the cattle sector in central and eastern europe: developments and opportunities in a time of...

The cattle sector in Central and Eastern Europe

Developments and opportunities in a time of transition

EAAP Technical Series No. 10

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Countries in Eastern-Europe are in a lengthy period of rapid changes. Ten Central and Eastern European countries entered the European Union in 2004 and two more entered in 2007. Surrounding countries to the east are in a similar process of change following the disintegration of the former Soviet Union. The transition processes were studied in a recent workshop resulting in this book. It is comprised of 13 contributions: four overview articles, one on the topic of animal welfare and eight country reports. The country reports come from a wide variety of countries in Eastern Europe and Asia: Slovakia, Poland, Baltic States, Russian Federation, Belarus, Ukraine, Caucasian countries and Central Asian countries. The country reports describe the transitions taking place in these countries. Both developments in the beef cattle sector and in the dairy chain are described with emphasis on the dairy chain situation. The authors are from a range of academic and professional backgrounds including universities, research and developmental institutions, farmers’ organisations, agribusiness and a marketing board. Some analyses are made and several critical points in development are signalled. Thus, barriers as well as opportunities for further development are mentioned and described in this book.

Editors:K.J. PetersA. KuipersM.G. KeaneA. Dimitriadou

ISSN 1570-7318ISBN 978-90-8686-104-0

Wageningen AcademicWageningen AcademicP u b l i s h e r ssseessbP u b l i s h e r sP u b l i s h e r sP u b l i s h e r s

Wageningen AcademicP u b l i s h e r s

cover EAAPts10.indd 1 27-4-09 9:14

The cattle sector in Central and Eastern Europe

The cattle sector in Central and

Eastern Europe

Developments and opportunities in a

time of transition

Editors:

K.J. Peters

A. Kuipers

M.G. Keane

A. Dimitriadou

EAAP Technical Series No. 10

ISBN: 978-90-8686-104-0e-ISBN: 978-90-8686-686-1

DOI: 10.3920/39978-90-8686-686-1

ISSN: 1570-7318

First published, 2009

© Wageningen Academic Publishers The Netherlands, 2009

This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned. Nothing from this publication may be translated, reproduced, stored in a computerised system or published in any form or in any manner, including electronic, mechanical, reprographic or photographic, without prior written permission from the publisher, Wageningen Academic Publishers, P.O. Box 220, 6700 AE Wageningen, the Netherlandswww.WageningenAcademic.com

The individual contributions in this publication and any liabilities arising from them remain the responsibility of the authors.

The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the European Association for Animal Production concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.

The publisher is not responsible for possible damages, which could be a result of content derived from this publication.

� The�cattle�sector�in�Central�and�Eastern�Europe

7

Table of contents

Introduction 9Kurt�Peters�and�Abele�Kuipers

Part 1 Overview articles

BeefsectorchallengesandperspectivesinnewEUmemberstates 13R.�Csillag,�A.�Rozstalnyy,�I.�Hoffmann�and�S.�Mack

DairysectorchallengesandperspectivesinCentralandEasternEurope 17A.�Rozstalnyy,�I.�Hoffmann�and�S.�Mack�

Developmentsincattleproductmarketsandproductprices 25K.J.�Peters

AnalysisofdevelopmentsinnewEUmemberstatesbasedonthedairyquotasituation 39A.�Kuipers,�A.�Malak-Rawlikowska,�M.�Klopcic�and�J.�Sataite

Thewell-beingofHeiferInternationalanimals 69T.S.�Wollen�and�D.P.�Bhandari

Part 2 Country reports

ThedairycattlesectorintheRussianFederationshowsatendencytoimprovement 77S.�Kharitonov,�I.�Yanchukov,�A.�Ermilov,�Y.�Grigoriev�and�O.�Osadchaya

CattlesectoranddairychaindevelopmentsinBalticcountries 87E.�Gedgaudas

CattlesectoranddairychaindevelopmentsinBelarus 97M.�Ramanovich

CattlesectoranddairychaindevelopmentsinUkraine 103I.�Ilienko

CattlesectoranddairychaindevelopmentinSlovakia 119M.�Stefanikova

CattlesectoranddairychaindevelopmentsinGeorgia,AzerbaijanandArmenia 133T.�Kartvelishvili

CattlesectoranddairychaindevelopmentsinPoland 153J.�Fałkowski,�A.�Malak-Rawlikowska�and�D.�Milczarek-Andrzejewska�

CattlesectoranddairychaindevelopmentsinKazakhstan,KyrgyzstanandUzbekistan 167T.�Karymsakov,�A.�Svitoys�and�K.�Elemesov�

Part 3 Concluding remarks

Remarksandrecommendationsoftheworkshop 175M.�Zjalic

Appendix.ShorthistoryoftheEAAPCattleNetworkWorkingGroup 179


9

Introduction

ThecountriesinEastern-Europeareinalengthyperiodofrapidchange.TenCentralandEasternEuropeancountriesenteredtheEuropeanUnionin2004andtwoenteredin2007.SurroundingcountriestotheEastareinasimilarprocessofchangefollowingthedisintegrationoftheformerSovietUnion.TheCattleNetworkoftheEAAPhasactivelyanalysedthetransformationprocessesinanumberofEAAPannualmeetings.PresentationsareavailableonthewebpageoftheCattleNetwork.In2004,aspartoftheEAAPmeetinginBled,Slovenia,aworkshopwasorganiseddealingwiththeconsequencesofEUentryforagroupofcountries.The‘new’EU-countries,butalsoallneighbouringcountriestotheEast,participatedinthismeeting.ResultsofthatmeetingareavailableintheEAAPTechnicalSeriespublicationNo.8:‘FarmmanagementandextensionneedsinCentralandEasternEuropeancountriesundertheEUmilkquota’.ThisworkshopwasorganisedbytheCattleNetworkWorkingGroup,theCentralandEasternEuropeanWorkingGroup,andtheCattleCommissionofEAAPduringtheannualmeetingoftheEAAPinVilnius,Lithuania.TheEasternlocationwasoneofthemotivesfordoingso.TheFAOagaingenerouslysupportedtheworkshopasbefore.About60personsfromawidevarietyofcountriesattended.Ms.AndieDimitriadouoftheEAAPsecretariattookcareofthelogisticsofthemeetingtogetherwiththetravelarrangementsoftheinvitedspeakers.ShealsocollectedanddistributedthePowerPointpresentations.Lateron,shecollectedthepublicationswhicharecompiledinthisbook.Weareverygratefulforhersupport.TheoriginalideafortheworkshopcamefromMr.KurtPetersandMr.AbeleKuipers.WetogetherwithMr.GerryKeanereviewedthepapersthoroughly.Mr.ArunasSvitojus,BalticHeiferFoundation,helpedaslocalorganiserrealisingtheworkshopandintheselectionoftheinvitedspeakers.Mr.AndriyRozstalnyy,FAOAnimalProductionandHealthOfficeratSubregionalofficeforCentralandEasternEuropewasverysupportiveintheorganisationoftheworkshop.SpecialgratitudeisgiventoMrs.MariaKadlecikovaFAORegionalRepresentativeforEuropeandCentralAsiaformakingthisworkshoppossible.Thisbookiscomprisedof13contributions:fouroverviewarticles,oneonthetopicofanimalwelfareandeightcountryreports.ThecountryreportscomefromawidevarietyofcountriesinEasternEuropeandAsia:Slovakia,Poland,BalticStates,RussianFederation,BelarusUkraine,Caucasiancountries(GeorgiaandAzerbaijan)andCentralAsiancountries(Kazakhstan,KyrgyzstanandUzbekistan).Thecountryreportsdescribethetransitiontakingplaceinthesecountries.Verypositivewasthefactthatthedevelopmentsinthebeefcattlesectoraswellasinthedairychainaredescribed.Themixofparticipatingspeakersfromuniversities,researchanddevelopmentalinstitutions,farmers’organisations,agribusinessclubsandmarketingboardswasverybeneficial.Someanalysesweremadeandseveralcriticalpointsindevelopmentweresignalled.Thus,barriersaswellasopportunitiesforfurtherdevelopmentarementionedanddescribedinthisbook.Thediscussionsduringtheworkshopwereofahighquality.Someconclusionsareaddedasalastchapterinthebook.

Kurt�Peters�and�Abele�Kuipers

Part 1 Overview articles


13

Beef sector challenges and perspectives in new EU member states

R.�Csillag1,�A.�Rozstalnyy1,�I.�Hoffmann2�and�S.�Mack2

1Food�and�Agriculture�Organization�of�the�United�Nations,�Subregional�Office�for�Central�and�Eastern�Europe,�Budapest,�Hungary;�[email protected];�2Food�and�Agriculture�Organization�of�the�United�Nations,�Rome,�Italy

Abstract

Meatconsumptiondeclinedduringthe1990sduetothefallinpurchasingpower.Since2000,meatconsumptionhasbeenincreasingandwiththeexceptionsofPolandandHungary,demandformeatcannotbesuppliedfromdomesticproduction.ManyslaughterhouseshaveclosedbuttheremainderhavebeenmodernisedtomeetEUstandards.Redmeatislosingmarketsharetopoultryduetohealthscares,highpriceandchangingdietaryattitudes.

Keywords:�beef,�consumption�trends,�processing

Introduction

SinceEUaccession,thenationalbovineherdsizehasdeclinedinmostoftheCEEcountrieswithacorrespondingfallinproductionandprocessingcapacity(Table1andTable2).AccessiontotheEuropeanUnion(EU)hashoweverstimulatedgreaterintensificationandconcentrationwithinthemeatproductionandprocessingsub-sector.Yetfarmstructuresremainfragmentedwithmanysmall,family-owned,semi-subsistenceunitscharacterisedbylowefficiencyandrelativelyhighproductioncosts.Theslowpaceofintensificationandthemovetomoreefficientproductionmethodspresentarealbarriertothedevelopmentofanefficientandintegratedmeatsector.Morethantwo-thirdsofbeef,andvirtuallyofallvealproduction,originatefromthedairyherd.Siresfrommeatbreedsareusedtoproducecrossbredstoberearedforbeef,butonlyonethirdofthebeefderivesfromspecificbeefbreedingherds.Beefproductionhasfalleninrecentyears.

Table 1. Totalofcattlepopulation(×1,000head).

2000 2001 2002 2003 2004 2005 2006 2007Bulgaria 652.2 641.1 699.0 736.2 679.6 630.0 636.5 611.0CzechRepublic 1,582.0 1,520.0 1,462.0 1,427.0 1,367.6 1,351.6 1,389.6 1,366.7Estonia 252.8 260.5 253.9 257.2 249.8 252.2 245.0 242.0Latvia 366.7 384.7 388.1 378.6 371.1 385.2 377.1 398.7Lithuania 748.3 751.7 779.1 812.1 792.0 800.3 838.8 787.9Hungary 805.0 783.0 770.0 739.0 723.0 708.0 702.0 705.0Slovenia 493.7 477.1 473.2 449.9 451.1 452.5 454.0 479.6Slovakia 646.1 625.2 607.8 593.2 540.1 527.9 507.8 501.8Poland 5,723.0 5,498.8 5,421.0 5,276.8 5,200.2 5,385.0 5,281.0 5,405.5Romania 2,870.4 2,799.8 2,877.8 2,897.1 2,808.1 2,861.1 2,933.6 2,819.0Sources:FAOSTAT,EUROSTAT,CzechStatisticalOffice(CSÚ),StatisticalOfficeofTheSlovakRepublic,StatisticalOfficeofEstonia,StatisticalOfficeofLithuaniaandUSDA.

Meat consumption

Thetrendinmeatconsumptionisanimportantsocialindicatoranditisnotsurprisingthatmeatconsumptionfellsignificantlyduringthemid1990’smirroringthecollapseofincomesandpurchasingpower.Since2000,however,totalmeatconsumptionhasstartedtoincreasethroughouttheregion(Table3).Increasingincomesinthenon-agriculturalsectorisraisingthedemandformeatthatcannotbesuppliedbydomesticproduction.MostofthenewEUmemberstatesremainnetimportersofbeefwiththeexceptionofPolandandHungary.

Processing

Thenumberofslaughterhousesandprocessingplantshasalsodeclinedsince1990.ThelargerenterprisesreceivedconsiderableinvestmentduringthepreparationforEUaccessioninordertomoderniseandharmonisetheiroperationtomeetEUstandards.Asignificantproportionoftheabattoirswerehoweversmall‘one-room’operations.MostofthesehavehadtocloseduetolackofcapitalandskillsnecessaryformeetingthestrictEUsanitaryandtraceabilityrequirementsaswellasanimalwelfare,environmental(handlinghighriskmaterials,wasteandeffluentdisposal)andmeatinspectionregulations.

Table 2.Numberofbovinesslaughtered(×1,000head).

2000 2001 2002 2003 2004 2005 2006 2007Bulgaria 422.00 161.27CzechRepublic 374.46 355.44 374.86 372.97 335.81 281.04 273.58 269.66Estonia 106.40 83.10 87.80 72.50 84.45 66.75 69.91 70.76Latvia 181.72 143.34 107.24 133.24 132.50 118.92 114.54 119.57Lithuania 562.50 416.60 372.00 330.20 337.17 312.28 238.75 252.43Hungary 173.50 148.22 145.45 121.92 126.00 130.19Poland 2,069.00 1,931.00 1,665.00 1,873.00 1,314.90 1,290.91 1,463.09 1,537.96Romania 1,115.00 1,206.00Slovakia 130.23 140.39 150.75 162.32 151.03 137.62 136.78 128.09Slovenia 119.32 99.08 93.80 112.40 98.85 99.67 81.71 87.45Sources:FAOSTAT,EUROSTAT,CzechStatisticalOffice(CSÚ),StatisticalOfficeofTheSlovakRepublic,StatisticalOfficeofEstonia,StatisticalOfficeofLithuaniaandUSDA.

Table 3.Beefandvealconsumption(kg/capita/year).

2000 2001 2002 2003 2004 2005 2006 2007Slovakia 9.3 7.0 6.8 6.9 6.4 6.9Hungary 4.3 3.9 4.3 4.1 3.9 3.1Poland 8.0 6.3 5.9 6.7 5.0 4.0CzechRepublic 12.5 11.6 11.3 10.4 10.0Estonia 12.1 11.4 13.3 10.4 12.8 12.4 13.8Lithuania 15.0 11.2 10.0 10.5 10.6 8.0Romania 4.7 3.5 3.4 4.4 4.9Bulgaria 5.0 4.9 4.9 5.1 5.1 5.1Sources:FAOSTAT,EUROSTAT,CzechStatisticalOffice(CSÚ),StatisticalOfficeoftheSlovakRepublic,StatisticalOfficeofEstonia,StatisticalOfficeofLithuaniaandUSDA.


15

Decline in red meat consumption

Consumptionpatternshavealsochangedinthepastdecade.Redmeatconsumption(includingbeef)hasdeclinedwhilepoultryconsumptionhassteadilyincreasedwiththeexceptionofatemporarydipresultingfromtheavianinfluenzascare.ThechangingconsumerpreferenceawayfromredmeatoriginatesfromtheoutbreakofBSE,therelativelyhighpriceofbeefcomparedtopoultrymeat,andnewdietaryattitudeswhichfavourlowerfatconsumption.

Future prospects

TheabilityofCEEcountriestoexpandanddeveloptheirdomesticandpotentialbeefexportmarketswilldependontheircapacitytoimprovetheirproductioncompetitiveness,bothintermsofpriceandquality.Thiscanbeachievedbyfurther:• restructuringandintensifyingbeefproductionandprocessing;• modernisationandconsolidationoffarms;• exploitingnichemarkets;• specialisationinbeefproduction;• improvingmeatqualityandproducttraceability;• developingandimplementingbreedingpoliciesandprogrammesthatfullyexploitthegenetic

potentialwithintheregion;• promotingnationaltrademarksandexploitingnichemarketsforlocalorspecialproductssuch

astheHungarianGrey.

References

CzechStatisticalOffice–ČeskýStatistickýÚřad(CSÚ).Availableat:http://www.czso.cz/eng/redakce.nsf/i/homeFoodandAgricultureOrganizationCorporateStatisticalDatabase(FAOSTAT).Availableat:http://faostat.fao.org/StatisticalOfficeofEstonia–EestiStatistika.Availableat:http://www.stat.ee/StatisticalOfficeofLithuania–StatistikosDepartamentasprieLietuvosRespublikos.Availableat:http://www.stat.

gov.lt/en/index/StatisticalOfficeoftheEuropeanCommunities(EUROSTAT).Availableat:http://epp.eurostat.ec.europa.eu/portal/

page?_pageid=1090,30070682,1090_33076576d=portal&_schema=PORTALStatisticalOfficeoftheSlovakRepublic-ŠtatistickýúradSlovenskejRepubliky.Availableat:http://portal.statistics.

sk/showdoc.do?docid=4UnitedStatesDepartmentofAgriculture(USDA).Availableat:http://www.usda.gov/wps/portal/usdahome


17

Dairy sector challenges and perspectives in Central and Eastern Europe

A.�Rozstalnyy1,�I.�Hoffmann2�and�S.�Mack2�

1Food�and�Agriculture�Organisation�of�the�United�Nations,�Subregional�Office�for�Central�and�Eastern�Europe,�Budapest,�Hungary;�[email protected];�2Food�and�Agriculture�Organisation�of�the�United�Nations,�Rome,�Italy

Abstract

ThereisadualmilkproductionstructureinmostcentralandeasternEuropeancountriesofsmallsubsistencefarmsandlargecommercialfarms.Cownumbershavedeclinedconsiderablybutmilkoutputhasbeenmaintainedthroughincreasedyieldpercow.Therehavebeenbigimprovementsinquality,particularlyinsomecountries.InPolandandCzechRepublicthenationalmilkquotaisabarriertoexpansion.InUkraine,Belarus,ArmeniaandGeorgiathenumberofcowsfelltolessthanhalffollowingthepoliticalchangesin1992,butinrecentyears,milkoutputhasincreasedagain.Thegreatestindustryproblemisthelargenumberofsmallproducersresultinginlowqualitymilkandthedeclininggeneticmeritofthecowherd.Thegreatestchallengeistofindthecapitaltomodernisetheindustry.

Keywords:�dairy�cows;�development;�milk�production

Introduction

ForcountriesthatjoinedtheEUsince2004,changesinthedairysectorhavebeendramatic.TheotherformerUSSRcountriescanlearnfromtheexperiencesofthenewEUcountries.

Central and Eastern EU countries

ThetotaldairycowpopulationoftheEUincreasedbyapproximately4.5millionafterthe2004expansion,andbyanadditional1.9millionaftertheaccessionofBulgariaandRomania.TheEU-15had~18.7milliondairycowsattheendof2004,andthishadincreasedbymorethan30%by2007(EUROSTAT,undated).InthenewEUmemberstates,thedairysectoraccountsfor7%to20%oftotalagriculturaloutput.

Herd size and production

InmostoftheCEEcountries,themajorityofthefarmsareverysmall,1-2cows(Figure1and2).Thesesmallfarmsarepredominantlysemi-subsistencedairyfarms.Thesmallestonesproducemilkandmilkderivatesfortheirownconsumption,andtradetherestasrawmilkandhomemadedairyproductslikecheese,curdandyoghurt.Thechangeinthepoliticalsystemintheregioninducedstructuralchangesinthedairysector.Thecooperativesthatusedtoholdlargedairyherdsweredissolvedduringprivatisation.Thereareonlysomecountrieswherethecooperativeformhassurvived.Theexistenceofthesmallsemi-subsistencefarmsandlargefarms,withherdsofmorethan100dairycowsresultindualstructureofdairyfarmsizeinCEEcountries.Thisfragmentedfarmsizestructureleadstohighmilkcollectionandotherprocessingcosts(sometimespoorqualityofrawmilk)onsmallfarms,whichresultsinlowcompetitivenessontheEUdairymarket.AfterEUaccession,afusionofsomeverysmalldairyfarmswasobserved.At

The�cattle�sector�in�Central�and�Eastern�Europe

18

thesametime,asignificantnumberoffarmers,whichownedsmallfarmseitherslaughteredtheirherdsandquitthedairybusiness,orswitchedtootherlivestockenterprisessuchasgoatorsheepproduction.Thenumberofherdsandnumberofdairycattlehasdeclinedoverthepastdecadein

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Estonia Hungary Latvia Lithuania Poland Slovenia Bulgaria Romania

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Figure 1.DairyherdstructureinsomeCentralandEasternEUcountries.

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Figure 2.DairyfarmstructureinsomeCentralandEasternEUcountries.


19

mostoftheCEEcountries(Table1,Figure3)butmilkproductiondidnotfollowthistrend.Despitethedeclineinthenumberofdairycattlemilkproductionremainedquitestable(Table2).Duetomodernisation,concentration,EUharmonisation,andgoodbreedingtechnologiesmilkyieldpercowhasincreasedsignificantly(Table3).QualitystandardsofmilkhaveimprovedconsiderablyinsuccessfulattemptstoadjusttotheEUstandards.AnexampleoftheimprovementofthequalityofmilkinSloveniaisillustratedinFigure4.Similarchangescanbeobservedintheothercountriesintheregion.

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cz Czech Republicee Estonialv Latviapl Polandsi Sloveniask Slovakia

Figure 3. NumberofthedairycowsinCentralandEasternEUcountries(dairycowsin1997=100%).

Table 1. Numberofdairycows(×1000head)inCentralandEasternEUcountries(1998-2007).

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Bulgaria 387.1 421.4 431.0 362.6 358.6 358.2 361.8 368.7 347.8 350.1 335.9CzechRepublic

598.0 583.0 548.0 529.0 496.0 464.0 449.0 429.3 437.1 417.3 407.4

Estonia 167.7 158.6 138.4 131.0 128.6 115.6 116.8 116.5 113.1 108.9 104.1Hungary 379.0 384.0 376.0 355.0 345.0 338.0 310.0 304.0 285.0 268.0 266.0Latvia 262.8 242.1 205.6 204.5 209.1 204.6 186.3 186.2 185.2 182.4 180.4Lithuania 582.8 537.7 494.3 438.4 441.8 443.3 448.1 433.9 416.5 399.0 404.5Poland 3,360.8 3,215.1 2,982.4 2,929.6 2,934.6 2,816.1 2,730.4 2,754.8 2,637.0 2,677.3Romania 1619.5 1627.4 1566.4 1625.4 1639.4 1572.9Slovakia 300.0 265.0 251.0 242.5 230.4 230.2 214.5 201.7 198.6 185.0 180.2Slovenia 147.6 146.5 149.1 140.2 135.8 140.0 130.7 134.0 120.3 112.5 116.4Sources:Agripolicy.net,CentralStatisticalBureauofLatvia,CentralStatisticalOfficeofPoland,CzechStatisticalOffice,EUROSTAT,StatisticalOfficeoftheRepublicofSlovenia,StatisticalOfficeoftheSlovakRepublic,andStatisticalOfficeofEstonia.


20

Milk quota

Thequotasystemallocatestwo‘nationalreferencequantities’toeachMemberState,onefordeliveriesofmilktodairies,andanotherfordirectsalesofmilkanddairyproducts.Ifeitherquotaisexceeded,alevyispayabletotheEUbudget.Thelevelofmilkquotaisaproblematicissueinmanycountries.InPolandandinCzechRepublicthenationalmilkquotaisaseriousbarriertothefurtherdevelopmentofthedairysector.WhilethetotaloutputofthePolishdairyindustryisapproximately12.0milliontonnes,theoutputallowedunderthenationalmilkquotaisonly9.2-9.4milliontonnes,whichmeansthatonlyabout75%oftheoutputiscommerciallyutilised.TheEUhasagreedtoretainthemilkquotasystemuntil2015,aftertheendofthecurrentCommonAgriculturalPolicyreform.

Table 2.Milkproduction(tonnes)inCentralandEasternEUmembercountries(2004-2007).

2004 2005 2006 2007Bulgaria 797.50 803.10 839.40 745.50CzechRepublic 2,563.22 2,543.20 2,392.50 2,445.52Estonia 536.10 571.20 605.90 593.40Hungary 1,541.71 1,594.00 1,448.35 1,447.73Latvia 478.10 501.70 592.32 630.70Lithuania 1,139.64 1,200.49 1,296.15 1,347.13Poland 8,151.40 8,825.19 8,825.99 8,744.39Slovakia 937.16 967.94 961.58 964.22Slovenia 503.34 508.34 511.02 530.37Sources:Agripolicy.net,CentralStatisticalBureauofLatvia,CentralStatisticalOfficeofPoland,CzechStatisticalOffice,HungarianCentralStatisticalOffice,NationalStatisticalInstituteofBulgaria,EUROSTAT,StatisticalOfficeoftheRepublicofSlovenia,StatisticalOfficeoftheSlovakRepublic,StatisticalOfficeofEstonia,StatisticalOfficeofLithuania,andUSDA.

Table 3. Cowyield(kg/year)inCentralandEasternEUmembercountries.

2000 2001 2002 2003 2004 2005 2006Bulgaria 3,273 2,854 3,641 3,653 3,716 3,490 3,522CzechRepublic 5,411 5,755 5,501 5,701 6,136 6,521 6,415Estonia 4,549 5,215 4,751 5,285 5,581 5,750 5,920Hungary 5,699 6,034 6,173 6,025 6,111 6,344 6,026Latvia 4,002 4,136 3,880 3,827 4,208 4,332 4,361Lithuania 3,465 3,919 3,994 4,035 4,109 4,271 4,343Poland 3,944 4,041 4,163 4,135 4,268 4,332 4,354Romania 2,542 2,634 2,753 2,863 3,524 3,583 3,583Slovakia 4,335 4,793 5,199 4,826 4,892 5,314 5,275Slovenia 4,490 4,667 5,201 4,589 4,980 4,880 4,880Sources:Agripolicy.net,CentralStatisticalBureauofLatvia,CentralStatisticalOfficeofPoland,CzechStatisticalOffice,HungarianCentralStatisticalOffice,NationalStatisticalInstituteofBulgaria,NationalInstituteofStatisticsRomania,EUROSTAT,StatisticalOfficeoftheRepublicofSlovenia,StatisticalOfficeoftheSlovakRepublic,StatisticalOfficeofEstonia,StatisticalOfficeofLithuania,andUSDA.


21

Consumption

TheconsumptionofmilkandmilkproductsinCEEisrelativelylowcomparedtoEU-15.Forexample,consumptionofmilkandmilkequivalentpercapitaforthefollowingcountriesisPoland250kg,Hungary135-155kg,Slovakia155kg,Slovenia240kg,andCzechRepublic230kg.

Dairy sector in Armenia, Belarus, Georgia and Ukraine

IntheformerUSSRcountries,thedairysectoraccountsforupto25%oftotalagriculturalproduction.Animalproductioninthesecountriessufferedseriouslyduringthetransitionperiodinthe1990’s(Figure5).Forinstance,inUkrainemilkinglivestockhavedecreasedtolessthanhalfin15years,andbytheendof2005amountedtoonly45%ofthe1990number.Afterthatrapiddecreaseinthecattlepopulationandthecorrespondingdecreaseinmilkproduction,agradualimprovementinthesituationhassincebeenobserved(Table4,Table5,).Themostimportantproblemsandconstraintsindairysectordevelopmentincludetheprevalenceofsmall-scalefarmsinthetotalrawmilksupplyoftenresultingintheproductionoflowqualityrawmilk,constraintstoaccessingcredit,lowpricesformilk,lackofinvestmentindairyfarming,andunderdevelopedlogisticsandinfrastructuresuchasmilkcollection,storinganddistribution.Theproductionoffeedsandfoddershavedecreasedsignificantlyandpasturesarenotwellmanaged.Theextentofartificialinseminationusehassharplydeclinedascentralisedbreedingfarmshavebeenabandonedandthecorebreedingstockhavebeendistributedtoprivateindividuals,whoareoftennotexperiencedinlivestockbreeding.Thishasledtodeteriorationofthegeneticcharacteristicsofcattle.Inaddition,highprevalenceofzoonoticandtransboundaryanimaldiseasesuchasbrucellosis,tuberculosis,footandmouthdiseasehinderthedevelopmentofthedairysectorinsomecountries.Milkyieldpercowisshownfor2002to2006inTable6,andfrom1992to2007,inFigure6.

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Share of milk in Bacteriological classextra (%)*Share of milk in Bacteriological class1 (%)**Share of milk with somatic Cell countup to 400,000/ml (%)

Figure 4. Share(%)ofmilkofdifferentbacteriologicalclassesinSlovenia.Sources:StatisticalOfficeoftheRepublicofSloveniaandGLiPHa.


22

Governmentalandfinancialsupport,includinglowinterestrateloansandtimelysubsidies,tofosterinvestmentinthedevelopmentofsustainable,environmentallyfriendlydairyproductionthatcomplieswithEU/WTOqualityandhygienestandards,aswellsproductionoforganicdairyproducts,remainthemostimportantchallengesforthedairycattlesectoroftheCEEcountries.

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Belarus

Figure 5.NumberofcattleanddairycowsinBelarusandUkrainein1992and2007.

Table 4.NumberofcattleanddairycowsinArmenia,Belarus,GeorgiaandUkraine.

2002 2003 2004 2005 2006Armenia totalcattle 514,244 535,784 565,800 573,260 592,067

dairycows 270,107 277,000 300,000 290,069 297,060Belarus totalcattle 4,084,500 4,005,100 3,924,000 3,989,000

dairycows 1,749,000 1,664,000 1,830,000 1,506,000Georgia totalcattle 1,180,200 1,215,895 1,242,500 1,252,073 1,265,097

dairycows 678,270 691,500 720,000 740,752 725,349Ukraine totalcattle 9,423,700 9,108,400 7,712,100 6,967,000

dairycows 4,820,400 4,620,600 4,202,900 3,863,000Sources:MinistryofAgriculturalPolicyofUkraine,MinistryofAgricultureandFoodofBelarus,FAOSTAT,andUSDA.

Table 5.Milkproduction(tonne/year)inArmenia,Belarus,GeorgiaandUkraine.

2002 2003 2004 2005 2006Armenia 475,113 498,100 535,831 557,300 570,000Belarus 4,772,500 4,682,600 5,124,100 5,650,100 5,869,900Georgia 720,703 743,270 754,992 760,786 690,000Ukraine 13,846,700 13,350,640 13,390,109 13,423,753 12,988,000Sources:MinistryofAgriculturalPolicyofUkraine,MinistryofAgricultureandFoodofBelarus,FAOSTAT,andUSDA.


23

References

AgriPolicy.net.Structureandcompetitivenessof themilkanddairysupplychains.Availableat:http://www.europartnersearch.net/agri-policy/index.php?page=marketanalysis#milk

CentralStatisticalBureauofLatvia–CentrālāStatistikasPārvalde.Availableat:http://www.csb.gov.lv/CentralStatisticalOfficeofPoland-GłównyUrzęduStatystyczny(GUS).Availableat:http://www.stat.gov.pl/gus/

index_ENG_HTML.htmCzechStatisticalOffice–ČeskýStatistickýÚřad(CSÚ).Availableat:http://www.czso.cz/eng/redakce.nsf/i/homeFoodandAgricultureOrganizationCorporateStatisticalDatabase(FAOSTAT).Availableat:http://faostat.fao.org/GlobalLivestockProductionandHealthAtlas(GLiPHA).Availableat:http://www.fao.org/ag/aga/glipha/index.jspHungarianCentralStatisticalOffice–KözpontiStatisztikaiHivatal(KSH).Availableat:http://portal.ksh.hu/portal/

page?_pageid=38,119919&_dad=portal&_schema=PORTALMinistryofAgriculturalPolicyofUkraine-MіністерсвоАграрноїПолітикиУкраїни.Availableat:http://www.

minagro.gov.ua/MinistryofAgricultureandFoodofBelarus-МинистерствесельскогохозяйстваипродовольствияРеспублики

Беларусь.Availableat:http://mshp.minsk.by/structure/branches/livestockNationalInstituteofStatisticsRomania-InstitutulNationaldeStatisticaRomania.Availableat:http://www.insse.ro/

cms/rw/pages/index.en.do

Table 6.Milkyieldpercow(kg/year)inArmenia,Belarus,GeorgiaandUkraine.

2002 2003 2004 2005 2006Armenia 1,758 1,778 1,841 1,921 1,965Belarus 2,728 2,729 3,091 3,503 3,639Georgia 1,062 1,054 1,037 1,034 937Ukraine 2,872 2,889 3,125 3,419 3,308Sources:MinistryofAgriculturalPolicyofUkraine,MinistryofAgricultureandFoodofBelarus,FAOSTAT,andUSDA.

0

5,00

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1000

g

Armenia Georgia Belarus Ukraine

1992200220032004200520062007

Figure 6. Milkyieldperanimal(kg/year)inArmenia,Belarus,GeorgiaandUkraine.


24

NationalStatisticalInstituteofBulgaria-НАЦИОНАЛЕНСТАТИСТИЧЕСКИИНСТИТУТРЕПУБЛИКАБЪЛГАРИЯ.Availableat:http://www.nsi.bg/Index_e.htm

StatisticalOfficeoftheEuropeanCommunities(EUROSTAT).Availableat:http://epp.eurostat.ec.europa.eu/portal/page?_pageid=1090,30070682,1090_33076576&_dad=portal&_schema=PORTAL

StatisticalOfficeoftheRepublicofSlovenia–StatističniUradRepublikeSlovenije.Availableat:http://www.stat.si/eng/index.asp

StatisticalOfficeoftheSlovakRepublic-ŠtatistickýúradSlovenskejRepubliky.Availableat:http://portal.statistics.sk/showdoc.do?docid=4

StatisticalOfficeofEstonia–EestiStatistika.Availableat:http://www.stat.ee/StatisticalOfficeofLithuania–StatistikosDepartamentasprieLietuvosRespublikos.Availableat:http://www.stat.

gov.lt/en/index/UnitedStatesDepartmentofAgriculture(USDA).Availableat:http://www.usda.gov/wps/portal/usdahome


25

Developments in cattle product markets and product prices

K.J.�Peters

Humboldt-Universität�Berlin,�Institute�of�Animal�Sciences,�Dept.�of�Animal�Breeding�in�the�Tropics�and�Subtropics,�Haus�9,�Philippstr.�13,�10115�Berlin,�Germany;�[email protected]

Abstract

WorldcattlestockscontinuetoshifttowardsAsiaandLatinAmericawithmajorgainsinChina,Brazil,CentralAsiancountriesandOceania.LargeststockreductionsoccurredinRussia,EasternEuropeancountries,butalsoinEUandNorth-America.Worldbeefproductionroseby2.3%in2007andisexpectedtorisein2008to68milliontonneswith56%producedindevelopingcountries.Allregionswherebeefisproducedfromthedairyherdshowlargereductionsinoutput(EasternEuropeancountriesandRussia-35.8%and-33,3%,EU-8,4%)whileinNorth-America(Canadaminus,USAplus)beefbenefitsfromfavourableexchangerates.BeefproductioninLatin-AmericacontinuestogrowwhileinArgentinatherecentlyintroducedexporttaxesreducesthecompetitivenessofbeefproductionbeyondthedomesticdemand.InAustralia,theoutputofbeefwilldependonthegrainpricesandpastincreasesarelesslikelytobesustained.Internationalbeeftradeamountstoabout7.1milliontonnesin2007,andthemarketmovedoutofdroughtperiodsinOceaniaandBSEincidencescurtailingtrade.MajorimportingcountriesbesidestheEUareRussia,USA/CanadaandChina;majorexportingcountriesareEU,EEC,Oceania,andIndia.LargestincreasesinimportsoccurredinEECandRussia,butonlyinRussiaarebeefimportsexpectedtogrowduetodemandincreasesandunfavourabledomesticproductionconditions.BeefexportsfromEECarelinkedtotradepoliciesinneighbouringcountries,mainlyRussia,wherecurrentlymajortradecontractsareestablishedwithBrazilandUSA.Internationalbeefpricesincreasedbyalmost7%in2008,duetogrowthinglobaldemandandlimitedexportsuppliesfromtraditionalproducersandfrombeeffromthedairyherd.Structuralfactors,pricepoliciesandproductioninefficienciesarethemajorreasonsforthedownscalingofcattleandbeefproductioninRussiaandEEC.Totalmilkproductionreached676milliontonnesin2007andisexpectedtogrowby2.5%in2008.Largestexpansionsoccurredindevelopingcountries,puttingtheirshareofglobalproductionataround47%,butinthemajorexportingcountries,responsiblefor80%ofglobalexport,milkproductionincreasedbyonly1%followingadeclineof0.7%in2007.StrongexpansioninBelarus,ArgentinaandtheUS,andmarginalgrowthintheEUandUkraine,waspartiallyoffsetbydeclinesinOceania.Thepriceincreaseformostdairyproductsin2007,duetoincreasingdemandinAsiaandRussia,effectivepoliciesinEUtoreduceoverproduction,anddepletionofmoststocks,isunlikelytobesustained,sincepreviousimportershaveexpandedtheirownproduction.Howworldmilkpricesaffectlocalproductionandcompetitivenessverymuchdependsontheimpactofregulationpoliciesactiveinmostdairycountriesaroundtheglobe.Observedcostsandpricesvarybyafactorof2.5andstilldonothaveamajorimpactonthecompetivenessofdairyproduction.Otherfactorsarelinkedtostructuralsectordevelopment,productionandprocessingefficiency.EasternEuropeancountriesandRussiadependtoalargeextendonsupportingpoliciestoallowthemodernisationofthephysicalandinstitutionaldairyvaluechain,tostimulateinvestmentinefficientproductionunitsandmarketinginfrastructure,andtoenhancedhumanskillsforqualityproduction.

Keywords:�cattle�population,�beef,�dairy,�production,�trade,�prices


26

Introduction

Globalmeatproductionin2007reachedalmost275milliontonnes(milliontonnes)ofwhich24.5%derivesfrombovines(cattleandbuffaloes).Withanannualgrowthinbeefproductionofaround1%per�annum(p.a.)therelativecontributionofbeeftoglobalmeatproductionissteadilydecreasing.In2007poultryandpigmeatproductioncontributed32.6%and35%respectively,withexpectedgrowthratesof3.8%and1.8%for2008(FAO,2008a).Despitethefactthatmeatproductionwithmonogastricspeciescanbeexpandedfasterandhasabetterfeedefficiency,beefproductionbasedonconversionofroughagefeedswithsomeadditionalconcentratefinishing,continuestohaveaplaceinglobalmeatproductioninordertomeetconsumerdemands.AccordingtoFAOdataglobalmilkproductionisestimatedtohaveexpandedby1.8%to676milliontonnesin2007,andgrowthin2008isexpectedtoreach2.5%,asproducersrespondedtohighpricesin2007.Thelargestexpansionofproductionoccurredindevelopingcountriesliftingitsglobalshareinmilkproductionto47.5%(FAO,2008b).Only8%to9%oftheglobalmilkvolumeistradedofwhich80%iscoveredbysixleadingexportingcountries.Changesinproductionconditionsinthesecountriesandshorttermchangesindemandfordairyproductscanleadtomajorshiftsintheglobalmarketsituation.Thispaperdealswithtrendsanddevelopmentsincattlestocks,thedynamicsinbeefproductionandbeeftrade,andtrendsindairyproductionandmarkets.

World cattle stocks and changes

Worldcattlestocksduringthelastdecaderosemodestlyby1.32millionto1.38millionorabout0.5%p.a.MostcattlearekeptinLatinAmerica,ChinaandIndiaandstockchangesshowgainsandlosses.StocksdeclinedmostdrasticallyinRussiaandtheEasternEuropeantransitioncountries.Amodestdeclineisalsonoticeableinhighincomecountries(EU,USA/Canada),whilemajorstockexpansionsoccurredincountriesofthesouthernhemisphere,andmainlyincountrieswithfasteconomicgrowthsuchasBrazil(+3.0%p.a.)andChina(+1.8%p.a.).CentralAsiancountriesmovedtowardsastabilisedcattlesectorwithanincrease(+1.1%p.a.)overthelast10years.Australiacontinuesaphaseofrestockingafteraprolongeddroughtandfinalstockswilldependonthedevelopmentofbeefmarketsbutalsothedevelopmentoffeedprices(Table1).

Table 1.Cattlestocksandcattlemeatproduction(FAOSTAT,2008).

Country Cattlestock(million) Meatproductioninmilliontonnes2006 Changessince1996(%) 2006 Changessince1996(%)

Argentina 50.8 -0.1 3.0 +10.6Brazil 207.2 +30.9 6.1 +25.7Australia/NewZealand 38.2 +8.0 2.8 +16.8China 117.8 +18.4 7.2 +115.2India 180.8 -9.9 1.3 -2.6USA/Canada 111.5 -6.6 13.3 +4.2EU27 90.4 -9.1 8.0 -8.4Russia 21.4 -45.9 1.8 -33.3EastEuropeancountries(Ukraine,Moldova,Belarus)

10.8 -53.7 0.9 -35.6

CentralAsiancountries 17.1 +11.4 1.1 +13.8


27

AnewpolicydirectioninRussiaisnowstronglyencouragingtheimportoflivedairyandbeefcattleforrestockingandrevitalisingthecattlesector(in2007141.2millionhead).Mostoftheliveimportations(dualpurposecattle,dairycattle)havetraditionallybeensuppliedbyEUcountriesbut,smallnumberswerederivedalsofromAustralia.LivebeefcattlewereobtainedfromCanadaandinfuturealsofromtheUSA(Hansenet�al.,2008;USDA,2008a,b).

Trends in the beef sector

Despitethefactthatbeefproductioncontributesasteadilysmallersharetotheglobalmeatsupplyitisgrowingproportionallyfasterthanmeatconsumptionindevelopedcountries,indicatingaspecialpreferenceforbeefwithrisingpurchasingpowerandwithahighlevelofoverallmeetconsumption(Table2).

Production

Afteradeclineof1.3%in2006,worldbovinemeatproductionroseagainby2.3%in2007,mainlyduetoliftsofimportbansorrestrictions(Japan,Korea,Russia).LeadingbeefproducingcountriesareUSA/Canada,EU,China,Brazil,andAustralia/NewZealand.Expansionofbeefproductionoverthelastdecade(+1.15%p.a.)havebeenbelowhumanpopulationincreasesandisexpectedtogrowby2.7%endingat7.6milliontonnesin2017(FAPRI,2008).Duringthedecadefrom1996to2006majorexpansionsoccurredinChina,Brazil,Australia/NewZealand,CentralAsianCountries,andArgentinecountries(Table2).BeefmeatproductioninNorthAmericaisexpectedtoremainvirtuallyunchanged.ExpansionintheUnitedStateswillbeoffsetbya6%declineinCanadaduetoimpactsoftheimplementationoftheCountryofOriginLabelling(COOL)regulationbytheUnitedStates.TheincreaseinUSAbeefoutputwhichispartlyduetoitsdepreciatingcurrency,hasincreaseditscompetitiveness.Moreover,highsuppliesofdistiller-driedgrainsfromtheproductionofethanolhavehelpedtolessentheimpactofhigherfeedcosts(FAO,2008a)InBrazil,thelargestproducerinLatinAmerica,the5%growthin2007isexpectedtobereducedto2.5%in2008,ifnoalternativemarketsarefoundtooffsettheeffectofthenewrestrictionsimposed

Table 2.Worldmeatmarketssummary(FAOSTAT,2008).

Worldbalance 2006 2007a 2008b Change:2008over2007milliontonnes

Production 271.5 274.7 280.9 2.3Bovinemeat 65.7 67.2 68.0 1.1

SupplyanddemandindicatorsPercapitameatconsumption:

World(kg/year) 41.6 41.6 42.1 1.1Developed(kg/year) 81.1 82.4 82.9 0.7Developing(kg/year) 30.7 30.5 31.1 1.8

Change:Jan-Apr2007:2008FAOMeatpriceindex %

(1998-2000=100%) 115 121 131c 10aEstimated.bForecast.cJan-Apr2008.


