SDVC Project Summary
The Dairy Sector in Bangladesh Figure 1: The Dairy Value Chain in Bangladesh Dairying activity in Bangladesh is comprised of two somewhat overlapping but weakly integrated systems: the informal semisubsistence local market system and the improved commercial value chain (see the value chain diagram, Figure 1). The informal market is characterized by smallholder mixed farms with 1-3 local breed cows that subsist on low quality feed and other inputs. Producers sell perhaps 1 liter of milk per day to local buyers at low and fluctuating prices with few hygiene practices. The formal market includes large and medium sized private sector processing companies that collect, refrigerate, pasteurize, process and package milk and milk products for consumption primarily in urban centers. For smallholders to benefit from dairy production they must overcome challenges including low productivity and profit margins, limited access to quality inputs, low informal market prices, geographically disaggregated production, and a lack of transparency and efficiency in dairy transactions. Further up the economic ladder, commercial diary processors face a different challenge—insufficient supply of quality milk. Operating below capacity, these companies are unable to satisfy the booming demand for dairy products in the urban areas. In fact, they receive only nine per cent of the country’s domestic milk production, requiring the country to import 27% of its milk consumption needs. Apart from foregone business opportunities and unrealized profits, highly unequal distribution of milk products between rural and urban regions leads to the escalating malnutrition rates, especially among children. In Bangladesh, 48 percent of children under five are chronically malnourished and 30 percent of the total population is below the minimum level of dietary energy consumption. Yet, although Bangladesh’s dairy sector is weak and fragmented, the potential for a more aligned and integrated value chain to simultaneously improve the livelihoods of small farmers and the businesses of processors is significant. to $40-50 per month. In addition to helping milk-producing small scale and landless farmers to enhance their livelihoods, by taking a value chain approach the project also aims to benefit a range of dairy value chain actors, including 350 milk collectors, 165 paravets, private sector processors, investors, and transporters. Holistic Value Chain Intervention The SDVC project has taken a holistic approach to strengthening the dairy value chain (Figure 1) through a series of market-based interventions that engage a variety of stakeholders and address many of the inherent weaknesses of the system. Having identified as series of key constraints CARE developed a comprehensive response strategy, broadly focused on: • Working to improve producer capacity, knowledge, market power and agency through organizing farmers into dairy producer groups • Improving access to quality inputs and services through partnerships with various private sector actors; and, • Creating linkages between producers and formal or informal market buyers through a range of delivery channels. CARE’s Response In 2007, CARE launched the Strengthening the Dairy Value Chain (SDVC) project, a 5-year, US $5.25 million initiative funded by the Bill and Melinda Gates Foundation aims to improve the livelihoods of 35,000 rural smallholder and landless households (175,000 individuals) in nine districts in north and northwest Bangladesh by enhancing their participation in and profits from the strengthened dairy value chain. By project end, CARE Bangladesh expects to increase household incomes of participants from a current $18-30 per month Using a facilitation approach to create market linkages, SDVC staff members create opportunities for village producers and farmer leaders to meet and get to know other important value chain actors such as chilling plant managers, feed and medicine sellers, vets and animal health workers, informal sector milk buyers, and artificial insemination service providers. Simultaneously, CARE has built relationships with all of the country’s major milk processors, as well as a number of strategic medium-sized and small processors and retailers to enhance demand for milk produced by CARE-facilitated groups. In addition to these core activities, CARE is continually pursuing strategic pilots to test potential solutions to bottlenecks in the dairy value chain and improve producer outcomes. Some efforts of note include: Community-Based Dairy Veterinary Services. This effort is testing a new approach to providing smallholders with access to quality dairy services and inputs. Rural Sales Program / SDVC Linkage. This pilot is facilitating smallholder producer access to improved dairy inputs, including improved animal feed and veterinary services, by integrating dairy input commerce in the Rural Sales Program’s retail distribution network which has 3,000 active agents. Participatory Performance Tracking Matrix. This unique, interactive tool allows CARE field staff to systematically collect and analyze data from dairy producers, promoting CARE’s accountability, supporting cooperation among the members of producer groups and allowing CARE to better identify and address potential problem areas. Introducing Digital Lactometers. CARE introduced a pilot for milk collectors and processors to use digital lactometers to assess the quality of the milk, and set an appropriately fair price. The transparency this enables (as opposed to buying by weight) has improved milk quality in the supply chain and enhanced trust among market actors. By focusing on a combination of core activities and innovative pilots, SDVC is advancing toward its targets while also taking on forward-looking challenges to long-term, pro-poor growth in the Bangladesh dairy sector. Results As of April 2010, SDVC has organized over 15,000 farming households into 519 producer groups and trained 163 milk collectors and 120 local animal health workers. Households have increased milk production 78% to 2.1 l/day and have increased their dairy related incomes 31% to 30 Taka($0.43)/ day. The percentage of SDVC producers, 77% of whom are women, selling milk to private sector processors increased from 25% to 29% and the average price received by farmers increased 5% to 26.5 Taka ($0.38). Women farmer leaders are successfully leading 65% of farmer groups and providing animal health and feeding advice to group members and their communities. SDVC has also signed MOUs with the major processors BRAC, PRAN and Milk Vita to help them think through how they could provide needed inputs and services to lowincome farmers on a profitable commercial basis. To further address the challenge of access to quality inputs for farmers, SDVC is supporting the development of a grassroots network of dairy input and service shops where farmers can buy quality feed and medicines and procure veterinary and artificial insemination services. CARE has also made progress in positively influencing the overall policy environment for the dairy sector by commissioning evidence-based research on specific issues constraining the industry, and then convening a national conference and issue-specific multi-stakeholder advocacy groups to work together on achieving the necessary improvements in government policy and regulation. 1 Narayan and Zaman (2009). Breaking Down Poverty in Bangladesh. Dhaka, Bangladesh: University Press Limited. See also Haque (2007). Improved Market Access and Smallholder Dairy Farmer Participation for Sustainable Dairy Development. Living in poverty in this co ntext means consuming less than 1 ,900 calories per day (the minimum desired level is 2,300). 2 Haque (2007). Improved Market Access and Smallholder Dairy Farmer Participation for Sustainable Dairy Development. 3 Ibid. 4 CARE. (2007). Strengthening the Dairy Value Chain in Bangladesh: Proposal to the Bill and Melinda Gates Foundation. 5 Ibid 6 WHO, 2009. Health Action in Crisis: Bangladesh. See also Barker, K. And Hin sch , M. 2009, TetraPak in Bangladesh. 7 WHO, 2005. Regional Health Situation: Bangladesh. 8 For more information on each initiative, please refer to the individual case studies. 9 All figures from SDVC’s Semi-Annual Report to the Bill and Melinda Gates Fou ndation, April 2010.