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Value Chain Study on Dairy Industry in Ethiopia

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Value Chain Study on Dairy Industry in Ethiopia VALUE CHAIN STUDY ON “DAIRY INDUSTRY IN ETHIOPIA” FINAL REPORT TO ADDIS ABABA CHAMBER OF COMMERCE AND SECTORAL ASSOCIATIONS BY: TAP CONSULTANCY SERVICES NOVEMBER, 2016 ADDIS ABABA Acknowledgment The study was financed with a budget obtained from Royal Danish Embassy to Strengthening the Private Sector in Ethiopia. Many people contributed technically throughout the study period. TaP Consultancy Services would like to acknowledge many individuals for their professional contributions. We extend our thanks and appreciation to the management bodies and experts of AACCSA for their support and guidance during the study period. We are highly thankful to officials and experts of the Ministry of Livestock and Fishery and its respective offices at different levels, Ministry of Crop and Natural Resource and its respective directorates, different public and private institutions, sectoral associations, woreda level key informants and study participants due to their valuable and constructive ideas obtained in different meetings and group discussions. The team acknowledges individuals who have contributed with valuable comments and feedbacks during the different stage of the study. i Table of Contents Page Acknowledgment ........................................................................................................................................... i Table of Contents .......................................................................................................................................... ii List of Tables ................................................................................................................................................ iv List of Figures ................................................................................................................................................ v List of Acronyms and Abbreviations ............................................................................................................ vi Executive summary .................................................................................................................................... viii 1. Introduction .................................................................................................................................. 1 1.1. Background to the study ....................................................................................................... 1 1.2. Essence of value chain approach .......................................................................................... 1 1.3. Organization of the report .................................................................................................... 3 2. Methodology ................................................................................................................................. 4 2.1. Data collection and analysis frame ....................................................................................... 4 2.2. Main Data Sources and Collection Method .......................................................................... 4 Primary sources: .................................................................................................................................... 4 Secondary sources: ............................................................................................................................... 4 2.3. Sample Size Determination and Geographical Focus ........................................................... 4 2.4. Data collection tools and analysis ......................................................................................... 6 3. Dairy Value Chain .......................................................................................................................... 7 3.1. Market (Supply and Demand) ............................................................................................... 7 3.1.1. Main Market Segments Trends and Driving Factors ................................................................ 7 3.1.2. Production and supply .............................................................................................................. 9 3.2. Functions and actors in the value chain ............................................................................. 10 3.2.1. Input supply and services ....................................................................................................... 11 3.2.2. Production .............................................................................................................................. 13 3.2.3. Collection, bulking and transporting of milk: ......................................................................... 16 3.2.4. Dairy processing: .................................................................................................................... 18 3.2.5. Wholesaling and retailing ....................................................................................................... 19 3.2.6. Supporters and enablers ........................................................................................................ 20 3.3. Analysis of policy environment, Institutes and Initiatives .................................................. 20 3.3.1. Policies Review ....................................................................................................................... 20 3.3.2. Institutes: ................................................................................................................................ 21 3.3.3. Existing Initiatives and projects .............................................................................................. 22 3.4. Economic analysis and relationships mapping ................................................................... 22 ii 3.4.1. Actors number and transactions volume ............................................................................... 22 3.4.2. Costs and profitability analysis ............................................................................................... 23 3.5. Gender, environment and governance situation ................................................................ 24 3.6. SWOT analysis ..................................................................................................................... 25 4. Review of other countries experiences ...................................................................................... 26 5. Conclusions and Recommendations ........................................................................................... 31 5.1. Conclusions ......................................................................................................................... 31 5.2. Constraints .......................................................................................................................... 31 5.3. Proposed Recommendations and Policy Implications ........................................................ 32 References .................................................................................................................................................. 34 Annexes .................................................................................................................................................... 35 iii List of Tables Page Table 1: Sample Size and Distribution…………………………………………………………………………………………………. 5 Table 2: Feed purchasing distance (Km)……………………………………………………………………………………………… 11 Table 3: Buying price of dairy cow (Birr) ……………………………………………………………………………………………… 12 Table 4: Dairy Producers Distance from Market, Development Centre and Road ……………………………….. 13 Table 5: Dairy Herd Size ……………………………………………………………………………………………………………………... 13 Table 6: Daily Production (per cow per day) ……………………………………………………………………………………….. 15 Table 7: Butter productivity and production ……………………………………………………………………………………….. 15 Table 8: Selling Price of Milk and Butter at different seasons ………………………………………………………………. 17 Table 9: Dairy Farm Scale and Cost Structure ………………………………………………………………………………………. 23 Table 10: Daily Sales and Cost (Profitability) ……………………………………………………………………………………….. 24 Table 11: Selected benchmark factors .................................................................................................... 26 Table 12: Summary of Constraints ………………………………………………………………………………………………………. 31 iv List of Figures Page Fig.1: Value Chain and other systems links ………………………………………………………………………………………. 1 Fig. 2: Different stages of value chain ………………………………………………………………………………………………………………. 2 Fig. 3: Value Chain Frame …………………………………………………………………………………………………………………………………. 2 Fig. 4: Study Area Map ........................................................................................................................... 5 Fig. 5: Consumption Projection (2015-2019/20) ……………………………………………………………………………….. 7 Fig. 6: Import CIF Value (USD) …………………………………………………………………………………………………………… 8 Fig. 7: Main Milk Shed ………………………………………………………………………………………………………………………. 9 Fig. 8: Milk and Milk Products Value Chain Map in Addis and Surrounding Milk Sheds ……………………… 10 Fig. 9: Milk per day per cow (ltr) ………………………………………………………………………………………………………… 14 Fig. 10: Daily Milk Production per day per HH ……………………………………………………………………………………. 15 Fig. 11: Morning and evening milk collection share (%) ……………………………………………………………………… 17 Fig.12: Average capacity used for different milk products ……………………………………………………..19 Fig. 13: Dairy Farms Average Cost Structure ………………………………………………………………………… 23 Fig. 14: Daily gross margin of
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