28

bytheEuropeanUniononimportsfromthatcountryduetoproductsafetyconcernsrelatedtoanimaldiseases.SinceRussiahasshownamajorinterestincontractedimportsofbeeffromBrazil,currenttrendsarestillsetforacomfortablegrowth(Hansenet�al.,2008;USDA,2008a).Argentina,withitswellestablishedexportorientedbeefproductionsystem,isalreadysufferingfromtheimpositionofgovernmentexporttaxes,stronglyreducingtheeconomiccompetitivenessofproducingbeefforexport,andshiftingthewholeagriculturalsectortodomesticmarkets.OthermajorbeefproducingcountriesinSouthAmerica(Chile,Columbia,ParaguayandVenezuela)areexpectedtoexpandtheirproductionbyaround5%(FAO,2008a).Steadyexpansionofcattlestocks,improvedmanagementpractices,andstronggovernmentsupportarethebasisforthecontinuedexpectedgrowthofbeefoutputinChina(+3%in2008).BeefoutputinAustraliaisexpectedtodeclineby3.3%in2008,duetomajoreffortstorebuildcattlestocks,andduetochangesincompetitivenessofgrainfeedinginfeedlotsduetohigherfeedcostsin2007.FavourableproductpricesforbeefwillboostbeefproductioninNewZealand,althoughfurtherdevelopmentislinkedtotherelativecompetitivenessofdairyandbeefproduction.BeefproductionintheEUcontinuesitsnegativetrend,asthenumberofdairycattleisdecliningduetomajormilkyieldincreases,andasthenumberofbeefcattleremainsstable.Thehugereductioninbeefproductionfrom1996to2006inEasternEuropeancountries(-35.6%)andRussia(-33.3%)islinkedtomajortransformationprocessesinthelivestocksectorinthesecountries.WhileinBelarusandUkrainetherestructuringprocesshasgainedmomentumandrevitalisedbeefoutput,inRussiabeefproductioncontinuestodecline,duetostructuralproblemsintheagriculturalsectorandreducedcompetitivenessofbeefinthedomesticmeatmarket(Hansenet�al.,2008;USDA,2008a).Thedynamicandinteractingtrendsinbeefproductionindifferentregionsandcountriesclearlysuggestthatbeefoutputfromhighyieldingdairyherdsisdeclining,whiledualpurposedairyherdswithlowermilkyieldsarestillamajorsourceofbeef,andbeeffromspecialisedbeefsuckler-cowsystemsareshowingthelargestexpansions.Theincreasedspecialisationandintensificationofdairyproduction,thus,stronglyaffectsbeefoutputandthetrendsinbeeftrade.Countrieswithlargerfarms(highratiooflandtohumans)andfavourableecologicalconditionsforbeefcattleproductionwillbethefuturebeefproducingcountries(Table3).

Beef trade

Internationalbeeftradeamountedtoabout7.1milliontonnesin2007andisforecastat7.2milliontonnesin2008.Thisrepresentsabout9.5%oftotalglobalbeefproduction.TheworldbeefmarkethasbeenaffectedbyaseriesofdroughtsinAustraliaandbytheBSEincidentsinNorthAmerica

Table 3.Originofbeef(Deblitzet�al.,2004).

Fromdairyherdtothesucklercows!• ‘Dairycountries’(<25%ofcowsaresucklercows)

– Poland,Pakistan,Hungary,CzechRepublicandGermany– Decreasingbeefsystems

• ‘Mixedcountries’(25to75%ofcowsaresucklercows)– NewZealand,Austria,France,IrelandandSpain– Balancedbeefsystems

• ‘Beefcountries’(>75%ofcowsaresucklercows)– USA,Canada,Brazil,Australia,ArgentinaandUruguay– Expandingbeefsystems


29

thatresultedintheimpositionofbansbymanyimporters.Asthesearebeingprogressivelylifted,tradeinbeefisresumingamorenormalpattern.AccordingtoFAOSTAT(2008),EasternEuropeancountrieshavegainedfirstpositionasbeefexporters,followedbyAustralia/NewZealandandIndia.Thelargestimport/exportbeefmarketisstilltheEU.MostofthistradeiswithintheEU,andtheimportofbeeffromBrazilhasdeclinedsubstantiallyduetoEUdemandsontraceabilityandproductionstandards.OtherSouthAmericancountriesarenotinastatetofillthegapsinceEUstandardscannotbemet,orasinthecaseofArgentina,duetolossofcompetitiveness(Table4).MajordownwardshiftsinexportsduringrecentyearsarenoticeableforUSA/CanadatomainlyJapanandSouthKoreaasaresultofBSEincidences.ThestrongEuro,highinternalpricesanddecreasedimportsfromBrazil,however,willdiscourageexportsfromtheEuropeanUnion.Canada’sbeefshipmentsarealsoexpectedtofall,negativelyaffectedbytheintroductionoftheCountryofOriginLabellinglegislationintheUnitedStates,whileexportsfromtheUSAareanticipatedtorise,sustainedbyaweakdollarandtheprogressiveliftingofimportbansbyitstraditionalimportingpartners.Russiaisthelargestnetimporterofbeefoverthelastfewyears(Table4).A12yeardeclineindomesticbeefproductionbecauseofdecreasedcattleandfeedstock,increasedgrainprices,andgenerallynegativeprofitabilityofcattleandbeefproductionhasdiscouragednewinvestors.In2006,theimportsoffrozenbeeftotalled647,200tonnes,andincreasedby25%in2007.SuppliestotheRussianbeefmarketshiftedfromEuropeansources(diseaserelatedimportbans)tomainlySouthAmericancountries(Table5).Recently,importsstartedagainfromUkraineandalsofromPoland(USDA,2008b).TheotherlargenetimporterofbeefisChina,alsoafteralongperiodofexportingbeef,thoughataratherlowlevels.Withcontinuousstrongeconomicgrowthandraisingdomesticbeefconsumptionitisassumedthatimportswillsteadilyincreaseintheyearsahead.Despiteremarkableprogressinexpandingcattlestocksandproductivity,beefproductionislimitedduetolimitedgoodpasturelandandhighopportunitycostforfeed(FAPRI,2008).ThestrongEuro,highinternalpricesanddecreasedimportsfromBrazil,however,willdiscourageexportsfromtheEU,whileexportsfromtheUSAareanticipatedtorise,sustainedbyaweakdollarandtheprogressiveliftingofimportbansbyitstraditionalimportingpartners(FAO,2008a).ExportsfromBrazilreflectdomesticproductiongrowthandtheopeningofnon-traditionalmarkets,suchasRussia,tooffsetimportrestrictionsimposedbytheEuropeanUnion,whileexportsfromArgentinahavedrasticallydeclinedandareexpectedtostabiliseataratherlowlevel,duetothe

Table 4.Cattlemeattrade1995-2005(×1000tonnes)(modifiedfromFAOSTAT,2008).

Country 1995 2005 Δ(%)Import Export Import Export Import Export

Argentina 3.02 42.71 2.57 9.24 -15 -78Brazil 60.33 0.01 3.05 1.66 -95 +165Australia/NewZealand 0.30 86.09 0.24 88.69 -20 +3China 8.77 1.79 11.05 1.52 +26 -15India - 27.87 - 31.25 - +12USA/Canada 114.73 177.92 23.35 26.66 -80 -85EU27 1,019.58 1,116.49 842.87 893.59 -17 -20Russia 149.70 0.17 259.39 0.00 +73 -100EastEuropeancountries(Ukraine,Moldova,Belarus)

1.95 42.68 5.85 95.09 +200 +123

CentralAsiancountries 8.45 0.85 0.09 0.08 -99 -91


30

taxesleviedonexports;exportsbyotherLatinAmericancountries,Chile,Paraguay,Uruguaywillfillthegap.BuffalomeatexportsfromIndiahavesteadilygrowninthepastdecadeandarelikelytorisein2008,inresponsetostrongimportdemandsfromIndonesia,Malaysia,thePhilippinesandcountriesintheNearEast(FAO,2008a).

Beef prices

Drivenbyhighfeedcostandrisingglobalimportdemandandtemporalexportlimitationsbymajorexportingcountries,theFAObovinepriceindexrosebyaround7%from2007to2008(FAO,2008a).Thegeneralpricetrendoverthelast5yearsshowsasteadyincreaseforbeefandalsodemonstratesthatbeefcomparedtomonogastricmeatisexpensive,butissurpassedbylambmeat(Figure1).

Table 5.SourcesofbeefimportstoRussia(WorldTradeAtlas,2008).

Country 2007(%) Δ2005-2007(%)Brazil 65.8 +168.9Argentina 15.7 -40.0Paraguay 8.5 +27.3Ukraine 5.1 -41.5Uruguay 1.6 +266.7Germany 1.0 -59.3Ireland 0.6 -82.3Others 1.6 -69.6Total 100.0 +10.4

1992 1994 1996 1998 2000 2002 2004 2006 200890

100

110

120

130

140 USD per tonne

0

1,000

2,000

3,000

4,000

5,000

Ovine

Beef

Pigmeat

Poultry

2003 2004 2005 2006 2007 2008

A B

Figure 1. (A)FAOinternationalpriceindexformeatproducts(1998-2000=100%).(B)FAOinternationalpriceindexforselectedmeatproducts(FAO,2008a).


31

Nationalpricelevelsofbeefstronglyreflectrespectiveproductioncosts.Differencesbetweenexportorientedcountrieswithlowproductioncostsandthosedependingonimports,andwithonlyaminordomesticproduction,amountto200%(Figure2).Thepressureonmarketpricesderivingfromdifferencesinproductioncostsgenerallyleadstorespectivepolicymeasurestomaintainbeefproductionalsoinregionswithahighproductioncost.AstheIFCN-Beefhasdemonstrated,4foldcostdifferencesbetweenfarmsinresponsetofarmingconditions,landendowmentandlandvalue,andintensificationneedsexist(Deblitzet�al.,2004).Giventheimpactofecologicalfactorsonbeefoutput,theglobalsupplylevel,therangeofshortormediumtermpolicydecisionsrelatedtobeefproductionconditions,beefexportandimportregulations,domestictradeandpricepolicies,thegrowingconsumerdemandsrelatedtoSPSandtraceability,thechangingconsumptionpatternforbeefinrelationtomajordiseaseincidences,theworldmarketpriceofbeefwillalwaysshowstrongvariations,especiallysincethevolumeofgloballytradedbeefisonlyasmallfractionofthetotalproduction.

Trends in the dairy sector

Dairy production

Globalmilkproductionreached676milliontonnesin2007,upby1.8%over2006.Productiongrowthin2008isexpectedtobearound2.5%asproducersrespondtobetterpricesin2007.TheleadingdairyproductionregionsareEU(22.7%),India(14.3%),USA/Canada(13.4%),China(5.4%),Russia(4.6%),Brazil(3.8%),Oceania(3.6%),EasternEurope(2.9%),andCentralAsiancountries(1.9%).Majorexpansionsofdairyingduringthelastdecade(Table6)occurredincountrieswitheitherfastgrowingeconomiesandlowpercapitadairyconsumptionlevels,orlargeincreasesindemandfordairyproducts,suchasChina(+258%),CentralAsiancountries(+44%),India(40.4%),andBrazil(32.4%).Amongtheleadingdairycountrieswithhighlevelsofconsumptionofdairyproductsonly

Figure 2.Bovinemeat:internationalprices(FAO,2008b).


32

Oceania(+30.3%)andNorthAmerica(+18.5%)dairyproductionhadasizableexpansion,whileintheEUthequotasystemkeptdairyoutputalmostconstant(FAO,2008a).Productiontrendsduringthelastfewyearshighlightthecontinuousexpansioninsocalleddevelopingcountriesreachingaglobalshareofalmost48%in2008.ThedairysectorinChinaexpandedby8%and9%during2006and2007,andinIndiaandPakistanby3%and4%,respectively.Thestrongimpactofpurchasingpowerondemandfordairyproductsincountrieswithafastgrowingeconomyandyetlowconsumptionlevelswillcontinuetoeitherprovideincentivesforexpandingthedomesticdairysectororforincreasingtherateofimportsofdairyproducts.AsshowninFigure3,thereappearsadependencybetweenpercapitaconsumptionofmilkandgrowthratesofdairyproduction.Thisstipulatescontinuoushighgrowthratesinallcountrieswithemergingeconomiesandshiftsofdietaryhabits.Changeofpurchasingpowerandlifestyleiswellconnectedwithurbanisationandover-proportionaleconomicgrowthinurbanareas,asthedatafromChinaconvincinglydemonstrate.Dairyoutputinthetraditionallyexportorienteddairyregionsoftheworld(Europe,Oceania,Brazil/Argentina)willnotchangeverymuch,andgrowthinsomeregions/countriesisoffsetbydeclinesinothers,whichdoesaffectexporttradeconditions.Thestronggrowthduring2008indairyproductioninBelarus(+3.9%),Argentina(+6.0%),theUSA(+2.7%),andthemarginalexpansionintheEU(+0.6%)andUkraine(+0.3%)isexpectedtobecounterbalancedbyamajordeclineinAustralia(-3.5%)andNewZealand(-4.5%)(FAO,2008a).InEasternEuropeancountries,thedairysectoroverthelastfiveyearsremainsstagnantinCaucasiancountries,showsacontinuousrevitalisationinCentralAsiancountries,appearstobeexpandingratherfastinBelarus(+4.0%during2007),turnstorecoveryinRussiawitharecentgrowthof+2.0%p.a.,andexhibitsaverymixedsituationinUkraine,whereafterconsiderablestabilisation,theexportofdairyproductstoRussiawereimpactedbyqualityproblems(-7.0%in2007)(Figure4).

Dairy trade

Only8%to9%oftheglobalannualdairyproductionistradedininternationalmarkets.In2007thevolumeofinternationallytradedproductsdroppedto5.6%milkequivalent.Themostimportantdairyproductstradedarebutter,cheese,milkpowders,caseinandcondensedmilk.TheEUandNewZealandremainthemajordairyexportersaccountingforover30%eachofallexports,followedbyAustralia.Conditionsinthesecountrieswilllargelyaffecttheglobaltrade(Figure5).TheEUisfurtherreducingitsexportabilityasaneffectofthequotasystemandinOceaniadairyoutputisreducedbyrecurrentdrought(mainlyinAustralia).Othertraditionaloremergingdairy

Table 6.Cattlemilkproductionlevelanddevelopment(milliontonnes)(FAOSTAT,2008).

Country 2006 Changessince1996(%)Argentina 8.1 -11.4Brazil 25.4 +32.4Australia/NewZealand 24.7 +30.3China 36.4 +257.8India 95.7 +40.0USA/Canada 90.6 +18.5EU27 153.8 +1.7Russia 31.3 -12.5EastEuropeancountries(Ukraine,Moldova,Belarus)

19.8 -35.6

CentralAsiancountries 12.7 +44.0


33

0

5

10

15

20

25

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007K

g pe

r milk

equ

ival

ent p

er c

apita Rural Urban

B

Figure 3. (A).Percapitaconsumptionofdairyproducts(DanishDairyBoard,2008c).(B).Urbanandruraldairyproductsconsumptionratesexpressedinmilkequivalent(ME)inChina(DanishDairyBoard,2008c).

0

5

1015

20

25

30

3540

45

50

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006Year

Pro

duct

ion

(in m

illio

n M

T)

Caucasian countries CAC Russian Federation Ukraine Belarus

Figure 4.MilkproductioninEasternEuropeancountries(FAOSTAT,2008).


34

exportersarenotfullyabletooffsetthiseffectduetocomparablelowsuppliestotheworldmarket(Figure6).MajorimportingcountrieswereformanyyearstheemergingdairyconsumernationsinNorthAfrica,NearEast,SouthEastAsia,EastAsiaandChina.Inthelightofthereducedvolumeoftradeddairyproductslinkedwithdramaticpriceincreasesmanyimportingcountrieshavereducedimportsbyaround5%,raiseddomesticdairyprices,andcreatedincentivesfordomesticproduction.Importvolumescontractedbydevelopedcountrieshaveremainedrobust(FAO,2008a).Theproductstructureoftradeddairycommoditiesischanging.Exportofatraditionalproductsuchasbutterhasdeclinedby26%during2004to2008ingeneral,andintheEUfrom355,000tonnesin2004to105,000tonnes(-29.6%)in2008.OnlyBelarusisexpandingitsbutterexport.TheRussianFederationappearsasthedominantimporterofbutterandshowsexpandingtrendsaslongasthedomesticdairysectorisunabletomatchthegrowingconsumerdemandinthecountry.OthertraditionalimportersareNorthAfrica,SouthEastAsiaandtheMiddleEastGulfStates.Skimmilkpowder(SMP)exportsfromtheEU,AustraliaandNewZealandhavealsodeclinedbyalmost33%,whichwillgivetheUSAfirstplaceinexportingSMP.MajorimportersarecountriesinSouthEastAsia,NorthAfrica,andCentralandSouthernAmerica.

Australia 12 %

Other 11 %

Ukraine 3 %

Argentina 6 %

US 6 %

New Zealand 32 %

EU 30 %

Figure 5.Exporters’shareofworldtradein2006(milkequivalent)(DairyAustralia,2008).

EU

New Zealand

Other Australia

USA

Figure 6.Shareofexporttradeinmilkequivalent(%)(DairyAustralia,2008).


35

Theglobaltradeinwholemilkpowder(WMP)isconstrainedbyinsufficientsuppliesdespitestrongimportdemandsfortheuseofreconstitutedmilkandotherproducts.MainexportersareNewZealandandAustraliaanduntilrecenttheEU,mainimportersareMiddleEastandcountriesinCentralandSouthAmerica.Theinternationaltradeincheeseisveryrobustandmarketdemandappearstobegrowing(+3.6%in2007)despiteconsiderablepriceincreases.TheEUistheworldleaderintheglobalcheesemarketwith35%ofthetotalmarketshare,andtheamountofmilkbeingusedforcheeseproductionisincreasing.AustraliaandNewZealand,thesecondlargestcheeseexporters(32%ofinternationaltradedcheesein2007),areexpectedtoreducetheirexportsduetoashortageinmilksupplies.TheUSAisamajorcheeseimporterunderpreferentialtradeagreementswiththeEU,NewZealandandAustralia,buthasrecentlyincreaseditsexports.OtherimportersareJapan,MiddleEastandNorthAfrica.

Dairy prices

Risingpurchasingpower,populationgrowthandlimitedagriculturalproductionresourceswillsustainhigherfoodpricesandespeciallythoseoflivestockorigin.Dairyproductionshouldbenefitfromthistrendsinceefficientproductionismuchdependentonfavourableecologicalconditionsandtheabilitytoimprovemanagementandtoconnecttomarkets.Therisingdemandfordairyproductsinemergingeconomieswithclimateslessfavourablefordairyingcanhardlybemetbyexpandeddomesticproduction,withonlymoderateyields.Thus,dairyproductionintemperateregionswithafavourableecologyremainsabeneficiaryofrisingglobaldemandsfordairyproducts.Dairyproductpricesrosefasterthanotheragriculturalcommoditiesduring2006and2007asaresultofdiminishingstocksinmajorexportingcountries.Underlyingreasonsforthedramaticchangesweretheconcomitanteffectsofhigherfeedprices,droughteffects,andtheeffectoftheEUCommonAgriculturalPolicydiminishingsurplusproductionthroughtherigidquotasystem(Morgan,2008).TheFAOindexofdairyproductprices(1998-2000=100)roseto266inApril2008,whichrepresentsa25%increaseinoneyear(Figure7).SMPexperiencedthehighestpriceriseandinducedincreasedproductionwhichfinallycausedamarkedadjustmentinprices.Butotherproductsexperiencedapricereduction(WMP8%,butter5%,cheese8%)duringearly2008.

6080100

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Figure 7. Monthlyindicesofinternationalpricesofselecteddairyproducts(Exporttradevalueweightsfortheworld)(FAO,2008b).Theindexisderivedfromatrade-weightedaverageofaselectionofrepresentativeinternationally-tradeddairyproducts.


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Althoughitisexpectedthatdairypriceswillremainrobust,thereareanumberofuncertainties.Factorssupportingalowerpricearerelatedtotheabilityofimportingcountriestoexpandtheirowndairysectorandcutimports,orallowingexportcountriesaccesstotheglobalmarketwithoutprohibitiveexporttaxesasinthecaseofArgentina.Otheruncertaintiesarerelatedtochangesinfeedcostascausedbyexpandingland-useforbio-energy,impairingthecompetitivenessofdairyproduction.Thepropagationofbio-fuelislinkedtooverallenergypricesbutisalsolinkedtorespectivepoliciestoreducedependencyonfossilfuel.Policychangesinthisareaaffectconditionsfordairyproduction.Thecurrentcostleveloffuelandfeedaremarkedlyaffectingthecompetitivenessofintensivedairyproductionandcouldleadtomajorcullingandareductionindairysuppliestothemarket,whicheventuallywouldagainleadtoincreasingproductpricesintheglobalmarket.Theactualmilkpricesreceivedbydairyproducersshowverylargevariationindifferentcountriesandunderdifferentproductioncircumstanceswithincountries.AstheIFCNDairyreportof2005reveals(IFCN,2005),farmgatepricesdifferbymorethan100%withextremelylowpricesincountrieswithemergingdairysectorsandlowerfactorcostforlandandlabourandratherhighpricesincountrieswithintensivedairyfarms(Figure8).Priceincreasessuchasthoseduring2007maynotautomaticallyleadtohigherfarmgateprices.TheDanishDairyBoardreportsontheadjustmentsindifferentEUCountriesandtheUSAwhichvariedfrom16%inFinlandto34-38%inGermanyandHollandandupto45%inUKandIreland(DanishDairyBoard,2008a).Themarketpositionofdairyproducersindifferentcountriesisinfluencednotonlybythemarketpoweroftheeverdecreasingnumberofdairyprocessingplantsbutalsobytheincreasingdiscountersintheretailbusiness.Thus,marginsbetweenfarmgatepricesandconsumerprices(Figure9)dovaryconsiderablyacrosscountries,astheworkbyIFCNsoclearlydemonstrates(IFCN,2005,2006).Dairypricespaidtothefarmerandpricesobtainedinexportmarketsareverydifficulttorationallyexplain,sincetheyareinfluencednotonlybyproductionrelatedcostfactors,butalsobydomestic/nationalpricesupportarrangements,whicharemoreoftenrelatedtoruralsocialpoliciesthantoanythingelse.

Figure 8.Farmers’milkprices(US$per100kgmilk-4%fat,3.3%protein)(IFCN,2005).


37

Inmarketswithquotaregulationsformanagingimports,therealisedreturnsfromsalesofdairyproductsareaffectedbytherespectiveprotectedpricestructuresintheimportingcountries,whicharenormallywellabovetheinternationalpricelevel.OtherdistortionsofinternationalpricesarecausedbypreferentialtradeagreementsorgeneralexportsubsidiesofexportorientedcountriessuchastheEUandUSA.Exchangeratefluctuations,levelofmarketstocksofproductsintheEUandUSA,modificationsinsubsidyregulationsandpayments,andthevolumeoffoodaidsupplycanalsoimpactonpricedevelopments.Themarketablevolumeofdairyproductsisfurtherinfluencedbyseasonalityofproductionandtheseverityofrecurrentdroughts,asitmainlyoccursinthesouthernhemisphere,andthusimpactsonnationalandinternationalmarketprices.

Conclusion

Cattlearethemostimportantlargelivestockspeciesforsupplyingmeatandmilktofeedtheevergrowinghumanpopulation.Expansionofcattlepopulationsareoccurringmainlyinregionswithgrowingproductmarketsand/orwithfavourableproductionconditions,i.e.inemergingeconomiesandincountrieswithproductionreserves.Intraditionaldairyproducingcountrieswithhighyields,thenumberofcattleisstagnantandproductmarketopportunitiesaremetwithyieldincreases.Beefproductiongrowsatjustabove1%p.a.andistendingtomovetocountrieswithproductionreservesinthesouthernhemisphere,whilethehighlyspecialiseddairysystemsloosetheirroletosupplyfeedercattleforthebeefsector.InternationaltradeinbeefflowsfrommajorexportregionssuchasOceania,SouthAmerica,andIndiatodeficitcountriesparticularlyRussia,ChinaandtheEU.Majorchangesincattlestocksandbeefproductionoccurredduringthelast10yearsintransitioncountriesofEasternEuropeandCentralAsia,indicatingdifficultiesinovercomingstructuralchangesinthelivestocksector,ininstitutionsofthecattlevaluechain,andinregainingacompetitivecattlesector,butalsoinadjustingtonewqualitystandardsandtradepoliciesofneighbouringcountries.Beefpriceshavenotchangeddramaticallybutshowalargevariationacrosscountries.Milkproductionshowsasteadyexpansionof1.7%p.a.withconsiderabledifferencesaccordingtotheprevailingconsumptionlevel.Thelargestexpansionisoccuringincountriesofthesouthern

Figure 9.IFCNestimateforconsumerpricesformilk(US$perkgmilkin2004)(IFCN,2005).


38

hemisphereandincountrieswithstrongeconomicgrowthfuelledbygrowingpurchasingpowerandeconomicstrengthofurbanareas.TheleadingdairyproducingregionsaretheEU,USA,IndiaandOceaniaandtheleadingexportcountriesaretheEUandOceania.Exceptionalpriceincreasesfordairyproductswererelatedtothegrowingimportdemandofdeficitcountries,andtoreducedproductstocksintheEU.Ageneralpriceadjustmentseemscorrelatedtoenergypricesanditseffectsongeneralproductioncostsandontheemergenceofbio-fuel.Dairypriceswillcontinuetofluctuateconsiderablyduetopricedisturbingeffectsofpolicies.

References

DairyAustralia,2008.Dairyproductionandtrade.Availableat:www.dairyaustralia.com.au/content/view/197/83/.DanishDairyBoard,2008.Mejeriforeningen.Percapitaconsumptionofdairyproducts.Availableat:http://www.

mejeri.dk/smcms/danishdairyboard_dk/Policies/International_dairy/Per_capita/Index.htm?ID=7925.Deblitz,C.,Charry,A.A.andParton,K.A.,2004.Beeffarmingacrosstheworld:anexpertassessmentfroman

internationalco-operativeresearchproject(IFCN).Availableat:http://www.csu.edu.au/faculty/science/saws/afbmnetwork/efsjournal/volume1/number1/EFS_Journal_v01_n01_01_ClausDeblitz_et_%20al.pdf.

FAPRI,2008.FAPRI2008U.S.andWorldAgriculturalOutlookDatabase.FoodandAgriculturalPolicyResearchInstitute.Availableat:http://www.fapri.iastate.edu/tools/outlook.aspx.

FAO,2008a.Foodoutlook,globalmarketanalysis.June2008.FoodandAgricultureOrganizationoftheUnitedNations.Availableat:http://www.fao.org/docrep/010/ai466e/ai466e00.htm.

FAO,2008b.Tradeandmarkets.FoodandAgricultureOrganizationoftheUnitedNations.Availableat:http://www.fao.org/es/ESC/en/15/162/highlight_176.htm.

FAOSTAT,2008.StatisticalserviceoftheFoodandAgricultureOrganizationoftheUnitedNations.Availableat:http://faostat.fao.org/.

Hansen,E.,Maksimenko,M.andDuBois,C.A.,2008.RussianFederationlivestockandproductssemi-annualreport2008.USDAForeignAgriculturalService.Availableat:http://www.fas.usda.gov/gainfiles/200803/146293870.pdf.

IFCN,2005.AnnualReport,2005.IFCNDairyResearchCenter.IFCN,2006.AnnualReport,2006.IFCNDairyResearchCenter.Morgan,N.,2008.Dairyprices,policiesandpotentialopportunitiesforsmallholderinAsia.AnAPHCABrief,2008.

Availableat:http::/www.fao.org/docrep/010/ai465e00.htm.USDA,2008a.GainReportNumberRS8014,release0120.08.UnitedStatesDepartmentofAgriculture,Foreign

AgriculturalService.Availableat:http://www.porkworld.com.br/img/File/41.pdf.USDA,2008b.UnitedStatesDepartmentofAgriculture.RussiaallowsforimportationofU.S.Livestock.05.Jun.

2008.04.Aug.2008http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB?contentidonly=true&contentid=2008/05/0120.xml.

WorldTradeAtlas,2008.Importenehmenzu.ZMPWeltAgrarMarkt,Januar2008.


39

Analysis of developments in new EU member states based on the dairy quota situation

A.�Kuipers1,�A.�Malak-Rawlikowska2,�M.�Klopcic3�and�J.�Sataite4

1Expertise�centre�for�Farm�Management�and�Knowledge�Transfer�(Agro�Management�Tools),�Wageningen�UR,�the�Netherlands;�[email protected];�2Warsaw�University�of�Life�Sciences,�Faculty�of�Economic�Sciences,�Warsaw,�Poland;�3University�of�Ljubljana,�Biotechnical�Faculty,�Slovenia;�4State�Enterprise�Agricultural�Information�and�Rural�Business�Centre,�Milk�Quota�Accounting�Bureau,�Vilnius,�Lithuania

Abstract

Theworlddairysituationwasrecently(2007)quitepositiveincomparisontotheperiod2002-2006.Demandfordairyproductsisgrowing,especiallybecauseoftherapidlyincreasingdemandinAsiancountries.In2007andearlypartof2008,asubstantialincreaseinmilkpriceswasseenintheEU,aswellasanincreaseinsomecostfactors(feedandenergy).Nevertheless,20outofthe25EUcountriesdidnotreachorjustreachedtheirnationalmilkquotainyear2006/2007.TheoverallmilkproductionvolumeintheEUisstableandexportisdecreasing.Onthecontrary,NewZealand,SouthAmericaandUSAarestrengtheningtheirexportpositionontheworldmarket.ThistrendhascausedadiscussioninEUaboutthefutureofthequotasystemafter2014;keepthisproductionrestrictinginstrumentorchooseanopenmarketsituation.ThesituationinsomeEUcountrieswillbedescribedindetail.Ascasestudies,thesituationincountriesofEasternEuropewithrelativelysmallherds,i.e.Poland,SloveniaandLithuaniaareexamined.Regionalisationofmilkproductioniscomparedagainstthequotasysteminuse:aregionalsystemversusanationalsystem.Thestructuraldevelopmentsinthevariousregionsinthesecountriesarealsocompared.ThedecouplingofEUsubsidiesfromproductionhasmadethechoiceofstrategymoreaneconomicalfarmmanagementdecisionthanbefore.ThedairysectorinEuropeisbecomingabusinessinariskymarketenvironmentaswasexperiencedbythepig,poultry,vegetable,andflowersectorsformanyyears.Becauseoffluctuatingmilkpricesinrecentyearsanduncertaintyaboutquotasystem,pricesofquotahavestartedtofluctuate.Itwillbeahugechallengeforthesectortocopewiththismarketsituationinasustainableway.Robustnessofthefarmbecomesafactorofmoreimportance.

Keywords:�milk�quota,�regional�and�national�systems,�chain�developments,�Eastern�EU�countries

Introduction

Inthisstudy,firsttheEUdairypolicywillbebrieflydescribed.ThequotasystemhasbeenthebackboneoftheEUdairypolicysince1984tobalancesupplyanddemand.Somecharacteristicsofthequotasystemwillbeoutlined,whichhavearelationshiptostructuraldevelopmentsofthesectorinthevariouscountries.Thentheapplicationofthequotasystemsince2004inthenewEUcountrieswillbedescribed.Emphasiswillbegiventostructuraldevelopmentaspects.Thiswillbedonemoreextensivelyforthreecountries,namelyPoland,SloveniaandLithuania.PolandischosenbecauseitisthelargestdairycountrythatenteredtheEUin2004.Ithasrelativelysmallfarms.Sloveniahasamountainouslandscapeandalsohassmallfarms.Inbothcountriesaformofregionalisationtakesplaceinapplyingthequotasystem.AdditionalattentionisgiventoLithuaniaasoneoftheBalticcountries:thiscountryhasanationallyappliedquotasystem,i.e.noregionalisationtakesplace.Thisyes/noregionalisationwasalsoareasonbehindtheselectionofthisBalticcountry.Also,extra


40

informationisprovidedaboutRomaniaandBulgariaasthelastcountriesthatenteredtheEU.Thus,thestudycoversawidespectrumoftheexistingdiversityinEuropeandairyproduction.

EU Agricultural policy

DetailedinformationontheEUdairysectorcanbefoundinthefactsheet‘MilkandmilkproductsintheEuropeanUnion’(EC,2007a).Thisfactsheetexaminesthedairysectorinfactsandfigures,explainstheroleoftheEU’sCommonAgriculturalPolicy(CAP)inrelationtomilkproductionandmarketing,andhighlightsthemainfactorsthatwillinfluenceitsfuture.Accordingtothisfactsheet,acommonmarketorganisation(CMO)formilkandmilkproductswassetupin1968.Althoughovertheyears,thedairyCMOhaschangedfundamentally,itstilloperatesinthreeareas:• internalmarketsupport;• usingtradeinstruments;• makingdirectpaymentstofarmers.

Internal market support

‘Safety-net’�intervention

Nowadays,publicintervention(buyingintostorage)forbutterandskimmedmilkpowderislimited.Interventionagenciesmayonlybuyinbutterduringtheperiod1Marchto31Augustofanyyear.Thereisalsoamaximumorthresholdonthequantitiesofbutterofferedforintervention.Thisthresholdwas50,000tonnesin2006,40,000tonnesin2007and30,000tonnesfor2008andsubsequentyears.IfthethresholdisexceededtheCommissionmaysuspendconventionalinterventionbuyingandcontinuebuyingusingatenderingprocedure.In2003itwasagreedthatthebutterinterventionpricewouldbereducedby25%overafour-yearperiod,beginningon1July2004,thefourreductionsbeingthreetimes7%plusafinalcutof4%in2007.Moreover,theactualbuyinginpriceisonly90%oftheinterventionprice(i.e.€221.75per100kgon1July2007).Skimmedmilkpowder(SMP)interventionwasonlyopenbetween1Marchandend-Augusteachyear,foramaximumquantityof109,000tonnes.Beyondthisquantity,interventionmaybesuspendedandmaybereplacedbyatenderprocedure.TheSMPinterventionpricewasreducedby15%overathree-yearperiod,withreductionsof5%ineachof2004,2005and2006,resultinginthefollowingpricelevels:€205.52/100kgin2003/2004,reducingto€174.69/100kgfrom1July,2006

Disposal�of�dairy�products�on�the�internal�EU�market

Inorderthatahealthymarketbalanceismaintained,theEUdairyindustrycontinuestohaveaccesstomeasurestoensurethecompetitivenessoftheirdairyproductsontheinternalmarket.VariousschemesfordairyproductsontheEUmarketstillplayaroleinthedairyregime,thoughspendinghasbeenreducinginrecentyearsinmostcases.Themainsubsidiseddisposalschemesare:• cream,butterandconcentratedbutterfornon-profitorganisations,forcommercialpastryand

icecreammanufacture(stillasignificantscheme–disposalmeasuresforbutter,butteroilandcreamcoveredatotalquantityof600,000tonnesofbutterequivalentsin2004);

• SMPforuseinanimalfeed;


41

• skimmedmilkforthemanufactureofcasein/caseinates;• schoolmilk;• aidintheformofdairyproductsforthemostdeprivedpeople.

Private�storage�aid

Forbutterandcertaincheeses(mainlyItaliancheeses),cheeseproducerscanobtainfinancialsupport(aid)forstoragecosts.Duetoseasonalvariationsinrawmilkdeliveriestheproductionofsomeproductsishighforashortperiod,whichcandestabilisemarkets.Thisaidstabilisespricesbyhelpingproducerstotaketheproducttemporarilyoffthemarket.Inthecaseofbutteritalsoservesasanalternativetointervention.

Milk�quotas

ThemilkquotaregimehasbroughtstabilitytotheEU’sdairysectorsinceitsintroductionin1984.TheCAPreformof2003decidedthattherewillbethreeannualincreasesof0.5%ofquotavolumesfor11oftheEU-15memberstatesbeginningin2006(Greece,IrelandandNorthIreland,ItalyandSpainaretheexceptionsastheybenefitfromearlierquotaincreases).Tomeetgrowingdemandfordairyproducts,theEuropeanUniondecidedinMarch2008toincreaseitsmilkquotasby2%beginninginApril2008.TheEU-15wasextendedin2004with10newmemberstates.ThenationalquotasforallEUmemberstatesin2004,includingthenewcountries,areillustratedinFigure1(MaltaandCyprusnotlisted).ItisclearthatPoland,asnewEU-country,belongstothelargedairycountriesinEurope,ranking6thinquotaamountofthe25EU-countries.In2007,RomaniaandBulgariaenteredtheEU.Thesituationinthosecountriesisdescribedlaterinthispaper.

Figure 1.QuotaassignedtoEU-memberstatesin2004(→indicatesthenewEU-states;MaltaandCyprusarenotlisted).


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Using trade instruments

Exports

AstheEUmarketpriceishigherthantheworldpricefordairyproducts,exportsgenerallytakeplacewiththeaidofexportsubsidies.Followingthe1994multilateraltradeagreement(knownastheUruguayRound)oftheWorldTradeOrganization(WTO),exportsubsidieshavebeenrestricted–boththequantitiesexportedandtheamountoftotalsubsidiespaidoutarestrictlylimited(Table1).Inpracticeonlycheeseexportshavereachedthequantitativelimiteachyear.Subsidisedexportsofotherdairyproductshavebeenwellbelowthevolumeconstraints.TheEuropeanCommissionintroducedatenderingsystemforexportrefundsonbutter,butteroilandSMPinbulkin2004.Thissystemrunsalongsidethetraditionalfixedrefundarrangementsforallproductsandhasreinforcedthemoremarket-orientedapproachofthedairyregimepost-2003.

Imports

TheEUmaintainsrelativelyhightariffsondairyproducts,inordertosustaintheEUmarketprice.Thereareonlyminimalimportsatfulltariff.However,manyoftheEU’stradingpartnersbenefitfromspecialimportarrangements–knownasTariffRateQuotas(TRQs)–wherebyimportscancomeinatlowertariffs.SomeoftheTRQsarespecifictoparticularexportingcountries;othersareopentoallunderthemost-favourednation(MFN)system1.TRQsarenotalwaysfilled(i.e.fullyutilised).Thoseforpowders(about70,000tonnes)arehardlyused;thereareTRQsforseveraldifferentcheesetypes–amountingtojustover122,000tones–theaveragefillrateis40%;thebutterTRQsofapproximately89,000tonnesarealwaysfilled.

Making direct payments to farmers

Directpaymentsorincomesupport2004-2007waslinkedtokgofmilkquota.Theintentionwasthatthedirectincomesupportwouldbenearlyequaltothereductionininterventionpricesfrom2004to2007.Incomesupportwasin2007decoupledfromkgofmilk(i.e.fromproduction),theso-called‘decoupling’.Then,thesupportwillbelinkedtoland(ha)ortothefarmer.Tobeeligibleforsubsidy,thefarmerhastocomplywithanumberofconditions,theso-calledCross-Complianceconditions.Theseconditionsrefertoallkindsofaspectsofsustainablefarmingoralsotoasetof‘GoodFarmingPractices’.GoodfarmingpracticesthatarepartoftheCross-Complianceconditionsrelateto:

1MFNrequiresthateverytimeamemberstateimprovesthebenefitsitgivestoonetradingpartner,itmustgivethesametreatmenttoallotherWTOmembers,sothattheyremainequal.

Table 1.Subsidisedexports–maximumallowablequantitiesandvaluesforEU-25.

Products Quantities(tonnes) Values(€1,000)Butter/butteroil 399,300 947,800SMP 272,500 275,800Cheese 321,300 341,700Other 958,100 697,700


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• environment;• productqualityandhygiene;• animalwelfare;• naturemanagementprogrammes(likepreventingerosionanddeteriorationofbiodiversity).These‘goodfarmingpractices’arearesultofthevariousEU-directives,liketheHygienedirectiveandtheEnvironmentalregulations.Insomecountries,publicagenciesordairycompanieshaveincorporatedthe‘practices’inso-called‘QualityAssuranceSchemes’.Farmersarestimulatedtoparticipateinsuchprograms.

Characteristics of quota system in relation to structural development

Theintroductionofaquotasystem,ashappenedin1984inthe‘old’EU-countriesandin2004inthe‘new’EU-countries,isaverycomplicatedprocess.Wehavetwotypesofquota:quotafordeliveringmilktothedairycompanies,i.e.topurchasers(QuotaA)andquotafordirectsalesfromthefarm(QuotaD).Introductionofsuchasystemrequiresinstitutionbuilding,settingupadministrativeprocedures,choicesaboutthesystem,thechoiceofprioritygroups,thehandlingofthebutterfatreference,controlaspects,farmmanagementandcostaspects,communicationwithfarmers,andlastbutnotleaststructuraldevelopmentaspects.Infactthequotasystemaffectsthedairyindustryandruraldevelopmentasawhole.ThisisdescribedfortheEasternEuropeancountriesbyKuiperset�al.(2007).Theimplementationofthequotasystemallowsdifferentoptions.Thechoiceofoptionsisveryimportantforthedevelopmentpossibilitiesofthedairysectorandtheindividualfarm.Especiallythewayquotatransferisarranged,thebuilt-upofanationalreserveandthedivisionofthecountryinregionsornotisessentialinthiscontext.Thevariouschoicestobemadearepresentedbelow.

Reference year

Thereferenceyearistheyearonwhichtheindividualquotaallocationtofarmersisbased.Forthenewmemberstates,thiswasusually2002,2003or2004oracombinationoftheseyears.EachmemberstatehasbeenassignedanationalquotabytheEU(seeFigure1).Thenationalquotaisdistributedoverthenationalreserveandtheindividualproducers.Insomestates,thenationalquotaisfirstdividedbetweenregionsand/orbetweenthemilkpurchasers,andinasecondstepassignedtotheindividualproducersbyregionalauthoritiesand/orbythepurchasersofmilk(cooperativesorprocessingplants).Thenationalquotaandindividualquotathathavebeenassignedareaffectedbythedevelopmentofthecowpopulationandmilkvolumeinthepast.ThedecreaseinthenumberofcattleandcorrespondingproductionvolumeintheCentralandEasternEuropeancountriesinyears1990-2002isillustratedinFigure2.

National reserve

Anationalreserveisneededtohelpfarmersinspecificproblemsituationsand/ortostimulatecertainnationalpoliciesonstructuraldevelopment.Thusthenationalreserveismeantto:• giveproblemfarmersastrongerbase;• provideforstructuralchanges.Itispossibletohaveamoreliberaloramoresocialapproachtodistributingquota.Withaliberalapproachthequotatransfersarelefttothemarket.Withasocialapproach,thenationalauthoritiescollectquotaatnationalorregionallevelandhaveguidelinesforthedistributionofthisquota.Inthiscase,thequotasystemisusedasadevelopmenttoolforthedairysectorandforruraldevelopment.


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Possibleconditionsforprovidingthisadditionalquotafromthenationalreserveare:• farmerswithdevelopmentplans;• youngfarmers;• regionswithlandreformplans.

Quota transfer and structural changes

Differentpolicieswhichexistconcerningquotatransferareasfollows:• QuotaExchangeBureau;• freetransferofquota;• transferofquotalinkedtoland;• leasing.Therealityisthateachcountryadoptsasystemthatismoreorlessfittedtotheownsituation.WhatcanwelearnfromthesystemspractisedintheWestern-Europeancountries?Welearnthatfreequotatransfergivesflexibility.Structuraldevelopmentsarenotblocked.Butwhenquotapricesincrease,thecostleveloffarmsalsoincreases.Thisimplies,thatthestartvalueofthefarmenterpriseishigherthanwithoutquota.Thisisnotfavourableforrestructuringandinvestmentingoodsotherthanmilkquota.Also,herdsizewillaffectstructuralchanges.Table2showsthatherdsizesdiffersignificantlybetweencountries.Whenherdsizeissmallitmaybeexpectedthatmanysmallfarmswillstopmilking,i.e.arenotallowedtodelivermilktothedairyplants.Thisiscausedbymilkqualityandeconomicissues.Forthedairysector,itisanadvantagethatquotagoesfreeofchargetootherfarmers.Thatwillkeepinvestmentinthesectorlimitedandcostlevelscompetitive.Quotatransferwithoutmoneytransactionsareonlypossiblewhenfreetransferisnotallowed.Inthiscaseallfreequotaflowstothenationalreserve.ThegovernmentAgencieshavetodistributethisquotaamongthefarmersthatremaininmilkproduction.Also,wholefarmtransfer,likeinFrance,isanoptionfordairycountrieswithasmallfarmstructure.

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Figure 2.DevelopmentofnumberofcowsinnewEU-memberstates.


