The ‘cream’ from more efficient dairying: Kenya to pilot scheme to pay smallholders for their environmental services

Global Agenda: 1 of 3 objectives

One of three objectives of the Global Agenda of Action in Support of Sustainable Livestock Sector Development. Its Third Multi-Stakeholder Platform Meeting was co-hosted in Nairobi, Kenya, by ILRI, FAO and AU-IBAR, 22-24 Jan 2013 (photo credit: ILRI/Susan MacMillan).

Guest blog post by ILRI’s Simon Fraval

In collaboration with the Food and Agricultural Organization of the United Nations (FAO) and the Kenya Ministry of Livestock Development, researchers at the International Livestock Research Institute (ILRI) are assessing the feasibility of the Kenyan dairy industry obtaining payment for its environmental services through productivity gains. (See this ILRI position paper for more information on ‘payment for environmental services’ schemes).

Reducing the level of greenhouse gases generated per unit of milk produced by smallholder farmers could be attractive to environmental markets. While this project will not provide direct money transfers to Kenya’s dairy farmers, it will support agricultural extension for better cow nutrition and other interventions made to increase milk production while also reducing emissions of greenhouse gases per unit of milk.

The concept gained momentum at an interim preparatory committee meeting of the Global Agenda of Action in Support of Sustainable Livestock Sector Development held in Rome in September 2012.

The Global Agenda is committed to broad-based, voluntary and informal stakeholder actions improving the performance of the livestock sector. It ambitiously aims to protect natural resources as well as to reduce poverty and protect public health. The Agenda’s stakeholders have agreed initially to focus on the following three objectives: Close the efficiency gap in livestock production systems, restore value to grasslands’ environmental services and sustainable livelihoods, and recover and recycle nutrients and energy contained in animal manure. The Agenda is working to achieve these objectives largely through consulting and networking, analyzing and informing, and guiding and piloting.

Progress on the Kenya dairy pilot ‘payment for environmental services’ project was presented at the third multi-stakeholder platform meeting of the Global Agenda, held in Nairobi, Kenya, 22–24 January 2013. This project provided a practical example of the Agenda’s core activity in piloting novel approaches to ‘close the efficiency gap’. The presentation to the Global Agenda meeting can be found on its Livestock Dialogue website.

Pilot workshop on payment for environmental services for Kenya's dairy sector

A stakeholders’ workshop on a pilot ‘payment for environmental services’ project for Kenya’s dairy industry was held in Jan 2013. Pictured left to right: Luke Kessei, Kenya Ministry of Livestock Development; Julius Kiptarus, Director of Livestock Production in Kenya’s Ministry of Livestock Development; Pierre Gerber, Food and Agriculture Organization of the United Nations; and Isabelle Baltenweck, ILRI (photo credit: MLD/Henry Ngeno).

Following the progress update provided at the mid-January 2013 Global Agenda meeting, a stakeholder workshop was held later in the month (29 Jan 2013) engaging representatives from the Kenya Dairy Board, the Kenya Agricultural Research Institute, the Kenya Dairy Processors Association, Kenyan livestock and cooperation ministries, development organizations and ILRI. The workshop was attended by Julius Kiptarus, Director of Livestock Production in Kenya’s Ministry of Livestock Development.

Stakeholders of the pilot ‘payment for environmental services’ project for Kenya’s dairy industry discussed the intricacies of such schemes, particularly carbon markets; site selection; potential greenhouse gas mitigation activities; and the design of a feasibility study. View slide presentations from this workshop here.

Technical mitigation options in dairy from ILRI: By Caroline Opiyo, of FAO.

This pilot project is the first to access markets for payment for environmental services schemes through productivity gains in smallholder livestock enterprises. With the setting of this precedent and development of an internationally recognized methodology, development organizations will be able to replicate this pilot project and draw funding from the carbon market and other providers of ‘payment for environmental services’ schemes.

