Leading the way in Agriculture and Rural Research, Education and Consulting SRUC is a charity registered in Scotland, No. SC003712 www.sruc.ac.uk Cesar Revoredo-Giha 1 , Rollins Chitika 2 1 Scotland’s Rural College 2 African Institute of Corporate Citizenship West Mains Road Nedbank House, Edinburgh, EH9 3JG, Scotland, UK Off Independence Drive, Private Bag 382, E-mail: [email protected] Lilongwe 3, Malawi Background Fractured supply chains have been identified as a barrier to growth for the agricultural sector. In this regard, African agriculture is particularly handicapped. Hence, the purpose of this project is to address some of the key challenges through an assessment of the current and potential contribution of the dairy sector to economic growth and food security in Malawi. Identifying Barriers for the Development of the Dairy Supply Chain in Malawi Acknowledgements This research is part of the DFID-ESRC funded project “Assessing the Contribution of Dairy Sector to Economic Growth and Food Security in Malawi” (ES/J009202/1), which runs between 2012-2015. 4. Low milk quality standards - The lack of enforcement as regards quality creates opportunities for profiting by lowering the standards. This happens, for instance, in the form of new MBGs opened by traders seeing business opportunities. The new entrants are less stringent on quality so farmers shift to them because they accept more water for the same price. Processors always agree to take the milk even if they have an existing MBG next door for fear that if they do not one of their competitors will. 5. High margins for mass consumption milk in supermarkets - The majority of processed milk is purchased by consumer from supermarkets and small shops. An analysis carried out last year carried out in Lilongwe and Blantyre found that although processors recommended retail margins between 12 to 22 per cent, actually the highest retailers’ margins were found for the 250 ml. bags of pasteurised and ultra-pasteurised milk. This is important for food security since these products are targeted at low income consumers. Fieldwork was carried out in two stages: first, a survey to 450 producers over the country was carried out in April 2013; the second stage, carried out during June-July 2013 comprised surveys to milk bulking groups, processors, visits to retailers and interviews to consumers. Farmers queuing to deliver milk at Chisomo MBG following a delayed collection by the processor. This highlights difficulties MBGs face concerning storage capacity and the logistics of processor collection and farmer deliveries. Milk churns and plastic pails are used as carrying vessels normally carried on foot or bicycle. Photo: S Thomson Methodology Figure 2: Location of SHMPA MBGs Surveyed Figure 1: Location of MBGs Surveyed Milk buyer & farmer agreeing milk volume at Chitsanzo MBG. MBG extension: telling farmers about water requirements of cows. Milk buyer assessing milk quality at Lumbadzi MBG. Photos: S Thomson and A Barnes 2. Infrastructure constraints at the milk bulking group level - There are problems with break down of generators and also electricity black-outs, leading to spoilt milk. Nearly half the MBGs do not have a backup generator / energy source. Cost of energy is a continuously cited problem. There can also be delays in processor uplift meaning those milk bulking groups with limited excess storage capacity can be faced with spoiling of milk or being unable to accept additional deliveries from farmers. 3. Prices paid to farmers - The price of milk in Malawi is set by processors and it is characterised by the sporadic adjustment of prices (nominal price expressed in Kwachas/litre). In a country with an annual inflation of above 20% this sort of adjustment implies that any increment in the actual price is actually eroded by inflation reducing its purchasing power. Project Purpose The purpose of this project is to identify the barriers faced by the dairy chain in Malawi through an assessment of its operation from producers to consumers. Findings Five key issues identified so far on the analysis: 1. Efficiency heterogeneity in dairy production and lack of cows constraining the pass on programme - Producers have different levels of efficiency in the production of milk and several reasons have been identified for this (e.g. feed quality and quantity). In addition, lack of cows was voiced as an issue that restricted farmers’ membership into the pass-on programme (an efficient way to expand of number of well-qualified dairy producers). The programme is restricted by the speed at which heifer calves are born from new members’ cows. In-calf heifers are often (but not exclusively) passed to female members of the household, with many milk bulking groups targeting households in poverty. Project: ‘Assessing the Contribution of the Dairy Sector to Economic Growth and Food Security in Malawi’ Start-up date: June 2012 Project beneficiaries: The dairy sector in Malawi Services provided: Analysis of the dairy supply chain in Malawi Location: The project is a research project; it is multidisciplinary and builds on the existing academic link between SRUC, Bunda College of Agriculture in Malawi and the African Institute of Corporate Citizenship (AICC), Malawi office. Figure 2: Nominal and real weighted average price of milk paid to farmers by processors Source: Own elaboration based on Shire Highlands Milk Producers Association (SHMPA) data. 0 5 10 15 20 25 0 20 40 60 80 100 120 140 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Real price in 2000 Kwachas Nominal price in Kwachas Nominal price Real price Linear (Real price)
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Leading the way in Agriculture and Rural Research, Education and Consulting SRUC is a charity registered in Scotland, No. SC003712
www.sruc.ac.uk
Cesar Revoredo-Giha1, Rollins Chitika2
1Scotland’s Rural College 2African Institute of Corporate Citizenship
West Mains Road Nedbank House,
Edinburgh, EH9 3JG, Scotland, UK Off Independence Drive, Private Bag 382,
E-mail: [email protected] Lilongwe 3, Malawi
Background
Fractured supply chains have been identified as a barrier to growth for the
agricultural sector. In this regard, African agriculture is particularly
handicapped. Hence, the purpose of this project is to address some of the
key challenges through an assessment of the current and potential
contribution of the dairy sector to economic growth and food security in
Malawi.