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Regions or not

Thephilosophybehindtheestablishmentofregionsisthatquotaisforcedtostaywithineachregion.Itprotectscertainregionsfromloosingquotaandfarms.Thisisespeciallythecaseforthelessfavouredagriculturalregions.Thecountriesthatoperateregionalquotasystemsare:• Germany:21regions(quotaprice:0.20-0.90€/kgmilk)• France:3-4regions• Poland:16provincesEachregionhasit’sowncharacteristics.Forexample,thequotapricesofthevariousregionsinGermanyin2004variedfrom€0.20-0.90.ThelowestpricesexistintheformerEast-Germanyregions,andthehighestpricesareinsouthernGermany(Bayern).Afirstindicationin2004ofquotapriceinPolandwas€0.20perkg,andinSlovenia€0.15-0.30perkg.Alsothenumbersofquotatransfersinthevariousregionssometimesdiffersignificantly,indicatingthatmoreorlessrestructuringofthedairysectorisgoingonindifferentpartsofacountry.Theadvantagesanddisadvantagesofinstalmentofregionsaresummarisedas:• Advantage:protectionofcertainregionstomaintaindairyhusbandryinthoseareas.• Disadvantage:economicdevelopmentsrestrictedtothebordersofaregion.

Present quota situation in new EU countries

ThepresentallocationofmilkquotatotheEUcountriesisshowninFigure1andthedevelopmentinthenumberofdairyfarmerswithquotaisshowninTable3.Inthe‘old’EU-countriesareductioninfarmnumbersof40-80%hasoccurredintheperiod1995-2007.Intheperiodof2005-2007anannualreductionindairyfarmnumbersof3-14%wasobserved.EspeciallyinSpain,PortugalandGreecethenumberoffarmsdecreaseddramatically.ThenewcountriesofLithuania,EstoniaandPolandhavealsoshownaverylargedecreaseindairyfarmnumbersinrecentyears(Table3).ThevariousEUcountriesshowaverydifferentstructureinsizeofdairyfarms(seeFigure3).Thenewcountriesshowevengreaterdiversityinthisrespect.Forinstance,Slovakiahasthelargestfarmsize,whileLithuaniahasthesmallestfarmsintheEU-25.Thedynamicsofdairyinginacountryistosomedegreeindicatedbythepressureofthefarmersonthenationalquota.Isthereatendencytoexceedtheindividualandnationalquotaoristhenationalquotanotfilledupbythefarmers?ThissituationisillustratedrespectivelyfortheEUasawhole(Figure4)andfortheindividualcountries(Figure5).AscanbeseeninFigure5,therehasbeenatendencyinrecentyears(2004-2007)thatmoreandmoreWesternEuropeancountriesdidnotutilisethenationalquota.ButthesituationinthenewmemberStatesismorecomplexanddifficulttopredict.InthefirstyearsafterenteringtheEUthe

Table 2.Numberandsizeoffarmswithquotainsomecountries(2004).

Country Farms Cow/farm Milkprod/cowNetherlands 30,000 52 7,500Lithuania 130,000 2.5 5,015Poland 450,000¹ 4.5 3,840Hungary 30,000 12 6,317Estonia 7,120 16 5,119CzechRepublic 3,400 212 5,718Slovenia 10,900 10.3 4,993¹Farmswhoreceivedquotafordeliveringtothemarket;totalnumberoffarmswasabove700,000.


46

Table 3. DevelopmentofnumberofdairyfarmerswithaquotainEU(EC,2007b).

Memberstate 1995 2005 2007 Change1995-2007

Annualchange1995-2005

Annualchange2005/2007

Austria 83,793a 53,713 47,378 -43.5% -4.3% -6.1%Belgium 24,047 14,533 12,672 -47.3% -4.9% -6.6%Denmark 15,301 6,540 5,354 -65.0% -8.1% -9.5%Germany 230,125 113,020 103,480 -55.0% -6.9% -4.3%Greece 30,316 7,752 6,288 -79.3% -12.7% -9.9%Finland 31,872a 17,833 15,213 -52.3% -5.6% -7.6%France 167,593 109,822 100,853 -39.8% -4.1% -4.2%Ireland 48,013 24,194 21,875 -54.4% -6.6% -4.9%Italy 107,011 52,674 46,651 -56.4% -6.8% -5.9%Luxembourg 1,465 991 923 -37.0% -3.8% -3.5%Netherlands 42,249 23,187 21,209 -49.8% -5.8% -4.4%Portugal 73,197 15,804 12,294 -83.2% -14.2% -11.8%Spain 132,352 35,906 28,465 -78.5% -12.2% -11.0%Sweden 17,023a 9,449 8,369 -50.8% -5.7% -5.9%UK 41,132 20,629 18,326 -55.4% -6.7% -5.7%CzechRepublic 2,991 2,727 -4.5%Estonia 1,859 1,506 -10.0%Latvia 25,457 22,141 -6.7%Lithuania 111,097 82,281 -13.9%Hungary 6,076 6,175 0.8%Poland 343,000 276,508 -9.8%Slovenia 10,578 8,897 -7.9%Slovakia 814 734 -5.0%aFigures1996-97.

0%

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Slov

akia

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usCz

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rov)

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ium

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ce (p

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y (P

rov)

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5)

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ugal

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ece

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and

Latv

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Aus

tria

Slov

enia

Pola

nd

Lith

uani

a

0 to 5050 to 100100 to 200200 to 300300 to 500500 plus

Figure 3.StructureofmilkproductioninEU-25-distributionofdairyholdingsbyquotasize(tonnes)inyear2006-2007(EC,2007b).


47

newmemberStatesdidnotfullyutilisetheirquota.ButwillthistrendcontinueafteradaptationtothenewEU-situation?Thisquestionwillalsobetackledintheshortdescriptionsofthedairysituationintheindividualcountriesinthenextsection.Thedynamicsindairyingisalsorelatedtothequotapricesfarmersarepreparedtopay.AnestimateofthetrendinthesepricesisdepictedinTable4.WhileinWesternEuropeancountries,liketheNetherlandsandBelgiumwithtraditionallyhighprices,adeceasingtrendisvisible,inseveralothercountriesquotapricesarerising.TheincreaseinpricesinDenmarkandIrelandisparticularlynoticeable.Whendescribingthesituationinthenewcountriesinthenextsection,thefocuswillbeonthestructuraldevelopmentaspects.

+ 15

1,75

4

+ 24

6,43

8

+ 1,

218,

001

+ 1,

226,

232

+ 1,

239,

371

+ 1,

147,

080

+ 1,

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073

+ 81

7,49

6

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9,63

0

+ 85

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0

+ 1,

079,

759

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067,

060

+ 1,

148,

916

+ 77

3,72

8

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31,5

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,193

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8

+ 86

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550

+ 94

3,60

8

+ 22

,443 + 47

5,00

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+ 48

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9

+ 52

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- 686

,285

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,974

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26

+ 92

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93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07

tonn

es

Total Overshoot Overshoot minus Under use

86,71

4.778

30,75

1.483

28,61

9.767

8,656.28

6

724.5

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69

-7,46

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IT AT NL DK DE LU CY MT IE SI BE EL EE CZ PT SK FI LV ES SE PL LT HU UK FR

tonnes

2004/05 2005/06

2006/07

Figure 4.Overshootandunder-useofEU-quotaamountinyears1993-1994till2006-2007(EC,2007b).

Figure 5.Overshootorunder-useofnationalquotaamountsinEU-25inyears2004till2007(EC,2007b).


48

Quota and structural developments in new member states

Inthissection,wedescribethesituationinthe10newEUcountries,exceptMaltaandCyprus.Thefocuswillbeonthestructuraldevelopmentaspects.Thiswillbedonemoreextensivelyforfivecountries,namelyPoland,Slovenia,Lithuania,RomaniaandBulgaria.PolandischosenbecauseitisthelargestdairycountrythatenteredtheEUin2004.Ithasverysmallfarms.Sloveniahasamountainouslandscapeandalsorelativelysmallfarms.Inbothcountriesaformofregionalisationisusedinapplyingthequotasystem.Thiswasalsoareasonbehindthechoiceofthesetwocountries.Also,theregionalisationisappliedmore(Poland)orless(Slovenia)strictly.LithuaniaisthecountrywiththesmallestaveragefarmsizeintheEUandhasanationaloperatingquotasystem.RomaniaandBulgariaareincluded,becausethesecountrieshaverecentlyenteredtheEU.ThiswaywecoverinsomewhatmoredetailawidespectrumoftheexistingdiversityinCentralandEasternEurope.

Slovenia

General�overview�of�the�Slovenian�dairy�sector

Inquotayear2006/2007,thetotalquotaallocatedtotheSloveniandairyfarmingsectorwas576,638tonnes.Outofthis,549,428tonneswasformilkdeliverytodairies(A-quota)and27,210wasfordirectsales(QuotaD);seeTable5.Partofthenationalquotawasleftasanationalreserveforsolvingproblemcases,suchasmistakesinallocationoralreadyinitiatedinvestmentinmilkproduction.Duringthequotayear2006/2007,atransferofquotawasmade:4,174tonnesofQuotaDwastransferredtoQuotaA,and126tonnesfromQuotaAwasmovedtoQuotaD.Attheendofquota

Table 4.Pricespaidperkgofquotaindifferentmemberstatesin2007/2008(Euros).

Memberstate 2007marketprice Administrativeprice DevelopmentsincelastyearTheNetherlands 70-80cents DecreasingBelgium(FL/W) 37/25cents DecreasingFinland 6-36cents 4cents DecreasingCzechRepublic 7cents DecreasingSlovenia DecreasingPoland 10-20cents DecreasingFrance 0/15cents StableSweden 9cents StableAustria 50-70cents StableGermany 23/42cents StableSpain 27cents StableItaly 30cents StableLuxembourg €1.20 IncreasingUnitedKingdom 6cents IncreasingDenmark 62cents IncreasingIreland 10-28cents 12cents IncreasingCyprus €1.33 IncreasingLatvia 43-72cents IncreasingHungary 6cents IncreasingSlovakia NopriceSource:MemberSatesestimates.


49

year2006/2007,thetotalquotaallocatedtoSlovenianfarmerswas553,476tonnesformilkdeliverytodairies(Aquota)and23,162tonnesfordirectsales(Table5).Thestructureofthedairysectorcanbedescribedbythedevelopmentinnumberoffarmsandquotasizeoffarmsandthetypeoffarmland(flat,hilly,mountainorlessfavouredarea).Thenumberof

Table 6. Numberofdairyfarms,dairycowsandquantitiesofmilksoldofffarminSlovenia.

Year No.ofherds No.ofdairycows

Quantityofmilksold(kg) No.ofdairycows/farmTotal Percow Perherd

1980 55,533 150,694 303,831,000 2,016 5,471 2.71985 58,194 175,696 352,454,200 2,120 6,063 2.91990 43,656 161,992 359,184,200 2,217 8,228 3.51995 30,040 132,532 388,394,400 2,968 12,942 4.42000 16,869 117,775 447,831,000 3,758 26,516 6.82002 12,589 113,599 473,500,000 4,154 38,577 9.32003 11,500 112,484 484,200,000 4,323 42,104 9.72004 10,900 112,500 488,683,000 4,344 44,833 10.32005 10,578 111,424 506,888,419 4,549 47,919 10.52006 9,509 111,000 512,034,328 4,613 53,847 11.72007 8,897 106,000 528,426,472 4,985 59,394 11.9

Table 5.Quotafordeliveriestodairiesandquotafordirectsales,2006/2007(AgencyforAgriculturalMarketandRuralDevelopment,2007).

Deliveries(tonnes)–QuotaA Directsales(tonnes)–QuotaD Total(A+D)Nat.Ref.Quantity 549,428 Nat.Ref.Quantity 27,210 576,638Numberofproducers 8,897 Numberofproducers 2,320 9,369Allocatedquota 553,476 Allocatedquota 23,162 576,638NationalReserve 1,117 NationalReserve 250Nat.Ref.Quantityontheendof2006/2007

554,593 Nat.Ref.Quantityontheendof2006/2007

22,045 576,638

Table 7.Farmstructurebasedonquotafordeliveriesintheyear2005-2006(AgencyforAgriculturalMarketandRuralDevelopment,2006).

Quotasizecategory(tonnes)

Numberoffarmsperquotasizecategory

%oftotalfarms Quotaallocatedtofarmsinthisquotasizecategory(tonnes)

%ofallocatedquota

0-50 6,614 68.77 137,813 26.5850-100 1,755 18.25 123,699 23.86100-150 611 6.35 74,049 14.28150-200 261 2.71 44,946 8.67200-300 221 2.30 52,501 10.13300-500 122 1.27 46,069 8.89500-750 23 0.24 13,531 2.61>750 10 0.10 25,795 4.98Total 9,617 100.00 518,404 100.00


50

farmsandmilksalesisdescribedinTable6.Thequotasizeoffarmsin2005-2006and2007-2008isdescribedinTables7and8,respectively.Ascanbeseen,50%ofthenationalquotain2005-2006,and45%ofthequotain2007-2008,belongtofarmswithlessthan100,000kg.Obviously,thereisasmallscaledairystructureinSlovenia.Inlastfewyears,thepercentagesofquotainallcategoriesabove100,000kgareincreasingby0.2-0.5%peryear.

Regions

InSlovenia,12statisticalregionsexist.TheaveragesizeofthefarmsinthevariousregionsisillustratedinFigure6.Bothdeliveriestothepurchaser(QuotaA)aswellasdirectsales(QuotaD)arepresentedinFigure6.

Table 8.Farmstructurebasedondeliveriesfortheyear2007-2008(AgencyforAgriculturalMarketandRuralDevelopment,2008).

Quotasizecategory(tonnes)

Numberoffarmsperquotasizecategory

%oftotalfarms Quotaallocatedtofarmsinthisquotasizecategory(tonnes)

%ofallocatedquota

0-50 5,863 64.37 125,302 22.4650-100 1,786 19.61 126,716 22.71100-150 699 7.67 84,765 15.19150-200 308 3.38 52,952 9.49200-300 259 2.84 62,100 11.13300-500 146 1.60 55,591 9.96500-750 35 0.38 20,797 3.73>750 12 0.13 29,696 5.32Total 9,108 100.00 557,918 100.00

0

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2004/20052005/20062006/20072007/2008

Figure 6.StructureofSlovenianfarmsregardingtheaveragequotasizein12regions.


51

Quota�transfer�and�structural�developments

InSlovenia,noofficial regionalquotaschemeexists, like inPoland,GermanyandFrance.Nevertheless,thequotatransferruleshavebeendesignedinsuchawaythatastructuralpolicyisenvisaged.Thepolicyistoprotectdairyfarminginthehillyandmountainregions.Withinthe12statisticalregions,quotaamountscanbetransferredfromonefarmtoanotherwithoutanydeductioninquotawherequotais�transferred�together�with�land.Themaximumofquotathatcanbetransferredtogetherwithlandis15,000kgofmilk/ha.Incasethatonefarmer(farmerA)rentslandfromanotherfarmer/owner,itispossibletotransferquotafromowneroflandtofarmerAforthedurationoftherentalperiod.Transfer�of�Quota�without�Land:inthecaseoftransferofquotawithoutland,partoftheindividualquotaisallocatedtothenationalreserve,asfollows(RepublicofSlovenia,2006):a.transferofquotainsidestatisticalregion: %toNationalreserve

– fromfarmtofarminthehillyandmountainregion 0%– fromfarmtofarminsidetheregionswithlimitedpossibilitiesforfarming(OMD) 5%– fromfarminlowlandtofarmwithlimitedpossibilitiesforfarming(OMD) 5%– fromfarmtofarminlowland 10%– fromfarmwithlimitedpossibilitiesforfarming(OMD)tofarminlowland 10%

b.transferofquotabetweenstatisticalregions: %toNationalreserve– fromfarmtofarminthehillyandmountainregions 0%– fromfarmtofarminregionswithlimitedpossibilitiesforfarming(OMD) 25%– fromfarminlowlandtofarmwithlimitedpossibilitiesforfarming(OMD) 25%– fromfarmtofarminlowland 30%– fromfarmwithlimitedpossibilitiesforfarming(OMD)tofarminlowland 30%

Whenquotaistransferredbetweenregions,25to30%ofthetransferredquotagoestothenationalreserve,whichdiscouragesquotamovementfromoneregiontoanother.However,quotacanbetransferredwithoutdeductiontohillyandmountainousregions.Didthispolicyhaveanyeffect?InTable9,wecanseethechangeofquotainthevariousregionsoverthelastfouryears.TheincreaseintotalquotaisduetotheenlargementofquotabyEUandbythetransfersofQuotaD(directsales)toQuotaA(deliveriestodairies).

Table 9.Distributionofquotafordeliveriestodairiesbetweenregions(kg).

Region QuotaA2004/2005

QuotaA2005/2006

QuotaA2006/2007

QuotaA2007/2008

Index2006-2007/2004-2005

Pomurska 48,778,782 50,242,512 53,520,748 50,554,361 109.7Podravska 93,160,150 97,418,174 103,412,443 103,018,557 111.0Koroška 31,075,782 32,663,161 35,110,992 34,983,212 113.0Savinjska 78,268,847 82,224,073 87,087,225 86,865,253 111.3Zasavska 3,412,588 3,607,568 3,813,578 3,693,365 111.8Spodnjeposavska 14,815,907 15,410,827 16,360,068 16,191,470 110.4Jugovzhodna 50,780,500 52,839,254 56,325,108 55,471,471 110.9Osrednjeslovenska 79,832,858 82,263,993 86,986,767 85,583,485 109.0Gorenjska 77,634,231 80,537,654 85,747,185 85,651,799 110.5Notranjsko-kraška 4,003,636 4,504,829 5,101,046 4,899,338 127.4Goriška 16,332,622 16,603,997 17,018,971 16,395,299 104.2Obalno-kraška 687,473 725,155 720,213 670,136 104.8Total 498,783,376 519,041,197 551,204,344 543,977,746 110.5


52

ThelowestincreaseinquotaisvisibleinthewesternpartofSlovenia(GoriškaandObalno-krašskaregions).Theseregionsbelonglargelytothelessfavouredareas.Goriškahasalsopartlyveryhillycountryside.InFigures7and8theovershootandunder-useofquotainthese12regionsisdepicted.Thisindicatesthatuntilnowmostoftheregionsstillhavereserve.Fourregions(Zasavska,Spodnjeposavska,GorenjskaandNotranjsko-Kraška)have‘noreserve’inmilkquotaA.ThehillyandmountainousareasarepartlylocatedintheGorenjska,Goriška,KoroškaandOsrednje-Slovenskaregions.ExceptintheGorenjskaregion,theseregionsstillunder-usetheirQuotaA.Eachregionhasitsowncharacteristics.ThestructuraldevelopmentperregionisillustratedinFigure9.Thetotalamountofmilksoldtodairies,theaveragequotaperfarm,andthereductioninnumberoffarmsduringthefirst4quotayears,aredepicted.Areductioninfarmnumbersof12to34%hastakenplace,showingthatlargedifferencesinregionalrestructuringexist.Theaverage

Quota A - State on 31.3.2006

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Quota D - State on 31.03.2006

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o-kraška

Goriška

Obalno-kraška

Figure 7.Overshootandunder-useofQuotaAinthe12regionsinSlovenia.

Figure 8.Overshootandunder-useofQuotaDinthe12regionsinSlovenia.


53

farmsizedoesnotseemtobeamajorfactorinthisdevelopment.Othernaturalcharacteristicsoftheregionareapparentlymoreimportantinaffectingthedevelopments.ThemarketformilkquotahasnotyetbecomeveryactiveinSlovenia.Thequotapriceinquotayear2006/2007wasbetween€0.083and€0.17perkgmilkquota.Suchaquotapricewasinfluencedbythefactthatownersofmilkquotareceivedattheendofquotayear2006/2007,thehistoricalrightsfortheirmilkpremium.Thisstimulatedfarmerstobuyquota.WithregardstothedistributionofquotafromNationalReserveinrecentyears,inquotayear2007/2008nearly‘nomarket’existedformilkquota.Forthisreason,thepriceofmilkquotaforthetimebeingisbetween€0.00and€0.05perkg.However,thepricediffersbetweenregions.Thehighestquotaprice,andalsothehighestdemandforquota,areintheGorenjska,SavinjskaandOsrednje-Slovenskaregions.IngeneralwecansaythatmilkquotatransfertakesplacefromthePomurska,Zasavska,GoriškaandObalno-kraškaregionstotheGorenjska,SavinjskaandOsrednje-Slovenskaregions.Transferofquotaonanationalscaleisasfollows:• Inquotayear2005/2006quotawastransferredasfollows:8,323,719kgofQuotaA(minus

deductionforNationalReserveinamountof598,461kgofQuotaA).Itmeans,thatonaverage7.2%wenttoNationalReserve.Only1.7%fromtotalQuotaAwastransferredfromonefarmtoanotherfarm.

• Inquotayear2006/2007quotawastransferredasfollows:5,593,160kgofQuotaA(minusdeductionforNationalReserveinamountof376,980kgofQuotaA).Itmeans,thatonaverage6.7%wenttoNationalReserve.Only1.0%fromtotalQuotaAwastransferredfromonefarmtoanotherfarm.

• Inquotayear2007/2008quotawastransferredasfollows:3,660,103kgofQuotaA(minusdeductionforNationalReserveinamountof252,103kgofQuotaA).Itmeans,thatonaverage6.9%wenttoNationalReserve.Only0.7%fromtotalQuotaAwastransferredfromonefarmtoanotherfarm.

Milk deliveries to dairies per region 2007/2008 (million kg)

51 mio.29 t.

- 28 %

3.7 mio.36 t.

- 13 %

16 mio.60 t.

- 27 %

0.7 mio.61 t.

- 31 %

4.9 mio.35 t.

- 34 %

16 mio.45 t.

- 31 %

55 mio.81 t.

- 33 %

87 mio.65 t.

- 15 %

35 mio.77 t.

- 12 % 103 mio.65 t.

- 21 %

86 mio.74 t.

- 22 %

86 mio.96 t.

- 17 %

Slovenia:Total milk quota: 544 mio.Average quota/farm: 62 t.Reducing no. farms: - 21 %

Goriška

Obalno-kraška

Notranjsko-kraška

JuhovzhodnaSlovenija

Pomurska

Podravska

Koroška

Savinjska

Gorenjska

Osrednje-slovenska

Spodnjeposavska

Zasavska

Figure 9.StructuraldevelopmentsinthevariousregionsinSloveniaintheperiod2004/2005until2007/2008.


54

Purchasers�of�milk�

Thevolumeofmilkgoingtothevariouspurchasershaschangeddramaticallyinrecentyears,especiallybecauseoftheincreasingquantityofmilksoldtoItaliandairyplants(seeTable10).

Poland

General�overview�of�the�Polish�dairy�sector

PolandisasignificantdairyproducerinEuropewithatotalmilkproductionof11.7milliontonnes(Table11),whichplacesitonthe6thpositioninEurope.ThedairysectorbelongstothemostimportantsectorsinthePolishagricultureandfoodeconomy.Itaccountstogetherwithbeefproductionfor26%ofPolishagriculturaloutputvalue.In2002therewereabout875,000dairyfarmsfromwhichabout42%-376,000weredeliveringmilktotheprocessors.In2007,657,000dairyfarmswerecountedofwhich247,000(40%)weredeliveringmilktotheprocessors.27,500farmsdidhavedirectsalestotheconsumer.InApril2007therewere232recognisedpurchasersofmilk(J.Falkowski,personalinformation,2007).Changeoftheeconomicalsystemanddrasticadjustmenttothemarketconditionsduringthetransitionperiodinthe90-tiescauseda43%declineinthedairyherdinperiod1990-2005.Anincreaseofthemilkefficiency/milkyieldpercow(29%duringtheperiod1989-2005)couldn’tcovertheherddeclinewhatcausedanoverallcutinmilkproductionof27%inthesameperiod.

Structure�of�dairy�production�in�Poland�

ThedairysectorinPolandcharacterisesaratherhighlevelofdiffusion,notcomparablewithanyother‘old’EUMemberState.Theaveragestatisticaldairyherdonafarmin2005accountedfor3.93heads.Duringthetransitionprocess(since1989),directlyconnectedwithradicalchangesoftheeconomicalconditionsofproduction,theaverageherdsizeincreasedonlywithabout14%(2.9in1989to3.3in2002),whilethedairyherddeclinedwithca40%(fromca.5millionin1989to

Table 10.SalesofmilktoSloveniaandItalyplants(litres).

Year SaleofmilktoSloveniandairyplants

SaleofmilktoItaliandairyplants

Fat,% Protein,%

1980 303,831,000 - -1985 352,454,200 - -1990 359,184,200 3.74 -1995 388,394,400 3.93 3.242000 447,831,000 4.10 3.362002 473,500,000 4.13 3.332003 484,200,000 4.14 3.342004 486,000,000 2,683,000 4.16 3.362005 448,600,000 58,288,419 4.15 3.362006 378,129,000 133,905,328 4.09 3.332007 338,715,000 189,711,472 4.11 3.34


55

Tabl

e 11

.Characteristicsofm

ilkproductioninPolandinperiod1989-2007(IE

RiGŻ,1990-2007;G

US,1989-2007).

1989

1990

1994

1998

2000

2001

2002

2003

2004

2005

2006

2007

Num

berofdairycow

s[1,000heads]

4,994

4,919

3,863

3,471

3,098

3,005

2,873

2,897

2,796

2,795

2,824

2,787

Index%

100

98.5

77.4

69.5

62.0

60.2

57.5

58.0

56.0

56.0

56.5

55.8

Milkyields[litres/cow

/year]

3,260

3,151

3,121

3,491

3,668

3,828

3,902

3,969

4,083

4,200

4,200

4,300

Index%

100

96.7

95.7

107.1

112.5

117.4

119.7

121.7

125.2

128.8

128.8

131.9

Milkproduction[millionlitres]

15,926

15,371

11,866

12,178

11,494

11,538

11,527

11,546

11,478

11,600

11,633

11,750

Index%

100

96.5

74.5

76.5

72.2

72.4

72.4

72.5

72.1

72.8

73.0

73.8

Milkdeliveries[millionlitres]

11,385

9,829

6,269

7,070

6,583

7,025

7,219

7,316

7,997

8831

8,419

8,380

Shareofdeliveriesintotalm

ilk

production%

71.5

63.9

52.8

58.1

57.3

60.9

63.2

63.4

69.7

76.1

72.4

70.9


56

3millionin2001)andmilkproductionalsowithabout30%(from16milliontonsin1989to11.6milliontonsin2005).DuringtheEUpre-accessionperiodtherestructuringofthedairysectorinPolandaccelerated.TheexecutionofEUstandards(especiallysanitaryandveterinarynorms,andmilkqualityrequirements)aswellastheimplementationoftheCAPinstruments(mainlypreparationstoimplementthemilkquotasystem),stimulatedproducerstostartmodernisingtheirprocessesandincreasingtheirscaleofproduction.Investments,financedbyfarmers’ownsources,loansgrantedbybanksanddairyprocessingenterprisesandpre-accessionsupportresultedinanoutstandingimprovementinmilkquality.Intheperiod1999-2005theshareofextra-classmilk(accordingtotheEUstandards)intotalmilkdeliveriesincreasedfrom35%to92%.FordairieswithanEUcertificatethissharewasevenhigher,andaccountedfor98%ofmilkdeliveries.Thesestrictqualityrequirementsalsobroughtaboutnegativesocialconsequences,however.Alotofmainlysmall,inefficientproducerswerenotabletoadjust,andwereforcedtoeitherquitmilkproductionorchangetosemi-subsistencefarming.Ineffect,in2004therewere712,000farmswithdairycows,butonlyabout48%ofthemweredeliveringmilkormilkproductstothemarket(Wilkinet�al.,2007).ThestructureofthedairysectorinPolandisillustratedinFigure10.Intheperiod1996-2002thenumberofdairycowskeptinthesmallestfarms(1-9cows)decreasedby37%,whichwasmainlyduetothefactthat34%ofthosefarmsresignedfrommilkproduction.Hence,itsshareintotalnumberofdairycowsdiminishedfrom86%in1996to64%in2002.Atthesametimetheshareofdairycowskeptinmiddlesizefarms(10-49)tripledfrom8%to29%(seeFigure10).During2003-2005,theprocessoffarmconcentrationfurtheraccelerated.Thenumberofdairyfarmsdecreasedby19%whereasdairycownumbershrunkonlyby2.7%.In2005theshareoffarmswithmorethen10cowsinmilksalesexceeded50%,whereasitsshareinthetotaldairycowherdaccountedfor40%(Wilkinet�al.,2007).ThelargechangesinmilkvolumeperregiondepictedinFigure11canbeexplainedbythefactthatintheperiodJanuary-July2004noquotasystemyetexistedinPoland.Solargechangesinregionalproductionoccurredwhenthequotasystemcameintosight.

37.7

24.923.1

7.5

0.5 1.3

5.5

27.3

15.5

21

26.1

2.7 1.7

5.6

0

5

10

15

20

25

30

35

40

1 to 2 3 to 4 5 to 9 10 to 29 30 to 49 50 to 99 >100

19962002

Figure 10.Numberofdairycowsandnumberofdairyfarmsaccordingtothefarmingsizein1996and2002(Wilkinet�al.,2007).


57

Organisation�of�the�milk�quota�system�and�transfer

ThemodelofthequotaregimeinPolandwasbasedonaregionalorganisation.TheNationalAuthorityresponsibleforimplementingandadministratingthesystemistheAgriculturalMarketAgency(AMA)withsupportofits16regionalbranches(oneineveryProvinceorregion).Thefollowingwaysoftransferareallowedbetweenfarmsandregions:permanenttransfer(tobuy/sell/donation),temporarytransferbyleasing(in/out)andconversionofthewholesale/directsalequota(permanentlyortemporary).• Permanent�transfer�regarding�the�regional�organisation�of�the�system.Permanenttransferof

quotaisallowedonlybetweentheproducerswhohavetheirfarminthesameregionofRBAMA(however,in2007isdecidedthattheregionallimitsofquotatransferwillbeabolishedasofbeginningofthe2009/2010milkquotayear).

• Temporary�contracts�–�leasing�of�quota.Theleasingcontractisvaliduntiltheendofthecurrentmilkquotayear.LeasingtransfersareallowedonlywithinthewholesaleproducerswithfarmslocatedinthesameregionofRBAMA.

Inthefinalpre-accessionnegotiations,Polandreceived8.96milliontonnesofmilkquotafromwhich95.4%asawholesalequota(limitfordeliveriestoprocessing).Inaddition,itwasassigned0.426milliontonnesfortherestructuringreservetobeusedasof2005/2006.Thefirstquotaallocationhasbeenmadeatthebeginningof2004,directlytoproducerswithrespecttotheirdeliveriesduringthereferenceyear(1April2002–31March2003).AccordingtodataoftheAgriculturalMarketAgency,duringthefirstallocationca.355thousandproducersreceivedthewholesalelimitand78thousandproducersthedirectsalesquota.Wholesalequotaassignedin2004/2005wasca.1.2milliontonnes(14%)higherthandeliveriestoprocessingin2003,hencetherewassomespacefordevelopmentinmilkdeliveries.Nevertheless,duetoadynamicrestructuringofmilkproductionduringthefirstmilkquotayear,thisgapwasalmostfullysuppliedbytheproducers.

73.7

92.6

106.8

62.5

118.1

86.6

109.1

156.1

103.9

117.1

97.9 101.9 106.4 102.9 107 111.5 108.7

0

20

40

60

80

100

120

140

160

180

Dolnośląskie

Kujawsko-pomorskie

Lubelskie

Lubuskie

Łódzkie

Małopolskie

Mazowieckie

Opolskie

Podkarpackie

Podlaskie

Pomorskie

Śląskie

Świętokrzyskie

Warmińsko-mazurskie

Wielkopolskie

Zachodniopomorskie

Poland

Region

Percen

tage

Figure 11.Changeinmilkdeliveriestodairiesin16regions(deliveringperiodJanuary-July2005comparedinpercentageperregiontoJanuary-July2004).


58

Deliveriestoprocessingduringthefirstmilkquotayear(2004/2005)wereca.2%lowerthanwholesalequotaassigned.Atthesametimedirectdeliveriestoconsumerswere33.4%lowerthandirectsalesquota,hencetotalnationalquotawasnotbindingtheproduction.Moreover,accordingtoaccessiontreaty,thefirstyearofthemilkquotasysteminPoland(2004/2005)wasnotchargedbythesuper-levypayment.However,duetoaverydynamicdevelopmentofmarketedmilkproductioninPoland,deliveriestoprocessingduringthefirstmilkquotayear(2004/2005)increasedby13.5%,(Figure11)accompaniedatthesametimebyareductionofdirectdeliveriestoconsumersandselfsuppliesonthefarm.Asaresultofthisrestructuring,thetotalmilkproductioninPolandhasnotchangedandthecommercialproductionratioincreased.Developmentinmarketedmilkproductionhasbeenfollowedbyafarmconcentrationprocess.Duringthefirstmilkquotayearnumberofregisteredwholesaleproducersdecreased(Figure12)by12.6%anddirectsalefarmsby40%.Consequently,theaveragewholesalequotaassignedtothefarmsincreasedbyca.30%tothelevelof27thousandkg.Inthesecondmilkquotayear2005/2006milkdeliveriesincreasedbyafurther5%,whatinconsequencecontributedtothenationalquotaoverrunby1.79%(ca.287.6thousandtonnes)2.ThePolishsurpluswasthirdlargestintheEUafterItalyandGermany.Noneofthe‘newmember’Countries,exceptCzechRepublic,hasexceededthenationalquota.DuringthefirsttwoyearsofthemilkquotasystemfunctioninginPoland(April2004-April2006),thenumberofdairyproducersdeliveringmilktoprocessingdecreasedby21.4%(Figure11).Atthesametime,milkdeliveriesraisedandhencetheaveragemilkproductionpercommercialfarmhasgrownby47%.Althoughabovechangesaffectedthewholecountry,significantdifferencesbetweenregionswithrespecttorateandscopeofrestructuringhavebeenobserved.Thereare5regionsfromthe16administrativeregionsinPolandwithalargeandincreasingproduction,accountingin2006for67%ofmilkdeliveredtodairies.Theseare:Mazowieckie,Podlaskie,Wielkopolskie,Warmińsko-MazurskieandŁódzkie.ItmightbeobservedthatmilkproductionmovestowardsthenorthernpartofPoland,whereverygoodnaturalconditions,alongtraditionofmilkeconomyandfavourableagrarianstructurehavefacilitateditsdevelopment.Theseregionscharacterisealsoahighnumberoflargeherds(over10cows),wherelivesca50-60%ofthetotalcowpopulation.

2Wholesalequotawasoversuppliedby3.32%,butdirectsalequotawasundersuppliedby39.38%,henceineffecttotalexcessreached1.79%(dataprovidedbyAgriculturalMarketAgency,August2006).

355.2

310.5

279.3

20.8

30.727.1

74.1

84.0 85.8

200.0

220.0

240.0

260.0

280.0

300.0

320.0

340.0

360.0

380.0

IV2004

IV2005

IV2006

IV2004

IV2005

IV2006

IV2004

IV2005

IV2006

0

10

20

30

40

5060

70

80

90

100

Number of wholesale producers (x 1000)Average wholesale quota per farm (x 1000 kg)Milk quota for deliveries owned by producers x 100 000 t

– 21.4%

+47.4%

+16%

Figure 12.Characteristicsofmilkwholesaledeliveriesatthebeginningofthe2004/2005,2005/2006,2006/2007milkquotayears(OwncalculationsbasingondataprovidedbyAgriculturalMarketAgency).


59

Themilksupplylimitinthethirdquotayear(2006/2007)wasenlargedbytherestructuringreserve,whatincreasedinitiallytheassignedlimitby5%.AfterthischangetheentirePolishmilkquotaamounted9,379mldkg.Asitwasexpectedthenationalmilkquotain2006/2007and2007/2008werenotoverrun.

Influence�of�the�quota�transfer�system�on�structural�development�

Sincethemilkquotasystemisbindingproductiontothearea,becausetransferofthemilkquotaisnotpermittedbetweentheregions,milkproductionrestructuringhasbeendisturbed.Themainproblemsconcerningmilkquotasaretwo:first,theplafondwhichislimitingproductionandwasoversuppliedin2005/2006(soproducerswerepunishedbythelevypayment),andsecondly,thequotatraderestrictions,whichresultinratherhighquotapricesandinhibitrestructuringofmilkproduction.Thepointisthatquotaisallowedtobetradedonlybetweenthefarmershavingtheirholdinginthesameadministrativeregion.Thatruleisextremelyunfavourableforrestructuringofdairyproduction.Intheregionswheremilkproductiondevelopedveryfast,likeinPodlaskie,WielkopolskieandMazowieckie,averyhighdemandforproductionquotasisobserved.Thisdemandcannotbemetbyexistingsupply,thereforequotapricesintheseregionsareafewtimeshigherthaninotherregions.Producerswhowanttodeveloptheirproductionhavetobearaveryhighcostsofinvestmentsorpaythesuper-levyforoverrunningthequota.Thesetransferprocedurescreatealsoahugebarrierforprocessingcompanies,whichhavetosearchfortherawmilkoutsidetheregion,increasingtransactioncosts.Thisruleinhibitstransitionofquotafromthelessfavourablemilkproductionregions(mainlysouthofPoland)tothosewithgoodconditionsformilkproduction.However,thisunfavourablerulewillbeabandonedatthebeginningofthe2009milkquotayear.Despiteofallconstrainsconcerningmilkquota,themilkproductionsectorinPolandhasbeendevelopinginrecentyearsinafastspeed:rigorousstructuraldevelopmentstookplacewithinthevariousregions.ThesechangesaredepictedinFigure13.Theaveragefarmquotasizeperregion

LubelskieŁódzkie

Wielkopolskie

Warmińsko-Mazurskie

Podlaskie

Mazowieckie

632.7750.9

1,052.8

1,496

661.8

1,671.6

Wholesale milk deliveries 31.03.2005 [mio kg]

1,500 – 1,680 750 – 1,500 600 – 750 190 – 600 180 – 190

90 – 180

Podkarpackie

Małopolskie

Opolskie

Zachodniopomorskie

13 t; -37%; 0.26

11 t; -32%; 0.22

102 t; -48%; 0.48

23 t; -31%; 0.47

168 t; -53%; 0.59

85 t; -33%; 0.61

59 t; -33%; 0.64

32 t; -24%; 0.58

71 t; -30%; 0.57

18 t; -26%; 0.30

Figure 13.StructuraldevelopmentsinthevariousregionsinPolandinperiod2004/2005till2007/2008.Thenumbersconcern:averagequotaamount/farmintonnes(2007/2008);%reductioninno.offarmsin4yearperiod;priceofquota/kginZlote(2008).


60

variedfrom11tonnes(inPodkarpackieregion)to168tonnes(inZachodniopomorskieregion).Thereductioninnumberoffarmswithquotainlast4quotayearsfluctuatesfrom24%(inMazowieckieregion)to53%(inZachodniopomorskieregion).AlsothequotapriceislistedinFigure13:itvariesfrom0,06europerkgmilkinPodkaropackieregiontill0,17europerkginthePodlaskiregion.Thereappearedtobesomerelationshipsbetweentheparametersmeasuredinthevariousregions,whichareusedtoillustratestructuraldevelopments.Especiallytheaveragefarmsizeofaregion,expressedinaveragequotaamountperfarmperregion,isastrongindicator.Forinstance,thecorrelationbetweentheaveragequotafarmsizeandthereductioninnumberoffarmsinacertainregioninlast4yearsappearedtober=0.70,indicatingthatalargerfarmsizegoestogetherwithastrongerrestructuringprocess.Alargeraveragefarmquotasizeinacertainregionisalsopositivelycorrelated(r=0.60)withatendencytoexceedtheindividualquotainthatregionmoreoften.Apparently,largerfarmsinPolandseemtohaveagreaterpressuretoproduce.Alargeraveragefarmquotasizealsorelatestoahigherquotapriceinthatregion(r=0.51).Inotherwords,largerfarmshavemorepressuretoproduceandtooenlargethefarmand,therefore,arepreparedtopayonaveragemoreperkgquotabought.Eventhoughthequotawasenlargedbyrestructuringreserveandenlargedbyafurther2%inthe2008milkquotayear,itwillcontinuetohamperfarmdevelopmentinforthcomingyears.Togetherwithgrowingmilkyields,thedairycownumberwillhavetobegraduallyreducedtokeepuptheproductionwithintherestrictedlevel.Growinginternaldemandwithslightlyreducedexport,whileproductionislimited,maycauseimportgrowthAtthesametimethefarmconcentrationprocesswillbenecessarytocompeteontheEUmarketandtodealwiththegrowingproductioncosts.Ontheotherhand,quotatradewillbefreedfromtheregionlimitsin2009,whichwillcreatemoreincentivesforregionalconcentrationofmilkproductionandwillenhancetheprocessofmilkproductionrestructuringfurther.Itcanbeexpectedthattheprocessofpolicy-drivenrestructuringwillcontinueinthenearfuture,sincenewregulationsrequireadditionalinvestmentsfromeithertheprocessingorthemilkproducingsector.PolicydrivenrestructuringwillbealsocausedbyreformoftheEUdairymarketorganisationresultingfromboth:futuredebateontheCommonAgriculturalPolicyaswellasWTOnegotiations.

Romania

AsacandidateEUmemberstate,RomaniaobtainedamilkquotaallocationfromtheEuropeanCommissionbytheendof2004andisfixedat3,245,000tonnesofwhich:• 1,093,000tonnesfordeliveriestoprocessors;• 1,964,000tonnesfordirectsales;• 188,000tonnesofnationalreserve.Thereferenceyearforthefatproductionis2004.Thereferenceperiodforvolumeis1April2005-31March2006.

Evaluation�on�request�for�milk�quota�system�by�1�April�2007

ByApril12007,amilkquotasystemwasinplaceandsincethenallocationshavebeenmadetothosewhoappliedfor,andareeligibleto,obtainmilkquota.However,duetomanycircumstances,allocationofquotaisstillunderdiscussionandwillbesubjecttochanges.Onthebasisoftheapplicationsmade,thefollowingconclusionscanbedrawn:• Deliveryquota

– nationalallocation1,093,000tonnes;– ofwhichinreserve21,860tonnes;– availableforallocation1,071,140tonnes;


61

– requestforallocation1,022,607tonnes;– 2%ismadeavailable1,002,155tonnes;– 68,985tonnesisreservedforfarmswithextensionsofthefarm(e.g.land)andnewinvestmentsinthefarm(e.g.housing).

250,493holdings(farms)appliedforquotafordirectdeliverytomilkprocessingfacilities.TheserequestscanbedividedinthefollowingquantitiesasshowninTable12.Intermsoffarmsize,therequestfordeliveriestoprocessorsareshowninTable13.

• Directsalesquota– nationalallocation1,964,000tonnes;– ofwhichreserve39,280tonnes;– availableforallocation1,924,720tonnes;– requestforallocation2,186,431tonnes.

622,504holdings(farms/individuals)appliedforquotafordirectsales.Theserequestscanbedividedinthefollowingquantities(Table14).Onlyfourfarmshaveaquota>1millionkg.

• Allocationofquotaforextensionsandnewholdings– availableforextensionsandnewholdings68,985tonnes;– numberofapplications1,233;– quantityofmilkrequested181,588tonnes;

Table 12.Volumerequestsbyfarmsfordirectdeliverytomilkprocessingfacilities.

Volume(kg) %<5,000 40.45,000-10,000 16.410,001-50,000 17.850,001-100,000 19.9>100,000 5.8

Table 13.Farmssizerequestingdirectdeliverytomilkprocessingfacilities.

Numberofcowsperapplicant %<2 43.63to5 18.06to10 7.911to50 16.451to100 3.8>101 10.3

Table 14. Volumerequestsbyfarmsfordirectsales.

Volume(kg) %<5,000 66.75,000-10,000 14.910,001-50,000 13.050,001–1,000,000 5.1>1,000,000 0.4


62

– estimationoftheallocation38%.• Quotatransferandregions

InRomania,8regionsareestablished,eachwithaseparatequota.Onlytransferswithinregionsareallowed.Withinaregion,freetransferofquotaexists.However,20%ofeachtransferistakenawaytogotothenationalreserve.Therefore,regionalisationandaconsiderableredistributionofquotaareenvisagedinRomania

Bulgaria

Thedairysectorreformturnedouttobeamuchmoreseriouschallengeforthelocalindustryandpolicymakersthaninitiallythought(USDA,2007;A.Kuipers,personalcommunication).Thisreportstatesthat‘thereformhadlotsofeconomic,socialandpoliticalimplications.Politicianshadtotakedifficultdecisions,notalwaysbasedonthebestmarketapproach.Lackoftrustbetweenvariousprivateandpublicplayersfurthercomplicatereformimplementation’.