For more information, please contact Simon Fraval, a volunteer with AusAID’s Australian Youth Ambassadors for Development program placed at ILRI’s Nairobi headquarters, where he supports CGIAR research programs on ‘Climate Change, Agriculture, and Food Security’ and ‘Livestock and Fish: More meat, milk and fish by and for the poor’. Fraval brings to ILRI expertise in livestock value-chain development and life-cycle assessment. Contact him at s.fraval [at] cigar.org

Milk markets as ‘the great equalizer’ in East Africa?

Making agriculture profitable for poor farmers builds self-sufficiency

A dairy farmer in Kenya. Incorporating informal milk producers and traders into the country’s formal milk markets is improving the welfare of the poor (photo credit: Flickr/Gates Foundation).

Remarkably, more than 80 per cent of the milk produced and sold in Kenya comes from small-scale players, typically farmers raising one or two dairy cows on small plots of land and milk hawkers plying their trade on bicycles on streets and in villages.

The fast-growing dairy sector in this East African country could help tens of thousands of people climb out of poverty. But this will require supporting small-scale milk producers and traders in gradually entering the country’s formal milk markets.

Until recently, Kenya’s informal milk producers and traders were harassed rather than supported by officials because they were unregulated and were perceived to be a threat to public health.

A chapter in a new book, Towards priority actions for market development for African farmers, describes how Kenya’s small milk producers and sellers are being integrated into formal dairy markets. Authors Amos Omore and Derek Baker, from the International Livestock Research Institute (ILRI), say that what was needed was ‘recognizing and embracing’ the big contributions of dairy’s informal producers and traders and the potential role played by the informal milk markets in fighting poverty. According to the researchers, the removal of policy barriers to allow price-based competition to govern milk trade is enabling this informal dairy industry to significantly improve the welfare of the poor.

Using lessons and examples from a highly collaborative research and development Smallholder Dairy Project, the authors point out that training and certifying small-scale milk traders helps draw the informal milk producers and traders into a more ‘formal’ trading environment. This training also raises consumer confidence by improving and guaranteeing the quality of milk produced for market. With this training, which also teaches business and entrepreneurial skills, the small market players are increasing their incomes as well as milk consumption among poor communities.

‘This dairy project was instrumental in bringing about “mind-set and policy changes” and an impact on the profits made by milk producers in Kenya,’ say Omore and Baker. ‘It also provided a new model of incorporating these small producers into the formal sector.’

Carried out between 1997 and 2005, the Smallholder Dairy Project was led by Kenya’s Ministry of Livestock and Fisheries Development and implemented by ILRI and the Kenya Agricultural Research Institute. It was funded by the UK Department for International Development.

Kenya’s dairy industry, one of the largest in Africa, is supported by over 1.8 million mostly small-scale cattle producers who at the time of implementing the Smallholder Dairy Project supplied over 86 per cent of the country’s milk through direct milk sales from producers to consumers and from dairy farmer groups and over 40,000 small-scale farmers.

The chapter argues that small-scale milk traders trained and certified by the Kenya Dairy Board improved their hygienic practices in milk production and handling. These efforts have brought about ‘direct and sustainable benefits’ for dairy-dependent livelihoods, including making more milk available in the market and higher prices. More licensed small-scale vendors now to operate in the country contributing to more competitive prices that encourage farmers to produce more milk.

The success of the dairy project in mainstreaming Kenya’s the informal milk producers into Kenya’s dairy industry led to a revision of the country’s licensing processes, which then began to start recognizing these informal milk sellers. A 2004 dairy policy change paved the way for significant increases in the number of traders adopting milk testing methods, greater enforcement and compliance in milk quality control and an on-going regional harmonization of dairy policies and standards aiming to transform informal milk markets in Rwanda, Tanzania and Uganda along the lines of the Smallholder Dairy Project in Kenya.

For the tens of thousands of small milk producers in Kenya, these policy changes have made a great difference. Evidence suggest that without the Smallholder Dairy Project, these benefits would have taken another two decades to come to small-scale dairy sector players.

