Abstract:
Dairy value chains in Ethiopia face a series of challenges. Stakeholders in the participatory
model-building approach of this research and prior studies noted that feed and market
related challenges are among the critical factors impeding development of dairy value
chains. Increased production and reliable supply of dairy products were hampered by
availability and fluctuation of feeds. Traditional system dairy producers also lack market
outlets or connection to remunerating ones. On the other hand, dairy value chains are
dynamic and subject to feedback relations which make them complex to fully understand
and tackle the challenges using the traditional value chain analysis paradigm. For the
purpose of finding and assessing ways to improve the smallholder-based dairy value chain
in West Shewa zone, system dynamics (SD) modelling was integrated with a participatory
model-building approach. The main objective of the research was to develop a system
dynamics model for the West Shewa dairy value chain and use it to analyze the impacts of
various policy and investment interventions. Two intervention sets, each targeting the
challenges at the production and marketing nodes of the dairy value chain, were identified
through the study. For the production node three interventions (1) enhance urea treatment
of crops residue, (2) increase production of improved feed, (3) invest in more dairy cows,
and two interventions for market improvement (4) dairy cooperatives invest in milk
collection capacity, and (5) Cooperatives invest in milk collection capacity while also
raising milk price for producers. These interventions were assessed ex-ante for impacts
mainly on milk production, market supply and financial performances for the key actors.
Analyses results show that policies targeting feed development can increase milk production
as well as household profit but with higher seasonal fluctuation. Long-term milk output
gains over the baseline ranges from 32% through improved feed development policy to 70%
through urea treatment of crops residue. Household profit increases by 287% through
improved feed production policy and by 737% through the crops residue treatment,
compared to the baseline. The crops residue treatment policy will increase seasonal
fluctuation in milk production rate by 38% compared to the baseline. It is also revealed that
improvement in cow productivity is the main source of milk output gains. With the feed
resources and their potential explored in the study, increasing herd size is not profitable for
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smallholder producers. Furthermore, it is found that policy of improved feed production in
drought event will not significantly reduce dairy cattle losses, causing the herd size to fall
below the scenario without drought. However, the same policy results in higher milk
production and household profit compared to the baseline. Hence, increasing herd size is
not a recommended course of action for improving the West Shewa dairy value chain.
Instead, dairy value chain development initiatives in the study area should focus on feeds
development. However, the improved feed policy still leaves a gap in the average feed
protein requirement of a dairy cattle in the study area. Therefore, in order to further
increase milk production by the smallholder dairy producers, future work should focus on
further enhancing supply as well as quality of feed resources and exploring the potential of
investment in improved breeds. The study also found that improving the market through
cooperatives investing in milk collection capacity improves performances at both nodes of
the value chain. In the long-run milk production rate rises by 57% under market access
policy and by 56% under market access policy with increased milk price for producers.
Dairy households’ average monthly profit under both policies increases by about 11-fold of
the baseline. The market improvement policies lead to more gains in output than the
production improvement polices except for urea treatment of crops residue. Simultaneous
improvement in production and market access for producers leads to even higher gains in
both milk output and profit than individual polices at either nodes. In comparison to the
baseline, average monthly household profit gains range from 10-fold (when increasing
cowherd is combined with market access) to 14-fold (when urea treatment of crops residue
is combined with improved market access while raising producer price). Long-run
production impact ranges from a 58% increase when improved feed production is combined
with improving market access while increasing price to 76% when crops residue treatment
is combined with improving market access. In conclusion, efforts to increase production are
needed to realize the full potential of West Shewa zone's smallholder-based dairy value
chain. However, the (economic) benefits of increased milk production is conditional on
producers having better market access. This suggests that efforts to improve the market
should be prioritized for better development of traditional system-based dairy value chain
in the West Shewa zone of Oromia region of Ethiopia.