Dairy�sector�development

Restructuringofthedairysectorhascontinuedin2006and2007withfurthercommercialisation,consolidationandenlargementofbiggerfarms,anddeclineinthenumberandroleofsmallerfamily-typefarms.In2006/2007,therehasbeenasignificantgrowthinthenumberoffarmswith10-20cows(32%)andfarmswith20-30cows(15%).Similarly,thenumberoffarmswithmorethan100dairycowsrose18%althoughtheystillaccountforonly7%ofallcows.Farmswithonlyonecow(backyardruralsemi-subsistencefarms)were10%lessin2006thanin2005,andaccountedfor25%ofBulgaria’sdairycows.Thenumberofsmallfarmsraisingupto9dairycowshasfallenby8%(seeTable15).AccordingtotheNationalDairyBoard(NDB)data,asofMarch2007,Bulgariahad96,595registereddairyfarms,whicharegroupedinthreecategoriesdependingontheircompliancewiththeEUhygieneandmilkqualitystandards:• Firstcategory(fullycorrespondingtoEUstandards)–1,125farms.• Secondcategory(meetingEUequipmentandhygienestandardsbutnotfullymeetingmilk

qualitystandards)–1,238farms.• Thirdcategory(notmeetingEUstandards)–94,232farms.Outofthetotalregisteredfarms90,415are‘small’withupto10cows,5,749are‘average’sizewith10-50cows,and431are‘large’farms(>50cows).Accordingtoanotherindustrysource(AssociationofMilkProcessors(AMP))78%offarmershave1-9cows.Themilkiscollectedat4,200milkcollectionstations.

Table 15.StructureofthedairyfarmsectorinBulgariain2006(MinAg,2007).

Dairycowsperafarm Farms DairycowsNumber Change2005/2006 Number Change2005/2006

1-2 113,328 -9.9% 140,500 -9.6%3-9 21,470 0.5% 92,400 2.6%10-19 3,552 31.8% 44,700 28.1%20andmore 1,578 2.5% 72,500 7.9%Total 139,928 -7.5% 350,100 0.7%


63

Milk�supply

Thetotalamountofmilkproducedin2006was1,515milliontonnesofwhich1,298milliontonnes(86%)cowmilk,107,000milliontonnes(7%)sheepmilkand102,000milliontonnes(6,7%)goatmilk.The2006milksupplywasslightly(0.5%)higherthanin2005,withastablegrowthinbuffaloandsheepmilk,adeclineingoatmilkandaslightincreaseincowmilk.Theaveragemilkyieldin2006was3,600litrespercow,1,428litresperbuffalo;87.3litrespereweand221litrespergoat(Table16).Theproductionofprocesseddairyproductswas12.6%lessthanin2005.About50%ofallfreshmilkproducedonfarmswasdeliveredtodairies.IntroductionanddistributionofmilkquotasinMay-July2007causedlotsofeconomicandpoliticalturmoil.Thedairyindustrywassplitovertheissue.Thetwomajorindustryorganisations,theNDBandAMP,expressedverydifferentpositions.Thesedifferenceswereconceptual,sometimespoliticised,orrelatedtocertaineconomicinterests.TheNDBhas8regionaldairyboards.Itissupportiveoffastermarketreformsandconcentrationdespitethenegativesocial/politicaleffects.TheAMPhas120members.Itismoreconcernedaboutthesocialandpoliticaleffectsinruralareasandthegoalistocontinueproductionofsmallerdairyfarmsasabackboneofthedairyindustry.ThenationalreferencequantityformilksetforBulgariain2007/2008is979,000tonnes,ofwhich722,000tonnesarefordeliveriesand257,000tonnesarefordirectsales,muchlessthanthetraditionalproductionof1.2-1.3milliontonnes.A‘reserve’quotaof39,180tonnesmaybeaddedin2009(countingcurrenton-farmconsumption).Thereferenceaveragefatcontentis3.91%.AsofJune/July2007,atotalof96,572farmershadindividualdairyquotas.Theaveragedairyfarmhasaquotaof7.0tonnesfordeliveries,and3.0tonnesfordirectsales.AccordingtotheNDB,5,100farmshavemorethan10cows(5.5%ofalldairyfarms)andcanproduceunderquota220,000tonnesofmilk.Thenumberoflargefarms(morethan50cows)is446andtheirmilkquotaisintotal189,000tonnes.Thesefiguresaredisputable,accordingtoprocessors,whoclaimthatonly35%ofthetotalmilkquotaisproducedbythelargefarms,whiletheremaining65%iscollectedfromsmallfamilytypefarms.

Milk�deliveries�quota

Asthedemandformilkdeliveriesexceededthequotabymorethan200,000milliontonnes(NDBdata)theNDBhadtoreducethequantityofrequestedmilktothesizeofthequota.Thisreductionwasappliedmainlytofarmsthatproducesub-standardqualitymilk(thethirdcategory,seeabove),basedonmethodologyapprovedbytheMinistryofAgricultureandForestryinDecree#51.

Table 16.Productionofmilkatfarmsbytypeofdairylivestockfor2002-2006inBulgariain2006(tonnes)(MinAg,2007).

Year Cow Buffalo Sheep Goat Total2002 1,305,912 4,410 93,479 104,820 1,508,6212003 1,308,525 5,276 88,679 101,530 1,504,0102004 1,344,750 6,229 117,682 129,381 1,598,0422005 1,286,909 6,989 105,057 109,114 1,508,0692006 1,298,709 7,132 107,535 102,297 1,515,6732006in1000liters 1,260,883 6,891 104,201 99,414 1,471,389Change2005vs.2006 0.9% 2.0% 2.4% -6.2% 0.5%


64

Aspecialreservewithinthemilkdeliveriesof92,463tonneswassetbasedonMinAginformationaboutinvestmentprojects.ThisdecisionwasapprovedbytheAgriculturalMinisterinOrdinance09-231/April13,2007.Thus,thequantityofmilkdeliveriesthatremainedforactualdistributionwas630,000tonnes.Itwasdistributedasfollows:192,400tonnestoallfarmsinthefirstcategory(1,125)meeting100%oftheirapplications,94,600tonnestoallfarmsinthesecondcategory(1,238)alsomeeting100%oftheirapplications,and342,500tonnestofarmsinthethirdcategory(94,209),whichis47%lessthantheirapplications.Byregions,theregionaldairyboardsinPlovdivandRoussereceivedthehighestshares,22%and17%,respectively.Reductioninquotasforthethirdcategoryfarms,themostnumerousgroup,causedprotests.Althoughthereisclearlegislation(Decree#51)aboutquotadistribution,thelackofapublicregisteroffarmsandtheirindividualquotasresultedinspeculationsaboutNDBjustificationforitsdecision.Onsomeofthereducedquotafarms,thequotaislowerthantheaveragemilkyield.Forexample,intheYambolarea,thereare3,606dairyfarmsinthethirdcategorycomparedto48inthefirst,and123farmsinthesecond,categories.Mostofthesefarmswillnotbeabletogotothesecondcategoryattheendof2007,whichmeansthatin2008manywillbeshutdownanddairycattlewillbeeitherslaughteredorsold.InregionofDobrich,farmersstartedtosellcowsatalowpriceof€250orslaughterthemduetoreducedquotas(140,000tonnesrequestedand90,000tonnesapproved).

Milk�direct�sales�quota

Milkdirectsalesquotasdidnotattractmanyfarmapplications–allrequestswerefullymetsincefarmsappliedforonly77,600tonnes.Outofthat,10,213tonnesweredistributedtothefirstcategoryfarms;6,176tonnestothesecondcategory,and61,202tonnestothethirdcategory.Byregions,thehighestshareofquotaswasreceivedbyBlagoevgrad(30%)andSliven,(26%).Thus,186,000tonnesremainedunused.

Dairy�manufacturers�response

Currently,dairymanufacturersevaluatetheirfixedexpensesforregistration,reporting,monitoringandtraceabilityformilkfromsmallerfarmsasmuchhigherthantheirprofitfrommilkprocessing.Manywilltrytooptimisemilkpurchasesbyswitchingtoasmallernumberoflargersuppliers,and/orimportsofpowdermilk/wheyasasubstituteforfreshmilk.TheindustryestimatesthatBulgarianmilkproductionwillbeefficientonlywhenmostfarmsproduce6-7,000litersaveragemilkyieldwithapotentialfor10,000liters(currently,itisabout3,600liters)whichmeansnotmorethan170,000-200,000cowstomeetthecurrentproductionceilingof979,000tonnes.

Dairy�products�market

Theissueofmilkqualityistightlyrelatedtothedynamismofthedairyproductsmarketasfollows:• Commercialsupplyofmajordairyproducts(liquidmilk,yogurtandcheese)hasslowlyincreased

since2003attheexpenseofhomeproductionalthoughitstillremainshigh.• Overthepast5years,distributionandsalesofdairyproductshavesteadilymovedfromtraditional

smallerretailoutletstosupermarketsandhypermarketswherequalityandhygienerequirementsaremorestringent.Forexample,in2006/2007,48%to89%ofvarioustypesofliquidmilkweresoldinsuper/hypermarkets.

• Retailqualityandsafetyrequirementsfordairyproductsbecomeincreasinglystringent.InearlyJuly,majorretailersannouncedthattheywouldrequireanewcertificationIFS(InternationalFoodStandard,introducedbyGermanandFrenchretailers,recentlyacceptedbyItaly)standardsfromlocalsuppliers.Sinceonlyafewhavesuchastandardinplace,thepressureformoreinvestment


65

islikelytoincrease,whichinturnwillaffectthepurchasesofrawmilk.IfBulgariancompaniescannotrespondfastenoughtoretailers’demand,importsfromotherEUcountriescanquicklyreplacelocalsupply.

Thedairyprocessingsectorcontinuestoattractforeigninvestors:twoofthelargestdairycompanieswerepurchasedbyforeigncompanies.Asanexample,thedairycompanyFamaisthemarketleaderinNorth-EastBulgariaanditislocatedclosetotheRomanianmarket.Ithasawelldevelopedmilkpurchasingandcollectionsystem,wellknownbrands,experienceinworkingunderaprivatelabelandhasgooddistributionnetworks(capacityis180tonnesmilkfordailyprocessing).Theicecreammarketalsoattractedseveralmajorinvestorsoverthepastyear.Currently,themarketsizeisestimatedat€40millionor11,000mtwiththeprospecttogrowto15,000mtor20%inthenext1-2years.TopcompaniesonthismarketareNestle(viaDelta)35%marketshare,andDarkowith22%marketshare.Theremaining45%issplitamongseverallocalcompanieswithabout10%shareeach(Karil,Izida,Deni).In2006,thecompaniesregisteredagrowthof5-20%comparedto2005,withthetrendcontinuingin2007.

Quota�transfer�and�regions

Bulgariaisdividedin8quotaregionstostartwith.Soregionalisationisenvisaged.Therulesconcerningquotatransfersarestillindevelopment.

Slovakia

InSlovakiain2004,85%ofthenationalherdof211,000cowsweremanagedon820farms.Indeed,Slovakiahaslargefarms.Theremainderofcowsareonverysmallfarms,mainlyforsubsistencefarming.ThiskindoffarmingexistsintheNorthernSlovakianregions.Slovakiadoesnothaveafreemarketformilkquota.Quotaisfixedtothefarm,i.e.tothecows.Whenafarmersellscows,hisquotaisdecreased;whenhepurchasescows,hisquotaisincreasedwithoutpayingforthequota.Awholefarmwithquotacanbetransferredtoanotherfarmer.ThisisasimilarsystemasinFrance.Thereisnotaregionalquotasystem.ThefillingofthenationalquotainSlovakiafromyear2004-2007wasbetween93%and95%.

Hungary

Hungaryisaspecialcountryinrespecttothequotasystem.ItwastheonlycountryjoiningtheEUin2004thatdidhaveanationalquotasysteminplacebeforeentering.Thequotasystemwasestablishedin1996.Thesituationisalsounique,becauseHungaryhasamixtureofverylargeandsmallfarms.In2004,about1000largefarmshadonaverageabout600cows.Inaddition,morethan20,000smallfarmshadabout7cowsonaverage.Thetotalquantityofnationalquotais1,947,280tonnes,ofwhich1,782,650tonnesarefordeliveriesand164,630tonnesisfordirectsales.Transferofquotawasinitiallyrestricted.Hungaryisconsideredasoneregion.

Czech Republic

ThenumberofdairycattleinCzechRepublicdecreasedby37%from1989-2003(1.248millionto0.46million).In2004,43%ofthefarmshadbetween100and300cows,and38%offarmershadmorethan300cows.TheCzechRepublic,SlovakiaandHungary(partly)havethelargestfarmsinEurope.


66

Thereisnoregionalquotasystemandtransferofquotaisfree.

Baltic countries

IntheBalticcountries,noquotaregionsareestablished,thusfreetransferofquotabetweenfarmsexists.Alsoleasingofquotaisallowed.Theadministrationofquotaandtheapplicationofthequotarulesareveryliberalinthesecountries.Therestructuringisverystrong,especiallyinEstonia.IntheBalticcountries,non-useofagriculturallandhasbecomenormalindicatingdrasticchangesinagriculturalstructures.InEstonia,2,428farmerswereassignedaquotain2004.However,4,356farmersdidnotapplyforquota.Thesesmallerfarmsobviouslywillleavethesectorinyearstocome.About57%ofthequotaholdershave1-10cows,29%have10-50cows,4%have50-100cows,9%have100-500cows,and1%haveabove500cows.Thisisaremarkabledistributionwithalargespreadfromsmalltolarge.Nearly10%ofdairyfarmshavefrom100-500cows.ThestructureoffarminginEstoniadiffersverymuchfromthoseinLithuaniaandLatvia.Lithuaniahad448,000dairycowsin2004.Thesecowsaremanagedon270.635farms,whichindicateanaverageofabout2cowsperfarm.InLatvia,therewere4,800cowskeptin2004givingtheaverageherdsizeofnearly6.

Case�study�of�extra�attention�to�the�structural�developments�in�Lithuania:�auction�of�quota

LithuaniaistheonlycountryintheEUwithanauctionsystemoftransferofquota.Sellersandbuyersmeeteachotherviainternetatanauction.ThissystemissomewhatcomparabletotheQuotaExchangeBureausinDenmark(centralisedBureau)andGermany(atregionallevel).Upuntilthepresent,3auctionshavebeenheld.TheamountofquotaexchangedandpricespaidarelistedinTable17.

Structural�developments

TheaveragequotaofthefarmsinthevariousregionsinLithuaniavariesfrom7.8tonnes(Svenčionysregion)to30.6tonnes(Siauliairegion).ThisillustratestheverysmalldairyfarmsizeinLithuania.Arigorousrestructuringofthedairysectoristakingplace(seeFigure14).Inthelast4quotayears,therewasareductioninthenumberoffarmswithquotaof31%(Tauragéregion)to46%(Rokiškisregion).ThisrestructuringlookssomewhatsimilartothesituationinPoland(seeFigure13),whilethechangesinSloveniashowamuchmoremodesttrend(seeFigure9).Itwouldbeveryinterestingtostudythefactorsbehindthelargedifferencesinrestructuringbetweenthecountriesbutalsobetweenthevariousregionsinthedifferentcountries.


67

Table 17.QuotaexchangeinLithuaniathroughanauctionsystem(1euro=3.413litters).

1stauction(November2007)

2ndauction(March2008)

3rdauction(November2008)

No.ofpotentialsellers 2,119 2,489 933Totalamountforsalein1000tonnes 19.7 23.5 11.5No.ofpotentialbuyers 328 380 134Totalamountrequestedin1000tonnes 11.7 10.7 3.7No.ofbuyers 244 342 127Totalamountpurchasedin1000tonnes 4.8 9.6 3.7No.ofsellers 576 842 251PricesellersdemandedAverageinlitters/kg 0.46 0.22 0.11Lowestversushighest 0.05-2.50 0.05-1.50 0.01-2.0PricebuyerspaidAverageinlitters/kg 0.28 0.20 0.06Lowestversushighest 0.23-0.60 0.10-0.50 0.03-0.20

No. of producers delivering milk to buyers Total sold milk to buyers, counted by national reference fat content (3,99%) in tAverage quota amount per farm in tons Reduction in no of farms with quota from 2004/2005 to 2007/2008

Percentage reduction in no. of farms from 2004 to 2008

4850

137554

26,9

4211

- 44%

5998

61982

10,1

3178

-32%

7395

175395

23,3

3484

-31%

7737

187915

23,2

6736

-43%

6912

182921

27,5

4206

-36%

6532

186593

27,1

6322

-46%

7017

213943

30,6

6593

-46%

4368

114129

25,2

2655

-37%

5951

51644

7,8

6831

-44%

5333

74652

13,1

4588

-42%

Figure 14. StructuraldevelopmentsinthevariousregionsinLithuaniaintheperiodfrom2004/2005to2007/2008.


68

References

AgencyforAgriculturalMarketandRuralDevelopment,2008.SodobnoKmetijstvo,Yearbook41,March2008.AgencyforAgriculturalMarketandRuralDevelopment,2007.SodobnoKmetijstvo,Yearbook40,No.1,March2007.AgencyforAgriculturalMarketandRuralDevelopment,2006.SpecialSupplement‘SodobnoKmetijstvo’,Yearbook

39,No.2,May2006.EuropeanCommission(EC),2007a.MilkandmilkproductsintheEuropeanUnion.Availableat:http://ec.europa.eu/

agriculture/publi/fact/milk/2007_en.pdf.EuropeanCommission(EC),2007b.ReportofCommissiontoCouncil,Brussels12-12-2007(COM-2007-800final).GUS,variousyears.Statisticalyearbooks(volumesfrom1989-2007).GUS(MainStatisticalOffice),Warszawa.IERiGZ,variousyears.Rynekmlekastaniperspektywy.MarketAnalysesSeries(volumesfrom1990-2007),Warszawa

ISSN1231-2673.Kuipers,A.,Klopcic,M.andSvitojus,A.(eds.),2006.FarmmanagementandextensionneedsinCentralandEastern

EuropeanCountriesundertheEUmilkquota.EAAPTechnicalSeries,No.8,WageningenAcademicPublishers,theNetherlands.

MinAg,2007.MinistryofAgriculturestatisticalbulletin#105.MinistryofAgriculture,Bulgaria.RepublicofSlovenia,2006.UREDBA.ospremembahindopolnitvahUredbeouvedbidajatvezamlekoinmlečne

proizvode.UradnilistRS,št.132/2006zdne15.12.2006,str.14588(OfficialgazetteoftheRepublicofSlovenia,No.132/06,published16.12.2006,p.14588).

USDA,2007.Bulgariadairyandproducts-acupofhotmilkforBulgariandairyreform2007.GainreportnumberBU7023.Date7/23/2007.UnitedStatesDepartmentofAgriculture,ForeignAgriculturalService.Availableat:www.fas.usda.gov/gainfiles/200707/146291846.doc

Wilkin,J.,Milczarek,D.,Malak-Rawlikowska,A.andFałkowski,J.,2007.ThedairysectorinPoland.Regoverningmarketsagrifoodsectorstudy,IIED,London.


69

The well-being of Heifer International animals

T.S.�Wollen�and�D.P.�Bhandari

Heifer�International,�1�World�Avenue,�Little�Rock,�Arkansas�72202,�USA;�[email protected]�

Abstract

HeiferInternationalisanon-governmentalorganisation(NGO)providinglivestockandtrainingincountriesofCentralandEasternEuropewithofficesin10ofthosecountries.Heiferprojectsareformedaroundstronglocalcommunitygroupsandprovidequalitylivestock,trainingandrelatedsupporttomen,womenandyouthinordertoassistwithfoodsecurityandtoimprovelivelihoods.Trainingandextensionservicesareprovidedtoassistfamiliestoimproveanimalhousing,management,breeding,nutritionandveterinaryhealth.Animalsreceivehumanehandlingandprotectionandinturnprovidefood,otherby-productsandworktothefamily.Traininginagro-ecologyintegrateslivestockproductionintosustainablefarmingsystems,whichprotectandenhancethelocalenvironment.Groupsaretaughthowanimalscanbecomeavitalpartoffamilyactivitieswithoutcausingaburdenonfarmresourcesandareintegratedintothecommunity.Animalwell-beingrecommendationsareprovidedaccordingtothetopicalareasofanimalnutrition,animalreproduction,animalhealth,animalhusbandry,carefortheenvironmentalandhumaneslaughter.Eachsectionlistscriticalelementstoachieveinordertoenhancethehealthandproductionoftheanimals.Eventhoughrelativelysimple,thecommunitygroupcanusetheserecommendationsforthreeimportanttasks.Theyformanoutlineofitemstoincludeinthepreparationofanimalhealth-relatedproposalstofunders.Theyalsoformthetrainingprogramoutlineforlivestockparticipants.Finally,theyserveasatoolformonitoringandevaluatingthesuccessofprojectsrelatedtolivestock.Theoverallobjectiveoftheserecommendationsistoselectandrearanimalsthatimprovefamilylivelihoodsandthataresuitabletoavailableresources.AsHeiferworkswithtrainedanimalhusbandrystaffandhealthcarespecialistsinalllocations,theserecommendationscanbeadaptedbylocallivestockprojectmanagementasneededtolocalconditionsandobjectives.Thisisthecaseformanyresource-deficientareaswherelivestockkeeperslackextensiveresourcesforlivestockcareandoftenmanageanimalhusbandryatbasiclevels.Furtheronthespectrumoflivestockfarmsarelargerscaleoperations,forwhichproductquality,quantityanduniformityareimportantfortheexternalmarketandrequireahigherlevelofmanagement.Regardlessofthescale,localcustomsshouldalwaysbetakenintoconsiderationincludingtraditionalpractices,localleadershipandotherexperiences.

Keywords:�animal�well-being,�animal�nutrition,�animal�reproduction,�animal�health,�animal�husbandry,�care�for�the�environment,�humane�slaughter

Introduction

HeiferInternationalisanon-governmentalorganisation(NGO)providinglivestockandtrainingin18countriesofCentralandEasternEuropewithofficesin10ofthosecountries:Albania,Armenia,Bulgaria,Kosovo,Lithuania,Poland,Romania,Russia,SlovakiaandUkraine.ToensuretheappropriatecareofHeiferprojectanimals,allrecipientfamiliesandcommunitiesparticipateinextensivetrainingpriortoreceivingtheir‘livingloans’.Throughtrainingandextensionservices,Heiferenablesfamiliestoimproveanimalhousing,management,breeding,nutritionandveterinaryhealth(Aaker,2007:124).Allanimalsreceivehumanehandlingandprotectionwhilegeneratingfoodandincomeforfamiliesengagedintheprograms.Traininginagroecology


70

allowsrecipientstointegratelivestockproductionintosustainablefarmingsystems,whichprotectandenhancethelocalenvironment.Inthismanner,animalsreceiveadequatecare,improvefarmconditionsandbecomeavitalpartofafamilylivelihood.TraininginthesepracticesisprovidedbyHeifertechnicalstafforprojectpartners,whothemselveshavebeentrainedinHeifer’smodelofparticipatorymethodsofvalues-basedcommunitydevelopment(Aaker,2007:46).Thismodelisbasedonlessonsfromthefield,includinganunderstandingofthelocalsituationandpractices,envisioningopportunitiesandobstaclestosuccess,designingactionplansandfollow-upmonitoringandevaluation.Localanimalhealthandhusbandryspecialistsareenlistedtoprovidespecificlessonsonveterinaryandagro-ecologicalsubjects.

Animal well-being recommendations

HeiferInternationalhasdevelopedanimal�well-being�recommendationstoserveasguidelinesforlivestockrecipientsandcommunity-basedanimalhealthworkers(HeiferInternational,2008).Heifer’srecommendationsencompassmorethanjustanimalhealth,encouragingholisticanimalmanagement.Thisholisticapproachincludesallfacetsofanimalhusbandry,nutrition,reproduction,humaneslaughterandenvironmentalimpact–reinforcedbycontinuouslearningandmonitoringofsuccess.Theoverallobjectiveofthefollowingrecommendationsistoselectandraiseanimalsthatimprovefamilylivelihoodsandthataresuitabletotheresourcesavailableintherespectivecommunity.AsHeiferworkswithtrainedanimalhusbandrystaffandhealthcarespecialistsinalllocations,thesestandardrecommendationscanbemodifiedbylocallivestockprojectmanagementasneededtoadapttolocalconditionsandobjectives.Thisisthecaseformanyresource-deficientareaswherelivestockkeeperslackextensiveexternalresourcesforlivestockcareandcanthusmanageanimalhealthandhusbandryatbasiclevels.Ontheoppositeendofthisspectrumarefor-profitlivestockoperations-forwhichproductquantity,qualityanduniformityareimportant-requiringahigherlevelofhealthandhusbandrymanagement.Regardlessofthescale,localcustomsshouldalsobetakenintoconsiderationforcommunitylevelmanagement,includingtheuseofindigenouspractices,traditionalleadershipandotherexperiences.SelectionofappropriateanimalmanagementforHeiferInternationallivestockwillbemadefromthesixmajorareasofconsideration.Eachcontainnumerousrecommendationsforimprovedhusbandryandindicatorsthatassistthelivestockmanagerinmonitoringhis/hermanagementprogress.

Animal nutrition

AnimalnutritionisoneofthemajorconcernsforHeiferinfieldprojectactivities.Projectbeneficiariesareencouragedtoprovidenutritionthatisappropriatetoage,gestationstage,andproductionandgrowthrequirements.Thereshouldbeacontinuoussupplyfreshwatertoallanimals.Feedmustbestoredtoretainqualityandtosafeguarditfromcontaminationandrodents.Individualfeedingredientscanbecombinedwithlocalforagestomeetlivestock,poultryandfishnutritionrequirements.Fodder,energyandorproteinreservesshouldbestoredfortimeswhenfreshfeedsarenotavailable.Pasturegrassescanbeorganisedandwarehousedfornearlyyear-roundfeeding,dependingontheclimate.Intensivelymanagedrotationalgrazinggivesfarmersmorebenefits.ForproducersfollowingNationalOrganicStandards,certifiedorganicfeedsubstancesmustbestoredaccordingtoregulationsandpasturesmaintainedaccordingtotheruleswithproperrecordsmaintained.


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Animal reproduction

Animalreproductionmanagementincludesappropriateselectionproceduresoffemalesandmalesofeachanimalspecies,well-designedbreedingprograms,recordedgestationcalendarsandbirthingcareofanimalsthatHeiferprovidestocommunitymembers.Animalsareselectedforgeneticimprovementbasedonrecipientcommunity’seconomicconditionsandabilitytofeedandprovidecare.Pregnancyoffemalelivestockiscertifiedpriortopurchase.TheHeifercommunitygroupisinvolvedintheselectionprocesstoguaranteethatprojectparticipantshavehusbandryskills,availableresourcesandamarketfortheoffspringandotherproducts.Localanimaltypesandbreedsthataresuitableforthelocalenvironmentarethebestchoiceforreproduction,whenavailableandingoodquality.Abreedingplanispreparedwiththeappropriatemalebreedingstockfornaturalbreedingorartificialinsemination.Breedingplansareorganisedforallreproductivelyactiveanimals.Appropriateequipmentandatrainedtechnicianareusedwhenemployingartificialinsemination.Appropriatecareformaleanimalsisprovidedduringnon-breedingseason.Duringgestation,feedandcareforpregnantanimalsisprovidedinapropermanner:pregnantfemalesarenotoverusedfordraft-powerandadequatenutritionlevelsaremaintainedaccordingtostageofgestation.Atthetimeofbirth,adry,heated(whennecessary)areaisprovidedthatisprotectedfromsevereweatherasmuchaspossibleandappropriatefortherespectivelivestockspecies.Afterward,appropriatenutritionthroughlactationisprovidedtoinsuretimelyrebreeding.Birthingcyclesaretracked,recordedandmonitoredinordertomeetspeciescapabilityunderthelocalconditions.

Animal health

HeiferInternationalsupportsbasicpreventivehealthcareprograms,treatmentofdiseaseconditionsandsurveillanceforemerginglocal,catastrophicandzoonoticdiseases.Theuseofethnoveterinaryproducts,localhealersandtraditionalremedieswhenappropriateandavailablearepromoted,especiallyinveryruralandremoteareas.Commercialmedicationsarepurchasedthroughreliablesourcestoavoidcounterfeits.Recordsofproductnames,manufacturer,supplier,lotnumberandexpirationdatearekept.Acoldchainisprovidedwhenrequiredformedicineandvaccines.Medicineswillbestoredinclean,safe,temperature-controlledenvironment,whenrequired.Expiredproductsaredestroyedimmediatelyandhazardousproductsarestoredaccordingtolabelrecommendations.Allmedicines,insecticides,pesticidesandotherproductsareusedstrictlyaccordingtothelabelunlessundersupervisionofveterinaryadvice.Alternativetherapiesandmanagementpracticeswillbeconsideredfordeworminganduseofantibioticsinordertoreducedevelopmentofresistance.Appropriatedeliverydevicesandprotectiveclothingareutilisedwhenneeded.Milkwithholdingtimesandslaughterwithdrawaltimesareobserved.Sickandrecoveringanimalsareisolatedfromhealthystockwhenpossible.Mortalitywillbeinvestigatedanddiagnosedinordertoavoidrecurringillness.Keepingarecordofallmedicalandalternativetreatmentsandmortalityisgoodforbuildingfuturehealthprograms.Diseasepreventionisnormallyachievedbyvaccinationschedulesandstrategicdewormingprograms.Allpreventivetreatmentsarerecorded.Internalandexternalparasitesaremonitored,managedandtreated.Healthchecksformineralsufficiencyforlivestockonrotationalgrazingpasturesshouldbeestablished.Diseasesurveillancecanbeanassettolocalgovernmentlivestockdepartmentsanddiagnosticlaboratories.Pre-purchasehealthchecks,bloodtests(especiallythoserequiredbythegovernment)andfecalcounts,aregoodprecautionswhenpurchasingnewanimalsforthecommunity.New


72

herdanimalsareputinquarantine,usuallyfor30days.Diagnosticproceduresforherdillnessareestablishedanddiseasedordeadanimalsaredisposedofcompletely.Localauthoritieswillbeinvolvedtomonitorzoonoticdiseases.

Animal husbandry

Appropriateanimalmanagement,facilities,hygieneandrecordkeepingarediscussedhereundertheserecommendationsataminimumbasiclevelfornewlivestockrecipients.Animal�management:Animalsshouldbeidentifiedinahumaneandsanitarymannerbyeartag,tattoo,brand,ear-notchorothermeans.Recordsarekeptoneachanimalfrombirthorpurchaseuntiltheanimalleavesthefarm.Functionalandhumanerestraintequipment(e.g.noserings)areinstalled.Animalsarekeptsafefrominjurybytrainingstaffinimprovedanimalmanagement.Taildocking,teethclipping,castration,dehorning,andotherequipmentmustbemaintainingoodworking.Tackiskeptcleanandoiled.Thesameistrueforshearingequipment.Techniciansaretrainedforeachrespectivehealthandmanagementprocedure.Woolandotherby-productsadequatelystoredfortopmarketpricesandlocaluse.Animal�facilities:Zerograzingunitsshouldbebuiltcorrectly,stockedproperly,cleanedregularlyandthemanurecollectedforuseinfarmingsystems.Animalsaregivendailyexerciseandsunlightwhenkeptinconfinement.Appropriatefencingisutilisedforanimalspecies;kepttightandingoodrepair.Appropriategatesareutilisedandkeptthemingoodworkingorder.Dryshelterandhousingisprovidedwithadequatelightingandairflow.Amplelots,pasturesandwoodlandsthatarehazard-freeandnotover-usedwillbeused.Milk�hygiene:Milkfacilitiesandequipmentarekeptcleanandmeetlocalmilkordinancestandardsforproductiontype.Milkersandmilkhandlersmustpracticegoodpersonalhygiene.Theappropriatemilkingtimeforeachanimalisestablishedandmilkhandlingandcoolingisconductedinatimelyfashion.Milkproductqualityprotectedandproductsafetypromotedthroughsoundmilkhandlingandpreservationmethodsforrawandprocessedproducts.Animal�records:Recordsforpure-bred,indigenous,rareandheritagebreedanimalsaremaintainedup-to-date.Breedingrecordsaremadeavailablesuchas:breedingdates,sire,birthdate,growth,weaning,andbodyconditionscoringdata.Healthrecordsaremaintainedincludingincidents,treatment,vaccinationandfinaldisposition.Causesofmortalityanddispositionofthecarcassaredocumented.

Care for the environment

HeiferInternationalencouragesdiversificationoflivestockandcropspeciestoavoidharshimpactontheenvironment.Inaddition,manureandpasturemanagementarekeyfactorstakenintoconsideration.Manure�management:Manureisremovedregularlyandcompostedinanappropriatelocation.Manureisutilisedforcropfertiliser,bio-gasandotherapplications.ManureisstoredadequatelytoavoidpestsPasture�management:Anadequatepasture/livestockdensityisensuredtoallowforproperanimalnutritionwithminimalsupplements.Thelandandpasturesaremanagedtocontrolsoilerosion.Overconsumptionofgrasses,shrubsandtreesforfodderisavoidedtoensurebestregeneration.

Animal slaughter

Fromtheanimalwell-beingperspective,HeiferInternationalhasdevelopedbasicrecommendationsforhumaneslaughterofanimalsforconsumptionandforsale.


73

Humaneslaughterincludesthefollowingpractices:(1)slaughterofanyanimalisonlyconductedbyproperlytrainedindividuals;(2)slaughterequipmentiskeptinsharp/goodworkingorder;(3)slaughteriscompletedasquicklyaspossibletominimiseanimalanxiety;(4)onlyhealthyanimalsareslaughteredforfood;and(5)anyanimalthathasdiedfromunknowncauseswillnotbeusedforhumanconsumption.

Training

TrainingisanothermajorpieceofoverallactivityforHeiferInternationalatalllevels.Eachcountryprogramshouldhaveadequatelytrainedstaffthatisconnectedtooutsidetechnicalexpertise.Trainingwillbeprovidedtoallprojectrecipientsinallaspectsofanimalwell-being.Heiferstaffand/orprojectpartnersshouldbeequippedwithsufficientskillsandresourcesfortrainingandmonitoring.Recipientsmusthavesufficientresourcesandotherabilitiestoutilisethetrainingthatisprovided.Bestpracticesaredocumentedandsharedthroughoutcountryprogramsandbeyond.Localcultureandtraditionsareincludedinalltraining.

Monitoring

Monitoringisimportanttoguaranteethesuccessfulapplicationofeachoftheaforementionedrecommendations.It isthereforeessentialthattheprogramcalendarfortrainedstaffincludemonitoringtime,whichshouldbecompletedonschedule(Aaker,2007:105-116).EachHeiferInternationalcountryofficeshouldalsocreateananimal�well-being�committeewiththetaskofreviewingandmonitoringprojectconditionsonaperiodicbasis.Thecommitteewouldserveastheforumofdiscussionwhenissuesofwell-beingarepresented,hearquestionsofabusebroughtbeforethegroupforevaluationandmakerecommendationstoprojectmanagers,programpartners,andthecountrydirector.Thecommitteeshouldincludeaveterinarian(fromthelocalcountryHeiferstaff,ifavailable),aprogramstaffpersonandaprogrampartner/lay-personfromoutsideHeifer.Thecommitteeshouldmeetregularlyandplanamonitoringvisittoeachprojectsiteatleastonceayear.Attimes,thecommitteemaydeemitnecessarytoremoveananimalfromaprojectfamilyduetounhealthyorabusiveconditions.Projectcontractsshould,therefore,containprovisionsstipulatingwhatconstitutesunhealthyorabusiveconditionsandtheactionsthatwillbetaken.Projectanimalsmaybesubjectedtoavarietyofundesirableconditionsthatposenoliferisk,butareinhumane.Afewexamplesarelistedbelow:• seriousmedicalproblemswithoutadequateveterinarycare;• lackofadequatefoodorwater;• exposuretoextremetemperatures;• inadequateshelterorbedding;• housinginunsanitaryenclosures.

References

Aaker,J.,2007.TheHeifermodel,cornerstones;values-baseddevelopment.Atrainingmanual.HeiferInternational,LittleRock,USA.

HeiferInternational,AnimalWell-Being,2008.Atrainingdocument.HeiferInternational,LittleRock,USA,8pp.

Part 2 Country reports


77

The dairy cattle sector in the Russian Federation shows a tendency to improvement

S.�Kharitonov1,�I.�Yanchukov2,�A.�Ermilov2,�Y.�Grigoriev3�and�O.�Osadchaya3

1Russian�State�Agrarian�University�–�MATA,�Timiryazevskaya�str.�48,�127550�Moscow,�Russia;�[email protected];� 2Moscow�Regional�Breeding�Organization,� Vinogradnaya� str.� 9-Б,�Dolgoprudniy,�141706�Moscow�region,�Russia;�3All�Russian�State�Research�Institute�on�Animal�Husbandry,�Dubrovitsy,�Podolskiy�District,�142132�Moscow�Region,�Russia

Abstract

ThedairycattlesectorisoneofthemostimportantbranchesofanimalhusbandryintheRussianFederation.Intheperiodfrom1992to2000,productionofmilkandmilkproductsdecreasedsignificantly.Themainreasonforthiswastheunstablesituationinthecountrywhichresultedinreducedanimalnumbersandproductivity.Thisnegativetrendinmilkproductionwashaltedin2005whentheNationalPriority-ProjectonDevelopmentoftheAgrariansectorwasestablishedandstartedtobeimplementedbytheGovernment.Thispaperoutlinesthemaincharacteristicsofmilkproductionandmilkconsumption,structureofmilkproductionbyfederalregionsandbyvarioustypesoffarms,breedcomposition,theorganisationalschemeofbreedinginthedairycattlepopulation,andperspectivesonthedevelopmentofthedairysectorintheRussianFederation.

Keywords:�agricultural�enterprises,�breed,�breeding�management,�dairy�cattle,�households,�milk�production,�milk�consumption�

Introduction

Duringthe1990s,Russiaexperiencedsomedramaticchangesinitssocial-economicstructure.Thebreak-upoftheSovietUnionandtransitionofthenationaleconomicsystemfromcentralisedstatecontroltobeingmarketorientedhadagreatimpactontheexistingequilibriumfordifferentbranchesofthenationaleconomy,theirstructure,andtheinfluenceofthestatesectoronthegeneraleconomicsituationinthecountry.Abreachinthepriceparityforagriculturalproduceononehand,andenergysources,farmmachineryandequipment,fertilisersandmixedfeedsontheother,resultedinasharpdeclineinagriculturalproductionandoutputbyagriculturalenterprises,whichinthemainweresubjecttonationalisation(privatisationandrestructuringtojointstockcompanies).Asaresult,thegrossoutputofagriculturalproductsdecreasedconsiderably.Inanimalhusbandry(i.e.dairycattlesector),itresultedinadeclineinlivestocknumbersforagriculturalenterprises,lowerproductivityoffarmanimals,andstructuralreorganisationoftheagrariansector.Ifintheearlynineties,agriculturalenterpriseswere100%representedbycollectivefarmsandstatefarms.Alreadybythemidnineties,themajorlargeandmediumsizelivestockfarmsweretransformedtojointstockcompanies,agriculturalcooperativesandothernon-stateamalgamations.Atthesametime,someprivatefarmsweredevelopingandtheystartedtoproduceagriculturalgoods,notonlyfortheirownconsumption(asithappenedinmostcasesinindividualhouseholdsoftheruralpopulation),butforsale.


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Production and consumption of milk products in the Russian Federation

InthelivestockindustryoftheRussianFederation,oneofthemainsectorsthatplaysaleadingroleintheproductionofanimaloriginproductsisdairycattlehusbandry.Forthereasonsthathavebeenmentionedabove,productionofmilkinallcategoriesofdairyfarmsinRussiadeclinedverysignificantlyduringtheperiodfrom1990to2005.Whilein1990theproductionofmilkwas55.7mt,theamountofmilkproducedin2005wasonly31.1mt,areductionof44.1%(Table1).Afterwards,thistendencystopped,andsince2005,theproductionofmilkhasslowlyincreased.AccordingtoofficialinformationoftheCentralStatisticalBureauoftheRussianFederation,in2007,totalproductionofmilkinallcategoriesoffarmswas31.4mt(DzaparidzeandKhrestin,2008).Accordingtoofficialdatafortheperiodstudied(2005-2007),worldmilkproductionincreasedby5.0%.ThemainincreaseinmilkproductionwasobservedintheAsianregion(11.2%)andthecountriesoftheEuropeanUnion(5.0%).IntheRussianFederation,thetendencytoincreasemilkproductionwasnotsostrong(about1.0%),butastabilisationofmilkproductioninthecountryisobvious.DatashowingtheratiobetweenexportandimportofmilkproductsindifferentcountriesarepresentedinTable2.ItisevidentthattheimportsofmilkproductsintotheRussianFederationismuchgreaterthantheexports.Duringtheperiod2005-2007,thecountryimported5.1%-5.9%ofannuallyworldtradedmilkproducts.Atthesametime,exportofmilkproductsfromRussiawasonly0.2-0.3mt.Thus,theratiobetweenimportandexportofmilkproductsrangedfrom1:7-1:13.5.Indynamicaspectsfrom2005to2007,importofmilkproductsdecreasedby33%,whileexportbecamelessby33%.ThesamesituationisobservedincountriesoftheAsianregionwhereimportsofdairyproductswas4.8-5.4timesgreaterthanexports.IncontrasttoRussiaandAsiancountries,thestatesoftheEuropeanUnionandUSAexportedmoremilkproductsthantheyimported.Forinstance,exportofmilkinEuropeancountrieswas6-7times

Table 1. Productionofmilk(DzaparidzeandKhrestin,2008).

Country/region Milkproduced(mt)2005 2006 2007

Worldtotal 642.3 656.8 674.6EuropeanUnion 146.9 145.5 154.2USA 80.3 82.5 83.5Asiaregion 216.2 227.8 240.3RussianFederation 31.1 31.2 31.4

Table 2.Importandexportofmilkproducts(DzaparidzeandKhrestin,2008).

Country/region Import(mt) Export(mt)2005 2006 2007 2005 2006 2007

Worldtotal 43.6 45.2 45.5 45.4 47.5 48.0EuropeanUnion 2.0 2.0 2.0 13.7 12.8 12.7USA 2.3 2.0 2.0 4.6 4.7 4.8Asiaregion 21.8 23.6 23.7 4.5 4.4 4.5RussianFederation 2.2 2.6 2.7 0.3 0.2 0.2


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morethanimported.Inaddition,itneedstobenotedthatimporteddairyproductsbytheRussianFederationcomprised8-9%oftotalvalueofmilkproducedinthecountry.Russiatakesthe5thplaceintheworldonconsumptionofmilk,rankedbehindthecountriesoftheEuropeanUnion,UnitedStates,IndiaandChina.Thedynamictrendinmilkconsumptionforthelast5yearsispresentedinFigure1.Figure1showsthattheconsumptionofmilkintheEuropeanUnionistendingtodeclineslightly.ThelevelofconsumptionofdairyproductsintheEUcountriesin2007comprised95.5%ofthe2003values.Inthesameperiod,thesituationwithmilkproductsconsumedbythepopulationoftheUSwasmorestable:27.2mtofdairyproductswasconsumedin2003comparedwith27.4mtin2007.ThedynamictrendindairyproductsconsumptionintheRussianFederationlookssimilartothechangesintheEuropeancountries,butonanotherlevel.WhiletheRussianpopulationconsumed13.4mtofmilkproductsin2003,thevalueofmilkproductsconsumptionhaddeclinedby10%in2007.In2007,theuseofmilkproductsinRussiaaccountedfor43.8%and35.3%,respectivelyofthesameindicesintheUnitedStatesandEuropeanUnion.Asforthemaincategoriesofmilkproducts,itcanbeconcluded(accordingofficialsources)thatintheRussianFederationtheconsumptionofcheesehasincreasedfrom498,000tin2003to660,000tin2007(32.5%).Consumptionofmilkbutterinthesameperiodwasstableatabout440,000tperyearwithasmallannualvariation(about5-7%).AccordingtothenormsestablishedbytheRussianAcademyofMedicalScience(RAMS),theprovisionofmilkandmilkproducts(expressedasliquidmilk)shouldbe392kgpercapita.InTable3,theconsumptionofmilkandmainmilkproductsintheRussianFederationandindevelopedcountriesisshown.ItisobviousthatthelevelofconsumptionofthemainmilkproductsismuchlessthanrequiredtomeetthenormsofRAMS,andcomparedtocorrespondingindicesindevelopedcountries.

Table 3. Provisionofmilkandmilkproducts(kgpercapita)(DzaparidzeandKhrestin,2008).

