale of Milk

Overview of the Cooperative business: Alnasir Milk Coop is established by a group of 52 women and one man in 2010. The aim of this coop society is to tap an opportunity of huge milk potential prevailing in their area as a collector and supply the same to whole buyers (JJ & Wachale). Members of the cooperative has elected --- people among themselves to manage the transactions& communicate the business with whole buyers in Jijiga and Wachale, who in-turn take the product to the end users in Hargessa. Since its inception the coop has been undertaking the transaction mostly with two big buyers; Abdulfatah from JJ and Farole from Wachale.

Collection potential: