1. Linking famers to (high value) livestock product markets: Opportunities and challenges in Southern and Eastern Africa Hikuepi (Epi) Katjiuongua Amos, Omore African Livestock Conference and Exhibition (ALiCE), Nairobi, 2628 June 2013

2. Outline 1. Background: Global livestock product markets and Africa 2. Lessons from Southern Africa: The Beef story from Namibia and Botswana 3. Lessons from Eastern Africa: Dairy in East Africa 4. Opportunities and challenges 5. Way forward 2 3. Demand for animal source foods: Global picture Demand for animal-sourced foods estimated to be very high Background: Global livestock product markets and Africa 3 108 10 7 33 6 86 0 20 40 60 80 100 120 Developed Africa Near East Latin America South Asia East South East Asia Estimated consumption-2005/07 Growth (mil. tons) Est. Consumption Annual growth rate 2030 2050 2005/7-2050 2005/7 - 2050 Developed 16.8 6.6 131.5 0.4% Africa 10.3 13.9 34.8 2.8% Near East 7 6.1 20.2 2.4% Latin. Ame. 17 9.7 60.6 1.3% S. Asia 12 21 40.4 4.1% East SE Asia 50 22.8 160.3 1.4% Why? Population growth Urbanization Increasing incomes Source: Delgado (2007), IFPRI, FAO Source: BMGF funded (WB, FAO, AU-IBAR & ILRI) Livestock Data Innovation in Africa Project (2013) 4. Demand for animal source foods: Africa picture Demand for animal-sourced foods: estimated to be extraordinarily high Source: BMGF funded (WB, FAO, AU-IBAR & ILRI) Livestock Data Innovation in Africa Project (2013) Background: Global livestock product markets and Africa 4 32.4 1.6 0.8 2.2 2.9 4.7 Milk Eggs Pig meat Mutton Poultry Beef Est. Consumption (2005/7), mil. tons Estimated Consumption (2050) Annual growth rate Milk 82.6 2.2% Eggs 6.1 3.1% Pig meat 3.5 3.3% Mutton 6 2.3% Poultry 11.8 3.3% Beef 13.6 2.5% Milk Eastern (43%); Northern (20%) Beef Western (27%); South. & East. (22%) Pig meat Southern(37%); Western (27%) Poultry South. (29%); North. (24%); W. (21%) Est. regional growth shares 5. Background: Global livestock product markets and Africa Africa: Net importer of animal source foods 5 0 200 400 600 800 1000 1200 1400 1600 1800 2000 1961 1970 1980 1990 2000 2010 Quantity(Tonnes) Africa total meat trade Imports Exports 0 200 400 600 800 1000 1200 1400 1961 1970 1980 1990 2000 2010 Quantity:tonnes('000) African total meat imports Chicken Pig meat Beef Meat offals Source: Calculated from FAO data (FAOSTAT, 2013) Production will not keep pace with consumption growth Africa expected to continue being a net importer of animal sourced foods Global trade share: 3% Intra-regional trade (2009): 10% 6. Background: Global livestock product markets and Africa Africa exports of animal-sourced foods 6 0 20 40 60 80 100 120 140 160 1961 1970 1980 1990 2000 2010 Quantity:tonnes('000) Meat exports (quantity) Chicken Pig meat Beef Meat offals 0 50 100 150 200 250 300 1961 1970 1980 1990 2000 2010 Value:USD('000) Meat export (value: mil. USD) Chicken Pig meat Beef Meat offals Source: Calculated from FAO data (FAOSTAT, 2013) Beef Southern (96%) Eastern (2%) Pig meat Southern (35%); Eastern (62%) Poultry Southern (80%); Western (9%) Mutton Northern (65%); Southern (25%) Goat Eastern (88%); Northern (10%) Source: Rich, K. (2009) African Regional Export Shares (2003) 7. Background: Global livestock product markets and Africa Global Meat prices 7 100 110 120 130 140 150 160 170 180 190 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total Meat price index (FAO) 100 120 140 160 180 200 220 2005 2006 2007 2008 2009 2010 2011 2012 2013 International meat price indices (FAO) Chicken Pig meat Beef Increasing meat products prices Increasing demand: regionally & internationally Economic development and business opportunity: volume & value Beef and milk: largest share in value Source: Calculated from FAO data (FAOSTAT, 2013) 8. Outline Lessons from Southern Africa: The beef story from Namibia and Botswana 8 9. Southern Africa: The beef story from Namibia and Botswana Role of livestock in the economy Over 60% of population depend on livestock for their livelihoods Key source of employment Export value: Over 200 mil USD/yr Historical trading relations with the EU Lome-Cotonou agreement: non-reciprocal preferential trade Current policy reforms: Economic partnership agreement (EPA) Mixed success stories Namibia Among the top ten beef exporters to the EU & penetrated high-end retail market Exported beef to the EU for the last 20 years. But holds only 3% market share Disease status (N. Namibia): limits greater participation of small livestock producers Botswana Inconsistent supply due to export bans: FMD disease challenge Focused primarily on the EU market: neglecting regional & domestic market opportunities Financial losses by key beef exporter 9 10. Southern Africa: Lessons from Namibia 1. Smart branding & marketing: shift from selling a commodity to selling attributes Sells individual meat cuts to specific end market requirements: move up the value chain Branding: sells certified free-range high quality meat to Niche markets (e.g. Woolworth) Premium high quality cuts sold in overseas international markets: EU & Norway - Norway: Sales volume: 5% But 15% of total sales revenue - EU: Sales volume: 27% But 45% of total sales revenue - Income returns of exports to EU: 40% higher per head of cattle Meatco revenue (2012): N$ 1.4 billion: primarily due to value addition and branding strategies 1% 19% 48% 29% 2% 0.19% 1% Sales volume distribution Africa Namibia S. Africa Europe Norway Switzerland Reunion EU and Norway sales value: 60% 10 11. Southern Africa: Lessons from Namibia 2. Credible cattle traceability system: FANMEAT certification Costly but signals compliance with international SPS standards & EU requirements Challenge: Strict EU standards/requirements change frequently - Example: New EU residency requirement regulation 3. Policy and private sector engagement Trade policy allows live animal exports: small farmers respond to higher weaner prices Weaner production system is more profitable for small livestock farmers. But it constraints animal supply to domestic abattoirs Ekwatho finance project: links livestock producers to the market and to add value o Partnership: producers, banks and abattoirs o Heads of cattle slaughtered: 13,000 (2012) and 11, 057 (2011) o N$ 110, million loaned to producers w/zero default o Target resettled small emerging livestock producers 11 12. Southern Africa: Lessons from Botswana 1. Market structure in a value chain matters: Monopsony (Botswana meat commission) BMC controls exports as a sole buyer and seller: little competition & low producer prices Operates below capacity: not profitable: Ave. losses of 33 mil. USD (2009-2011) Subsidized by the govt. currently undergoing reforms to revive sales and profitability 2. Weak traceability system & veterinary service provision: inconsistent supplier Inefficient traceability system: farmers report operational and misidentification problems Veterinary service delivery: not timely and FDM surveillance adds burden vet. officers service High transaction costs in marketing livestock 3. Trade policy hinders regional trade Trade: restricts farmers to sell live animals including small stocks into regional markets Livestock producers unable to take advantage of increasing weaner prices (e.g. SA market) Heavy focus the EU market: neglecting local and regional market opportunities 12 13. Botswana and Namibia: role of small livestock producers 1. Small producers can supply high-value livestock product markets: participation is low - Costs of moving to a weaner-ox production system are high (e.g. feed costs) - Animal disease and animal welfare requirements: challenge & locks out many suppliers - The lingering land question: insufficient grazing land 2. How to increase greater smallholder market participation? - Market diversification: market segmentation targeting regional & domestic markets - Public private partnerships: finance mechanisms to overcome capital constraints faced by small livestock producers and other value chain actors - Coordination: to achieve economies of scale - Diversity of smallholder livestock farmers: degree of market orientation 3. Costs of standards & compliance: should it all be borne by the farmer? - Public good in ensuring safety in food supply chain and public health - Need for appropriate mechanism to share costs of meeting food safety standards 13 14. . Lessons from Eastern Africa: Dairy in East Africa 14 15. Strong local and regional demand : highest estimated growth in Africa Removal of tariffs within the EAC region: doubled dairy trade to 11% (2005) vs. 5% (1995) Dairy in Eastern Africa 15 Bur- undi Kenya Rwa da Uga- nda Tanz- nia EAC ROW Total exports EAC (%) Burundi 0.0 0.0 0.2 0.0 0.0 0.2 9.7 9.8 1.7 Kenya 2.8 0.0 4.8 152.5 122.0 282.2 239.3 521.5 54.1 Rwanda 0.7 0.0 0.0 0.0 0.0 0.7 45.8 46.5 1.4 Uganda 3.2 50.5 54.7 0.0 40.5 148.8 0.0 148.8 100.0 Tanzania 12.8 164.3 23.3 6.3 0.0 206.8 5.5 212.3 97.4 Imports from EAC 19.5 214.8 83.0 158.8 162.5 638.7 231.3 870.0 73.4 ROW 595.2 1,405.5 505.3 412.7 2,361.8 5,280.5 Total imports 614.7 1,620.3 588.3 571.5 2,524.3 5,919.2 EAC (%) 3.2 13.3 14.1 27.8 6.4 10.8 Source: Gelan & Omore (2013) based on FAO data But Non-tariff barriers and transport costs hinder effective supply response to local & regional demand 16. Smallholder dairy producers in Eastern Africa are competitive Improving economies of scale (e.g. collective action) Improve access to services and appropriate technologies Enabling policy and institutional environment Informal raw milk markets dominate in Eastern Africa Dairy in Eastern Africa 16 Kenya Tanzania Uganda 82% 84% 86% 88% 90% 92% 94% 96% 98% 100% Market share (%): Informal raw milk markets Low cost for consumer Taste and preferences: Raw milk considered fresh and tastier (high butter fat content) Pay higher farm-gate prices in most markets Source: ILRI Collaborative Research 17. . Opportunities and challenges Way forward 17 18. Opportunities High growth in domestic and regional demand of animal-sourced foods Increasing global meat product prices Inclusive livestock sector growth strategy: yields greater benefits for society at large Challenges Low competitiveness and productivity (rising feed costs) High costs of compliance: SPS requirements in high value markets NTBs and high transport costs in regional markets Export of lower quality livestock products and by-products into African markets - 5th quarter cuts from the UK are targeted to West and Central Africa - EU low quality poultry cuts exports to African markets - Attractively priced: EU CAP direct payments and investment aid keep EU raw material prices low Opportunities & challenges: livestock product markets in Africa 18 19. Way forward 1. Lower NTBs and improve regional integration: key to foster intra-regional trade and investment Development of intra-regional markets & trade: necessary to support livestock sector growth High NTBs and transport costs key obstacles to intra-regional investment Improve dialogue and capacity related to SPS standards issues 3. Improve productivity & competitiveness: productivity is required to respond to the growing demand Identify and scale out appropriate technologies to address production constraints Lower the cost of technology transfer and improve service delivery (e.g. animal disease vaccine delivery) Improve risk mitigating and coping strategies 19 20. Way forward 4. Create smart linkages between private service providers and VC actors Reduce risk and address binding constraints faced by VC actors Enhance economies of scale for producers and other value chain actors Target small livestock producers: dominate in many countries, But different type of support for different types (small) livestock producers 5. Invest in livestock data Enhance information flow on market conditions and planning Gain accurate picture about markets: consumption and animal resource base Improve data collection systems and analytical capacity 6. Trade agreements: EU-EPA trade agreement and others Need for informed and smart negotiation strategies Take a long-term perspective and retain some agric. safeguard measures 21. 21 Thank you 22. Opportunities & challenges: livestock product markets in Africa: 0 500 1000 1500 2000 2500 3000 3500 4000 SADC COMESA ECOWAS CEMAC East Asia & Pacific South Asia Latin America EU Cost to import (USD/container) 0 10 20 30 40 50 SADC COMESA ECOWAS CEMAC East Asia & Pacific South Asia Latin America EU Time to import (days) Border inefficiencies & delays - Risk to SSA exports and econ dev. - Drive up retail prices - Losses and spoilage in agric. & livestock products Source: AfDB (2012)