Milk-and-Dairy-Products-in-Human-Nutrition-FAO

Chapter 8 – Dairy-industry development programmes: Their role in food [...] 333
2005, with the new owners investing US$30 million in expanding milk collection
and processing infrastructure. The company now exports UHT milk and powder
to other African countries and the Middle East (FAO, 2011c).
In India producers, mainly small but some large, sell fresh milk directly to urban
and rural consumers, restaurants, hotels, sweet shops, small and large processors.
Contract farming is emerging in India as an important form of vertical coordination
in the agrifood supply chain, giving lower per-unit cost because of bulk-buying
inputs and more cost-effective access to markets (Birthal et al., 2008). Nestlé have
successfully operated a similar system in Pakistan (FAO, 2007b). China’s dairy
chain has four basic modes for market organization: (i) spot market chain; (ii)
cooperation chain; (iii) relation-based alliance; and (iv) entrepreneur’s partnership
mode (Schiere et al., 2007).
The World Bank (2007a) identified five issues in milk marketing: (i) lack of access
to markets; (ii) weak technical capacity; (iii) difficulty in meeting quality standards;
(iv) difficulty in meeting contract conditions; and (v) exposure to investment and
other risks. In many developing countries quality control is difficult because of lack
of trained staff, shortages of grading equipment and high cost of testing relative to
value of each consignment. Emerging industrial dairy chains provide new market
opportunities to Ethiopian farmers but these handle only a few percent of all milk
consumed (Francesconi, Heerink and D’Haese, 2010).
Supermarkets have grown extremely rapidly since the mid-1990s in much of
South America, East Asia outside China (and Japan), northern-central Europe and
the Baltic, South Africa and, more recently, in eastern Africa, adversely affecting
markets for some smallholders (Reardon, Timmer and Berdegue, 2004). Large processors
set higher quantity, quality and uniformity standards for produce, but many
smallholders were unable to afford the investments needed to meet these standards.
For example, Brown (2005) found that many small dairy farmers in Argentina,
Brazil and Chile could not meet standards set by supermarkets and went out of
business. In the latter half of the 1990s, 60 000 small-scale dairy farmers in Brazil
were de-listed by the 12 largest processors; similar patterns were found in Argentina
and Chile. This shows the need for farmers’ organizations to arrange collective
approaches to financing to help small-scale producers meet the quality and volume
trade conditions required by supermarkets.
8.6.2 Organization of milk producers
The previous section highlighted the need for efficient links between producers and
consumers. Individual marketing of highly perishable commodities such as milk
is not viable. Because collective action is needed to manage collection, transport,
processing and marketing and increase smallholder bargaining power, DIDPs
emphasize organization of farmer groups.
The type of organization varies among countries and ranges from informal
groups and partnerships, through formal democratic cooperative structures, to
so-called national cooperatives controlled by governments. The term cooperative
means different things in different regions, but there has been an evolution towards
democratic structures in most countries. In 2002 FAO published a Milk Producer
Group Resource Book, a practical guide to setting up and operating dairy enterprises
(FAO, 2002). Smallholder milk producers must produce top-quality milk at