Bernardo M. Villegas
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Dairy Farming For Poverty Alleviation (Part 1)

          In a comprehensive paper prepared with the help of the New Zealand Embassy entitled “Philippine Dairy Industry Development Strategy”, the topic of my talk seems to be immediately rendered irrelevant with the following very frank assessment: “Dairy farming, especially cattle, is not a viable option for poverty alleviation.  It requires significant investment by farmers in land, cattle and infrastructure.  Growth in dairying can only be achieved through generation of comparatively high profit.  Dairy farming is not an easy option and requires a high level of knowledge and skill to be successful.” In a way, I am glad to read this obviously discouraging observation about milk production in  the Philippines because  it assures me that even the most rabid nationalists and protectionists will not make the same mistake as those policy makers of ours who for decades followed the hopeless path of self-sufficiency in rice and have inflicted so much harm on Filipino consumers and even on the rice farmers themselves who were given the false hope of ever competing with the Thai and Vietnamese rice farmers in farm productivity.  I am sure no one in this assembly will ever recommend that the Philippines be self-sufficient in milk production.

         Despite the pessimistic assessment of the role of dairy farming in poverty alleviation, there is still room for opposing opinions which I will present in this brief paper.  Individually, the small farmer may not be able to assume the risk of putting his very meagre savings, if any at all, in livestock, whether cows, goats or carabaos.  He may neither have the necessary creativity and innovativeness which are crucial to entrepreneurship.  This dilemma is faced again and again in well intentioned efforts to help the poor to venture into entrepreneurial small business activities.  The evidence is still overwhelmingly in favor of not trying to get the poor to be entrepreneurs.  They just need help to acquire the necessary skills to be employed either by middle-income or rich entrepreneurs, workers’ cooperatives or what are called corporatives as in contract farming.   Let me explore a middle way between these opposite views.

`       What role can we assign to the poor in achieving the goal that this present Administration has set for the dairy industry:  to increase the milk sufficiency rate from 1.2% to 10% by 2022.  Indeed, as the strategy paper observes, this is a daunting task and will require significant investment by farmers and support from the government to succeed.  As might have been already alluded to by some of the other speakers, let me first give a brief background of the development strategy for the dairy industry to which I have been referring.  It was funded by the Philippines-New Zealand Dairy Project, with the National Dairy Authority (NDA) facilitating extensive consultation with dairy stakeholders.  Nine provincial workshops, mainly with farmers were followed by three regional workshops involving products, processors, industry bodies, academics and service organizations.  All in all, 685 stakeholders attended these workshops and their contributions were formally recorded.  Data collected from a number of dairy farms, data and information supplied by NDA, including NDA’s draft 2016-2022 Dairy Road Map and other industry information provided by NDA, processors, and input suppliers were taken into account.  Two international consultants were tasked with preparing the draft strategy for feedback from stakeholders.  The Consultants prepared a detailed document based on an in-depth analysis of the dairy industry and this was used as a basis for this strategy.

         To identify what specific role the rural poor can play in the implementation of the strategy, let us first cite how the industry was described in brief in the strategy paper.  The dairy industry is small,  producing around 22 million liters of milk in 2016.  Of total milk production, 65% or 14.3 million liters is from dairy cattle.  The dairy industry is characterized by:

         --Many small herds of 2 to 10 cows, few herds over 50 cows and even fewer in excess of 100 cows.

         --Low per cow milk production, influenced by low production per cow on the milk line, long calving intervals and short lactation periods.

         --Low farm profitability with little on-farm data to validate assumptions on profitability and return on capital invested.

         --Large number of underutilized milk processing facilities.

         --Long distances from processing facilities for many farmers with small  volumes of milk resulting in high delivery costs.

         --An over-reliance on grants and government support and under-recognized opportunities for growth driven by profitability

         --No operational cold chains resulting in milk safety being compromised.

         --Inability to capture markets through low total milk volumes and a lack of supply continuity.

         --Lack of involvement of the private sector in development of policy options and delivery of services to farmers.

         --NDA conflicted by requirement to generate revenue as a GOCC while at the same time delivering services and administering a range of financial support programs.  (To be continued)