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Developing a value-added dairy sector in West Africa

02 May 2011

Regional press sources have reported on a workshop held in late December in Dakar to take forward the findings of a study carried out by GRET, examining the dairy sector in Senegal and challenges and opportunities for a dairy enterprise in the country. ‘Laiterie du berger’, a company set up in 2006 as a ‘social business’, aims to ‘add value and develop local dairy production, while bringing a regular income to dairy farmers. The company now processes 2,500 litres of fresh milk every day from 630 farmers, up from 500 litres 4 years earlier, and aims to reach over 4,100 litres from 1000 farmers by the end of 2012, although this is still far from its daily capacity of 10,000 litres.

A major issue noted in the press report is ‘the impact of imports on the balance of trade of a country that imports over 40,000 tonnes of milk, worth some 58bn CFA francs [€88.4m]’, impacting on ‘those working in the industry as well as on farmers’. The GRET study raises a number of environmental issues as well as technical and management capacity issues. The next steps for the company include ‘dialogue between the different professional parties involved in the dairy industry’. The press report notes that the big issue for developing dairy farming in Senegal is ‘a regulatory framework that generally puts the local industry at an unfair disadvantage, while the low price for the more competitive milk powder is known to be linked to subsidies in the countries of production’.

As regards wider milk production in West Africa, a workshop held in September 2010 on the role of stakeholder bodies in developing the potential of the milk sector highlighted a multiplicity of factors holding back local milk production, including:

  • a lack of structural investment in developing value chains;
  • a lack of stakeholder organisation in the sector, preventing farmers from accessing available markets;
  • a relative neglect of small-scale milk producers;
  • a policy tendency towards favouring dairy processors over milk producers, in order to supply low-cost dairy product to urban consumers.

Despite this, the conference report noted a growing policy focus on developing milk production in West Africa, as it is one of 14 WAEMU priority sectors. The workshop called for greater investment in developing the production and marketing of milk, and noted the need for a regulated flow of milk powder and other dairy imports, in line with national milk-sector development strategies.

The report also called for the activation of a wide range of other policy measures to improve access to animal feed, credit, inputs and technology, as well as increased investment in infrastructure development.

The report noted that at present, small-scale milk production contributed to local food security, generated important cash incomes in rural areas, stimulated rural value-added processing, and potentially offered hope for sustainable employment creation in the dairy sector. A wide variety of specific recommendations arose from the workshop linked to the development and integration of local milk production into dairy-sector value chains.

The external pressures experienced in Senegal can be compared to the dairy sector in Cameroon, described in a Brot für die Welt/EED briefing on the impact of EU milk powder exports on dairy sector developments posted at the end of 2009. This paper highlights how in the 2008-09 period, imports of milk powder from the EU undermined efforts to develop smallholder dairy production in association with a local dairy. According to the director of the smallholder dairy development project, Henry Njakoi, ‘it became increasingly clear … there was no real chance of creating a large-scale dairy business’ when imports of milk powder from Europe enabled competing processors to undercut dairy products manufactured from locally produced milk. While imports from the EU are only part of the challenge facing dairy sector development in Cameroon, it was maintained that ‘they send a clear message to all domestic investors to keep out of the dairy economy and let the world market profit from the huge opportunities offered by the Cameroon dairy market’.

Milk and yoghurt costs (SOTRAMILK and CAMLAIT)

Estimated production costs in NW Cameroon

(1 litre of milk)

Price paid to farmers by SOTRAMILK up to 2008

(1 litre of milk)

Price for milk made from EU milk powder

(1 litre of milk)

Price of yoghurt from SOTRA-MILK (± 20% local content)

(per 150g pot)

Price of yoghurt from CAMLAIT (100% EU milk powder)

(per 150g pot)

€ 0.51 €0.68 €0.40 - €0.51 €0.46 €0.34

Editorial comment

The EC, in its recent ‘Prospects for agricultural markets and income’ report, maintained that the EU will face strong export competition in the coming 10 years in bulk dairy products. This means that EU exporters are likely to strongly defend their access to existing markets and to seek expanded access to ‘markets of last resort’ across Africa.

While the EU routinely cuts export refund levels for dairy commodities when world market prices rise, it is the opposite trend, of increasing export refund levels when world market prices fall, which is the major source of concern in Africa. While the export of milk powder as raw materials for use in newly established African dairies can enhance capacity utilisation and financial viability while domestic supplies are built up, this requires a carefully conceived import-management policy linked to a national dairy-sector development, if unregulated dairy imports are not to undermine local investor confidence in the returns which can be obtained from dairy-sector investments. This is the principal concern regarding the impact of EU dairy-sector policies.

In this context, it would appear important for African countries to be able to continue using traditional trade-policy tools (e.g. import licences, TRQs etc.) to support dairy-sector development. The current EPA negotiations and the specific discussions on the possibility for ACP countries to use such tools is therefore a key area. The absence of such tools could seriously undermine investor interest in dairy-sector development in countries where EU exports are already entrenched.

This could have far-reaching implications for national dairy-sector development, in the context of the EU’s active use of a range of support measures to sustain and promote domestic EU dairy production, many of which have important external implications (see Agritrade article, ‘ Policy tools critical to turning around crisis in the EU dairy sector’, May 2010). These policies, by insulating EU milk producers from the worst effects of price declines, sustain EU milk production and subsequent exports at levels which would simply not be the case in the absence of this range of safety-net interventions. Being unable to benefit from similar support measures, dairy producers in ACP countries would have to bear the full risk of severe dairy-market price volatility, particularly during periods of declining prices.


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