Product AmountrequiredtothenormsofRAMS

ConsumptionRussia Developedcountries

Milk 114 64 112-182Sourmilkdrinks 32 14.4 29-46Cheese 21 6.2 18-29MilkButter 6.1 4.2 2.1-7.7

05

10152025303540

2003 2004 2005 2006 2007Year

Milk

con

sum

ptio

n (m

t)

EC USA Russia

Figure 1. Dynamictrendinmilkconsumptioninselectedcountries.


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Russiaisdividedinto7federalterritorialadministrativeregions,e.g.Central,North-Western,Southern,Privolzhskiy,Ural,SiberianandFarEastern,whichinturnaresubdividedintorepublics,kraisandoblasts.ThestructureofmilkproductionbyfederalregionsispresentedinTable4.ThefiguresinTable4showthat86%oftotalmilkwasproducedin4regions:Privolzhskiy(33%),Central(20%),Siberian(17%)andSouthern(16%).Therestofthecountry(3regions:North-Western,UralandFarEastern)togetherproducedjust4.5mtofmilkaccountingfor14%oftotalmilkproductioninRussia.OneofthemainreasonsthatmilkproductiondecreasedintheRussianFederationwasadiminutionindairycattlenumbers.Whilein1990thenumberofcattlewas57,043,000head,attheendof2007itwasonly23,310,000onallcategoriesoffarms.ThedynamicchangesinthenumbersofdairycowsindifferenttypesoffarmsispresentedinTable5.Itisevidentthatintheperiodexaminedthemaximumcurtailmentinnumberofdairycowsoccurredinagriculturalenterprises:thenumberofcowsonthesefarmsdeclinedby39%andamounted3.97min2007.Thesametendencywasalsoobservedintheprivatesector,althoughitwasrathersmallcomparedtotheagriculturalenterprises.Asaresult,thetotalpopulationofcowsdecreasedby26.5%in8years.ItisremarkablytonotethatlivestocknumbersdeclinedinallregionsandalloblastsoftheRussianFederation.Table6providesinformationontheproductivityofdairycattleinagriculturalenterprises,aswellasfarmers’householdsandprivateauxiliaryhouseholds.Intheearlyyearsofthe20thcentury,thesituationwithmilkproductionintheRussianFederationwasmoreorlessstable.Inspiteofasignificantreductioninthenumberofdairycattleinagriculturalenterprises,thetotalmilkproducedinthiscategoryoffarmsessentiallydidnotdecrease.Astablesituationwithmilkproductionwasobservedintheprivatesectorandanabsolutelypositivetendencyhasbeenshowninfarmers’households.Incontrastwiththeninetiesoflastcentury,whenareductionofdairycattlepopulationwasaccompaniedbyasimilardecreaseinmilkproduction,thetotalvolumeofmilkproducedinyears2000-2007indifferenttypesofdairyfarmshasremainedthesame:32.3mtin2000and32.2mtin2007.

Table 4. Structureofmilkproducedbyfederalregionsin2007(DzaparidzeandKhrestin,2008).

Federalregion MilkproducedAbsolutevalue(mt) %

Central 6.44 20North-Western 1.93 6Southern 5.15 16Privolzhskiy 10.63 33Ural 1.93 6Siberian 5.47 17FarEastern 0.64 2

Table 5. Numbersofdairycowsinvariouscategoriesoffarms(m)(DzaparidzeandKhrestin,2008).

Categoryoffarm Year2000 2001 2002 2003 2004 2005 2006 2007

Agriculturalenterprises 6.49 6.09 5.65 5.13 4.67 4.29 4.07 3.97Farmers’households 0.25 0.28 0.31 0.35 0.36 0.41 0.47 0.49Privatesector 5.98 5.85 5.79 5.61 5.22 4.85 4.86 4.85Total 12.66 12.22 11.75 11.09 10.25 9.55 9.41 9.30


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Inthiscontext,itneedstobekeptinmindthatthegreatestroleinmilkproductionisplayedbyagriculturalenterprisesandbyhouseholdsofthepopulation,whichproducedrespectively44.0%and52.0%ofmilkin2007.Theproportionoftotalmilkproducedinfarmers’householdswasnotsosubstantialandamountedtoonly3.9%oftotal,althoughitincreasedbymorethantwofold(1.8%in2000vs.3.9%in2007).Thestablesituationwithproductionvolumeinthecountryhasbeenachievedinspiteofareductioninthedairylivestockpopulationduetorisingmilkproductivityofcows.ThedataondynamictrendsinaveragemilkyieldpercowinagriculturalenterprisesofvariousregionsisshowninTable7.AccordingtoTable7,averagemilkyieldpercowduringtheperiodunderreviewhasincreasedfrom2,341kgin2000to3,798kgin2007.Theincreaseinaveragemilkyieldforthisperiodwas62.2%forthewholeofRussia.ThehighestaverageproductivitypercowoccurredintheNorth-Easternregion(4,753kg)wheremilkyieldincreasedby59.9%fromthebaseoftheyear2000.Inotherfederalregions,alterationsinaveragemilkyieldfortheperiodunderreviewwasfrom47.9%intheFar-Easternregionto67.8%intheSouthernregion.

Breed composition of dairy cattle of Russia

ThepopulationofdairycattleintheRussianFederationisrepresentedby24breedswhichcanbestructurallyclassifiedasfollows:• Blackandwhitebreedswhichinclude:BlackandWhite,Istobenskaya,Tagilskaya,andHolstein

ofBlackandWhitecolor.• Simmentalandrelatedbreeds:Simmental,Sychevskaya,RedandWhite,andHolsteinofRed

andWhitecolor.

Table 6. Milkoutputfromdifferenttypesoffarms(mt)(DzaparidzeandKhrestin,2008).

Categoryoffarm Year2000 2001 2002 2003 2004 2005 2006 2007

Agriculturalenterprises 15.3 15.5 16.0 15.4 14.4 14.0 14.1 14.2Peasants’households 0.6 0.6 0.7 0.8 0.9 1.0 1.1 1.3Householdsofthepopulation 16.4 16.8 16.8 17.2 16.9 16.2 16.2 16.7Total 32.3 32.9 33.5 33.4 32.2 31.2 31.4 32.2

Table 7. Averagemilkyieldpercow/yearinagriculturalenterprises(DzaparidzeandKhrestin,2008).

Region Averagemilkyieldinyear(kg)2000 2001 2002 2003 2004 2005 2006 2007

Central 2,358 2,609 2,798 2,981 3,130 3,319 3,613 3,790North-Western 2973 3,350 3,637 3,878 4,059 4,295 4,629 4,753Southern 2,467 2,728 2,968 3,088 3,238 3,669 3,973 4,140Privolzhskiy 2,277 2,460 2,718 2,924 2,988 3,155 3,463 3,476Ural 2,359 2,352 2,688 3,029 3,137 3,360 3,793 3,971Siberian 2,157 2,369 2,690 2,721 2,684 2,983 3,106 3,302FarEastern 1,725 1,691 1,884 1,952 1,999 2,047 2,265 2,550Total 2,341 2,551 2,878 2,979 3,068 3,292 3,623 3,798


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• Brownbreeds:BrownSwissandKostromskaya.• Red breeds: Red steppe, Suksunskaya, Bestuzhevskaya, RedGorbatovskaya, and Red

Tambovskaya.• Originalbreeds:Ayrshire,Kholmogorskaya,Yaroslavskaya,Jersey,Dagestanmountaincattle,

Zebucattle,andYakutskaya.Itisallowedtouseanyinterclasscrossesandoffspringshallbeconsideredpurebredsofthedambreed.ThepercentagedistributionofdifferentbreedsofdairycattleintheRussianFederationisshowninTable8.ThedatainTable9summarisetheproductivityofthepedigreedairycattlepopulation.ThegroupofblackandwhitebreedsisthemostwidelyspreadanditisfoundinallregionsoftheRussianFederation.Itisoneofthefewbreedsthatincreasedinnumberofanimalsfromyeartoyear.ThecommonfeatureofthebreedsofthisgroupisthattheanimalsoriginatedfromDutchandNorthGermancattle,andthisservedasabasistocombinetheminonecommongroup.Duringtheprevious40-50years,animalsoftheblackandwhiteHolsteinbreed(siresinmajority)havebeenwidelyused,andarebeingusednow,inthisgrouptoincreasemilkyieldandshape,aswellasconformationandadaptabilityoftheuddertomachinemilking.ThereproductionofHolsteingeneticmaterialgoesintwodirections:duetotheimportsofworldwidebreedingstock(fromUSA,Canada,recentlyfromGermany,Netherlands,Denmark,Hungary)andduetotheintroductionoflocallybredsiresandtheirintensiveuseforbreedingpurposes.Inrecentyears,embryotransplantationisbeingwidelyused,mainlyfortheproductionofsires.Theblackandwhite,asrule,hasthehighestpotentialformilkyieldwithmoderatebutterfatandproteincontents.Atpresent,Russiaisusingabreed-regionalsystemofdairycattleselection.Ofcourseitdoesn’tmeanthatanyregionalpopulationispresentedasanisolatedgroupbutexchangeofgeneticmaterial

Table 8. Percentagedistributionoflivestockbreedsofdairycattle(Shapochkin,2007).

Breed(groupofbreeds) Relativenumberofanimals,% Relativenumberofcows,%2005 2006 difference 2005 2006 difference

BlackandWhite 55.2 56.5 +1.3 54.9 56.4 +1.5Simmental 13.4 12.6 -0.8 13.2 12.2 -1.0Kholmogorskaya 9.2 9.6 +0.4 9.5 9.8 +0.3Redsteppe 5.7 5.0 -0.7 5.7 5.2 -0.5RedandWhite 3.7 3.7 0 3.5 3.6 +0.1Others(19) 12.8 12.6 -0.2 13.2 12.8 -0.4

100% 100% 100% 100%

Table 9. Averageproductivetraitsofcowsinthemainbreedsofdairycattle(breedingpartofpopulation)(Shapochkin,2007).

Breed Milkyield(kg) Fatcontent(%)2005 2006 difference 2005 2006 difference

BlackandWhite 4,209 4,483 +274 3.75 3.75 0Simmental 3,138 3,307 +169 3.73 3.76 +0.03Kholmogorskaya 3,791 3,972 +181 3.68 3.71 +0.03Redsteppe 3,592 3,819 +227 3.82 3.83 +0.01RedandWhite 4,004 4,222 +218 3.80 3.83 +0.03Allbreeds 3,937 4,190 +253 3.76 3.77 +0.01


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isrestrictedbylocalinterests.Theregionalbreedingsystemsarebasedontheoblastprogramsofselectiontargetedtothegeneralimprovementofproductivityandbreedingperformanceofanimals.TheLeningradandMoscowregionsaswellastheSverdlovsk,PermandOmskregionstaketheleadingpositionsinraisingblackandwhitedairycattle.Untilthe1960s,SimmentalandrelatedbreedsdominatedinRussia.Intheseyears,thepopulationofSimmentalcattleintheBlacksoilzonereached95%ofthetotalnumberofdairycattle.Atthattimethelargestherdsize(over800,000head)wasintheVoronezhregion.Bythenineties,theSimmentalpopulationinmanytraditionalrearingzoneshaddecreasedtolessthanhalf(Samara,Kaluga,Tulaoblasts)andhadnearlydisappearedinKemerovo,AmuroblastsandinKhabarovskandPrimorskiykrais.Inthe1990s,theRedandWhitebreedofdairycattlewasapprovedinRussia.ThisbreedwasselectedbyusingtheRedandWhitedairycattleinthepopulationofpurebredSimmentalcattlewhichwasrepresentedasatypicaldual-purposebreed.InthegroupofSimmentalrelatedbreeds,theRedandWhitebreedisdistinguishedassignificantlyspecialiseddairycattlewithhighmilkyieldsandimprovedudderquality.ThemajorityofmoderncattlebreedsclassifiedasBrownSwissbreed,wereselectedinSwitzerlandandadjacentmountainregionsofGermany,AustriaandItaly.Since1995,theBrowncattleinRussiaaresubdividedintotwobreeds:BrownSwiss(whichincludesasmallnumberofcattleoftheDagestanBrownCaucasianbreedasatypebecauseithadnosiresatAIstations)andtheKostromskayabreed.ThefirstgroupofBrownSwissanimalswasimportedtoRussiafromSwitzerlandin1861toafarmoftheMoscowAgriculturalAcademy.ThisbreedsoonbecameverypopularintheMoscow,Smolensk,TulaandotherregionsofRussia.NowtheBrownbreedshavelosttheironcepre-eminentpositioninthetotaldairycattlebreedingpopulationinRussia.Actually,BrownbreedsofcattlehavealmostdisappearedintheMoscowregionbutarestillpreservedinsomefarmsofVladimir,NizhniyNovgorod,Bryansk,TulaoblastsaswellinTatarstan.NowthepopulationofBrownbreedcowsisabout6.5%ofthetotalnumberofcattleinRussiaandisatendingtofurtherreduceinnumberofanimals.RedcattlehavealonghistoryinRussia,sinceearly18thcentury,whenthefirstimmigrantsfromGermanyandHollandcametosettleinRussia.TheybroughtwiththemcattleofdifferentRedandBlackandwhitebreedsandtheirpredecessorscanstillbefoundinGermany,Switzerland,FranceandHolland.Attheendof19thcentury,AnglerandDutchbreedswereusedtogeneticallyimprovethesecattle.ItisworthmentioningthatattemptstocrossRedSteppewithimportedAnglerandRedDutchcattleintheseventiesandninetiesfailedtosubstantiallyincreasemilkyieldsandnowsomefarmscrossredcowswithRedandWhiteHolsteinsires.ThelastgroupofcattlebreedshasaspecificsignificancesinceeachbreedisindependentandasruleisnotusedforcrossingwithotherbreedsexceptwiththeKholmogorskayaandYaroslavskayabreedswhereintroductionofBlackandWhiteHolsteingenesisallowed.Inthesixtiesandseventiesof20thcentury,thetotalnumberofKholmogorskayabreedcowsexceeded1.1millionin35oblastsofRussia.Thenumberofoblastshasincreasedduetotheregionsandrepublicsthathaveatypicalcoldclimate(Murmansk,Kamchatka,Magadan,Tjumen,Yakutia).In1993,thePecherskiytypeofbreedwasconfirmed,whichiswelladaptedtothesevereclimaticconditionsoftheNorthernpartoftheKomirepublic.TheYaroslavskayabreedwasselectedinthe20thcenturyintheCentralEuropeanpartofRussiabyusinglocalNorthernforestcattle.TheKholmogorskayabreeddidhaveasignificantinfluence,ontheformationoftheexistingpopulationoftheYarislavskayabreed,whiletoalesserextent,animpactofBlackandWhiteDutchcattlestillexists.Atpresent,theYaroslavskayabreedofdairycattleiscommoninYaroslavl,Ivanovo,VologdaandTveroblastsoftheRussianFederation.Theremainingbreedsofdairycattle,excepttheAirshirebreed,belongtolocal,practicallyisolated,breedsraisedundercertainenvironmentalconditionsandwelladaptedtothem.Theaverage


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productivetraitsofcowsinthemainpopulationsofdairycattleareshowninTable9.ItisclearthattheaveragemilkyieldaswellasfatcontenthaveincreasedsignificantlyinallthemainbreedsofRussiandairycattle.Ithasresultedinanincreaseinmilkyieldof6.4%,andinfatcontentof0.002%inthewholebreedingpopulationofdairycattleinRussia.

System of breeding work in dairy cattle of Russia

ThemanagementofgeneticresourcesintheRussianFederationisbasedontheFederallaw‘OnPedigreeAnimalHusbandry’.Thislegislativedocumentwasintroducedin1995.Itdefinesthebasicprovisionsforactivities(conditions,requirements,obligations,rights)ofbreedinganimalowners(organisations,enterprises,jointstockcompanies,farmers’households,privateentrepreneurs)irrespectiveofthetypeofownership(RussianFederation,1995).Thefarmanimalpopulationisdividedintothreetypesofpedigreeorganisations:• breedingplantswhicharerepresentedbythebestbreedingfarms;• breedingreproducerswhichanswertobreedingrequirementsbuthaveworseresultsofbreeding

activitiesthanbreedingplantshave;• organisationsonartificialinseminationoffarmanimals(AIstations).ThelatestofficialresultsofthebreedingactivitiesforthefirsttwotypesofpedigreeorganisationsarepresentedinTable10.DatainTable10showthatcomparedwith2008,in2006,thenumberofbreedingfarmswasconsiderablylower:forbreedingplantsby16unitsandforbreedingreproducersby79units.Thishasledtoadecreaseinthenumberofpedigreeanimals.In2006,theproportionofrecordedanimalswaslittlemorethan5%ofthetotaldairylivestockpopulation.Onapositivenote,theaveragemilkyieldpercowinthebreedingpartofthepopulationsignificantlyexceededthevalueforinthewholepopulation-inbreedingplantsby75%,andinbreedingreproducersby35%.Itwasthefundamentalreasonwhyeconomicindicesincreasedinbreedingfarms.Theprofitabilityratereached17-19%.BesidebreedingfarmsandAIstations,theorganisationalschemeofmanagementofdairycattlebreedingresourcesinRussiaincludestwoupperlevels:federalandregionalones.Onthefederallevel,theMinistryofAgricultureisresponsibleforelaborationoffederalprogramsaimedatimprovingthesocio-economicsituationinthewholeruralsector.Inanimalhusbandry,theFederalMinistryworksoutgeneralconcepts,specificstandardsandprinciplestosupportprogramsimplementation.Onregionallevels,therearestateregionaladministrationswhichareresponsibleforimplementationofprogramsinregions(republics,krais,oblasts).TheyareworkinginclosecollaborationwiththeFederalMinistry,buttheyarefreetointroducetheirownprogramsintheframeworkoftheirauthoritiesandresources.

Table 10. MainresultsofbreedingworkinpedigreeenterprisesinthedairycattlesectorofRussia(Shapochkin,2007).

Traits Breedingplants Breedingreproducers2006 ±to2005 2006 ±to2005

Numberoffarms(units) 300 -16 680 -79Numberofanimals(thousandheads) 456.1 -10.4 671.3 -39.1Numberofcows(thousandheads) 255.0 -3.0 370.9 -19.3Averagemilkyield(kg) 6267 +267 4838 +242Averagefatcontent(%) 3.88 +0.01 3.81 0Profitabilityrate(%) 19.3 +1.0 17.1 +0.7


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Inconclusion,thepresentsituationofdairycattleintheRussianFederationhasbecomemorestableandpredictablethanitwasinthe1990s,butremainsrathercomplicated.Theofficialdocument‘Concept-ForecastforRussia’sAnimalHusbandryDevelopmentuptoYear2010’,whichhasbeenapprovedbythescientificsessionoftheRussianAcademyofAgriculturalSciencesandGoverningBoardoftheRussianMinistryofAgriculture,envisagesthefollowingactions(MinistryofAgricultureoftheRussianFederation,2001):• restorationanddevelopmentofthepopulationandstructureaswellaspreservationoftheunique

genestockofbreedinganimals;• creationoffavorableconditionsforinvestmentpolicyinthissector;• raisingtheeconomicefficiencyofactivitiespursuedbybreedingorganisationsandenterprises.Toresolvetheseissues,ithasbeendecidedfirstofalltoimprovethenormative–methodologicalaswellaseconomicalandmaterialfoundationofcattlebreeding,whichisaimedat:• increasingthenumberofbreedingherdsandanimalsunderregistration(identification,maintaining

thedatabasetobeusedasabasisforofficialherdbooksofpedigreeanimals);• increasingthepaceofgeneticprogressforbreedinganimalpopulationsaccordingtotheselected

characteristicsduetotheintroductionandoptimisationofbreedingprogramswiththepopulationsoffarmanimals;

• optimisationofthebreedingorganisationsinfrastructure(associationsonbreeds,systemonfarmanimalsartificialinsemination,independentlaboratoriestoregisterphenotypicalcharacteristicsandappraisaloftheanimalsgeneticvalue);

• increasingtheeffectivenessofdistributionofthebestgeneticresources,itsrationaluseandrealisationofthepotentialundertherealconditionsofagriculturalproduction;

• conductingtheobjectivemonitoringofthebreedinglivestocksector,projectionofitsdevelopmentandoptimisationofbreedingprograms;

• Russia’saccessiontointernationalorganisationsdealingwithpedigreeanimalhusbandry.ImplementationofthesestepsintothepracticeofdairycattlehusbandryintheRussianFederationofferstheopportunitytolookaheadwithdefiniteoptimism.

References

Dzaparidze,T.andI.Khrestin(eds.),2008.InquirybookofdairymarketinRussia.Moscow,RussianFederation,335pp.Shapochkin,V.(ed),2007.Year-bookonresultsofbreedingworkindairycattleofRussianFederation.LesnyePolyany,

Moscowregion,RussianFederation,287pp.MinistryofAgricultureoftheRussianFederation,2001.Concept-forecastforRussia’sanimalhusbandrydevelopment

uptoyear2010.Publishedasspecialissue.RussianFederation,1995.FederalLaw‘Onanimalbreeding’,legislativenumber123.ApprovedbyStateDumaon

12.07.1995andsignedbyPresidentoftheRussianFederationon03.08.1995.


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Cattle sector and dairy chain developments in Baltic countries

E.�Gedgaudas

Lithuanian�Cattle�Breeders�Association,�Kalvarijos�g.�128,�Kaunas�46403,�Lithuania;��[email protected]

Abstract

DairyfarminghistoricallyandtraditionallyisstilloneofthemostimportantagriculturalsectorsinallthreeBalticcountries.Inthebeginningofthe20thcentury,animalrecordingwasstartedandbreedingassociationswereestablished.Theywereworkingveryactivelyuntilcollectivisation.WhenBalticcountriesbecameindependentfromtheSovietUnion,thebreedingsystemhadtobere-establishedinallthreecountries.Dairycooperativefarms,agriculturalcompaniesandfamilyfarmsstartedtheiractivities,butthemainpartwassmallkeeperswith2-3cows.Animalidentification,milkrecording,dataprocessing,milktestandbreedingprocessesweredeveloped.BeforebecomingEUmembers,BalticcountriesreceivedverybigsupportforagriculturefromEUfunds.Ithelpedtoincreasefarmsizeandtomodernisecattlefarmsandofferedpossibilitiestoimprovethequalityofherdmanagement.Italsocreatedthepossibilityforincreasedproduction,allowedareductioninthepriceofmilk,facilitatedimprovedanimalwelfareandachievedEUstandardsformilk.TheEstonianHolsteinisthedominantbreedinEstonia;theLatvianBrownisthedominantbreedinLatvia,andtheLithuanianBlackandWhiteisthedominantbreedinLithuania.Cowsofdifferentbreedsarebeingmilkrecordedandaveragemilkyield,proteinandfatcontentsdifferbetweenbreeds.InallBalticcountries,farmersusemoreandmoreHolsteinbreedsemenforinseminationoftheircows.Inthefuture,Holsteinwillbethemaindairybreed.TotalnumberofcattleinEstoniais242,000,including112,700cows,inLatviatotalnumberofcattleis389,700,including195,600cows,inLithuaniathetotalcattlenumberis787,900,including414,800cows.MilkrecordingisbestdevelopedinEstonia,where,in2007,90.9%cowswereinmilkrecorded.InLatviaitwas70%,andinLithuaniaitwasonly47.6%.TheaveragesizeofmilkrecordedherdsislargestinEstoniaat74,inLatviaitis13,andinLithuaniaitis17.Duetoareductioninthenumberofsmallfarms(1-5cows),theproportionofbigfarmsisincreasinggradually.SmallkeepersinBalticcountriesgooutofthedairybusinessbecausetheygetsupportfromEUtodoso.Milkproductionincreaseseachyearinallthreecountries.InEstonia,theaverageyieldofmilkacrossthevariousbreedsin2007was7052kgwith4.15%fat(293kg)and3.36%protein(237kg).InLatvia,theaverageyieldofmilkwas5478kgwith4.37%fat(239kg)and3.37%protein(185kg),whileinLithuania,milkyieldwas5863kgwith4.28%fat(251kg)and3.36%protein(197kg).Allthreecountriesaretryingtoimprovegeneticmerit.TheyaremembersofICAR,whileEstoniaandLatviaarealsomembersofINTERBULL.EstoniaisthemostliberalBalticcountryintheareaofcattlehusbandry.Ithasachievedthebestresultsinthissector,becausegovernmentinstitutionshavetheleastinfluenceontheworkandactivitiesofcattlebreeders.

Keywords:�Baltic�countries,�cattle,�cows,�fat,�milk�yield,�protein

Introduction

Historicallyaswellastraditionally,thedairysectorhasbeen,andremains,oneofthemostimportantagriculturalactivitiesinallthreeBalticcountries.Dairycattleselectionstartedtodevelopattheendofthe19thcenturyandthefirstcattlebreedingassociationswereestablishedatthebeginning


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ofthe20thcenturyandcontinuedtobeactiveuntilcollectivisation.EvenduringSoviettimes,allthreecountriesmaintainedanddevelopeddairytraditions,althoughmostofthecattlewerepartofgovernmentownedcollectivefarmsandprivateownerswereallowedtohaveonetothreecowsforpersonalneeds.AftertheBalticcountriesdeclaredindependencein1991,theystartedtoestablishfamilyfarmsandagriculturalcooperativecommunities,whichinitiatedthecreationofcattlebreederassociations.TheseassociationswereestablishedintheBalticcountriesin1992and1993.Thenewassociationsencounteredalotofissuesinrespecttocattlefarmrestructuring.Theassistancereceivedfromforeignexpertswasgreatlyappreciatedduringthetransitionperiod.Foreignexpertshelpedtoestablishcattlemarketingsystemsandtostrengthenbreedingassociations,sotheycouldatleastpartiallytakeoverthefunctionscarriedoutbythegovernmentsduringthetransitionperiod.InEstonia,mostofthebreedingfunctionsweretransferredtotheEstonianCattleBreedingAssociationbasedonEUlegislation.Meanwhile,inLatviaandLithuaniagovernmentswereactivelyregulatingbreedingfunctionsandallrequireddocumentformsandrequirements.Inordertousebullseffectivelyandconductmilkrecordingintheircountries,BalticcountriesjoinedICAR.AllthreecountriesweregrantedaspecialICARstamp:• EstonianAnimalRecordcenterwasgrantedin2006;• Latvianpublichomeanimalsbreedandrecordingcenterwasgrantedin2005;and• LithuanianMinistryofAgriculturewasgrantedin2007.ThemembershipoftheINTERBULLorganisationisalsoveryimportanttoallthreecountries.FarmerscanchooseandcomparebullsbyusingINTERBULLevaluationdata.AsofnowonlyEstoniaandLatviaaremembersofINTERBULL.ThemaindairyorganisationsintheBalticcountriesare:• inEstoniathereisone-AnimalBreeders’AssociationofEstonia;• inLatviatherearetwo–(1)LatvianCattleBreedingAssociations,and(2)LatvianAssociation

oftheHolsteinCattle;• inLithuaniatherearethree–(1)LithuanianCattleBreedersAssociation,(2)LithuanianBlack

andWhiteCattleBreedersAssociation,and(3)LithuanianRedCattleBreedersAssociation.TheyallareunitedbytheumbrellaorganisationChamberofAgricultureoftheRepublicofLithuania.

ThecurrentpopulationofLithuaniais3.5million,thatofLatviais2.4millionandthatofEstoniais1.4million.Themostmilkpercapital(574kg)isproducedinLithuania,andtheleast(370kg)isproducedinLatvia(LatvijasStatistika,2008;SLRV,2008).Thequantityofmilkproducedpercapitahasbeengrowingsince2000;inLithuaniaitincreasedby15.88%,inLatviaitincreasedby5.94%andinEstoniaitincreasedby10.85%.Inmilkproduction,LithuaniaexceedsEstoniaby10.1%andLatviaby35.54%(Figure1).TheLithuanianpopulationconsumesonly300kgofmilkanddairyproductspercapitaandthereforethecountryshouldactivelysearchforthemarketsfordairyproducts(SLRV,2008).FarmersrealisedthatbecomingpartofEUprovidesbiggeropportunitiesfordairycattlefarmsbutatthesametimetheyalsohavetofacehighercompetition.UsingtheEUsupportsfordifferentprograms,theBalticcountrieshavestartedactivecattlefarmmodernisation,payingsignificantattentiontocattlebreeding.Theherdsofthegrowingfarmscontinuetoincrease,butatthesametime,smallfarmersavailingofearlyretirementopportunities,areleavingthedairybusiness.Duetothesechanges,thenumberofdairycattlestartedtodeclineintheBalticcountries.TheaveragesizeofdairyherdsisfourcowsinLithuania,threecowsinLatvia,andfifteeninEstonia.Comparedto2000,theoveralldairycattlenumberdecreased,inEstoniaby20.5%,inLithuaniaby19.3%,andthelowestdecreaseisnotedinLatviaatonly9.6%(Figure2).Thedecreaseincattlenumberscanbeexplainedbythedecreaseinthenumberoffarmers.AlotofsmallfarmersretiredfromthedairybusinessinLatviaresultinginadecreaseof44.3%,inEstoniathedecreasewas34.7%,andinLithuaniaitwas35.2%(Figure3).Itisexpectedthatthenumber


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0100200300400500600700

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willcontinuetodecreaseinLithuanianextyear(EestiStatistica,2008;LatvijasStatisika,2008;SLRV,2008).Despitethedecreaseinthenumberofcattle,productivityisincreasinginallthreecountries.Thefarmersrealisedthatunderfreemarketconditionstheyhavetoincreasetheoutputofmilk,improvethequalityandinvestineconomicallyusefulcattle.Therefore,demandforworldclassgeneticshasdeveloped.Breedingheifersandcows,provenbulls,embryosandsemenfromGermany,Denmark,Finland,theUSAandothercountriesarebeingimportedintotheBalticcountries.UntilnowmostofthesemenhasbeenimportedfromEUcountries,withtheleastamountfromthirdworldcountries.ThesemenofbullsthatareevaluatedintheBalticcountriesisnotsoldbetweenthe3countries.Thequalityofthemilkalsoimprovedduetobetterqualityfeed,betterherdmanagementandthesenseofownership.Byusingthebreedingbullsthatpassallthequalifications,animprovementwasnoticedincowappearance,legsandlongevity.Holstein,whichwaschosenforbreedimprovement,providedahigheconomicimpactinallthreecountries.Thebiggestincreasesince2000inmilkquantitywasnotedinEstonia,withanincreaseof28.1%,inLatviaitwas13.7%andinLithuaniaitwas17.4%(Figure4)(EstonianAnimalRecordingCentre,2008;VALDC,2008;Žemės,2008).Sinceestablishmentofindependence,alltheBalticcountrieshavebecomeconcernedaboutthesecurityandmaintenanceofthecattlebreedgenepool.Allthreecountrieshaveafewbreedsthattheyintendtopreserve.InLithuaniathefollowingrarebreedsarebeingpreserved:LithuanianNativeWhiteback,LithuanianLightGrey,LithuanianBlackandWhiteoldgenotype,LithuanianRedoldgenotype.InLatvia,theLatvianBlueCattlearebeingpreservedandinEstoniatheEstonianNativecattlearebeingpreserved.AnationalcoordinatorisassignedtoeachcountryfornationalgeneticresourcespreservationandcoordinatorsmaintainrelationshipswithFAO.RarecattlebreedsareincludedintotheWorldAgriculturalAnimalsVarietyCatalog(WorldWatchList;Scherf,2000).Inregulatedherds,theHolsteinisthemostnumerousbreedamountingtoabout240,000andcontinuestoincrease(Figures5through7).InFigure7,only2.3%ofthecowsareshowntobeHolsteininLithuania;howeverthislownumberisduetothefactthatLithuanianBlackandWhite,whichmakesabout70%ofthecowpopulation,ismixedwithHolsteinandhasover70%ofHolsteinbreedmix.Hopefully,in2009throughthecooperationofassociationsandgovernmentinstitutions,thenameoftheLithuanianBlackandWhitewillbechangedtoLithuanianHolstein.LithuaniahasthebiggestpopulationofRedcows(about62,000cows).Thebasisforbreedingismilkrecording.Basedonthenumberofdairyanimals,themostcowsinmilkrecordingareinEstoniaat90.9%,followedbyLatviaat69.4%,andLithuaniaat47.6%(Figure8)(EstonianAnimalRecordingCentre,2008;VALDC,2008;Žemės,2008).ThedecreaseinmilkrecordedherdswasveryextremeinLatviaandLithuania.Before1990,inLithuaniamorethan500,000,andinLatviamorethan400,000,cowswererecordedcomparedto188,400and121,400cows,respectivelyin2007(LatvijasStatistika,2008;Žemės,2008).In

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91

Estonian Red

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White74%

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Figure 5.CowpopulationdistributioninEstonia.

Figure 6.CowpopulationdistributioninLatvia.

Figure 7.CowpopulationdistributioninLithuania.

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Lithuania,associationsandbreedingenterprisesareputtingadditionalemphasisonmilkrecording;however,thelackofacommonbreedingstrategybasedoncollaborationbetweendifferentinstitutionsledtothedecreaseofthenumberofrecordedcows.Thedecreaseinmilkrecordedcowswasalsoimpactedbythelowmilkprice.Alongwiththeincreaseindairyherdproductivity,themilkproductionlevelofrecordedcowsisalsoincreasinginallthreecountries.Theproductionlevelinthemilkrecordedherdsisincreasingduetoaconsistentemphasisonbreedingworkperformedbytheassociations.Since2000,cowproductivityincreasedmostinEstonia(29.7%),withanaverageproductivityin2007of7,052kgmilk.InLatvia,theincreasewas19.5%,withanaverageproductivityin2007of5,478kgmilk.ThelowestincreaseinproductivitywasnotedinLithuania(17.3%),withanaverageproductivityin2007of5,863kgmilk(Figure9)(EstonianAnimalRecordingCentre,2008;VALDC,2008;Žemės,2008).Theproteinyieldisincreasingalongwiththemilkyield.Since2000,averageproteincontentinmilkincreasedmostinEstonia(40.3%)withanaveragemilkproteinof3.36%in2007.InLithuania,theincreasewas26.4%withthesameproteincontentasinEstonia(3.36%),andinLatvia,theincreasewas21.1%withanaveragemilkproteinof3.37%in2007(Figure10)(EstonianAnimalRecordingCentre,2008;VALDC,2008;Žemės,2008).Currently,thefarmers’mainfocusistheincreaseofproteincontentinmilk.

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Figure 10.AverageproteinyieldofcowsinmilkrecordinginBalticcountries.


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Themilkfatincreaseisalsorelatedtotheoverallmilkyieldincrease.Since2000,fatcontentinmilkincreasedmostinEstonia(27.6%)withameanfatcontentof4.15%in2007.InLithuania,fatcontentincreasedby22.7%withameanfatcontentof4.28%in2007,andinLatvia,fatyieldincreasedby18.8%withmeanfatcontentof4.37%in2007(Figure11)(EstonianAnimalRecordingCentre,2008;VALDC,2008;Žemės,2008).MilktestlaboratoriesareestablishedinallthreecountriesandareconnectedtotheICARreferencelaboratoriesnetwork.LaboratoriesareequippedwithmodernmilkanalysisequipmentandareaccreditedaccordingtoISO/IEC17025standards.BeforejoiningtheEU,theBalticcountriesraisedthemilkquoteissue.AllthreecountriesnegotiatedacceptablemilkquotasbeforejoiningEU.Milkquotashelpedthethreecountriestocontrolandadministerthemilkproductionandtobalancemilkvolume.Lithuaniareceivedthebiggestmilkquota(Figure12)(ProductschapZuivel,2007).DuetomilkandcheeseconsumptionincreasesinEurope,inApril2008,thequotaswereincreasedforallEUcountriesby2%anditwasagreedthatthemilkquotawouldberemovedin2015.Atpresent,milkquotasinLithuaniaarebeingauctioned.Since

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Figure 12.NationalmilkquotainBalticcountries.


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2007itwasdecidedtostartsalebyelectronicauction.Thefarmersthathavecomputersandinternetaccesscanacquirequotawithoutleavingtheirhouses.Milkquotainauctionscanbepurchasedonlybyactualmilkproducers,whichhaveusableland(fortentonsofmilkquotatheyshouldhavenolessthan1hafarmland)andhavetoberegisteredintheofficialregister.Themilkcanbesoldonlytoapproveddistributors.Quotasmaybetradedatanauctiontobeheldthreetimesayear.InEstonia,quotaistradedwithcowswhileinLatviathereisfreetradeinquota.Ofthethreecountries,Lithuaniaexportsmostdairyproducts,whichconsistofcheeses,milkpowderandbutter.EstoniaandLatviaconsumemostoftheirdairyproductsinternallyandthemainexportdairyproductinbothcountriesischeese.Forallthreecountries,Russiaisthebiggestexportpartner.MostoftheimportsofdairyproductsisdonebyLatvia,whilethequantitiesofimportsbyLithuaniaandEstoniaaresimilar.In2007,farmerswereveryhappywithanincreaseincowproductivityandhighermilkcollectionprices,hopingtoincreaseinvestmentindairyproducts.Milkcollectionpriceswereincreasinguntiltheendof2007,butin2008,whenthemilkcollectionpricesignificantlydecreased,manyfarmersintendedtoretirefromthedairybusiness.IntheJanuary–Mayperiodof2008,themilkcollectionpricedecreasedinLithuaniafrom€32.9to€24.09per100kg.InLatvia,itdecreasedfrom€33.83to€27.72per100kg.InallthreeBalticcountries,theaveragemilkcollectionpriceisthelowestofall25EUcountries.InMay2008,themilkcollectionpriceinLithuaniawasthelowestwithadifferenceofupto€11per100kgcomparedtotheEU25averageprice(Figure13)(LietuvosRespublikosŽemėsŪkioMinisterija,2008a,b).ThereasonwhythemilkpricesinLithuaniaarethelowestisbecauseafterprivatisationmilkproductionlandedinprivatecompanies.Thosecompaniesestablishedmilkcollectionpricesthatwerenotinfavorofthefarmers.Theexplanationthemilkproductioncompaniesprovideforthelowpricesisthatitiscostlytocollectthemilkespeciallyasmostfarmsaresmall.Uptillnow,milkproducersandfarmershavenotreachedcommonground.However,thesolutionmightbeinfarmers’cooperationregardingmilkcollectionandpartialproduction.

Conclusions

Themarketisdamagedandinitiativesaresloweddownduetotightgovernmentregulationsandunwillingnesstopasstheresponsibilitiestoassociations.Suchgoverningorientedstructureencouragestheusenationalmoneyinalessefficientandeconomicalway.EstoniaisoneofthemostliberalcountrieswithintheBalticcountrieswiththeleastgovernmentinterferenceinthebreedingareaand,therefore,showsthebestresults.

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Figure 13.MilkcollectionpricesinBalticcountriesandaverageof25EUmembers.


95

Thesaleofmilk,milkproductsandbreedinganimalsthatpresentlytakesplaceishandledseparatelywithineachofthethreecountries;howeverthecountriesshouldcollaboratemoreinthebreedingarea.Inthecurrentglobalisationprocess,Lithuania,LatviaandEstoniamightconsidersomesortofcooperationtobecomemorecompetitiveinworldmarkets.AlthoughthenumberofcowsisdecreasingintheBalticcountries,milkproductionisincreasing,whichcallsforhigherdairyproductexport.ThisismostapplicabletoLithuania,whichshouldbemoreactiveinexportmarkets.INTERBULLmembershiphaspositivelyimpactedtheLatvianandEstonianbreedingsector.LithuaniamustalsobecomeamemberofINTERBULLtobeabletoperformacompletebullevaluation.

References

EestiStatistica,2008.Availableat:http://www.stat.eeEstonianAnimalRecordingCentre,2008.ResultsofAnimalRecordinginEstonia2007.Elmatar2008.52pp.LatvijasStatistika,2008.Availableat:http://www.csb.gov.lvLietuvosRespublikosŽemėsŪkioMinisterija,2008a.VĮAgroRinka.Žemėsūkioinformacijosirkaimoverslocentras.

Lietuvosžemėsūkioirmaistoproduktųrinkosinformacinėsistema.Nr.8(92)/2008m.27p.LietuvosRespublikosŽemėsŪkioMinisterija,2008b.VĮAgroRinka.Žemėsūkioinformacijosirkaimoverslocentras.

Lietuvosžemėsūkioirmaistoproduktųrinkosinformacinėsistema.Nr.12(96)/2008m.30p.ProductschapZuivel,2007.StatistischJaaroverzicht2007.ProductschapZuivel,theNetherlands,116pp.Scherf,B.D.(ed.),2000.WorldWatchListfordomesticanimaldiversity.3rdedition.FoodandAgricultureOrganisation

oftheUnitedNations,Rome,Italy.Availableat:ftp://ftp.fao.org/docrep/fao/009/x8750e/x8750e.pdfStatistikosdepartamentasprieLietuvosRespublikosVyriausybės(SLRV),2008.Availableat:http://www.stat.gov.lt.ValstsAģentūraLauksaimniecībasDatuCentrs(VALDC),2008.Availableat:http://www.ldc.gov.lvŽemėsūkioinformacijosirkaimoverslocentras(Žemės),2007.Kontroliuojamųkarviųbandųproduktyvumas2006-

2007metų(20061001–20070930)apyskaita70.Vilnius2007.108pp.


97

Cattle sector and dairy chain developments in Belarus

M.�Ramanovich

IFCN�Dairy�Research�Center,�Schauenburgerstr.�116,�24118�Kiel,�Germany;��[email protected]

Abstract

MilkproductionisoneoftheimportantbranchesoftheBelarusianagriculturalsector.Inthebeginningofthe90’s,milkproductioninBelaruswasnegativelyaffectedbythecollapseofthesocialistsystem.Bothnumberandproductivityofcowsdecreasedsignificantly.Since2001,improvementinthesituationoftheBelarusiandairysectorhasbeenseen.Milkproductionincreasedduetogrowingproductivityinlargescalefarms.Inresponsetothegrowingmilkproduction,Belaruscouldincreasemilkprocessingandtheexportofdairyproducts.ThemilkpricepaidtoproducersinBelarusisregulatedbythegovernment.AsaconsequencethepricelevelinBelaruswassignificantlybelowtheworldmarketpriceformilkduringtheperiodoftheanalysis.Fortheanalysisoffarmeconomics,themethodologyoftheIFCNDairyResearchCenterwasused.ResultsshowedthatthecostofmilkproductioninBelaruswaslow.Evenwithamilkpricebelowtheworldmarketlevel,producerscouldrealiseaprofitfrommilkproduction.

Keywords:�Belarus,�cattle�sector,�milk�production,�dairy�chain,�farm�economics

Introduction

ThedairysectorisoneoftheimportantbranchesofBelarusianagriculture.TheaimofthisstudywastoanalysethecurrentsituationandrecentdevelopmentsinthedairysectorinBelarus.Thestudycontainsananalysisofthewholedairychain.Developmentsinmilkproductionandprocessing,aswellasdevelopmentsofdairytradeandprices,wereanalysed.AdditionalattentionwaspaidtotheeconomicsofmilkproductioninBelarusincomparisonwithselectedEuropeancountries.

Methods and data

Inthisanalysis,thestandardmethodologyoftheIFCNDairyResearchCenterwasapplied.TheanalysiswasbasedontheofficialagriculturalstatisticsfromBelarus(http://belstat.gov.by),theFAOdatabase(http://faostat.fao.org)anddatacollectionbytheIFCNNetwork(http://www.ifcnnetwork.org).Forthefarmlevelanalysis,theconceptoftypicalfarmsandtheTIPI-CALsoftware(Hemme,2000)wereused.

