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

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Milk and dairy products in human nutrition
The impact of scaling up on small-scale farmers will depend partly on the speed
at which it is done. Companies investing in dairying usually buy into existing
market chains through existing companies and hence use their contract arrangements
for local farmers and traders. Over time, the less competitive operators drop
out and the market chains concentrate. This effect may be positive or negative for
producers in remote areas, who can generate a reliable daily or weekly income and
not just food if they are connected to urban markets. It can also affect the ability of
medium-scale dairy processors to find enough milk to keep their plants operating.
Even the most entrepreneurial may face high transport costs because of distance and
are, to a great extent, price takers, as they must sell their milk on the day that it is
produced. Scaling up can be favourable for them if it enables them to operate under
a fair and reliable contract with a company rather than relying on spot-trading with
milk hawkers – but not if a monopoly takes away their power to negotiate. In the
Philippines and Thailand, contract farmers producing pigs and poultry benefitted
from fixed contracts at a time when world-market prices for their products were
falling (Delgado, Narrod and Tiongco, 2003). In the USA, however, contract farming
has been reported to reduce both independence and profits (World Bank, 2005).
It is here that the development of local institutions such as cooperatives and dairy
groups can improve negotiating power and market access and provide economies of
scale in milk preservation and collection.
In urban settings, scaling up offers the potential to provide a steady supply of
safe food. However, the ability to benefit depends on the individual’s income and the
effectiveness of regulations. It is easier and more cost-effective to control product
safety in a market chain when fewer farms are involved. Better-off urban consumers
also appreciate the convenience of integrated dairy market chains and where market
chains are well regulated they also appreciate the reassurance of certified products.
However, as discussed in the previous section, the benefits of integrated market
chains take time and require good regulation to come into effect, and food that is
certified as safe may not be affordable for the urban poor. Food safety requires
investment by all market-chain stakeholders including producers, collectors,
transporters and processors, who are not always rewarded with higher prices. In
some countries foods that are labelled as safer or otherwise of higher quality can
command a higher price; some consumers will not choose to benefit while others
cannot afford to. Given the relatively slow rate of scaling up in the dairy sector, it
is particularly important to ensure that equal attention is given to food-safety practices
suitable for small and medium-sized enterprises so that levels of food safety are
improved throughout the dairy sector, to the benefit of all involved.
All consumers can benefit from economies of scale if the market is large enough;
in developed countries supermarkets have played a part in keeping milk prices down
to the benefit of consumers, although not of farmers.
9.2.5 Local or global
Chapter 2 describes dairy products as being far less traded internationally than
meat, with only about 13 percent by volume being exported, representing 6 percent
of agricultural export value compared with 10 percent for meat. The perishability
of milk and regional preferences for certain dairy products contribute to the high
proportion of milk and dairy products consumed within the countries of origin.