Identifying Barriers for the Development of the Dairy Supply Chain in Malawi
Acknowledgements
This research is part of the DFID-ESRC funded project “Assessing the Contribution of
Dairy Sector to Economic Growth and Food Security in Malawi” (ES/J009202/1), which
runs between 2012-2015.
4. Low milk quality standards - The lack of enforcement as regards quality
creates opportunities for profiting by lowering the standards. This happens,
for instance, in the form of new MBGs opened by traders seeing business
opportunities. The new entrants are less stringent on quality so farmers shift
to them because they accept more water for the same price. Processors
always agree to take the milk even if they have an existing MBG next door for
fear that if they do not one of their competitors will.
5. High margins for mass consumption milk in supermarkets - The
majority of processed milk is purchased by consumer from supermarkets and
small shops. An analysis carried out last year carried out in Lilongwe and
Blantyre found that although processors recommended retail margins
between 12 to 22 per cent, actually the highest retailers’ margins were found
for the 250 ml. bags of pasteurised and ultra-pasteurised milk. This is
important for food security since these products are targeted at low income
consumers.
Fieldwork was carried out in two stages: first, a survey to 450 producers
over the country was carried out in April 2013; the second stage, carried
out during June-July 2013 comprised surveys to milk bulking groups,
processors, visits to retailers and interviews to consumers.
Farmers queuing to deliver
milk at Chisomo MBG
following a delayed
collection by the processor.
This highlights difficulties
MBGs face concerning
storage capacity and the
logistics of processor
collection and farmer
deliveries. Milk churns and
plastic pails are used as
carrying vessels normally
carried on foot or bicycle.
Photo: S Thomson
Methodology
Figure 2: Location of SHMPA MBGs SurveyedFigure 1: Location of MBGs Surveyed
Milk buyer & farmer
agreeing milk volume
at Chitsanzo MBG.
MBG extension: telling
farmers about water
requirements of cows.
Milk buyer assessing milk quality at
Lumbadzi MBG.
Photos: S Thomson and A Barnes
2. Infrastructure constraints at the milk bulking group level - There are
problems with break down of generators and also electricity black-outs,
leading to spoilt milk. Nearly half the MBGs do not have a backup generator /
energy source. Cost of energy is a continuously cited problem. There can
also be delays in processor uplift meaning those milk bulking groups with
limited excess storage capacity can be faced with spoiling of milk or being
unable to accept additional deliveries from farmers.
3. Prices paid to farmers - The price of milk in Malawi is set by processors
and it is characterised by the sporadic adjustment of prices (nominal price
expressed in Kwachas/litre). In a country with an annual inflation of above
20% this sort of adjustment implies that any increment in the actual price is
actually eroded by inflation reducing its purchasing power.
Project Purpose
The purpose of this project is to identify the barriers faced by the dairy
chain in Malawi through an assessment of its operation from producers to
consumers.
Findings
Five key issues identified so far on the analysis:
1. Efficiency heterogeneity in dairy production and lack of cows
constraining the pass on programme - Producers have different levels of
efficiency in the production of milk and several reasons have been identified
for this (e.g. feed quality and quantity). In addition, lack of cows was voiced
as an issue that restricted farmers’ membership into the pass-on programme
(an efficient way to expand of number of well-qualified dairy producers). The
programme is restricted by the speed at which heifer calves are born from
new members’ cows. In-calf heifers are often (but not exclusively) passed to
female members of the household, with many milk bulking groups targeting
households in poverty.
Project: ‘Assessing the Contribution of the Dairy Sector to Economic Growth
and Food Security in Malawi’
Start-up date: June 2012
Project beneficiaries: The dairy sector in Malawi
Services provided: Analysis of the dairy supply chain in Malawi
Location: The project is a research project; it is multidisciplinary and builds on
the existing academic link between SRUC, Bunda College of Agriculture in
Malawi and the African Institute of Corporate Citizenship (AICC), Malawi
office.
Figure 2: Nominal and real weighted average price of milk paid to farmers by processors
Source: Own elaboration based on Shire Highlands Milk Producers Association (SHMPA) data.
0
5
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Nominal price Real price Linear (Real price)
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