Status and developments in Belarus dairy sector

Traditionally,thecattlesectorwasanimportantcomponentoftheagriculturalsectorofBelarus.IntheSovietUnion,Belarusianagriculturespecialisedinmilkandbeefproductionforthecommonmarket.AsareturnservicefromotherSovietrepublics,thecountryreceivedcropproductsforhumanconsumptionandfeedingofanimals.ThisspecialisationceasedafterthecollapseoftheSovietUnion,causingsignificantchangestotheagriculturalindustryofBelarus(ZMP,2002).Thestructuralchangestothedairysectorafterthecollapseofthesocialistsystemin1990causedasignificantreductionofdairyherdsandcowproductivity.Asaconsequence,milkproduction


98

decreaseddramatically.From1990to2000,annualmilkproductiondecreasedby40%from6.8to4.1mt(EnergyCorrectedMilk).Since2001,aconsolidationofmilkproductionhasoccurred(Figure1).Thevolumeproducedincreasedsignificantlyandamountedto5.4mtin2007.Thisincreaseofmilkproductionwasachievedthroughanimprovementofcowproductivitywhilethenumberofcowswasstilldecreasing.In2007theaveragemilkyieldpercowperyearwas3.6twhilethetotalnumberofcowsdecreasedto1.5millionhead.InBelarus,adualsystemofmilkproductionexists.Producerscanbedividedbroadlyintotwogroupsnamely:large-scalefarmsandhouseholds.Large-scalefarmsareformercollectivefarms(kolkhozes)andinmostcasesherdsizeisintherangeof400-800cows.Householdshavemilkproductionasasubsidiarybusinesswith1-3cows.Thestructureofmilkproductionhaschangedovertheyears.Inthebeginningofthe90’s,theshareofbigfarmsdroppedfrom75%to60%andremainedstableforseveralyears.Since2001theimportanceoflarge-scalefarmshasincreasedagain,andby2007,theyproducedabout80%ofthetotalmilksupply.Positivedevelopmentsatfarmlevelbroughtpositiveeffectsforthewholedairychain.Withtheincreasedmilkvolumeproduced,theamountofmilkdeliveredtodairiesincreased(Figure2).In

ECM= Energy Corrected Milk (4% fat, 3.3% protein)

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2000,lessthan2mtofmilkwereprocessedtodairyproductsbutby2007,milkprocessinghaddoubledto4mt.Thereasonforthisincreaseinmilkdeliveredisanon-goingindustrialisationofmilkproduction.Householdsproducingmilk,mainlyforhomeconsumption,aregoingoutofbusinesswhileatthesametimelargescalefarmsarecontinuallyincreasingmilkproduction.Withgrowingmilkproductionandmilkprocessing,thedairysectorinBelarushasbecomeanimportantmilkexporterontheworldmarket.Whilemilkimportsforconsumptionhasremainedverylowinrecentyears,milkexportshavesignificantlyincreased(Figure3).Between1996and1999,Belaruswasexportingdairyproductsequivalenttoonly6to9%ofthetotalmilkproduced.Sincethentheshareofexportsoftotalmilkproductionhasincreasedrapidlyandin2006and2007about35%oftotalmilkproducedwasexported.Thecurrentsituationanddevelopmentsinthedairysectorwerestronglyinfluencedbyagriculturalpolicies.Themilkproductionsector,especiallythelarge-scalefarms,isgovernedbynumerousstateregulations.Oneofthemostdestructiveregulationsisthemilkpricepolicyastherawmilkpriceisfixedbythegovernment.Inaddition,farmerscannotchoosethedairyprocessortheyprefer.Inmostcases,farmersareobligedtodelivertheirmilktothedairyprocessingplantintheiradministrativeregion.Thisinterferenceofstateinstitutionsdisturbscompetitioninthedairymarket.Furthermore,thedeliveryobligationsweakensthepositionofmilkproducersagainstmilkprocessors.TheimpactofpriceregulationisshowninFigure4.Themilkpricepaidtoproducershasbeencontinuouslybelowtheworldmarketprice.Thepricedifferenceinmostyearswasabout5US$

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Figure 3.Dairyexportsandimports(Hemme,2008).

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Figure 4.Milkpriceevolution(US$/100kgECM)(Hemme,2008).


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per100kgmilk,butthegapincreasedastherecentyearsandgrowthinworldmarketmilkpricewasnotfullytransmittedinpricespaidtomilkproducersinBelarus.Asaconsequence,thepricedifferencein2007increasedupto25US$/100kg.

Dairy farm economics

TobetterunderstandthedevelopmentsinthedairysectorofBelarusaninternationalcomparisonofdairyfarmeconomicswascarriedout.BelarusianmilkproducerswerecomparedwithproducersfromGermany,Poland,BulgariaandUkraine.Theresultsareshownfor2006.Thefarmsanalyseddifferedinherdsize,intensityofmilkproductionandownership.MilkproductionpercowperyearisshowninFigure5togetherwiththenumberofcowsperfarm.The3typicalfarmsanalysedinBelaruswereonehouseholdplotwith2cows(BY-2)andtwolarge-scaleagriculturalenterprises(BY-650andBY-650++)eachwitha650cowsbutwithdifferentfarmqualityandherdmanagementstandards.Thefirstofthese(BY-650),hadaveragemanagementwhilethesecond(BY-650++)wasmanagedaccordingtobestpractice.Themanagementqualityaffectedthemilkyield.Thebest-managedfarmhadanannualmilkyieldofabout5.6t,whilethefarmwithaveragemanagementonlyyielded3.3t.FarmsinUkrainewereahouseholdplotwith2cows(UA-2)andonelargescalefarmwith641cows(UA-641).TheUA-2hadamilkyieldpercowcomparabletoBY-2andBY-650.ThemilkyieldpercowofUA-641wasslightlybelowthelevelinBY-650++.ThetwofarmsinBulgariawerefamilyfarms.The2-cowfarmrepresentsahouseholdplotproducingmilkasasidebusiness.Thisfarmwillprobablygooutofbusinessinthenextfewyears.TheBG-34wasalargerfamilyfarmspecialisinginmilkproductionandintendingtoincreaseherdsizeinfutureyears.With4.5tpercowperyear,themilkyieldoftheBG-2wassignificantlyhigherthaninthefarmsofthesamesizeinBelarusundUkraine.ThemilkyieldpercowintheBG-34wasonthesamelevelwiththelargerfarminUkraine.ThefarmsinPolandweretypicalfamilyfarmswith15(PL-15)and65cows(PL-65).ThemilkyieldofPL-15was6.7tpercow.Thebiggerfarmshadmoreintensivemilkproductionwithanannualyieldof7.2tpercow.

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Figure 5.Milkyieldontypicaldairyfarms(thenumberfollowingthecountrydesignationisthenumberofcowsperfarm)(Hemme,2007).Thedatareferto2006.


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ThetypicalfarmsfromGermanywereaveragesized(DE-82)andsomewhatlarger(DE-120)familyfarmsfromNorthernGermany.Withmorethan8.1tmilkpercowDE-82hadthehighestmilkyieldofalltheanalysedcountries.Tocomparetheeconomicsofmilkproductionintheselectedcountries,thecostsofmilkproductionandmilkpricespaidtoproducerswerecalculated(Figure6).Costsofmilkproductionconsistofthreecostelements:(a)costsfromprofitandlossaccount(comprisingofallcashcostsanddepreciationcostsforfarminvestments)–non-milkreturns(comprisingofcattlereturns,beefreturns,salesofmanure,etc.);(b)opportunitycostsforfamily-ownedresources(land,labourandcapital)usedinthedairyenterprise;and(c)quotacosts(comprisingofrentsandopportunitycostsforownedquota).Thiswasonlyrelevantforcountrieswithamilkquotasystem(GermanyandPoland).Generally,twocostlevelscouldbeidentifiednamelyahighcostlevelof34-42US$/100kgmilk,andalowcostlevelofUS$15-22/100kgmilk.AllthreefarmtypesanalysedinBelarusbelongedtolowcostcategory.Furthermore,relativelylowcostsofmilkproductionwerefoundformilkproducersinUkraineandonthelargerfarminBulgaria(BG-34).ThecostsofmilkproductioninGermanyandPoland,andthesmallfamilyfarminBulgariaweresignificantlyhigher.Incomparisontohighcostcountries,milkproducersinBelarushadacostadvantageofaboutUS$20per100kgmilk.Theanalysisalsoshowedsignificantdifferencesinmilkpricespaidtothefarmersinthecountriesstudied.Thelowestmilkprice,onaverageaboutUS$17per100kgmilk,waspaidtosmallscalefarmsinUkraineandBelarus.LargescalefarmsinBelarusreceivedUS$20-21per100kgmilk.ThefarmsinBulgaria,andthelargescalefarminUkraine,receivedbetweenUS$25-30per100kgmilk.ThehighestmilkpriceofUS$35-36per100kgmilkwaspaidtofarmersinGermanyandPoland.Comparedtothemilkpricepaidinhigh-pricedcountries,milkproducersinBelarusreceivedaboutUS$15lessper100kgmilk.Withtheproductioncostsandmilkpricelevelin2006,largescalefarmsinBelaruswereabletoachieveabusinessprofitfrommilkproduction.ThesmallscalefarminBelaruswasabletocoverallcashcostsbutwasunabletogenerateareturnfullycoveringopportunitycostforownlabour,landandcapital.AsimilarsituationwasfoundinUkraine,butduetoahighermilkprice,thelargescalefarmwasabletosecureasignificantlyhigherprofitthanthelargescalefarmsinBelarus.Also

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Figure 6.Economicsofmilkproductionintypicaldairyfarms(Hemme,2007).Thedatarefertotheyear2006.Note:P&L=ProfitandLoss.


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inBulgaria,thelargerfarm(BG-34)wasmuchmoreprofitablethanthesmallerfarm(BG-2).Evenwithsignificantlyhighermilkprices,theprofitabilityofmilkproductioninGermanyandPolandwasthepoorest.Amongfarmsofthefourcountriesanalysedonlyone(PL-65)wasabletothecoverfulleconomiccostsofmilkproduction.

Conclusions

TheBelarusiandairysectorrecoveredafterthecollapseofthesocialistsysteminthebeginningof90’sandhasachievedasignificantincreaseinmilkproductioninrecentyears.Themain-stayofthedairysectorinBelarusarelargescalefarmsproducingmostofthemilk.Withtheincreaseofmilkproduction,significantsuccessininternationaldairytradewasachieved.In2007,Belarusexportedabout35%ofmilkproducedintheformofdairyproductsandreachedaself-sufficiencyrateinmilkofabout151%.Duetogovernmentregulationofthemilkprice,thepricepaidtoproducerswassignificantlybelowtheworldmarketlevel.FarmeconomicanalysisshowedthatofmilkproductioninBelaruswasprofitable.LargescalefarmsinBelaruswereabletoachieveaprofitproducingmilkatlowcost.

References

Hemme,T.,2000.IFCN–Aconceptforinternationalanalysisofthepolicyandtechnologyimpactsinagriculture.EinKonzeptzurinternationalvergleichendenAnalysevonPolitik-undTechnikfolgeninderLandwirtschaft.LandforschungVölkenrode,Sonderheft215,Braunschweig.

Hemme,T.(ed.),2007.IFCN2007DairyReport2007.InternationalFarmComparisonNetwork,IFCNDairyResearchCenter,Kiel.

Hemme,T.(ed.),2008.IFCN2007DairyReport2008.InternationalFarmComparisonNetwork,IFCNDairyResearchCenter,Kiel.

ZMP,2002.LandwirtschaftinGUS:Tier-undPflanzenproduktion.ZMPZentraleMarkt-u.Preisberichtstelle,Auflage:1.


103

Cattle sector and dairy chain developments in Ukraine

I.�Ilienko

Association�‘Ukrainian�Agribusiness�Club’,�Tbiliskiy�Provulok�4/10,�03055�Kiev,�Ukraine;��[email protected]

Abstract

DuetotheUkraine’saccessiontotheWorldTradeOrganisation(WTO),thereisneedtoexpandintonewmarketsandtoincreasethequalityofmeatanddairyproducts.Inthispaper,themajorandmostimportanttendencies,whichmayinfluencethecompetitivenessofthedairychaininUkrainearesummarised.Therapiddecreaseinlivestocknumbersandtherestructuringofthelivestockproductionsector,whichtookplaceforthelast17years,hadobjectivereasons.Whilebigfarmsweretryingtogetridofloss-generatingorlow-profitactivities,ruralresidentsweremaintainingrelativelystablenumbersofcattle,forthepurposeofmaintainingorimprovinglivingstandards.Asaresult,thenumberofcattleisincreasingwithinsocalledindividualhouseholds.Theindividualhouseholdsandsmallfamilyfarmsarealsoanimportantsupplierofmeatanddairyproductstothepopulationandtotheprocessingindustry.Thecattlepopulationdecreasedinthetwolastyearsby6%and11%,respectivelycomparedtocorrespondingperiodofthepreviousyear.Themostimportanttrendinmilkproductionbyagriculturalenterprisesistheprofitabilityoflargefarmenterprises,withonaveragemorethan500cows.Thistrendencouragescompanies,whichalreadyoperateeffectively,tofurtherincreasetheirscaleofproduction.Thegreatestherdincreasesoccurredincompanieswithmorethan1000cows.Acrossthewholedairychaintherearemanyweaknesses,startingwiththeprevalenceofhouseholds’inthetotalrawmilksupplyandthelowqualityofthismilk.Thereisalsoapronouncedseasonalpatternofrawmilkproduction,alackofinvestmentindairyfarming,andunderdevelopedlogisticsorinfrastructureformilkcollection,storageanddistribution.Thispaperpresentstheofficialstatistics,statementsbysectorplayersinthecourseofinterviewsandtheresultsofrecentempiricalstudies.

Keywords:�cattle,�dairy�chain,�Ukraine

Cattle populations and its spatial distribution in Ukraine by region

Inthepastdecadeaconsiderabledecreaseinthecattlepopulationinvolvingallbreedshastakenplace.Thistendencyistheresultofthenegativeprofitabilityofmilkproductionandlowpricesformilk,lowproductivityandcomparativelyhighprimarycostsofproduction.Inaregionalcontext,mostofthelivestockandpoultrypopulationisconcentratedinVinnitsa,whichholdsaleadingpositioninthelivestockpopulationasawholeandinthecowpopulationinparticular.TheleadingregionsinlivestocknumbersasofJanuary1,2008areasfollows(×1000head):Vinnitsa383.7,Khmelnitskiy325.1,Lviv317.5,Poltava310.2andChernigiv294.8(Figure1).ThegreatestnumbersofcowsacrosstheUkrainianregionsarefoundinagriculturalenterprisesinCentralandNorth-EasternUkraine,withsuchregionsasPoltava,Chernigiv,Kyiv,Cherkasytakingthelead.IntheCentralregions,NorthandNorth-East,livestockproductionismostlyspecialisedingrowingcattlefordairypurposesandmeatisasecondaryproduct.Intermsoflivestockdensity(headper100ha),theWesternregionstakethelead(Figure2).


104

Figure 1. CattlepopulationinUkrainebyregion(×1000head).(StateStatisticsCommitteeofUkraine,2008)

Total cattle: head per 100 ha AA

35.6

10.0

1.5(NV)

(NV)

Figure 2. SpatialdistributionoftotalcattleinUkraine(headper100haagriculturearea)(CalculationsofUCAB&vTibasedonthedataoftheStateStatisticsCommitteeofUkraine,2008).


105

Genetic diversity

Altogether,32breedsarefoundinUkraine.Ofthese,17areofmilkandmilk-meattypes,namelyWhiteheadUkrainian,RedPolish,Pinzgauer(alldomesticbreeds),BrownCarpathian,RedSteppe,Lebedin,Simmental(adaptedbreeds),UkrainianRed-Piebald,UkrainianBlack-Piebald(breedsselectedfromforeignbreeds);UkrainianRedMilk(UkrainianFat-Milktype),North-EastmilktypeofBrownbreed(breedscreatedfromforeignbreeds);Golshtin/HolsteinofEuropeanselection,Golshtin/HolsteinofCanadianselection,SimmentalofAustrianselection,Shvitsbreed,AnglerandAirshire(allforeignbreeds).ThedistributionofcattlebreedsissummarisedinFigure3.Thereare7domestictypesofmeat-breedsinUkraine,whichhavebeenselectedovertime,namelyGrayUkrainian,Ukrainian,Volynska,Polisska,Simmental,Znamyanska,whichaccountfor76%ofallmeatcattle.Theremaining24%arespecialisedforeignbreeds:AberdeenAngus,Hereford,Simmental(AustralianandAmericanselection),Limousin,Charolais,Blonded’ÀquitaineandPiemontese.BeefcattlebreedsaremainlyconcentratedinVolyn(28%),Zhytomyr(14%),Rivne(9%),KirovogradandChernigiv(7%).

Structural changes in cattle numbers and milk production

Asmentionedabove,duringlast twoyearsthecattlepopulationdecreasedby6%,and11%respectively,comparedtothepreviousyear.Animportanttrendisthechangingproportionsofcattleproductionbetweenagriculturalenterprisesandprivateholders.Theagriculturalenterpriseshavereducedtheirshareofthecattlepopulationfrom35%in2000to22%in2008(Figure4).Thelargeagriculturalfarmshavebeentryingtocutlossescausedbylow-profitactivitiessuchasmilkandbeefproduction,whileruralresidentshaveretainedafairlystablenumberofcattle,inordertomaintainorimprovetheirstandardofliving.Asaresult,themajorityofcattleisnowkeptbysocalledindividualhouseholds.Individualhouseholdsandsmallfamilyfarmsareanimportantsupplierofdairyandmeatproductstoinformalmarketsandtotheprocessingindustry.Theconsiderableexportpotentialofthedairysectormayonlybefullyrealisedaftermeasurableimprovementsinproductivityandinthequalityofrawmilkanddairyproductsareachieved.Theseconditionscanbestbemetbylarge-scalemilkproduction.

Imported breeds5%Adapted breeds

16%

Breeds and types selected using foreign

breeds79%

Domestic breeds0%

Figure 3. Thestructureofcattlebreedsproducedonlargescaleholdings(milkanddualpurposebreeds)(MinistryofAgrarianPolicy,2008).


106

Milk production by agro-enterprises

Structure of the cow population across farms

Improvementsinprofitabilityofmilkproductionoccurredmainlyonlargescalefarms,whichalreadyoperatedeffectivelyandtheyfurtherincreasedtheirscaleofproduction.Thelargestimprovementswereobservedincompanies,whichalreadyhadmorethan1000cows.Theselargescalecompanies,specialisingindairyproduction,increasedtheirnumberofcows(Table1).

Dairy cow productivity

Agro-enterprisesstillneedtoincreaseproductivityfurther.AsFigure5shows,comparedtowesternstandards,theproductivityofcowsislow.Ontheotherhand,asalsoshowninFigure5,somedairyfarmsarecapableofachievingagoodlevelofproductivity.Itisimportanttonotethataveragefigures

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Number of cattle in agroenterprises Number of cattle in householdsFigure 4. NumbersofcattleinUkraine(StateStatisticsCommitteeofUkraine,2008).

Table 1. Structureofcowpopulationacrossfarms(datafor1Januaryeachyear)(basedonthedataoftheStateStatisticsCommitteeofUkraine,2008).

Numberofagro-enterprisesinthecategory

Change2006to2008(%)

Totalnumberofcowsbycategory(×1000head)

Change2006to2008(%)2006 2007 2008 2006 2007 2008

upto10 1,380 1,295 1,138 82 6.3 5.7 5.0 7911-49 1,668 1,383 1,013 61 45.2 36.8 26.8 5950-99 1,174 969 742 63 82.7 68.7 51.9 63100-199 1,291 1,118 948 73 180 155.6 131 73200-499 1,202 1,017 900 75 355.4 305.4 274.3 77500-999 247 230 215 87 155.5 148.1 139.3 90morethan1000 32 31 36 113 41.1 43.7 50.2 122Total 6,994 6,043 4,992 - 866.2 764 678.6 -


107

canbemisleadinginsuchaheterogeneoussector.Whiletheaveragemilkyieldfordairyfarmsandhouseholdsin2007was3.7t,themajorityofagro-enterpriseshadyieldsnohigherthan2t.Theaveragemilkyieldforagro-enterpriseswas3.1twhilethatforhouseholdswas3.8t.Thenumberofenterpriseswithanannualherdmilkyieldabove6,000litresisconstantlygrowing.In2006,thenumberofsuchcompanieswas181andin2007itwas195(Table2).Theshareofsuchcompaniesinthedairysectoris3.6%ofallholdingsbuttheirshareofmilkproductionis13%.Thegeneraltrendsinagro-enterprisesarearapiddecreaseofcownumbersandasteadyincreaseofmilkyieldpercow(Figure6).

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Table 2. Dairycowproductivitydistributionamonglargeandmediumenterprises1(StateStatisticsCommitteeofUkraine,2008).

Productivity(kg/cow)

2006 2007Numberofagro-enterprises

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Grossmilkyield

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×1000t Shareintotal(%)

Number Shareintotal(%)

×1000t Shareintotal(%)

<1000 1,019 16.2 35.1 1.5 1,008 18.7 34.9 1.71,001–2,000 1,820 28.9 251.9 10.8 1,470 27.3 218.8 10.52,001–3,000 1,632 26.0 473.7 20.4 1,323 24.6 388.3 18.73,001–4,000 934 14.8 546.9 23.5 759 14.1 430.0 20.74,001–5,000 480 7.6 459.7 19.8 428 8.0 438.7 21.25,001–6,000 229 3.6 298.1 12.8 200 3.7 292.2 14.1>6,000 181 2.9 257.9 11.2 195 3.6 271.2 13.1Total 6,295 100.0 2,323.3 100.0 5,383 100.0 2,074.1 100.01>100halandor>50employees.


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Grazing system and/or confined

InUkraine,year-roundindoormanagementandpartlyindoor-grazingmanagementaremostcommon.Inmostholdings(98%),cowsarekeptintie-stanchionsandtherestarekeptloose-housingsystems.Forbeefcattle,bothtie-stanchionandloose-housingmethodsareequallyused.

Specialisation

Amongagriculturalenterprises,whichhavemorethan50employeesandoperatemorethan100hafarmland,specialisationincattlebreedingcanbedescribedasfollows:on40%ofenterprisesmorethan60%ofthetotallivestockkeptarecattle,whileon10%offarmscattleaccountfor40%to60%ofalllivestockkept.Pigscomprisetheothersizeableshareoffarmlivestock.Duringtheperiod2005to2007,thenumberofagri-enterpriseswithmorethan41%ofthegrossincomederivedfrommilkincreasedwhilethenumberwithalowermilkrevenuesharedecreasedconsiderably(Table3).

Slaughtering of cattle

Inrecentyears,thenumberofcattlesoldforslaughterhasfallenconsiderably.Asaproportionoftotallivestockproduct,cattleaccountedfor47%in2001butdecreasedto33%in2007,andto30%in2008.Itisevidentthatmeatproductionfrompigsandespeciallypoultry,hasanincreasingmarketshare.Themeatsupplyoriginatingfromagriculturalenterpriseshasalsodecreased,accountingforonly30%in2007.Youngcattle,cattleofaveragefatnessandcattleofhighfatness(bullsover400kgandcowsover350kg)arethecommonslaughtercattleandpricecategories.Theaveragelive-weightbeforeslaughterofcowsisabout170-180kgdependingontheseasonofslaughter,itishigherinautumn.InUkraine

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Figure 6.Dairycowproductivityandnumberofcowsbyagro-enterprises(StateStatisticsCommitteeofUkraine,2008).


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therearehardlyanyqualitypaymentdifferencesbetweenbreedsatslaughter,aconsequenceofthepoordevelopmentofmeatproducingcattlebreedsandproductionsystems.

Dairy supply chain in Ukraine, its weaknesses and possibilities

MilkproducingfarmsaremostlyconcentratedintheNorth-Central-WestpartofUkraineanddairyplantstofollowthesamepattern.Accordingtotheofficialstatistics,in2007Ukrainehadabout600

Table 3. Milkproductionspecialisationonlargeandmediumenterprises1(calculationsbasedonthedataoftheStateStatisticsCommitteeofUkraine,2008).

Shareofmilkinthetotalrevenue(%)

2005 2007 Change2005to2007(%)

Numberofagro-enterprisesincategory

Shareinthetotal(%)

Numberofagro-enterprisesincategory

Shareinthetotal(%)

1-10 2,166 46 1,339 41 6211-20 1,327 28 758 23 5721-30 792 17 524 16 6631-40 424 9 339 10 8041-50 162 3 171 5 10651-60 75 2 89 3 11961-70 23 0.5 34 1 14871-80 6 0.1 9 0.3 15081-90 2 0.0 5 0.2 250>90 0 0.0 3 0.1 -

Total 4,677 100 3,271 100 701>100halandor>50employees

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dairyplants,mostofthemprivate,andabout3,700milkproducingagriculturallargeandmediumenterprises(>100halandor>50employees).However,thesefarmsproducedlessthan20%ofthetotalnationalrawmilk(Figure8).

Efficiency of ago-enterprises

ThedairychaininUkrainehassomedistinctweaknesses,whichstartwiththelowefficiencyandqualityofmilkproductionintheagro-enterprises.Toevaluatetheefficiencyofagro-enterprisesweusedtheDataEnvelopmentAnalysis(DEA)methodandmadecalculationswithaprogramDEAP2.1(createdbyTimCoelli).Atotalof870enterpriseswereselectedinwhichtheshareofmilkinthetotalfarmincomewasmorethan30%.Theaveragetechnicalefficiencyoftheseenterpriseswas36.6%(ofthepossiblemaximumfortheresourcesdeployed),showingthehugepotentialforefficiencyincreasesthatexistatproductionlevelwitharequirementforonlyminoradditionalresources.Theefficiencyofcattlebreedingwas21%and28%in2005and2006,respectively.

Feed production for dairy sector

FeedproductionfordairycowsonUkrainianfarmsgenerallytakesplaceonaveryextensivebasis,whichresultsinlowfeedqualityandhightotalfeedcosts.Feedandforagesaccountforabout50%-75%ofthecostsofcattleproduction.Thedeclineinthecattlepopulationsince1990hasledtoareductioninthedomesticdemandforforagesforbothagriculturalenterprisesandhouseholders.Asaresult,thereweresomechangesinlanduse,namelyareductionofnaturalmeadowsandcultivatedpastures.Therewasalsoareductionintheproductionofforagetubersandmelons,sugarbeetforforage,andmaizesilage.Asaresultofthesechangestheforagecropareadecreasedfrom4mhato3.1mhasince1990.

Figure 8.DairysectormapofUkraine(Nivievskyiet�al.,2007).


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Productionofhay,foragetubers,melonandsugarbeetforcattlefeedingisgenerallyconcentratedinprivatefarms,whilemaizesilageandhayproductionismainlypracticedinagriculturalenterprises.Ukrainehasabout2.4mhaofhayand5.5mhaofpastures(StateCommitteeofUkraineforLandResources,2007),butyieldsarerelativelylowat1.3t/hahayand4.7t/hagreenmass.Thisareagives2.1mtofhayor1.1mtfeedunits3.Potatoesandvegetablesarealsousedforfeed.Thetotalvolumeofsuchfeedisabout2.5-2.7mtfeedunits.Mostofthefodderisproducedon-farm.Feedadditivesaremostlyimported.Ukrainealsoimportsproteinrichagro-industrialby-productsandmealssuchasmeatandbonemeal,fishmealandsoybeanmeal.Thesehavebetterproteinqualitythansunflowermeal.Ukrainehasgreatpotentialtoexpanddomesticfeedproduction.Itisalreadyexportingfeedgrains,sunflowermealandsiftingsbutpricesobtainedfortheseproductsarelowincomparisonwithworldmarketprices.ThetotalsupplyoffeedresourcesinUkraineisestimatedat39-40mtfeedunits,including23-24mtfeedunitsofconcentratefodder.About38%(ca.14mtfeedunits)ofthetotalfodderstockisusedformilkproduction.Concentratesandcompoundfeedsareconsumedmostlybypoultryandpork(about74%).Productionofmixedconcentratesforcattle,asforotherkindsofdomesticanimals,isincreasing,butitsshareoftotalconcentrateproductionisdecreasing,mainlyduetotheconsiderableexpansionofthepoultrysector.In2005,theconcentratefeedsforcattleconsistedabout599,000t(19%),andin2006itwasabout650,000t(17%).TheproductionwasconcentratedontheenterprisesintheSumy,Donetsk,Kharkiv,PoltavaandRivneregions,whichproducedmorethanhalfoftheconcentratefeedsforcattle.

Extension service and access to market information

Animportantagencyinthedevelopmentofthedairysectoristheextensionservice.ThereareonlyafewextensionservicecentersinUkraine.Forexample,IFChasadairyprojectinVinnytsia.Dairiesandotheragro-businessoperatorsareprovidingforthegrowingdemandforspecialisedextensionservices.PrivateextensionhasalsobeendevelopinginUkraine.However,publicextensionhasshownverylittleprogress,despitethefundingofsuchactivities.Onthenationallevel,thereisnoofficialsupplyanddemandstatisticsavailableforextensionservices(NivievskyiandStrubenhoof,2007).InmostEuropeancountries,theextensionservicesnotonlyprovidetechnicalinformation,butalsoassistinbusiness-planning,andprovideconsultancyonthepreparationofofficialdocumentsforbudgetsandsubsidyapplications.ThedevelopmentofextensionservicesinUkraineiscontrolledbylegislation(LawofUkraine‘Onagriculturalextensionservices’No1807-IVon17.06.2004).Suchservicesmaybefinancedfromthepublicbudgetaswellasdonorprojects.ThecurrentleveloffinancingoftheextensionservicesinUkraineisquitelow.Besides,Ukrainianservicesoftenprovideandmakeconsultationsonlyongeneralissues,mostlyinsocialandprivatesmallbusinessinitiatives.

Pedigree�Cattle

Thecurrentsupplyofpedigreecattlefromthenationalselectionschemesisfarbelowthedemandfromdairyproductionenterprises.Thereareseveralwaysofsourcinghighqualitypedigreecows(withproductivityof8-12tmilk/year):

31feedunit=1kgofoat,5kgofgreenmass,1-0.8kgofgrain;500kgcowneedsatleast5feedunitsperday.Usuallytoget1kgofmilkacowneeds0.5feedunitsoffodderabovemaintenance.Thus,for20kgofmilkacowrequires15feedunitsonaverage.


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• Importationfromabroad:threeproblemsexist(a)importprocedures,(b)mustdealinlargeconsignments,suitableonlyforlargefarms,(c)itisalikelythatfarmerswillnotobtainmaximumyieldsbecauseofpoorpracticesandinsufficientknowledge.Themoreproductiveacowis,themorecareitrequires.In2007,importsofcattleincreasedby64%to3,638headcomparedtothepreviousyear.Theoriginsofimportedpedigreecattlewere:Germany60%,Hungary39%,therestwerefromDenmark.TheimportedcattlefromHungarywere6%cheaperthancattleimportedfromGermany.Theaveragepriceperheadofpedigreecattlein2007wasUS$2,585.

• Fromdomesticbreedingorganisations:theproductivityoftheseiscomparativelylow.Thereareabout90pedigreedairybreedingcattlefarmsinUkraine.MostareinKyivandCherkasyregions–17and12farms,respectively.

• Inseminationofdomesticcowswithimportedsemenfrompedigreebulls:theproductivityoftheoffspringobtainedwouldbelowerthanthatofimportedcows(ca.9vs.12tmilk/year).Howeverthecostwouldalsobelower.

Logistic�and�infrastructure

AnotherimportantfeatureoftheUkrainiandairysupplychainisthatlogisticsandinfrastructure(milkcollection,storageanddistribution)areunderdevelopedandexpensive.Milkcollectioninmostofcases,isdonebydairiesbutsometimeslocalauthoritiesorcooperativesmayberesponsibleforcollection.Usually,dairiesuseoldtruckswith5tmilktanksmadefromaluminum,inwhichitisdifficulttomaintainmilkquality.IngeneralthemilkcollectionsysteminUkraineisheterogeneous,asalargeshareoftherawmilkisboughtfromhouseholds.

Raw�milk�quality

Theprevalenceofhouseholdsinthetotalrawmilksupplyandthelowqualityofrawmilkaddscoststotheproductionchain,makingitlesscompetitiveintheworldarena(Niviewskyiet�al.,2007).Moreover,theUkrainianqualitystandardsarefarfromWesternstandards(Table4),whichlimitstheexportpossibilitiesforthedairiesmostlytotheformerSovietrepublics.Milkfromhouseholdsusuallyclassifiesasmilkof2ndgradeaccordingtotheUkrainianstandard.IntheEUandUSAsuchmilkisnotusedforfoodproduction.Atthesametime,about80%ofallmilkdirectedforfurtherprocessingissuppliedfromhouseholds.Thesituationlooksbetterindairyfarms,whichdelivermostly1standhighergrademilk(Table5).Thus,adeclarativelystrongstandardssystemdoesn’tsimulatemilkqualityimprovementinUkraine.Themajorweaknesseswhichdetermineefficiencyofthedairysupplychainare:lackofinvestmentsindairyfarmingmainlyduetotaxationofinputs(seeds,agrochemicals,machinery,etc.)viatariffandnon-tariffimportbarriers,excessiveregulation(e.g.certification),alackofamarketforfarmland,alackofmarketinginformationandinfrastructure,andanacuteshortageofhumancapital.Thepronouncedseasonalpatternofrawmilkproductionbyhouseholdsanddairyfarms,andverylowproductivityofcowsperlactation,addsproblemsandcoststodairyprocessors’operations.

Table 4. RawmilkqualitystandardsforfoodproductioninUkraineandEU(EC,1992;USFDA,2003).

EU UkraineExtragrade Highergrade 1stgrade 2ndgrade

Platecount30°C(×1000perml) ≤100 ≤100 ≤300 ≤500 ≤3,000Somaticcellcount(×1000perml) ≤400 ≤400 ≤400 ≤600 ≤800


113

Production and consumption of dairy products and beef in Ukraine

ImprovementsofallthedairysupplyandbeefproductionchainsinUkrainehasbecomeurgentasthereisscopetoexpandproductionandthereisunderusedprocessingcapacity.ThedistributionofdairyproductsforUkraineisshowninFigure9.Theper-capitaconsumptionof,andtheexportopportunitiesfor,dairyproductsandbeefarecurrentlycomparativelylowbutarelikelytoriseinthenearfuture.Milkandmilkproductsconsumptionpercapitahasgrownsince2000(Table6).Thesmalldecreasein2007wascausedbyaconsiderablepriceriseformilkproducts.Dairyproductsconsumptionin2007was11%greaterthanin2000,withregionalvariationsof2%to44%.ThehighestconsumptiongrowthwasobservedintheCentral,EasternandSouthernregions.Thatcorrelateswiththehigherincomeintheseregions.Inspiteoftheconsiderableincreaseinconsumptionofmilkproducts,thelevelisstillmuchlowerthanthebiologicalnormofca.300kgperyear(thelevelofconsumptiondefinedasoptimumforbalancednutrition),andislowerthaninseveralEuropeancountries.Wholemilkisthemostpopularofalldairyproductsconsumed.Inmonetarytermsabout40%ofthevalueofalldairyproductsconsumediswholemilk,about30%ischeese,about15%isbutterandspreads,andtherestisdividedbetweenice-cream,cannedmilkandmilkpowder(11%,4%and2%,respectively)(Figure10).WiththegrowingpurchasingcapacityoftheUkrainianpopulation,andtheavailabilityoffavourableopportunitiesforexport,thereissizablepotentialforexpandingproduction.Withregardtobeef,bothproductionandconsumptionhavedecreasedsignificantly,andthesaleofcattleforslaughterhasalsodecreased.Comparedto1990,productionofbeefin2007haddecreasedby70%mainlybecauseofreducedproductionbyagriculturalenterprises,eventhoughhouseholdersdoubledbeefproductioninthesameperiod.Theshareofbeefinthevalueofallmeatimportsisonly5%.BeforetheRussianrestrictionsonUkrainiandairyandmeatproductsthemajorpartofbeefexportswenttoRussia.PercapitaconsumptionofbeefinUkrainewas10.8and10.2kgin2006and2007,respectively.Becauseoftheshortageofbeefforthemeatprocessingindustry,andreductionsofimportdutiesafterWTOaccession,anincreaseinimportsofbeefisexpected.

Table 5. Qualityofmilksoldbyagro-enterprisestoprocessorsin1sthalfof2008(DSTU3662-97)(StateStatisticsCommitteeofUkraine,2008).

Quality Milksold×1000ton Shareintotal(%)Extragrade 0.5 0.1Highergrade 236.9 27.31stgrade 554.1 63.82ndgrade 63.4 7.3Offal(nonvarietal) 13.3 1.5

Table 6.ProductionandconsumptionofmilkanddairyproductsinUkraine(StateStatisticsCommitteeofUkraine,2008).

2000 2001 2002 2003 2004 2005 2006 2007 2000to2006(%)

Production(mt) 12.7 13.4 14.1 13.7 13.7 13.7 13.3 12.3 97Consumption(kg/year) 199 205 225 226 226 225 235 220 111


114

642792 859

10631213 1259

153130

159

181213 186

103127

168

224

274 217

95107

111

117

126 120

6268

81

104

110 100

11780

91

123

143 131

0

500

1,000

1,500

2,000

2,500

2001 2002 2003 2004 2005 2006

Dairy products from whole milk Butter and spread CheeseIce-cream Canned milk Milk powder

Figure 9.ProductionofdairyproductsinUkraine(×1000t)(StateStatisticsCommitteeofUkraine,2008).

776906 965

1170 1230 1288

111116

130

150162 165

8399

109

130150

173

95108

111

115123

119

56

6272

7890 83

29

3135

4059

43

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2001 2002 2003 2004 2005 2006

Dairy products from whole milk Butter and spreadCheese Ice-creamCanned milk Milk powder

Figure 10. ConsumptionofdairyproductsinUkraine(×1000t)(StateStatisticsCommitteeofUkraine).


115

Some aspects of dairy policies and producer support in Ukraine

Fixed agricultural tax

Agriculturalproducersmayavailofspecialtaxationbenefits.AccordingtotheUkrainianlaw‘OnTheFixedAgriculturalTax’,itispossibletochangethetaxorderforagriculturalproducersfromanordinarysetoftaxes(varioustaxesincludingprofittax)to‘afixedagriculturaltax’(FAT)(UkraineGovernment,1998).AgriculturalenterprisesareeligibletopayFATifagriculturalproductsaccountforover75%oftheirrevenues.Thisspecialtaxregimereplacesprofittax,landtaxandsomeothertaxes.ThebaseforFATisthenormativevalueofafarm’sagriculturalland4.Thetax�rates�arespecifiedforthreetypesoftheagriculturalland:(1)0.15%oflandvalueperyear,forarablelands,meadowsandpastures,(2)0.09%ofthevalueofperennialplantations,and(3)0.45%ofthevalueofwaterresources.FATispaidmonthly,butthepaymentratesvarysothat10%ofthetotalpaymentisdueinthefirstandsecondquarters,while50%and30%aredueinthethirdandfourthquarters,respectively.Inaddition,thereisaspecialregimeforthetaxationofagriculturalproducerswithvalueaddedtax.In2008,thefollowingmainarticlesoftheLawofUkraine‘OnTheValueAddedTax’(VAT)remainedinforce(UkraineGovernment,1997).Theircontentsaresummarisedbrieflyasfollows:• Article6.2.6:VATequalszeroforproducersofmeat(inliveweight)andmilkwhoselltheir

productsdirectlytoprocessingenterprises.• Article11.21:VATamountstobepaidbymeatandmilkprocessorstothestatebudgetare

redirectedtomeatandmilkproducersasasubsidyproportionaltothedeliveredrawmaterials.• Article11.29:VATamountsfromsellingagriculturalproducts(exceptmeatinliveweight,and

milk)remainontheaccountsofagro-producersandmaybeusedforoperationalneeds.TheFATwillstayinforceuntil2010.Meanwhile,thespecialorderofVATpaymentsareprolongedfortheyear2008.Thus,thefirstandthebiggestsubsidyelementforrawmilkproducerscomefromVATcollectedfromthedairyprocessingindustry(alreadymentionedabove).VATreceivedbydairyprocessingenterprisesfromsellingdairyproductsisretainedonaspecialaccountandpaidtoagriculturalproducerssellingtheirunprocessedmilktoprocessingenterprises.AnimportantaspectofthesesubsidiesisthattheydonotcomplywithWTOrequirements,sincetheyaredomesticsupportmeasures(WTO,1994;Nivyevskyiet�al.,2008).TheVATregimeformilkandmeatproducerswillchangewithWTOaccession(mostlikelybeginningof2009).

Special regime of Pension Fund payments for agricultural enterprises

FATpayerspaytothePensionFundatspecialrates(19.38%in2008)with20%annualincreaseuntilthecommonratewillbereached(32.3%)(UkraineGovernment,2004).Theninafewyears,FATpayersareexpectedtopaythefullpaymentratetothePensionFund.

Subsidy for cattle grown and sold

Cattleof390kgminimumliveweightforagro-enterprisesand330kgforhouseholdsaresubsidisedat2.9UkrainianHryvnia(UAH)/kg(€1=7.4UAH;US$1=5.8UAH).

4Landvalueisdeterminedaccordingtoqualityandpotentialproductivityand,therefore,canvarysubstantiallyfromfarmtofarm.TheaveragelandvalueinUkraineforFATpurposesonthe1stJanuary2008is9,179UAH/ha,rangingfromamaximumof12,708UAH/hainARofCrimeatoaminimumof6,664UAH/hainZhtomyr(excludingKievcity,SevastopilandCrimea).


116

Special subsidy for heifer livestock

Aspecialsubsidyforbreedingheifersfromsuckler-cows,whichareboughtfromhouseholdstoincreaselivestocknumbersispaidtoagro-enterprisesatarateupto5UAH/kg.

Special subsidy for livestock

Aspecialsubsidyispaidforbeefcattleifthemeat-productivityoftheanimaliscorrectlyidentified.Producersofeco-testedmilkdeliveredtodairyprocessingfactoriesforproducingbabyfoodobtainasubsidyattherateof500UAH/tmilk.

Partial interest rate compensation

Agriculturalenterprisesmayreceivecompensationforinterestratesforshort-termcreditobtainedinnationalorforeigncurrenciesforcoveringproductioncosts(e.g.purchasesoffuel,feed,spareparts,fertilisers,pesticides,insurancepayments,etc.),andforlong-termcreditobtainedinnationalorforeigncurrenciesforfinancinginvestmentsinfixedcapital.

Partial compensation of agricultural machinery costs

Underthisscheme,theGovernmentcompensates30%ofthepriceofdomesticallyproducedagriculturalmachinerytoagriculturalproducersandenterprisesofthefoodprocessingindustry.

Partial compensation of insurance payments

Farmsreceive50%compensationforinsurancepayments.ItiswidelyacceptedthattheUkrainianproblemisnottheleveloftaxesbutthecomplexityoftaxmanagementandtaxcontrol.Todate,thereislittletransparencyintheperformanceofthelocaltaxadministrations,especiallyregardingVATcompensation.Inthisway,taxauthoritiesmayprolongtermsofexporters’examinationbeforerewardinganexpectedcompensation.Agriculturalexportersarealsoveryfamiliarwiththispractice.

Conclusions

Thelivestockandmilkproductionindustrieshaveconsiderablepotentialtoincreaseproductioncapacity,expandmarketsandadopttechnologiesforproductionandefficiencyimprovementsatalllevelsoftheproductionchain.Demandfordairyandlivestockproductionwillfurtherincrease.Simultaneously,exportswillgrow.FollowingtheprohibitionofdairyandlivestockproductstoRussiain2006,moreandmoreproducersarenowreceivingindividualexportlicensesafteraseriesofinspectionsbyrepresentativesoftheRussianauthorities.Inaddition,livestockanddairyproducers,togetherwithgovernmentalbodies,areworkingintensivelytoachieveaccesstoEuropeanmarketsfortheirproducts.ThisrequiresfurtherharmonisationofdomesticandEuropeanqualitystandardswithmoredistinctboundarysettingatthelegislativelevelbythecentralqualitycontrollingbodies,qualityimprovementsofdairyproducts,andimprovementofstorageandtransportationsystemsforallstagesofproduction.Foragriculturalenterprises,thereisademandforimprovementsinproduction,optimisationofavailableresourceuse,increaseinefficiencybyintroductionofnewtechnologies,improvementoftheskillsoftheemployeesofthefarms,improvementsinmanagement,furtherrestructuringoftheindustry,andfinallyanincreaseinforeignmarketsharebyindividualenterprises.Areasnear


117

dairyplantsthathavebeenmodernised,haveahigherproductivitygrowth,mainlyduetoenhancedtechnologicalprogress.Processorsrequiringadependablesupplyofhighqualityrawmilkassistfarmstomakethenecessaryinvestmentsforequipment,productionresourcesandotherneeds.Themaindrawbackstothestateprogramsofindustrysupportareinstabilityinthefinancingpriorities,thenecessityforannualre-approvalforfunddistributiontogetherwithinsufficientinformationandconsultationwithagriculturalproducers.Besides,forthestabilisationoflivestockandmilkproduction,thereisaneedforastabletaxsystem,transparencyanduniformdistributionofstatesupport,anddecreasesinthetimeframesforinvestmentsreturns.

