Dairy industry solutions sought:

USAID launches new project to help dairy sector

More than 30 representatives of the private and public sectors discussed strategies to improve the dairy industry in Sri Lanka so it can reduce dependence on imported milk powder and encourage economic development in the conflict-affected East.

The discussion was hosted by the U.S. Agency for International Development (USAID), which will launch a new project next year called Connecting Regional Economies (CORE) focusing on improving rural value chains in the Eastern and North Central Provinces.

Dairy industry participants at the roundtable reported that Sri Lanka imported 70,000 metric tons of milk powder at a cost of Rs. 17 billion last year, a figure expected to double in 2007.

They were optimistic, however, that improving domestic production of fresh milk could reduce the country’s dependence on imported powder, boost the economy, and improve children’s health.

“We have all read about doubling of the price of imported milk powder in the last year indicating a huge demand for milk due to short supply worldwide,” USAID Mission Director Rebecca Cohn told the November 16 gathering at the American Center.

“Energizing the local dairy sector would not only help meet this great demand and bring down prices, but also give a much needed boost to local economies long suffering from more than two decades of conflict.”

Coordination between small-scale farmers and larger farms could also potentially benefit rural households in terms of income, employment, and access to technology and dairy management practices.

Also highlighted was the importance of private sector investments, donors’ support and government allocation of infrastructure such as grazing lands, to create a sustainable environment for private sector-led dairy growth similar to that in the poultry industry.

Additional Secretary of the Ministry of Livestock Development Dr. A.O. Kodituwakku provided a government perspective on trends in dairy development, while private sector perspectives were provided by Ranjith Page, CEO of Cargills, Lindsay Saunders, a New Zealand-based livestock consultant affiliated to Fonterra, and Matthew Krause, Country Director of the American firm Land O’ Lakes, which is implementing a successful dairy project in Jaffna funded by the U.S. Department of Agriculture.

“The Ministry is encouraging dairy producers to retain their cows and invest in improved productivity by raising the price of milk by 10 rupees per litre,” Dr. Kodituwakku told participants. “We are also working to strengthen the mechanism for collecting milk.”

According to the Sri Lankan Ministry of Livestock Development, some 140,000 families in the Eastern province alone engage in some component of livestock farming. Large Sri Lankan processors working on a national scale collect just 56 per cent of the total amount of milk produced in the country, with the balance either consumed or processed locally.

“Due to poor productivity, small producers often find selling the cows for beef is more profitable than milk production,” said A. Wickramanayake of Pelawatte Dairies.

“But if the large amount of land available for dairy production that exists in the East is utilised effectively, and feeding practices are improved, we have the potential to improve production by up to 300 per cent. In addition to natural grasses, rice bran and crop residues are available as feed.”

Participants agreed that cooperatives of small-scale farmers could benefit rural households in terms of income and employment if access to technology and dairy management practices is improved.

USAID is keen to assist in the development of the dairy sector under its CORE programme by strengthening private sector participation and investment to improve the dairy value chain, while looking to the government to facilitate the process through policy initiatives.

CORE will explore how all elements of the dairy value chain can come together to leverage resources to improve the industry for the economic and nutritional benefits of a steady supply of fresh milk.

USAID has conducted follow-up meetings with government officials to help tap the potential of the private sector to develop the indigenous dairy industry as a means to achieve sustainable livelihoods and viable economic enterprises in those strategic areas.