Read the full chapter (part of section 4):

http://mahider.ilri.org/bitstream/handle/10568/16491/AGRA-ILRI-Section4.pdf

Download the whole book:

http://mahider.ilri.org/handle/10568/16491

For more information about the Smallholder Dairy Project visit: http://www.smallholderdairy.org/default.htm

 

Changes in Kenya’s dairy policy give wide-ranging benefits to milk industry players, new study shows

Woman milking

A dairy farmer milks a cow in Kenya’s Nyandarua district. Kenyan small-scale dairy farmers are benefitting from  the dairy policy changes that began in 2004. (Photo credit: East African Dairy Development Project)

Recent findings from an assessment of the impacts of the Kenya dairy policy change of September 2004 show that changes in the sector, which incorporated small-scale milk producers and traders into the milk value chain and liberalised informal milk markets, have led to an increase in the amount of milk marketed, increased licensing of milk vendors and an increased demand for milk leading to benefits of US$230 million for Kenyan milk producers, vendors and consumers over the past 10 years (US$33 million per year).

The study, conducted between August 2007 and January 2008 among milk producers, vendors and dairy farmers in Nairobi, Nakuru, Thika and Kiambu towns, shows there was a threefold increase in marketed milk in all the towns with Nairobi recording a fourfold increase between 2004 and 2008. The findings also show that overall, ‘small-scale dairy operators have profited from quick, relatively high volume turnovers and welfare benefits to small-scale vendors have increased,’ since the introduction of the new policies in Kenya’s dairy industry.

According to the study ‘allowing licenced small-scale milk vendors to operate leads to increased milk supply to the retail market’ and it also found a continual increase in the number of small-scale milk vendors acquiring licences since 2004 to run milk bars to meet the increased demand for milk.

The study’s findings show that in Nairobi, the highest profits were gained by non-producer mobile traders, followed by milk bars and mobile transporters while in Nakuru those who benefited the most were producer mobile traders. The study, however, notes that the changes in policy also led to a decrease in market margins for retailers with an average 9% reduction across the surveyed towns. Milk traders in Nairobi experienced a reduction of Ksh 0.80 (US$0.012) per litre of milk sold.

With nearly 800,000 Kenyan smallholder households depending on dairying for their livelihoods and the dairy sector providing employment to over 350,000 people in milk collection, transportation, processing and sales; the dairy industry plays an important role in meeting the livelihood needs of poor Kenyan households as well as in contributing to Kenya’s economic development.

The study ‘Kenyan dairy policy change: influence pathways and economic impacts,’ was carried out by Amos Omore, a scientist with the International Livestock Research Institute (ILRI), among others researchers from Qatar University, Norwegian Institute of International Affairs and the World Agroforestry Centre (ICRAF). It assessed the impact of the Smallholder Dairy Project (SDP) and its contribution to the revised Kenya dairy policy and looked at the behavioural changes among field regulators and small-scale milk vendors resulting from recognition of their role in the milk value chain. The study also estimated the economic impact of the policy on producers, vendor and consumers.

Among the study’s other findings is that as a result of the new policies, milk handlers across the country are better trained, ‘with 85% reporting they had been trained on milk handling and quality control methods’ and that it is now much easier for producers and vendors to acquire licenses for their operations. Training and licensing is carried out by the Kenya Dairy Board and the Public Health Department who are now ensuring that licensed outlets and premises, especially those run by small-scale milk vendors, meet all hygiene, testing, sanitation and health requirements for milk handling. They also assist the milk vendors to meet these condition and this change in approach means that nearly all producers and traders understand the requirements of milk handling and quality control.

Kenya has made significant progress in liberalizing its dairy industry and is working towards training and licensing more small-scale milk vendors to allow them to fully engage in the formal milk sector. As a result of these experiences, the study says, there has been ‘behavioural changes among regulators and small-scale milk vendors that has led to positive economic benefits across Kenya.’

To read the complete report and its findings, visit http://dx.doi.org/10.1016/j.worlddev.2010.06.008

The Smallholder Dairy Project which started in 1997 and ended in August 2005 was implemented by ILRI, Kenya Agricultural Research Institute and the Kenya Ministry of Livestock and Fisheries Development. It was funded by the UK Department for International Development. To read more about the project and its achievements, visit http://www.smallholderdairy.org/default.htm