References

EuropeanCommission(EC),1992.CouncilDirective92/46/EECof16June1992layingdownthehealthrulesfortheproductionandplacingonthemarketofrawmilk,heat-treatedmilkandmilk-basedproducts.OfficialJournaloftheEuropeanUnionL268:1-32.

Nivyevskyi,O.andStrubenhoff,H.,2006.BarrierstoinvestmentintheagricultureandfoodsectorinUkraine.IERPolicyPaper.Availableat:http://ierpc.org/ierpc/papers/agpp5_en.pdf.

Nivievskyi,O.,Ilienko,I.andRyzhkova,M.,2007.DairysupplychaininUkraine:bottlenecksanddirectionsfordevelopment.PresentedattheIAMOForum,Halle(Saale),Germany.

Nivyevskyi,O.,VonCramonTaubadel,S.andBrümmer,B.,2008.SubsidiesandtechnologychangeofUkrainiandairyfarms:spatialdependenceinthecomponentsofproductivitygrowth.PresentedattheVthNorthAmericanProductivityWorkshop25-27June2008,New-York,USA.

StateStatisticsCommitteeofUkraine,2008.Websiteavailableat:http://www.ukrstat.gov.ua/.UkraineGovernment,1997.Ukrainianlaw‘OnTheValueAddedTax’(VAT)–No.168/97-BPasofApril03,1997.

Availableat:www.rada.gov.ua.UkraineGovernment,1998.Ukrainianlaw‘OnTheFixedAgriculturalTax’(FAT)-No.20-14asofDecember17,

1998.Availableat:www.rada.gov.ua.UkraineGovernment,2004.Ukrainianlaw‘Onamendmentstosomelawsontaxationofagriculturalenterprises’–No.

2287-IVasofDecember23,2004.Availableat:www.rada.gov.ua.USFDA,2003.Grade‘A’pasteurizedmilkordinance2003revision.UnitedStatesFoodandDrugAgency,CFSAN,

USA.Pressreleases;DSTU3662-97.Availableat:http://www.cfsan.fda.gov/~acrobat/pmo03.pdfWTO,1994.UruguayRoundAgreementonAgriculture.Availableat:http://www.wto.org/english/docs_e/legal_e/14-

ag.pdfZubets,M.andMelnychuk,D.,2004.PresentationongeneticresourcesofUkrainiancattle.Ukrainianacademyof

agrariansciences.


119

Cattle sector and dairy chain development in Slovakia

M.�Stefanikova

Slovak�Association�of�Dairy�Farmers,�Výstavná�4,�949�01�Nitra,�Slovakia;�[email protected]

Abstract

ThispaperpresentsthecurrentsituationandaperspectiveofthecattlesectoranddairychaindevelopmentinSlovakiaundertheimpactoftheCommonAgriculturalPolicyoftheEuropeanUnion.Thefirstsectionisdedicatedtodairyfarming,includingdataoncattlenumbers,productionunitnumbers,cattlebreeds,milkyields,milkproduction,dairyfarmernumbers,milksales,milkquotas,milkpricesandsupportpolicy.Thesecondsectiondealswiththemilkprocessing/dairysectorincludingthenumberofdairies,productionofmilkanddairyproducts,andmilkbalance.Thethirdsectiondealswithissuesofconsumptionandpromotionofmilkanddairyproducts.ThefourthsectionpresentssomeresultsontheeconomicefficiencyofmilkproductioninSlovakiaandinEuropeanDairyFarmers(EDF)countries.ThefifthsectiondiscussesissuesofthedairysectorintheEUincludingthe‘HealthCheckoftheCAP’,soft-landing’andtheSlovakpositiontotheproposedmeasures.

Keywords:�cattle�breeds,�cattle�sector,�dairy�farmers,�milk�prices,�dairy�products�consumption,�Slovakia

Introduction

TheSlovakcattlesectorhasundergoneimportantdevelopmentsinrecentyears.Thefollowingsectionshighlightthedevelopmentsin(milk)productionandprices,themilkprocessingsector,consumptionandmarketingofdairyproductsandeconomy.

Production and prices

Numbers of cattle and production units

Since1989thecattlepopulationhasdecreasedby65%,fromapproximately1.5millionto0.5million(Figure1).Themainreasonsforthislargedecreaseincattlenumberswerepolitical,economicandsocialchanges.ThetransitionperiodandaccessionofSlovakiatotheEuropeanUnionwerethemostimportantmilestonesinthisdevelopment.Bigchangesoccurredinthecattlesectorintermsofstructure,ownership,producerandcattlenumbers.Improvementsinhousing,feedingandmilkingtechnologies,butalsoingeneticsandnutrition,positivelyinfluencedmilkyields.Ontheotherhand,dairyfarmershadtoinvestheavilytocomplywithstricthygienicandenvironmentalrequirements.Bigchangesoccuredalsointheproductionvolumeandintheoverallrelationshipsamongthoseinvolvedinthedairychain.Negativeimpactsonthecattlesectorstartedwithenormousincreasesofinputpricesatallproductionlevels.Inputpricesledtoinceasesofconsumerprices,whichhadanegativeimpactonconsumptionofmilkanddairyproducts.Atthesametime,especiallyaftertheEUaccession,thevolumeofimporteddairyproductsincreased.Allthesecircumstancesledtoexcessiveover-production,whichhadanegativeimpactonfarm-gateprices.Manydairyfarmers,mainlythosewithlowproductivity,graduallyceasedmilkproduction.


120

AccordingtothefiguresoftheStateBreedingInstitute(Table1),therewere519,584cattleinSlovakiaattheendof2007,managedinapproximately11,500productionunits(includinghouseholdsproducingmilkforownconsumption).Over44%ofallcattleareinherdsof>500head.Theaverageherdsizeis45head/productionunit.Butifherdsizesbelow10areextended,thentheaverageherdsizeis258.

Cattle breeds

Fleckvieh(Simmental)andPinzgauerweretraditionalSlovakbreeds.Nowadaysthesebreedsarecharacteristicof,andmainlyconfinedto,mountainousareas.Fleckviehcattledecreasedby29%andPinzgaucattledecreasedby4%.PrevailingbreedsforintensivemilkproductionunitsinlowlandconditionsareBlackorRedHolsteinwhichcomprise56%ofallcattle.Othermilkingbreedsrepresent<18%.Meatbreedsrepresent8%,and3%ofthecattlehavenobreedclassification(Table2).

1563.1

1396.6

1202.7

993 916.2 928.7892

803.4704.8

680 646.1 644.9 607.8 593.2540.1 527.9 507.8 501.8

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

(in thousand heads)

Year

Figure 1.Cattlenumbers(×1000)in1990-2007(SlovakAssociationofDairyFarmers,2008).

Table 1.Numberofcattleandproductionunitsin2007(dataprovidedbytheStateBreedingInstitute).

Category(herdsize) Cattleproductionunits CattleNumber % Number %

1-10 9,518 82.6 19,474 3.811-20 326 2.8 4,688 0.921-50 248 2.2 8,187 1.651-100 207 1.8 15,640 3.01101-200 327 2.8 48,308 9.3201-500 588 5.1 193,083 37.2over500 313 2.7 230,204 44.3Total 11,527 100.0 519,584 100.0


121

Beef breeds

Therewere39,270beefcattleat theendof2007, representing19beefbreeds.ThemostcommonbreedsareCharolais45%,Limousin34%,Simmental6%,Blonded`Áquitaine3%andPiemontese3%.

Milking cows

Thenumberofmilkingcowsdroppedfrom542,800in1990to180,600in2007,adecreaseof67%in19years(Figure2).Thatdecreaseisstillcontinuingwithadeclineof6%or11,900headin2007.DuetothecurrenteconomicandpoliticalsituationintheEUdairysector,acontinuedreductioninmilkingcowsisexpectedinfuture.Accordingtopresentdevelopmentsitisestimatedthattherewillbefurtherdropofapproximately5%,or9,000milkingcowsin2008.

Average milk yields

Lastyearannualmilkyieldreached5,951kg/cow.Whilethisrepresentsacontinuingincrease,itisneverthelessstillratherlow.In2007,milkyieldincreasedby5%or281kg/cow.Continuousimprovementinmilkyieldisexpectedinfutureduetoimprovementsinhusbandrytechnologies,

Table 2.CattlebreedsinSlovakia(dataprovidedbytheStateBreedingInstitute).

Breeds TotalFleckvieh(Simmental)

Pinzgau BlackandRedHolstein

Othermilkbreeds

Meatbreeds Otherbreeds

Head 151,956 18,326 295,924 3,626 39,270 17,900 527,002% 28.83 3.48 56.16 0.68 7.45 3.4 100

3537

2887 2888 29533175 3292 3316

36033970

42514467

47935045 5179 5235

54425670

5951

542.8528.7

460.8

411.3

363.7 349.8 339.3309.7

287.6 274

243.2 239.5226.1

211.9 199.7 198.5 192.5 180.6

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Milk

(kg

milk

/milk

ing

cow

/yea

r)

0

100

200

300

400

500

600

Milk yield Number of dairy cows

Num

ber o

f dai

ry c

ows

(ths.

head

s)

Year

Figure 2.Numberofmilkcowsandmilkyields(1990-2007)(SlovakAssociationofDairyFarmers,2008)


122

housing,feedingandherdmanagement.Theestimateofthatimprovementisapproximately250kgmilkpercow(+4%p.a.)infutureyears.

Milk yields of cattle breeds

Holsteinisthemostcommondairybreedandhasthehighestmilkyieldreaching7884kgofmilkpercowin2007(Table3).SlovakSimmentalandPinzgauerhaveahigherfatcontentandthereforeareusuallyusedincrossbreedingprogrammes.

Suckler cows

Therewere35,400sucklercowsattheendof2007.Since1997,thenumberhasincreasedalmostfourfoldfrom10,100(Figure3).

Table 3. Milkyieldsofcattlebreeds(DataprovidedbytheStateBreedingInstitute).

Breed Number(head) Milk(kg) Fat(%) Protein(%)Holstein 25,640 7,884 3.9 3.2Holsteinwithcrosses 75,931 7,198 4.0 3.2SlovakSimmental 25,045 5,223 4.1 3.3Pinzgaeru 1,072 4,323 4.0 3.3Pinzgauerwithcrosses 4,553 4,534 4.0 3.3BrownSwiss 147 6,414 4.0 3.3Allbreeds 113,175 6,517 4.0 3.2

10,100

18,600

23,700

28,700 28,10029,500

30,800 30,900 31,00033,600

35,400

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Number

Year

Figure 3.Numberofsucklercows(1997-2007)(SlovakAssociationofDairyFarmers,2008).


123

Milk production

Thelargereductionindairycowshadaprofoundimpactonmilkproduction.Whilein1989morethan2mtofmilkwereproduced,nowadaysitisonlyhalfthat(1,074mtin2007).During2007milkproductiondecreasedby2%(Figure4).

Number of milk producers/dairy farmers

Atpresentthereare680milkproducers/dairyfarmersinSlovakia(Figure5).Duetounfavorableconditionsinthedairysector,mainlyincreasesinofinputprices,stagnationofmilkprices,andabsenceofsupport,146dairyfarmers(18%)stoppedmilkproductionduringthelast4years.Ifthepresenteconomicandpoliticalconditionscontinue,itisexpectedthatthenumberofdairyfarmerswillcontinuetodecrease.

Figure 4.MilkproductioninSlovakia(1989-2007)(SlovakAssociationofDairyFarmers,2008).

Figure 5.Numberofmilkproducers/dairyfarmers(2005-2008)(SlovakAssociationofDairyFarmers,2008).


124

Sale of milk

In2007,Slovakmilkproducers/dairyfarmerssold974millionkgofrawcowsmilk(Figure6).Thisincludesbothdeliverytopurchasersanddirectsales.Therehavebeenonlysmalldifferencesintheamountofsalesinrecentyears.Thedifferencebetweenthelasttwoyearswasonly0.4%(4mkg).Inthelasttwoyears95%ofthemilksoldwasclassifiedasQ–superiorandI.classquality.

Milk sales

Theseasonalandmonthlydistributionofmilksalesfrom2004toJune2008isshowninFigure7.Basedonthisanalysisitisestimatedthatthevolumeofmilksoldthisyearwillbesimilartolastyear.

1035 1008951 975 970 974

300

400

500

600700

800

900

1,0001,100

2002 2003 2004 2005 2006 2007

Figure 6.Salesofmilk(2002-2007)(SlovakAssociationofDairyFarmers,2008).

50

60

70

80

90

100

2004 76.3 72.4 78.7 80.4 86.8 82.3 82.8 81.2 76.5 74.5 68.2 77.1

2005 79.654 73.127 76.051 84.612 91.199 90.578 84.735 81.021 75.741 78,554 74.761 77.963

2006 79.539 73.249 83.084 82.609 88.23 84.918 84.165 82.823 77.286 76,563 72.225 77.008

2007 79.821 73.74 83.632 82.925 86.316 82.472 83.894 82.597 78.555 77,999 73.806 78.432

2008 80.614 77.50 83.691 82.195 84.569 80.674

I. II. III. IV V VI VII VIII IX X XI XII

Figure 7.Deliveredmilk(2004-2008)(SlovakAssociationofDairyFarmers,2008).


125

Milk purchase

Atpresentthereare48dairyprocessingcompaniespurchasingmilkandregisteredbytheAgriculturalPaymentAgency.Ofthese,19areproductionandtradecooperativesand29aredairiesandbusinesscompanies.

National Reference Milk Allocation - milk quota

AsaresultofthenegotiationprocesswiththeEU,theinitialmilkquotawas1,013,316mkgstartingin2003/2004andcontinuinguntil2005/2006.Forthequotayear2007/2008,anadditional27mkgwereallocatedasasocalled‘restructuringreserve’,increasingthenationalmilkquotato1,041,788mkg.AftertheapprovaloftheCouncilRegulationthiswasfurtherincreasedby2%toanationalquotaof1,061,603mkg.TherearenoregionalquotasinSlovakia.Thenationalmilkquotaisdividedintoamilkdeliveryquota(99%)andaquotafordirectsaleofmilk(1%).Thereferencefatcontentis3.71%.

Milk�quota�fulfillment�-�quota�years�2004-2008

Theproportionofthenationalmilkquotafilledinsuccessiveyearswas:95%in2004/5,97%in2005/6,93%in2006/7,and95%in2007/8.Withregardtomilksales,itisestimatedthatthecurrentmilkquotawillbefilledtoapproximately96%inthe2008quotayear.Therefore,SlovakiaisopposedtothecurrentproposaloftheEuropeanCommissiontoissueadditionalmilkquota.

Milk�quota�administration�

Themainstakeholdersinquotaadministrationare:• MinistryofAgricultureSRastheStateAuthority;• AgriculturalPaymentAgencyastheCompetentExecutiveAuthority;• 680milkproducers/dairyfarmers;• 48milkpurchasers.

Main�features�of�milk�quota

• milkquotaisbound/tiedtothecompanyandtocows;• milkquotaisnotsubjecttofreetrade(selling/buying),neitherisitsubjecttorent;• milkquotaisnotincludedintothecompanyestate;• milkquotaisasubjectofallocationfromnationalreserveorquotatransfer.

Main�administration�procedures�of�milk�quota

• newmilkquotaallocation;• additionalmilkquotaallocation;• milkquotatransfer.

New�milk�quota�allocation

• itisallocatedtonewdairyfarmersfromthenationalreservebasedonapplication;• maximumofnewmilkquotais50,000kg/applicant.


126

Additional�milk�quota�allocation

Additionalmilkquotaisallocatedtoexistingdairyfarmersfromthenationalreservebasedonapplication.Eligibleapplicantsaredairyfarmerswhofilledtheirexistingmilkquotatoatleast95%.Applicantscanapplyforadditionalmilkquotatoamaximumof15%basedontheexistingmilkquota.(PaymentAgencyconsiderstheapplicationandallocatestheapplicantsrequestsaccordingtotheavailablemilkquotainnationalreserveequally/accordingly)

Milk�quota�transfer

Transferofmilkquotaispossibleonlythroughpurchaseorrentingofthewholefarmorpurchaseofmilkingcows

Milk prices

Figure8showstheaveragemilkpricefrom2004untilJune2008.CalculatedusingthemonthlyexchangeratebetweentheSlovakcrownandEuro,themilkpricewasapproximately€33.25/100kginJune.FromJanuarytoJunethepricedroppedby15%.SlovakiaisscheduledtojointheEurozoneon1stJanuary,2009.DuetothestrengtheningoftheSlovakcurrency,therehasbeenanunusualdevelopmentinthepricecomparisonanditscalculationinSlovakcrownsandinEuro.WhilethepriceinSlovakcrownsdecreasedinrecentmonthsthepriceinEuroincreased.

Milk price comparison in EU member states

Figure9showstheaveragemilkpricefor2007inthe26individualEUmemberstates.TheaverageSlovakmilkpricewas€28.97/100kg.Itwaslessthanthemilkpricesinsurroundingcountries–especiallyCzechRepublic,Austria,andPoland.

9.00

10.00

11.00

12.00

13.00

2004 9.36 9.38 9.48 9.43 9.23 9.30 9.32 9.34 9.43 9.62 9.73 9.80 9.45

2005 9.97 10.02 9.99 9.80 9.79 9.68 9.55 9.52 9.65 9.64 9.75 9.81 9.76

2006 9.70 9.67 9.74 9.55 9.52 9.51 9.38 9.38 9.56 9.60 9.70 9.74 9.59

2007 9.80 9.76 9.86 9.59 9.58 9.52 9.54 9.62 10.04 10.70 11.20 11.61 10.07

2008 12.15 12.03 11.94 11.30 10.88 10.39

I II III IV V VI VII VIII IX X XI XII pr.

Figure 8.MilkpricesinSlovakia(2004-2008)(SlovakAssociationofDairyFarmers).


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Support of the dairy sector in Slovakia

SubsidiesorothersupportpaymentshavenotbeenprovidedtothecattlesectorinSlovakiasince2004.ItwasoneofmanybaddecisionsofthepreviousgovernmentthatresultedinlossincompetitivenessofSlovakdairyfarmers.Farmcompanies,specialisedindairying,weremostaffected,leadingtoan18%dropofdairyfarmersduringtheperiod.TheSlovakAssociationofDairyFarmersalwaysdefendedtheinterestsofdairyfarmers,butwithoutanysuccesswiththepreviousgovernment.Afterthenewgovernmentwaselected,agriculturewasdefinedasoneofthenationalprioritiesandsupportforanimalproductionwasintroduced.TheMinistryofAgricultureintroducedmeasuresfortherevitalisationofanimalproductionandsubsequentlythe‘GovernmentRegulationonSupportinAgriculture’byCNDPbasedonpaymentsperLivestockUnitswasapproved(Table4).

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

2007 33.72 27.93 31.68 33.46 26.90 38.59 35.20 31.42 34.59 34.30 41.46 26.18 24.04 35.70 28.50 33.64 33.76 29.56 31.33 28.00 28.97 35.09 32.00 30.21 32.30

BG CZ DN GE EE GR ES FR IE IT CY LT LI LU HU NL AT PL PT SL SK FI SE UK EU

Figure 9.MilkpricesinEUstates(2007)(DGAGRI-AnalysisCirca).

Table 4.GovernmentRegulationonSupportinAgriculturebyCNDPbasedonpaymentperLivestockUnit(SlovakAssociationofDairyFarmers).

Category Coefficient1 De-couplingdateCalvesupto6months 0.2 De-coupling31.March2008Cattle6-24months 0.6 De-coupling31.March2007Bulls,oxenandheifersolderthen24months 1.0 De-coupling31.March2007Sucklercowsolderthen24months 1.0 Coupling15.AprilofactualyearSheepandgoatsolderthen12months 0.15 De-coupling31.March2007

Coupling15.AprilofactualyearMilkquota 0.1998 De-coupling31.March20071Coefficientforcalculationofanimalnumbersforlivestockunitnumbers.


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Milk processing sector

Number of processing dairies

Thereare28dairiesprocessingmorethan2mkgmilk,annually.Another31dairiesprocessbetween0.5to2mkg,andfurther61dairiesprocesslessthan0.5mkgmilk,annually.

Production of milk and dairy products

Accordingtothestatisticaldata,dairyprocessingincreasedconsiderablyin2007(Table5).Theindividualproductincreaseswere:skimmedmilkpowder44%,processedcheese18%,butter9%,freshcheese10%,liquidmilk6%,fermentedmilkproducts6%,andwholemilkpowder4%.

Consumption and promotion

Consumption of milk and dairy products in Slovakia

ConsumptionofmilkanddairyproductsinSlovakiahasdecreasedbyalmost100kgpercapitaperyearoverthelast15years,adropof39%(Figure10).WhereastheaverageSlovakpersonconsumed253kgofmilkanddairyproductsin1989,itwasonlyapproximately153kgin2006.Thedecreaseinmilkconsumptionwascausedmainlybythereducedpurchasingpowerofthepopulationandthewiderangeofsoftandenergybeveragesonthemarket.Inaddition,thedairysectorandthepreviousgovernmentsdidnotinvestinadvertisingtoconsumers.Intermsofproductrangeconsumption,therewasadecreaseinliquidmilkandanincreaseincheese(Table6).

Promotion of milk and dairy products

Despitethefactthatmilkproducersandmilkprocessorsfightondifferentsidesofthebattlefield,allfightinthesamewar.Theargumentsoftheprocessorsonhighinvestmentrequirementsandreallystrongpressurefromtheretailchainsthatareforcingdownthemilkpriceareaccepted.ItisalsoacknowledgedthattheappreciationoftheSlovakcurrencyhashadanegativeimpactondairieswithexportactivities.Furthermore,itisacknowledgedthatthefightagainsttheretailchainsislikefightingagainstwind-mills.EffortsareunderwaytoidentifycommonareasofinterestbetweenproducersanddairieswhichmightimprovetheoverallsituationofthedairysectorinSlovakia.Thus,theSlovakAssociationofDairyFarmers–astherepresentativeofmilkproducers/dairyfarmers,andtheSlovakDairyAssociation–astherepresentativeofmilkprocessors,reachedan

Table 5.Productionofmilkanddairyproducts(t)(ResearchInstituteofAgriculturalandFoodEconomy,2008).

Year Liquidmilk

Naturalcheese

Processedcheese

Cream Fermentedproducts

Butterandmilkfatproducts

Totalmilkpowder

Skimmedmilkpowder

Wholemilkpowder

2004 292,712 37,105 11,747 31,190 50,279 13,131 11,550 6,772 4,7192005 246,873 43,447 10,630 34,535 52,263 10,034 12,856 5,801 6,6342006 238,331 47,879 11,595 33,670 51,305 10,689 11,954 5,705 5,5712007 252,279 44,669 13,641 34,619 54,180 11,690 14,285 8,207 5,808


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agreementtwoyearsago.Therearedifferentactivities,butthemostimportantonesarethoseaimedatincreasingmilkconsumption.Duringthelast3yearsseveralsmall-scale,butsuccessfulactivitiespromotingmilkanddairyproductsweredevelopedandimplemented.Theseeventswerelow-costandwerefinancedfromthebudgetsofbothassociationswiththeactivehelpofdairiessupportingtheseeventsthroughtheirproducts.Aftermutualagreement,theassociationsdecidedtoprepareasystemprojectcalled‘PromotionandInformationProgrammeonMilkandDairyProductsConsumptioninSlovakia’.ThisprojectproposalwasapprovedwithintheCouncilRegulation(EC)Nr.2826/2000onInformationandPromotionActionsforAgriculturalProductsontheInternalMarket(EC,2000).ItwillbethefirstprojectimplementedwithinthisEUprogrammeinSlovakia.Thedurationoftheprojectwillbe3yearsandthebudgetwillbeapproximately4millionEuros.TheprojectwillbeimplementedbycommonfundsoftheEU,nationalsourcesandtherestwillbefinancedbySlovakAssociationofDairyFarmers(SZPM)andSlovakDairyAssociation(SMZ)thougha‘Milkfund’.Theobjectiveofthe‘Milkfund’istocollectfinancialcontributionsfromthedairyfarmersandmilkprocessors.Basically,eachdairyfarmerandeachprocessorissupposedtocontributeoneheller(penny)perkgmilktothe‘Milkfund’.

253.2

226.3

211.8

193.8

170.6

165.7

162.4

162.1

161.8

162.5

161.4

160.2

161.8

166.2

158.3

153.3

154.6

152.4

153.3

100

125

150

175

200

225

250

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007*

Figure 10.ConsumptionofmilkanddairyproductsinSlovakia(1989-2007)(SlovakAssociationofDairyFarmers).

Table 6.ConsumptionofmilkanddairyproductsinSlovakia(kg)(ResearchInstituteofAgriculturalandFoodEconomy,2008).

Category 2002 2003 2004 2005 2006 Estimate2007Liquidmilk 67.1 63.9 59.1 55.7 55.9 54.5Cheeseandcottagecheese 9.0 9.3 8.2 9.1 9.5 9.6Milkpowder 1.6 1.4 1.4 1.7 1.1 1.5Butter 3.0 2.8 2.2 2.0 2.0 2.0Cream 2.2 2.4 2.2 2.8 3.0 2.7Yogurt 13.1 12.4 12.6 13.1 12.3 12.6Otherdairyproducts 0.4 0.4 0.3 0.6 1.2 1.7Total 166.2 158.3 153.3 154.6 152.4 153.3


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Milk balance

In2007,thetotalmilkbalanceamountedto1,413,964.7t.Thiswascomprisedof973,529tofrawcowsmilkpurchasedfromdairyfarmers,412,757.3tofimportedmilk,andanadditional27,678.4tofthestocks(Table7).Ofthistotal,831,046.2t(ca59%)wereconsumed,550,205t(ca39%)wereexportedand32,713.5tremainedinstock.Thereisapositivetradebalanceofmilkanddairyproductsamountingto2,260mSKK.Accordingtothestatistics,theimport/consumptionratioisjustlessthanhalf(49.7%)whiletheexport/saleratiois57%.

Economic efficiency

Economic efficiency of milk production

TheeconomicefficiencyofmilkproductioninSlovakiaandEuropeanDairyfarmers(EDF)countriesin2007wereanalysed:• EconomicefficiencyofmilkproductioninSlovakia• Averagecostsformilkproduction: 11.02SKK/l• Averagemilkprice: 10.07SKK/l• Economicresult: loss-0.95SKK/lEconomicefficiencyofmilkproductioninEDFcountries• Numberofcompaniesanalysed: 270(from17countries)• Averageentrepreneursresult: loss€2/100kg

Table 7.BalanceoftradedcowmilkinSlovakia(ResearchInstituteofAgriculturalandFoodEconomy,2008).

Indicator Unit 2004 2005 2006 2007Averagenumberofmilkingcows

×1000 206.0 198.5 192.5 180.6

Averagemilkyield kgpermilkingcowperyear

5,235.7 5,541.8 5,670.1 5,951.4

Production t 1,078,625.3 1,099,827.0 1,091,737.2 1,074,655.3Stocksatthebeginningofyear

t 20,000.0 18,880.2 17,596.4 27,678.4

Milkpurchasefromdairyfarmers

t 950,548.0 974,493.0 970,115.0 973,529.0

Import t 140,166.0 301,282.0 351,188.0 412,757.3Totalsources t 1,110,714.0 1,294,655.2 1,338,899.4 1,413,964.7Export t 340,334.0 482,192.0 515,042.0 550,205.0Domesticconsumptionwithoutnaturalconsumption

t 751,499.8 794,866.8 796,179.0 831,046.2

Stocksattheendofyear t 18,880.2 17,596.4 27,678.4 32,713.5Import/consumptionratio % 18.7 37.9 44.1 49.7Import/saleratio % 14.7 30.9 36.2 42.4Export/saleratio % 35.8 49.5 53.1 56.5


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Relationships among milk producers dairies and retailers

TheSlovakAssociationofDairyFarmerskeepscontactwiththedairiesandnegotiateonthemarketsituation.ThecommonplatformisthenegotiationbetweenSZPMrepresentingdairyfarmersandSMZrepresentingdairies.Differentanalysesareconductedtocomparepricesforproducers,processorsandretailersandtherespectivemargins.Forexample,Figure11showsthedevelopmentofproducerpricesper1kgofrawcowmilkincomparisonwiththepricesofprocessorandretailersandtheirmarginfor1kgof1.5%skimmedUHTmilk.Thevolatilepattern,especiallyinthefirsthalfof2008isclearlydepicted.Attheendof2007,theretailchainsimplementedalargepriceincreasefordairyproducts.Thiscausedadropof18%inconsumptionuntiltheendofMarch.Stocksofmilkanddairyproductsincreasedbothatthelevelofprocessorsandretailers.Retailerspusheddowntheprocessorspricesandtheprocessorspusheddowntheproducerprices,butintheend,theconsumerspricesontheshopshelvesremainedmoreorlessthesame.Thegeneralfeatureofrelationswithinthedairychainistheunequalpositionofthedifferentstakeholders.Retailersabusetheirdominantpositionbypushingdownprocessorprices.Additionallytheyforcetheprocessorstopaylistingfees,promotionfeesandotherhiddenpaymentswhicharenotdirectlyincludedintotheproductprice.Alawonequalconditionsonthemarketisbeingframed.ThisEthicCodexisunderthelegislativeprocedureandshouldbeadoptedatthebeginningof2009,butitisunlikelytosolvethepresentsituation.ItislikelythatitwillbenecessarytoadoptacommonEuropeanlawdefiningtherulesforequalpositioninthemarketchainincludingsomespecialrulesforbiddingmarketdistortingpracticesbyretailers.

Farm-gate price Processors margin Retailers margin

Figure 11.Producerpriceof1kgofrawcowmilkandprocessorandretailmarginof1kgof1.5%skimmedUHTmilk(2004-2008)(SlovakAssociationofDairyFarmers).


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CAP ‘health check’

Slovak dairy sector as a part of the common European dairy sector

SlovakiaisapartoftheEuropeanandworldmilkmarketandthereforemustanalysethesituationobjectively.Mostofthecurrentproblemsinthedairysectorarecommontoallmemberstates.Oneofthemostrecentissuesofconcernisthe‘healthcheckofCAP’.Themilkquotasystemwasintroduced24yearsago,withinacompletelydifferentsocial,economicandpoliticalenvironment.Milkquotas,ononehandensuredthestabilityofEuropeanmilkproducersincomes,butontheotherhanddestroyedthe‘natural’operationofthemilkmarket.Itisacknowledgedthatitwillbedifficulttoreturnthe‘artificialmilkmarketsystem’backtoa‘naturalmilkmarketsystem’.ItwillalsobedifficulttotaketheappropriateandsensitivemeasureswhichwouldleadtopreservationofasustainableandcompetitivedairysectorintheEUasawholeandintheindividualEUmemberstates.Itisunlikelythatinthecurrentsituation,characterisedbyvolatilemilkprices,anincreaseinmilkquotaistheonlypossiblesolutiononhowtoreacha‘softlanding’onmilkquotas.Itisobvious,thatanincreaseinquotawillbringadvantagesforthe‘bigmilkplayers’thathavethecapacityforexpansion,buttheadoptionofthismeasuremayendanger‘smallmilkcountries’,suchasSlovakia.TheSlovakAssociationofDairyFarmerswillsupportmeasures,whichwillbebasedonthesamebusinessconditionsandwhichwillnotgivepreferencetoeitherindividualproductionsystemsorindividualmemberstates.Milkproducersinthemountainousregionsanddisadvantagedareasshouldbegivenseparatesensitivemeasures.Withregardtothemarketsupportmeasures,theEuropeanCommission,ontheonehand,presentsthegrowingdemandformilkanddairyproductsontheworldmarketasabigchallengefortheEuropeandairysector,butandontheotherhand,itcancelledtheexportsubsidies.Returningtothesituationoflastyear,theincreaseinpricesatalllevelsofthedairychaincausedthebigdropofconsumption.Atthesametime,farmgatepricesincreased.Suddenlytherewasoverproductionwhichaffectedtheinternalmarketandconstantlyincreasedthepressureonthewholedairysector.Finally,thereisaquestion:‘Whowillsupplytheincreasingworldmarketdemand?’TheUSFarmBill,withpaymentsformorecowsanda‘feedcostadjuster’partlysuppliestheanswer.WorldTradeOrganisation(WTO)dealsdefinitelyendangeragriculturegenerallyandparticularlythedairysector.Itisdifficulttoforecastmilkpricedevelopments.Constantlyincreasingcosts(feedstuffs,energy,fertilisers,etc.)makethemilkmarketmorevolatile,whilecrosscomplianceandthebioenergyboomdonotimprovethesituationeither.Thepertinentquestionis‘Candairyfarmerswithstandtheevolvingconditionsandsurvive?’

References

EuropeanCommission(EC),2000.CouncilRegulation(EC)No2826/2000of19December2000oninformationandpromotionactionsforagriculturalproductsontheinternalmarket.OfficialJournaloftheEuropeanUnionL328:2-6.

ResearchInstituteofAgriculturalandFoodEconomy,2008.Websiteavailableat:http://www.vuepp.sk/SlovakAssociationofDairyFarmers,2008.Websiteavailableat:www.szpm.sk


133

Cattle sector and dairy chain developments in Georgia, Azerbaijan and Armenia

T.�Kartvelishvili

Georgian�National�Association�for�Animal�Production,�0172�Tbilisi,�Georgia;��[email protected]

Abstract

ThisstudydescribesthepresentsituationintheGeorgiandairysectorandidentifiestheproblemsintermsoflivestockbreedingandforagesupply,milkproduction,itsprimaryhandlingandsubsequentprocessing.BasedoninformationprovidedbytheMinistryofAgriculture,DepartmentofStatisticsandotherorganisations,relevantdataisgiven,including:numberoflivestock(milkingcows),milkproduction(industryandhouseholds),dairyprocessingvolumes(industryandhouseholds),dairyproductconsumption(onanationwidescaleandannually,percapita),export-importindicatorsanddataonongoingandcompletedinternationalprojectsinthedairysector.Thoughitshouldbementionedthatfigurespublishedbystateorganisationsdonotadequatelyshowtheexistingsituationofthesectors,consequentlymakingithardtomakesufficientconclusionsoutofsuchinformation.CurrentmilkanddairyproductionandconsumptionlevelsinGeorgia,aswellasthedomesticself-sufficiencyratioarealsoanalysed.Forexample,therecommendednormforannualconsumptionis330kgofmilkpercapita,whiletheaverageconsumptioninGeorgiawasestimatedin2005at238kgandtheamountproducedbytheGeorgiandairyindustrywasjust184kg.Thedeficitbetweenconsumptionanddomesticproductionispresentlybeingfilledbyimporteddairyproducts.Together,thisdataillustratesboththecurrentunderdevelopmentofthedairyindustryinGeorgiaaswellasthepotentialforstrengtheningandexpansion.Inanalysingtheinformationcontainedinthisdocument,itbecomesclearthatthedairysectorrepresentsacriticalvalue-chaininGeorgianagricultureand,giventhatvirtually100%ofallmilkinthecountryisproducedbyfarmfamilies,onethatisparticularlyimportantforruralfamilyincomesaswellasforruraldevelopment.ThisarticlealsoincludessomeinformationaboutlivestockdevelopmentsinArmeniaandAzerbaijan.Azerbaijanisanancientlivestockcountry.ThoroughchangeshaveoccurredinthelivestockofAzerbaijanduringlast12years.Forthepurposeofcattlebreeds’development,thedistrictsinAzerbaijanaredividedinto3zones:adairy-productionzone,adairyandmeat-productionzoneandameat-productionzone.TheArmenianAgricultureconsistsoftwomainsub-branches:agriculture(plantgrowing)andlivestockbreeding,whichintheirturnaredividedintovarioussmallersub-groups.MostagriculturalproductioninArmeniaisdirectedtowardscrops,whichin2007accountedfor64%ofgrossagriculturaloutput.Themajorityofcattlebreedingintherepubliciscarriedoutbyandbasedonextensivemethods.

Keywords:�cattle�sector,�dairy�production,�dairy�processing

Developments in Georgia

Introduction

Georgiahasavastuntappedagriculturalpotential,infact,somuchthatitcouldincreasefivefolditsvalueofcropproduction.Yet,inordertorealisethispotential,thenationalsofacesvastchallengesthatcanslowifnotactuallypreventtheattainmentofanygoalssetforthesector.


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GovernmentofGeorgiahasthreebroadgoalsforthenation–economicgrowth,civilorderandpovertyalleviation.NowourvisionistobecomeanationwhereallGeorgianshaveaccesstoasafe,affordable,nutritiousfoodsupplywherethosewhoprovidefoodandotheragriculturalproductscandosoprofitably,safelyandwithdignityandrespect,wherethebeautyandfunctionofthenaturalenvironmentismaintainedandenhancedandwherenationalsecurity,employment,socialandobjectivesforfoodandagriculturearemet(TheGeorgianNationalFoodandAgricultureStrategy,2006).TheabilitytodevelopGeorgia’sagriculturesuccessfullywillbehighlydependentonthesector’sexternalfactors.Themoreimportantoftheseincludeeconomicanddemographicconsiderations,social-politicalandinternationalfactors,andconsumerandretailtrends.

Economic considerations

EconomicallyGeorgiahasmadeconsiderableprogressoverthepastdecade.Oneofthemostsignificantaccomplishmentsisthat:• realGDPhasnearlydoubled;• therealvalueofexportsisupapproximately150%;• thegovernmentexpendituresincreasednearlyfivefoldinonlytenyears;• inflationisnowundercontrol;• realaveragemonthlysalarieshaveincreased;• allsectorsoftheeconomyseemtobegrowingorhaveatleaststoppedanyfurtherdeclinesfrom

Sovieteralevels(exceptmining);• expendituresoneducation,healthcareandinfrastructurehaveincreasedexponentially.Thereisareasonableoptimismwithingovernmentthattheeconomicprogressoftherecentpastwillcontinueintothefuture.Infact,thegovernmentfeelsthatrealeconomicgrowthinthe5.0-7.5%rangeannuallyisarealisticexpectationforthecomingyears.Nevertheless,governmentforecastsontheeconomicgrowth,budgetaryapproachesandcurrentstructureofeconomyhasproblemfactors.IfthesefactorswillinfluenceefficiencyoftheGeorgianeconomyandthegovernmentpolicythatcurrentoptimisticeconomicprospectitwillnotbeprobabletobecarriedout.TheRussianembargosince2005onfoodandagriculturalproductsfromGeorgiahassignificantnegativeimplicationsforthecountry.UnfortunatelyforGeorgia,becauseoftherelativesizesofthetwoeconomiesandgiventheglobalisationoftheworldeconomy,RussiacantakepoliticalactionswhichaffectthefoodandagriculturesectorofGeorgiasignificantly,butdohaveaminimalornoaffectoneitherthelargercountry’seconomyoronitsconsumers.

Demographic considerations

DemographicallythreefactorsstandoutinGeorgia:• thenationalpopulationhascontinuedtodeclinethrough2005;• thepopulationonaveragehascontinuedtoage;• naturalpopulationincreaseisapproachingzero.Thereisaveryinterestingdemographic-economicphenomenoninGeorgiathatisfairlytypicalofcountrieswithstrongfamilyties,underhighunemploymentandnosocialwelfaresafetynet.Inmanyrespects,thisinterdependencyispositivesinceithelpsprovideasocialwelfaresafetynetaswellasprovidingatleastlimitedcapitaltotheunderfinancedfarmsector.


135

Social-political factors

Thegovernmentissupportingruralandremoteareadevelopmentinitspublicpronouncementsanddiscussionswithdonors.However,theseprioritiesdonotseemtobewidelyheldoractivelypursued.Somegovernmentallimitedreactioninareaswhereunemploymentandhighpovertyexiststakesplace,whenanaturaldisasteroccurs.Thesesituationscannottotallybeignored.However,innoneofthesesituationshasacoherentlongertermstrategybeenbuildupforidentifyingandassistingareaswithchronic(butnotcrisislevel)povertyormalnutrition.Todate,theprimaryapproachofthegovernmenttoaddressexistingorpotentialsocialorpoliticalproblemshasbeentofocusontheprivatisationofpublicassets,thedevelopmentoftheenergyandroadssectors,theeliminationofonerouslawsandregulationsandtheincreasedfundingofeducation.Theapparenthopeisthatthispolicywillbesufficientlystimulativesuchthattheeconomicgrowthtargetwillbemet.Thisgrowthinturnwouldhopefullygenerateincreasedemploymentandimprovedincomessufficientlytodampenoreliminateanypotentialsocialorpoliticalunrest.IngeneralthisapproachofGeorgiangovernmentisnotanunreasonableone.Thenationhaslimitedresourcesandvirtuallyunlimitedproblemsorneeds,problemsandneedswhichcannotallbeaddressedequallyandsimultaneously.Withrespecttoagriculturespecificallyandruraldevelopmentingeneral,thegovernmenthasbeentakingarisk.Atthistime,agriculturalonlyreceivesabout1.5%ofstatebudget.Ofthis,roughlyhalfwasprovidedindirectlybytheEUFoodSecurityProgram(FSP)budgetarysupport.Thus,lessthanhalfof1%ofthestatebudget,providedfromGeorgianrevenues,goestoagriculture.Thisimpliesasectorthatcomprises16-20%ofGDPandprovidesover50%ofemploymentdirectly.Whenproductioninputs,processing,wholesaling,transportation,governmentservicesandotherdependentorpartiallydependenteconomicactivitiesarealsotakenintoaccount,pluswhenotherappropriateeconomicmultipliersareapplied,itisnotunlikelythatatleastone-thirdofthetotaleconomyandover55.3%ofnationalemploymentisdependentonagriculture.Whentheeconomycollapsedafterindependence,thelandwasdistributedandleasedingenerallysufficientquantitiestoenoughpeopletoinsurethattherewasnotalargeportionofthepopulationwithanymeansofsupport.Thestructureofagriculturallandownershipunderwentasignificanttransformationinthefirststageoftheagrarianreforms.Afterthelandreforms,aboutonemillionhouseholdsbecametheownersofnearly30%oftotalagriculturalland.Asaresult,overhalftheworkingpopulationcouldsupportitselfatsubsistencelevelthroughfarming.Withoutthispolicy,therewouldlikelyhavebeenamuchlargerunemployedurbanworkforcewithsignificantpotentialforsocialandpoliticalunrestandevenviolence.Itisunclearwhetherthecontinuationofgovernment’sapproachtotheagriculturalsectorwillremainsociallyandpoliticallyviable.

International factors

GeorgiaispresentlypartoftheWTO.Theserelationshipsimposevariousrestrictionsthatmaylockthecountryintounfairagriculturalcompetitionwithexistingmembernations,especiallythosemoredevelopedmemberswithhighlysubsidisedfarmsectors.Georgiadoesnothavetheresourcestoprovidesimilarsubsidies,butitwillnotbepermittedtolevytariffstomitigateagainstsuchsubsidies.Ontheotherhad,membershipinsuchorganisationsdoesprovedcertainprotectionsforGeorgiawhenitistryingtocontrolitsbordersfromdumpingofsubstandardorunfairlypricedproducts.Italsoprovidesameansbywhichitsexportedproductscanmorefairlycompeteandprotectedfrominfringementsabroad.


136

Yet,regardlessofwhetherGeorgiaisamemberofWTO,theEUoranyothersimilartreatyorinternationalaffiliations,ifithopestocapitaliseonexportmarkets,itsagriculturalsectormustincreasinglybeabletomeetinternationalstandards.LogicallyGeorgiamustrecogniseanddefendsuchlawsandstandardsonproducts,whichitexports.Realistically,thismaynotbesufficient.CertainsegmentsofGeorgia’sagriculturearealreadyhighlydependentonexportmarkets,likemandarins,apples,greens,nuts,wineandmineralwater.Infuture,itisexpectedthatthiswillbecomeincreasinglysoforotherproductsaswell.Withexports,onefacesnotjustmarketuncertainties-butpoliticaluncertaintiesaswell.(e.g.Russia)

Key factors of Georgian agriculture

KeyfactorsforGeorgianagricultureareproduction,nutritionandconsumption,capital,trade,farms,employment,income,agricultureandmarketknowledge.

Production

• Nearly17%ofnationaleconomyisdirectlydependentontheagriculturalsectorandindustry.Duetothemultipliereffect,possiblymorethan30%.

• Afterdecliningsignificantlyfornearlyadecade,therealvalueofthefoodandagriculturalsectorhasbeguntoincreaseslightlyoverthepastsevenyears.

• Livestockproductionhasbeenslowlybutsteadilyincreasingformostcategories.• Cropyieldontheaverageareonly1/3oftheirpotential.• Approximately1/3ofarablelandisnotinproduction.

Nutrition�and�consumption

• Over60%ofconsumerincomeisspentonfood(vs.15-20%intheWest).• Nearly50%ofpopulationconsumeslessthantheFAOminimumrecommendedlevelof2,100

caloriesperday.• Over25%ofpopulationconsumeslessthan1,600caloriesperday,whichisconsiderablybelow

FAO’sabsoluteminimumof1,800calories.

Capital�

• Currentcapitalutilisationinthefoodandagriculturalsectorisestimatedtoexceed600millionGEL(1GEL=0.53EURO).

• Eventualcapitalrequirementsforthissectortoreachitsfullpotentialareexpectedtoexceed2billionGEL,itmeansthatshortfallofnearly1.5billionGEL.

• Duringthenexttenyear,approximately900millionGELwillberequiredforthenationtoattainitsgoalforthefoodandagriculturesector.

Trade

• Thereportedrealvalueofagriculturalexportshasbeenincreasinglyofimportancetothecountry.• Foodandagriculturalimportsare50%greaterthanexports.• ThecountryisoverlydependentonexportstoRussiaforvirtuallyallfoodandagriculture

products.


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Farms,�employment�and�income

• Georgiahas657,542farmswithanaveragesizeof1.48hapriortothenextphaseofprivatisation,afterwhichtheaveragefarmsizewillbe1.70ha;

• Presentlythereare16,000farmsof4haorgreater,buttheserepresent40%ofallcroplandinprivatehands(ownedorleased).

• About55%ofthenationallaborforceispresentlyemployedinagriculturevs.only25%in1990;NowadaysinGeorgiathemostagriculturalproductionisproducedbyhouseholdfarming,whichisorientedonself-provisionandischaracterisedbythelowlevelofproduction(Table1).Householdersaresmallandmediumoutputscaleandfragmentary.Smallhouseholdfarmspredominatethroughoutthelivestocksphere(Table2).Onaverage,farmershave1-9cows,aswellaspigsandpoultry.Todayfarmerspossess1.48hectares,wheretheyproducevegetables,fruitandgrains(maize,sunflower,barleyingeneral)bothfortheirownconsumptionandforsale.Theselandsareprivatisedandareonlyarable.Inthisregardtheuseofsuchlandforpastureisn’tappropriateandproductionofforagegrainsissmall.Livestocktendstograzeonpastureswhicharecommunitypropertyofthewholevillage.Intheevening,theanimalsgobackhomeandthefarmerhastoprovideadditionalfeedbyfromstoredgrain.Veryfewfarmersareabletofeedlactatinganimalsproperly.Duringwinter,especiallyintimesofsnow,animalsarehousedinspecialbarns(usuallyforbetween1-3monthseachyear).Duringthisperiodtheanimalsarefedbyhayandsometimesthedietisenrichedwithwheatbran,sunflower(inKakhetiRegion)orsoy-bean(inSamegreloRegion).Generalanimalhealthsuffersgreatlyduetopoordietduringthewinter.Advanceddairyfarmerspossessmoreanimals.Theseadvancedfarmersdorealisethenecessityofimprovedfeeding,richforageandconcentratesfortheanimalsduringthewinter.Regardlesstheabandonedpasturesandtheshortageofthefoodstocks,developmentandcultivationofthenaturalpasturesarenotyetpracticed.70.7%ofthevalleysand95.3%ofthepasturesarenotprivatisedandareyetunderstateproperty-therefore,theyarenotproperlycaredforanddeveloped.Productionofforageandsilageforwinterisaswelllimitedduetothelackofappropriateinputs.

Table 1.TotalnumberofholdingsanditsstructurebyholdingtypeinGeorgiain2007(StateDepartmentofStatistics,2007b).

Allholdings Familyholdings Agriculturalenterprises OthertypeholdingNumberofholding 657,542 656,247 720 375Structure% 100 99.8 0.1 0.1

Table 2. Numberofholdingsbysizeoffarmexpressedinnumberofcattle(w/obuffalo)inGeorgiain2007(StateDepartmentofStatistics,2007b).

1 2 3-4 5-6 7-9 10-14 15-19 20-29109,513 129,826 106,145 31,938 12,814 6,590 1,399 87030-49 50-69 70-99 100-199 200-299 300-499 500-999 >1000519 191 91 38 7 1 1 -


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Agriculture and market knowledge

Historically,Georgiaislocatedinaregionintheworld,wherethemostagriculturallyprogressivecountrieswereseveralgenerationsago.InpresenttimeGeorgiadoesnothaveeffectivenationalresearch,education,extensionormarketinformationsystems.AgriculturalResearch,EducationandExtension(AgREE)systemsarepracticallydisorganisedandtheirexistenceisnotmeaningful.Unfortunately,Georgian’sAgREEsystemhasprogressedonlyminimallytowardsmeetingtheneedsofthenewfarmingsector.Thus,itmustbeexpectedthattremendouschallengeswillbefacedingettingAgREEinstitutionaldevelopmentstartedontherightcourseandoncestarted,inkeepingitontrack.

The cattle sector

Cattlebreedingistheancientandtraditionalfieldofagriculture.InGeorgiatheindicatorsofaverageproductivityofcattlewerelowevenduringthepreviousperiodofcrisisin1989.Theaveragemilkyieldofcowsinallcategoryfarmsofthecountrywas1,275kg,thepopulationofcowswas588,000andatotalof714,000tonsofmilkwasproduced.DuringtheSovietperiodcattle-breedinggavetherepublicmorethanhalfoftotallivestockproduction(incurrency).From1990on,thetransitionfromthecentrallyplannedeconomytothemarketeconomycausedcrisisthat,onitspart,resultedinreductionofthenumberoffarmanimals,lossoftheirproductivityandlossoftheanimalproductionindustry(Table3).Afterthevividdecreaseinnumberofanimalssince1991,therehasbeenalittle,butstableincreaseprocess,whichhasmainlyincreasednumberofcows.InGeorgiathisisconditionedbyarelativedevelopmentofthedairysector,whichisstimulatedbygovernmentsupporttofarmersforimportedcowsfromEUin2007.

Most�important�animal�products

Thefollowingspeciesareutilisedinprimarylivestockproduction:cattle,pigs,sheep,goats,poultry,fishandbees.Cowmilkispredominantinmilkproduction,whileporkandpoultryareequallyrepresentedinmeatproduction.Locallyadaptedbreedsfulfillamuchlargerroleinalllivestocksectorsthanmodernimportedbreeds.Thereasonisthathighproductionbreedsaresimplynotimported.Nevertheless,theproductivityofthelocalbreedsislow,becausethebreedsaredegenerated.Themostimportantprimarylivestockproductsaremeat,milk(Table4),eggs,fishandpoultry.Georgianregionsdifferinrespectofsignificanceoftheseproducts.Theimportanceoftheseproductsrelatestoparticularregions,dependingongeographic,socialandeconomicstatusandmanagementofnaturalresources.Inlastyearstherehasbeenasignificantreductioninlivestockproductsexport,sincewearenotself-sufficientinlivestockproduction(Table5).Socialdifficultiesandprivatisationprocesseshavesubstantiallycontributedtothedeclineinlivestockproduction.

Table 3.ChangesinofcattlepopulationinGeorgiaintheperiod1996till2007(×1000)(StateDepartmentofStatistics,2007a).

Cattle Ofwhichcows1996 2004 2007 1996 2004 2007973.6 1,242.5 1,128.9 551.7 728.0a 571.4aThenumberofcowshassharplyfallenin2005-2006andthenincreasedagain.


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Animal�health

Generallyhumanhealthisdirectlyaffectedbywhatthenationdoesordoesnotdowithrespecttolivestockdiseases.Someofthesecanbespreadwithseverehealtheffectsforhumans,e.g.anthrax,tuberculosis.Mostrecently,anewproblemhassurfacedthatofavianinfluenzaandswineplague.Becauseofthepotentialproblemsforhumanfromtheselivestockdiseases,governmentcannotsimplytakeapassiverole-cannotrelysolelyonindividualfarmerstotaketheproperstepstomonitor,treatfororeradicatesuchproblems,farmerswhogenerallyhavelittlemoneyformedicinesorvaccinesoreasyaccesstothem.Inaddition,evenwhenproducers,suchascommercialpoultryfarmerscanactuallytreatcertainlivestockhealthproblems,anotherhumanhealthproblemcanarise.Thisareacannotbelefttotheprivatesectortodoallthatisnecessarytoinsuresuchproblemsdonotsurface.Presentlygovernmenthasasysteminplaceforvaccinationsonlyincattle,butthereisnotrackingandrecordingsystemwherebyitcanbedeterminedwhenthelastvaccinationwasmade.(UnfortunatelytheGovernmentofGeorgiacancelledallstateprogramsrelatedtoepizooticdiseaseslikeFMD,anthrax,rabies,tuberculosis,brucellosis,etc.).Fortunately,whilethereareshortcomingsinthecurrentsystemforcontrollinglivestockdiseasesthatmightaffecthumanhealth,therehavebeennotproblemsofsignificancetodate.Thiscannotbereliedontocontinueindefinitely(avianinfluenzaandswineplagueisaperfectexample).Mostproblemscanbeaddressedbytheaffectedfarmertakingappropriatecontrolmeasures.However,therecanbeproblemsinlivestockwhereon-farmcontrolisnotadequateevenwithpreventivemeasuresbeingtaken.

Food�safety�

In2005GeorgiastillhadaSovietstylefoodcontrolsystemwhichdidnotworktoprotectconsumersorindustry.Ratheritwasappliedmainlyasameanofsupportingalargenetworkofinefficientandineffectiveinspectorsandlaboratories.Thefoodsafetysystemfocusedonendproductcertificationandcontrol.Withinthesystematthattime,inspectors’technicalknowledgeandskillswereoutdated(samesituationtilltoday).

Table 4.LivestockproductioninGeorgiain1996till2007(×1000tons)(StateDepartmentofStatistics,2007a).

1996 2000 2004 2007Meat 117.8 107.9 109.2 111.2Milk 530.3 618.9 780.4 857.6Eggs1 350.2 361.4 496.6 383.2Wool 3.0 1.9 2.2 2.21Numberofeggs×1,000,000.

Table 5.ShareoflivestockinagriculturaloutputinGeorgiain1996till2007)(StateDepartmentofStatistics,2007a).

1996 2000 2004 2007Livestockin%oftotalagriculturaloutput 0.45 0.52 0.50 0.52


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ThelawonFoodSafetyandQualitywasadoptedinDecember2005byParliamentofGeorgia(MinistryofAgriculture,2005).ThenewlawestablishesalegalframeworkconsistentwithWTOrequirementsandtheEUacquis�communautaire.Thelaunchofthereforminthefoodsafetysystemcoincidedwithamajordrivebythenewgovernmenttoderegulatetheeconomy,whichheavilyinfluencedtheprocessastowhatwasperceivedastheappropriateextentandnatureofofficialcontrolandregulation.ComponentsintheFoodlawdraftrelatingtolicensingoffoodestablishmentsregardinginternalsafetycontrolsystemsandtraceabilitywereconsideredtoprovideopportunitiesforcontinuedlawfulextortionof‘fines’fromfoodbusinesses.ApprovalofthelawonFoodandQualityisjustthefirststepinthereformprocess.Thereisnovaluetothelaw,nomatterhowgood,unlessitisproperlyimplementedandenforced.AccordingtodecisionoftheParliamentofGeorgiathelawissuspendedtill1January2010.Thus,thereisstillaconsiderabledistancetogobeforeGeorgiawillhaveanacceptableleveloffoodsafety.

Farm animal genetic resources

NowadaysthegeneticresourcesoflocalcattleinGeorgiaarerepresentedbythreebreeds:GeorgianMountainCattle,MegruliRedandCaucasianNutBrown,andalsoGeorgianbuffalo(SaghirashviliandKarttvelishvili,2006;Saghirashviliet�al.,2006)

Georgian�Mountain�Cattle

Thisbreedisoneoftheoldestbreeds,firstofallfortheproductionofmilk.Itisalsousedasbeefcattleanddraughtforce.DuringSovietperiodthenumberofGeorgianMountainCattleinthesocialsectorcomposed16.2%ofthecattletotalpopulation.PresentlyitispreservedontheSouthernslopesofCaucasusmountainrange.Theextensionzonesofthisbreedarerichofriversandbrooksheads,werarelymeetplains.Inthemostzonesofextensionthebentofpasturesreaches30-35°andothercattlecouldnotuseit,exceptGeorgianMountainCattle.GeorgianMountainCattleisverysmall,theheightinwitherofthecowisonaverage98-100cm.Itischaracterisedbylowmilkyieldintheconditionsofprimitivefeeding,butinthecaseofimprovedfeedingandcare-keepingthemilkyieldincreasesonaverageto2,000kgwith4.2%butterfat(fatness).Duringtheincreaseofmilkyield,GeorgianMountainCattlemaintainsfatpercentagecompositioninmilk.Ithasahardconstitution,endurance,milkbutter-fatandhighculinarypeculiaritiesofmeat.Themostpartofmilkproductionisrealisedduringthepasturageperiod,butaftertakingthecowonstationaryfeeding,milkyieldreducesquicklyandstops.

Megruli�Red�Cattle�

MegruliRedCattlerepresentsthebreedofuniversalusage.Itisraisedwiththecompletionoflocalsmall-bodycattlebyfarmersin60sof19thcentury.MegruliRedcattlespentsummerinalpinezonesofmountains,butinwinteritispasturedinKolkhetibogswithoutstationaryandsupplementaryfood.Innomadicconditionsthemilkyieldofthesecowswasincreasingfrom2-3to7-10liter.Thisbreedispermanentlyintheopenair,sothisfactorconditioneditsadaptabilitytowardslocalconditions,healthendurance,hardconstitutionandgoodworkingpeculiarities.Theconstitutionofthisbreedismostlytowardsthemilkproductionherd.


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Caucasian�Nut�brown�(grey)�breed�

Thisbreedisoneofthemostsignificantachievementsofthezoo-technicalscienceinthe20thcentury:itmeanttheestablishmentoftheCaucasianNutBrownbreedonthebasisofjointworkoftheCaucasiancountries’scientists.ThisbreedisraisedbycrossingofGeorgian,Armenia,AzerbaijanandDagestanlocalcattlemainlytotheSwissBrownbreed.Unfortunately,consequentlytotheminimumleveloffeedandcare-keepinginintensivefromwasachievedinGeorgia,itwaspracticallyimpossibletoraisemoreproductivebreed.TheCaucasianNutBrownbreedcomposedmorethan90%ofthetotalcattlelivestockpopulationinGeorgiaduringtheexistenceofsocialfarms:thebreedwaseconomicallyjustified.Forexample:therewas1.1millionlivestockaccordingto1990data,ofwhich330,000cows.Theannualmilkyieldwas2,400-2,800kgintheconditionsofaveragefeedingwith3.8-4%fatness.Withimprovedconditionsoffeedandcare-keepingmilkyieldreached3,500-4,500kg,whilethemaximummilkyieldwas8,789kg,whichindicateshighgeneticabilitiesofthisbreed.NowadaystheamountofCaucasianNutBrownbreedexceeds95%offromthetotalcattlepopulationinGeorgia,buttheirproductiveindicatorsdonotcorrespondtobreedstandards.Thisiscausedbythefactthatbreedingfarmsdonotfunction,zootechnicalregistrationisoutoforderandartificialinseminationdoesnotexist.Therearezerobreedingfarmsinthecountry,whichfinallywillcausethedegradationoftheCaucasianNutBrownbreed.Accordingtoourdata,ananalogoussituationconcerningtheCaucasianNutBrownbreedexistsinArmeniaandAzerbaijan.

Georgian�buffalo

BuffalobreedinghasalonghistoryinGeorgia.InSouthCaucasianCountries,in1960buffalopopulationwasmorethan500,000,butthenitdeclinedandin2007wasfixedat29,541inGeorgia.Themainpartofmilkproductionisreceivedduringpasturageperiod,butaftertakingthebuffalo-cowonstationaryfeeding,milkyieldreducesquicklyandstops.Buffalobreedingisdirectedtowardswork-dairy-meat.Forthedairypartit’snearlythesameasforthelocalcattlebreeds.Thebuffalogives1,300-1,500kgmilkwithnearly7,8%fatness.Buffalodairyproductivityhasthepotentialof3,000kg.GeorgianbuffaloisliketheArmeniaandAzerbaijanbuffalosinconstitution,whichiscausedbytheclosenessoftheirextensionarea,commonoriginandsimilarityofcare-keepingconditions.

Dairy production and processing

Milk�production

CattlehusbandryismainlyconcentratedinprivatefarmsthroughoutGeorgia(Table6).Accordingly,99.9%ofthemilkproductionfallsinthissector.Enhancementofquantity,qualityandenergeticpropertiesofanimalfeedwillstimulatetheproductionofalllivestockproducts,includingmilk.Georgiahasamorethansuitablenaturalandclimateconditionsforcattlehusbandry.Todaythemilkproductionvolumeissteadilyincreasing,althoughthedatavariesbyregionandgenerallylowproductivitypercowisstillamajorproblem(Figure1).Improvementstoincreasetheproductivityoflivestockbreeds,meadowsandpastures,stimulatecultivationofthefoodcrops,introductionofeffectivetechnologyrelatedtoanimalindoorfeeding,willfurtherincreasethestableproductionofhigh-qualitymilkduringsummerandwinter.


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Dairy processing industry (Millennium Challenge Georgia Fund, 2006)

Owingtothepositiveeconomic-politicalstatus,appropriateinvestmentpolicyandsimplificationofthetaxsystem,thelocalproductionofmilkproductshasbeenincreasedduringthelastfewyears.In2005theprocessingvolumeofmilkandmilkproductswasestimatedat98,616tons.DairyprocessinginGeorgiaisdoneonthreelevels:• farmers/householdsprocessingmilkfromtheirownherds;• smallscalecheeseproducersprocessingfreshmilkcollectedfromadjacentfarms;• largescaleindustrialdairies,processingpredominantlyimportedmilkpowderaswellaslocally

collectedmilk.ItiscommonforGeorgianruralhouseholderstoprocessmilkathomeandsellsvariousdairyproductsintheregionalorcentralmarkets.In2005ruralhouseholdsproduced89,251tonsofdairyproducts.Mostoffreshmilkistransformedintocheeseormatsoni(yoghurttype)bythefarmersintheirhouses(Table7).Transformingfreshmilkintocheeseandmatsoniextendsthemarketingwindowforthedairyproductsandallowsfarmerstotradewiththevalue-addedgoods.Mostcheeseissoldasunbrandedlargeblock.Theretailerscutthematthetimeofsale.Thereissomelinkagebetweencheesemakersatthevillagelevelandtraders,buyinglargequantitiesatthefarmgateoratthemarketplace.However,ingeneralthedairysectorischaracterisedbyitslackofformalstructureandoftheobviouschannelsoffarmertodairyanddairytoretailoutlet.

Table 6.MilkproductivityandmilkproductionbyfarmsofallcategoriesinGeorgiain2004till2007(StateDepartmentofStatistics,2007a).

2004 2005 2007Totalmilkproduction(×1000t) 780.4 787.7 857.6

Byhouseholds 779.6 786.7 856.8Byagricultureenterprises 0.8 1.0 0.8

1,033 kg

1,048 kg

1,196 kg

2005 2007 2004

Figure 1.MilkproductionlevelinGeorgiafrom2004till2007(averageannualyieldpercowinkg)(StateDepartmentofStatistics,2007a).

Table 7. DairyproductsprocessedbyhouseholdsinGeorgiain2005(StateDepartmentofStatistics,2005b).

Matsoni Sourcream Cottagecheese Cheese Curd ButterTotal(tons) 34,587 256 1,508 49,095 4,372 2,433


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Thereareanumberofsmall-scalecheeseproducersthroughoutthecountrywiththecapacityofprocessingonetofivetonsofmilkperday.Theycollectmilkfromtheirneighbours;produceSulgunicheese(Mozzarellatype)inabasementofavillagehouseadjustedtosuchprocessingoperationandsellcheeseinTbilisiorinacentraltownoftheregion.Thesesmallprocessorsusuallyemploy5-8people;howevertheyareoperatingwithoutproperregistrationandcertification.Theirproductionissubjecttoseasonalfluctuationandstopsorsharplydropsinthewinterseasonwhenmostofcowsdryoff.Shortageofmilkstimulatesanincreaseofitspriceandmakescollectionmoreexpensive.Atthesametime,thesefactorsdrivethecheesepriceup,sothatthoseprocessorswhostayinoperationduringwinterseasoncanmaintainviability.Thesmalldairyunitsusuallyhaveafewpigsandfeedwheytothem.Thisisanadvantageoverthecentralisedlargerdairieswhichwastewheyandarerequiredtoconductitsadditionaltreatmentbeforedischargingitintoasewagesystem.Itisnoteworthythatin2003thedatarelatedtoprocessedmilkanddairyproductsdidnotexceed5,559tons.In2005theproductionofmilkanddairyproductshadgoneupto9,365tons(Table8).RegardlessthenumbersofproblemsexistingwithintheagriculturalsphereofGeorgia;productionofindustrialfoodproducts(milkanddairy)hasincreasedby1.7times.Today,anumberofsmallandmedium-scaleenterprisesandseverallarge-scalemilkprocessingplantsarefunctioninginGeorgia.Largeandmedium-scaledairyplantsarelocatedinTbilisi.Theyhavemadeconsiderableinvestmentsintotheirprocessingandpackingequipmentandkeeptheproductqualityhigh.Thelackoftheappropriatecoolingtanksandrefrigeratedtrucks,poorconditionofruralroadsandthefragmentationofdairyfarmsinhibitthecollectionofrawmilkfromregionstotheprocessingplants.Products,principallymatsoni,milk,sourcreamandcottagecheese,aresoldtosupermarketsandsmallshopsmainlyinTbilisiandothercities.Dairyfactories’productionismainlybasedonreconstitutedpowderedmilk.Onlyfewofthemareprocessingrawmilk,althoughsignificanteffortsaremadebysomeprocessorstoincorporatelocalnaturalmilkintheirproducts.Thistendencyisfurthersupportedbyeconomicconsiderations.Asprocessorsspecify,productionondrymilkcostsmorethanpurchaseandtransportationoffreshmilktheremoteregionsinthesummerwhichareontwo-threehoursdrivedistancefromTbilisi.Milkcollectiondropsinwintertimewhenmostofcowsdryoffandthosewhodon’t-dropmilkyieldsbyhalfduetopoorfeedandtemperaturestress.Reducedsupplyofrawmilkdrivesthereforemostoflargedairyplantsceaserawmilkcollectioninwinter.PursuanttodatafromtheDepartmentofStatistics(inyear2005),thelargestshareinmilkproductsrepresentedimportedmilkandmilkproducts:cream,concentratedmilkandmilkpowder.

Table 8. DynamicsofdairyproductionindustryinGeorgiain2003till2005(tons)(StateDepartmentofStatistics,2005a).

2003 2004 2005Freshandprocessedliquidmilkandcream 721 940 1,067Cheeseandcurds 323 412 559Butter 284 682 1,159Matsoniandotherproducts 1,643 2,190 3,075Othermilkproducts 2,588 3,256 3,505Total 5,559 7,480 9,365


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Milk�and�dairy�products�consumption

Georgiahasonlynowobtainedthepossibilitytoproducemoreproductthanitisconsumedlocally.Neithertheappropriateinputnorthevaluechains(startingfromtheagriculture,passingthroughtheprocessingandtradecyclesandaddressingtothefinalconsumer)areavailableyet.Inadditiontothat,thequalityandsafetylevelofthefoodproductdoesnotcorrespondtothestandardsthataredesiredbytheprocessingindustryandthefinalconsumer.Theseproblemsarestillpainfulduetoshortageoffunds,unavailabilityoftheproductioninput,etc.Theseobstacleshinderthedevelopmentoftheagriculturalsector.Incomparisonwiththepreviousyears,in2005theconsumptionofmilkandotherdairyproductsdecreasedduetoanincreaseinpricerangingfrom50%-150%(Table9).Itshouldbealsonotedthatpercapitaconsumptionofmilkanddairyproductshasbeendecreasedfrom242to238kgduring2003-2005(Figure2).Duringthesameperiod,thelocalpercapitaproductionofthedairyproductsamountedto176to184kg.Theself-sufficiencyrationvariesbetween71%and75%accordingly.Accordingtothephysiologicalnorms,therationalpercapitaconsumptionofmilkanddairyproductsshouldtotalto330kilogramannuallyinGeorgia.Therefore,itwillbethebesttostimulatetheproductionandconsumptionoftheseproducts.

Table 9. MilkanddairyproductsconsumptionbyhouseholdofGeorgia(intons)(StateDepartmentofStatistics,undated).

2003 2004 2005Freshandprocessedliquidmilkandcream,milkpowder 230,800 228,600 228,600Cheeseandcurds 46,300 45,100 42,900Butter 7,000 7,200 7,200Matsoniandotherproducts 37,200 37,700 39,300Otherdairyproducts 5,300 5,400 5,500Intotal 326,600 324,000 323,500

73 71 75

176 181 184

238 242 242

2007 2004

2006

Consumption, kg

SSR %

Production, kg

Figure 2. Dairyproduction(kg),consumption(kg)andself-sufficiencyratio(SSR)(%)(StateDepartmentofStatistics,undated).


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Import�of�products

Tosatisfythehighandsteadydemandonrangeofhigh-qualityanddiversedairyproducts,mostoftheseproductsareimportedtoGeorgia.Toimprovethecattlebreeds,8,000headsofcattlearedeliveredintothecountryin2004-2008(Custom’sDepartmentdata).Importofmilkanddairyproductssince2003isincreasing(Figure3).

Export�of�products

InlinewiththedataretrievedfromtheStateDepartmentofStatisticsasof2008,theshareofcattleexportisveryinsignificantwithintheoverallexport.In2006and2007theshareequaledtozero.Milkanddairyproductsexportislessascomparedwiththedataof2004(Figure4).

05,000,000

10,000,00015,000,00020,000,00025,000,00030,000,00035,000,00040,000,00045,000,000

2004 2005 2007

Import

kgUSD

Figure 3. DairyproductimportintoGeorgiain2004-2006(kg,US$)(Custom’sDepartment,2006).

2005 20072004

01,000,0002,000,0003,000,0004,000,0005,000,0006,000,0007,000,0008,000,0009,000,000

10,000,000Export USD

Kg

Figure 4.DairyproductsexportfromGeorgiain2004till2006(kg,US$)(Custom’sDepartment,2006).


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International projects

DuringthelastfewyearsseveralinternationalprojectswereimplementedinGeorgia.Theprojectssupporteddevelopmentofmilkandmilkproductionsectorandexploredthestablemarketsthereof.Themostimportantwasthe3-yearprojectimplementedbySIDAthatwascompletedinOctober,2005.Undertheproject,thespecialtrainingswereconductedtorefinetheskillsoffarmersandmilkproducers,finallyleadingtostimulationofmilkproductionandcollection.Duringthecompletionperiod,theprojectwasmainlyorientedonmilkqualityandproductionsystem.Undertheproject,theinformationalandmarketingserviceswereprovided.DuringtheimplementationperiodofScanagriproject‘Fromcowtoconsumer’,twomilkcollectioncentreswereestablishedinEastGeorgia.Theprojectalsocarriedoutamarketingprogramwhichincludedfarmerstraining,capacitybuilding,raisingofpublicawarenessaboutmilkconsumptionthroughadvertisingcampaign,etc.Despitementionedresults,uponthecompletionoftheprojectterms,sometasksoftheprojectremainedundonewhichplayedthedecisiveroleintheselectionofOPTOInternationalastheimplementingorganisationofthesecondphaseofSIDAassistanceinGeorgiandairysector.From2005,OPTOInternationalisdeliveringtheproject‘DairysectorsupportinGeorgia’intodifferentregionsofGeorgia.Theprojectsupportsthesmallandmedium-scalemilkproductionenterprisesanddairymarket.Asoftoday,sixmilkcollectionandtwomilkproductionenterprisemainlyfocusedonproductionofcheeseandMatsonihavebeenfoundedundertheproject.Theprojectwillprovideassistanceintermsofoverallequipmentandoutputsale;namely,OPTOhasanagreementwiththelarge-scalemilkproducerenterprisesonpurchaseofthemilkfromthecollectioncenters.Todaytheequippingprocessisunderway.Inadditiontothat,theprojecthasestablishedamilkcollectioncentreinSouthOssetia.

Conclusions for Georgia

Pursuanttothetrendsdescribedabove,fordevelopingthedairysectoritisnecessarytofocusonthefollowingfactsanddirections(advicespartlyderivedfrom‘Dairy�production�and�processing�in�Georgia,�2006.�Millennium�Challenge�Georgia�Fund’):• Nearly17%ofnationaleconomyisdirectlydependentontheagriculturalsectorandindustry;

duetothemultipliereffect,possiblymorethan30%.• Afterdecliningsignificantlyfornearlyadecade,therealvalueofthefoodandagriculturalsector

hasbeguntoincreaseslightlyoverthepastsevenyears.• Livestockproductionhasbeenslowlybutsteadilyincreasingformostcategories.• Cropyieldontheaverageareonly1/3oftheirpotential.• Approximately1/3ofarablelandisnotinproduction.• Improvementstoincreasetheproductivityoflivestockbreeds,meadowsandpasturesareneeded:

stimulatingcultivationoffoodcrops,introductionofeffectivetechnologyrelatedtoanimalindoorfeeding,andincreaseofastableproductionofhigh-qualitymilkduringsummerandwinter.

• Thereisahighandstabledemandonmilkanddairyproductsinthecountry.• Thesectorhassolidpotentialofdevelopmenttoreplacetheimporteddairyproducts.Intotal

323,500tonsofmilkandmilkproductsareconsumedinGeorgiaannually,whileproductionoftheindustrialoutputtotalsto98,616tons,therefore,tosatisfythelocaldemandanadditional224,884tonsofmilkanddairyproductsarerequired.

• Thesmallandmedium-scalelivestockfarmsshouldbeconsolidatedandenlargedandthepackaging-storagefacilitiesshouldfunctioninordertoexploreandobtainstablemarketsformilkanddairyvalue-addedproducts;moreover,newtechnologiesshouldbeintroducedandtheenterprisesmodernised.


147

• Acentralisedmarketingnetworkshouldbecreatedthusassistingthefarmersandentrepreneurstouninterruptedlysupplythemilkanddairyvalue-addedproducts.

• Milkcollectionfrommanysmallfarmersisassociatedwithhugeexpenses,thusmakingthepriceuncompetitivefortheproducers.Therefore,processorsprefertodealwiththelarge-scalefarmsand/orutilizeimportedmilkpowder.Establishmentofthemilkcollectioncenterswillbenefitnotonlythesmallfarmersbutthevalue-addedenterprisesaswell.

• Theprocessingenterprisesshouldbeestablishedinthedistrictsspecializedindairyfarming.• Intermsoffoodsafety,thedocumentationconfirmingtheappropriatequalityshouldbeattached

totheproduct.Inordertoproduceasoundproduct,theveterinaryservicecentersshouldoperateineachregion.ThebestscenarioisiftheywilloperatewithintheFarmServiceCenters.Themilkanddairyproductsshouldpassthelaboratoryanalysis.

• Thevaluechainshouldbeformedinsuchawaythatitstartsfromthebasis(farms),passesthroughtheprocessingindustryandtradeandisaddressedtothefinalconsumer.

Developments in Azerbaijan

Introduction

OneofthemaingoalsforAzerbaijantodayistoreducethedependencyoftheeconomyonoilandassureanexpansionofeconomicdevelopmenttotheruralareas.BeingthethirdbiggestsectorintheAzerbaijanieconomyafteroilandconstruction,agriculturepossessesthebiggestshareofemployment(in2006,39.1%oftotalemployedpopulationwasworkinginagricultureandonly1%intheoilsector).Agriculturehasalsoahugeinfluenceonpovertyreductioninruralareas.Asresultoftheagrarianreformsimplementedsince1995,marketrelationshavebeenestablishedinthedomesticeconomy,landandpropertyareeffectivelyused,thefieldstructureoftheagrariansectorhasimproved,entrepreneurshiphasimproved,andtheappearanceofvillageshaschanged.Todaythenumberofagriculturalproducersis1,208.700,ofwhich99.98%iscomprisedofprivate,and0.02%ofpublic,farms.Inaddition,thereare78,648cottagefarmsdealingwithproduction,processingandsaleofagriculturalproducts.Intotal,66.8%ofspecialisedagriculturalproducersarefamily-villagers,32.8%arehousekeepersand0.2%arefarmers.In2007,agriculture,huntingandforestryaccountedfor7.1%ofgrossdomesticproduct(GDP).In2007Investmentinagriculture,huntingandforestryincreasedby42%comparedwith2005.Thebudgetallocationtoagriculture,fisheryandforestryincreasedby3.5%incomparisonwith2005to37.2%.Thetotalareaoflandownedandrentedbyagriculturalproducersis2,324,200ha(69.3%family-villager,11.4%housekeepingand2%farming).Eachagriculturalproducerhasonaverage1.92haoflandarea.Notwithstandingthepositiveresultsofthelastyear,therearestillseveralproblemsintheagrariansector,suchasinthefieldofcattlebreeding(weakartificialinseminationstationslow-levelofsupplywithequipment,seed,liquidnitrogenandspecialvehicles).Fundamentalactionsareneededtoimprovethefeedbase,tominimisethedelayinimplementationofasetofactionstoimproveprivatepoultryfarmsandpoultryfactories,toassureproperveterinarycontrolofanimalproduction,processing,procurementandinimportofanimalproducts,andimprovingthereproductiveefficiencyofanimals.

Cattle sector

Azerbaijanisanancientlivestockcountry.Atpresent,99.5%ofcattleand100%ofpoultryareinfarmers’andcooperatives’handsandonly0.5%ofcattleisintheownershipofthestatecompanies(Figure5).


148

Aftertheagrarianreformshadtakenplace,asteadilygrowingnumberofcattleandpoultrycanbeobserved.Theproductionofalltypesoflivestockincreasedappreciably.On1January2008,therewere2,512,000cattleintheRepublic,including1,215,000cowsandbuffalos(Table10).Therelativedensityofbreedingherdsis47.8%fromgeneralstock,whereasintheSovietperiodthisparameterdidnotexceed26%.Now,thenumberofcattleandsmallruminantsconsiderablyexceedeventhehighestnumbers,inprevioustimes.Todaythereareonaverage2.3cattle,including1.1cowsand7.5sheepineachfamily.Lastyear,productionamountedto294,000tofmeatliveweight,1,341,000tofmilk,and871mofeggs(Table11).AccordingtotheFoodSafetyprogram,thepercapitaconsumptioninAzerbaijanwas,onaverage,22kgmeat,179kgmilkand97eggs.Ofcourse,thisisfarbelowtherecommendednutritionallevelofconsumptionoflivestockproducts.Thegrowthofproductionoflivestockbasicallyhappensinanaturalway.Thenumberofcattlehasincreasedsomuchthattherearegreatdifficultiesinmaintenanceofpasturesbecauseofovergrazing.Milkyieldpercowisalittleover1,130kg.Duetoproductionproblemsfrom1990son,breedingofcattledeclinedconsiderably.Duringthetransitionalperiodofagrarianreforms,thecattlebreedingsystemwasletdriftandnootherworkwascarriedon.Forthepurposeofcattlebreeds’development,thedistrictsinAzerbaijanaredividedinto3zones:adairy-productionzone,adairyandmeat-productionzoneandameat-productionzone(GeneticResourcesInstituteofNationalAcademyofSciencesofAzerbaijan,2006).

Private holding

State breeding enterprises

Figure 5.StructureofholdingsinAzerbaijanin2007(AnGRNC,2008b).

Table 10.ChangesinofcattlepopulationinAzerbaijanintheperiod2004to2007(×1000)(AnGRNC,2008b).

Cattle Ofwhichcows2004 2006 2007 2004 2006 20072,293.6 2,445.2 2,512.2 1,007.5 1,184.1 1,215.7

Table 11.LivestockproductioninAzerbaijanin2006and2007(×1000t)(AnGRNC,2008b).

2006 2007Meat 274.2 294.5Milk 1,300.6 1,341.2Eggs1 761.6 871.0Wool 13.6 14.01Numberofeggs×1,000,000.


149


Thereare27breedsofcattleinAzerbaijan,twoofthemarelocalbreeds:CaucasianNutbrown(grey)breedandRedKazakhcattle,besidesthereare2breedsofbuffalos(oneofthemislocal)andlocalbreedofzebu-AzerbaijanZebu(GeneticsResourceInstituteofNationalAcademyofSciencesofAzerbaijan,2006).

Red�Kazakh�Cattle

Thisistheproductoflocalselection.Itscolorisgolden-red,sometimesdark-red.Kazakhcattlearerobustandareofgoodconformation.Theudderhasaregularshape,andtheanimalisresistanttovariousdiseases.Ithasgoodstamina,istoleranttoharshlocalconditionsofmanagementandhasrelativehighfertility.Themilkyieldofcowsperlactationis1,900-2,000kgwithafatcontentof4.2-4.6%.Theaverageliveweightofcowsreaches380-400kgandbullsweigh450-500kg.Calvesgiveover50%meats.

Azerbaijan�Zebu

TheAzerbaijanZebuisoneoftherarespeciesofanimalsfoundintheRepublic.Itscolourisblackanddark-brown.Youcanseeahunchonitsback.Azerbaijanzebuanditshybridsareveryrobustandsuitedtolocalmanagementconditionsandresistanttodiseases.Theyarewelladaptedtolocalmanagementconditionswhichhavereinforcedandperfectedcertainbiologicalfeaturesincludingtheirprecocity.TheAzerbaijanZebureaches300-350kgliveweightandgivesabout58.8-60%ofitsweightasmeat.TheZebucowgivesover500kgofmilkperlactationwith5-6%offat.

Azerbaijan�Buffalo

Asaresultofalongandintensivegeneticselectionandlivestockbreedingprocess,togetherwiththecreationofgoodandbeneficialconditionsforfeedingandmanagingthecattle,theAzerbaijanbuffalo’squalitypotentialhasbeensignificantlyimproved.Theproductionofafemalebuffalois1,300-1,500kgmilkperlactationwith8-12%fat.Theaverageliveweightofthebuffaloreaches400-500kgforcowsand800-1000kgforbulls.

Conclusions for Azerbaijan

• CattlehusbandryisthemostsignificantfieldofagricultureinAzerbaijan.• InAzerbaijanthepurposefulagriculturalreformshavecreatedarealpotentialforreorganising

thepedigreelivestocksectorinconformitywiththeneweconomicalconditions.• ThelivestockproductioninAzerbaijanmeetpeople’sdemandintheinternalmarket.• InAzerbaijan,thewelladaptedbreedstolocalconditionandrationalbreedingbythefarmers

arestrongpointsforagooddevelopmentofthecattlesector.• Aweaksystemofartificialinseminationisabigprobleminthecattlebreedingsectorin

Azerbaijan.


150

Developments in Armenia

Introduction

AgricultureiscarriedoutmainlyinthevalleysandmountainsidesofArmenia’suneventerrain,withthehighestmountainpasturesusedforlivestockgrazing.Only17percentofthecountry’slandissuitableforfarming,whichseverelylimitsagriculturalproduction.Fertilevolcanicsoilallowscultivationofwheatandbarleyaswellaspasturageforsheep,goats,andhorses.Despitethelimitationsofthissector,agricultureprovidesthelargestsourceofincomeforArmenia.Agricultureinpost-SovietArmeniareflectstheresultsoftheprivatisationofcollectivefarms,thedistributionofthatlandtotheworkers,andthelargeunemploymentresultingfromclosedfactories.Grossagriculturalproductionhasnotchangedmuchsince1990.Arablelandandorchards,previouslyfarmedasaunitdedicatedtoonecrop,nowproduceavarietyofproducts.LandholdingsbyruralArmeniansrangefromonetothreehectaresonaverage,oftencomprisedofsmaller,non-contiguousparcels.Asaresult,farmingthesesmallplotsisveryinefficient.Onthebrightside,Armeniaisblessedwithmultipleagronomiczones,conducivetoproductionofarangeofcropsandanimalproducts.Thereareextensivehighmeadowssuitableforgoatsandsheep,whichcansupplythemilkforavarietyofgoodcheeses.Agriculturalproductionisheavilybiasedtowardcrops,whichin2007accountedfor64%ofgrossagriculturaloutput.TheagriculturalsectorremainsanimportantcontributorinArmenia.Notincludingfoodprocessing,whichisfactoredintoindustrialoutput,theagriculturalsectorprovides30-35%ofGDPinanaverageyear.IncludingfoodprocessingwouldraisethetotalsectorcontributiontoGDPtonearly45%.Thesectorisalsoamajoremployerwithover40%ofthepopulationdependentontheagriculturalsectorforemployment.However,accordingontheUSAID,USDAandMinistryofAgricultureofArmenia(2006)teamreporttherearesignificantconstraintstothedevelopmentoftheagriculturalsectorinArmenia.Theseimpedimentstoathrivingandefficientagriculturalsectorinclude:• lackofadequatetransportationandthehighcostfortransportation;• structuralfinancialmarket impedimentscausinga lackofsuitablefinancial instruments:

insufficientcreditavailableforlongterminvestmentsandhighinterestrates;• therelativehighcostofinputsatboththefarmandtheprocessinglevels;• shortageofexperiencedmanagers;• lackofgovernmentalsupport(includingalackofappliedresearchinformation);• smallfarmsresultinginlittleornoefficiencyofscale.

Cattle Sector

InArmeniaatpresent,ahighpercentageofcattleareinfarmers’andcooperatives’hands.From1990on,thetrendsofreductioninnumberofanimalsonafarm,lossoftheirproductivityandlossofthemanufacturingindustryofanimalshavebeenstopped.Aftertheagrarianreformshadtakenplace,asteadilygrowingnumberofcattleandpoultrycanbeobserved(Table12),comparabletoasimilartrendintheothertwosouthCaucasiancountries-GeorgiaandAzerbaijan.Mainanimalhusbandryproductsmanufacturedintherepublicaremilk,beef,chicken,pork,eggsandhoney.Woolandleatherareregardedasimportantrawmaterial.Theseproductshavedifferentsignificancefordifferentsocialsegments.Populationinthealpinezonesisengagedinlivestock(cattleandsheepbreeding);inlowerzonespigandrabbitbreedingandapicultureareaddedtothem.Fowlsareraisedmainlyinareaslocatedintheproximitytourbanareas.Productionofmeat,woolandmilkaresupportedbylocalconditionsandwelladjustedbreeds,whileproductionofeggsandpoultryisbasedonhighlyproductivebreedsoffowls,intendedforgivingchickenmeatandeggs.


151

Livestockproductionin2007reached66,800tonsofmeat(slaughterweight),620,000tonsofmilk,and464millioneggs.Butonlymilkproductionincreasedsignificantlyduringthepost-Sovietperiod.


ThemaincattlebreedinArmeniaistheCaucasianGrey/NutbrownBreed(thesameasinGeorgiaandAzerbaijan).Secondly,thereisalsotheBlack-and-Whitebreed(Rukhkyanet�al.,2005).

Black-and-White�cattle

Importofthisbreedwasdictatedbythenecessityofmovinglivestocktostationaryconditions,whichoccurredparticularlyinregionscloselylocatedtourbanareas.From1970on,manyfemalespeciesofthistypewerebroughtintoArmeniaandmanyBlackandwhiteherdswerefounded.Theyhaddifferentproductivityindicesthanlocalcattle.Underfavourableconditionsoffeedingandcaretheirmilkproductivitywasbetween4,000and5,000kg,butitwentdownunderunfavourableconditions.Thereforeraisingthisbreedisnotexpedient.Nowthisbreedisconsideredassecondimportantcowbreedinthecountry.Theydonotadjustwelltomountainouspastures’conditions.Ruralfarmerswishingtoacquirethistypeofcowshouldhaveinmindthattheyshouldbekeptinstationaryconditionsorinpasturesclosetohouseholds.Onlyfemaleheiferscanbetakentomountainouspasturesgiventheyarenotstony.TheiraverageliveweightinArmeniais480kgatfirstcalving,520kgatsecondand550kgatthird.Milkyieldin305daysin1st,2ndand3rdlactationis3,250kg3,600and4,000kg,respectively.Fatis3.6%andproteinis3.2%.SemenofbullscanbeobtainedfrompedigreefarmsinRussiaorstationsspecialisedinartificialinsemination.InordertoraisetheefficiencyofthistypeofcowstheyarecrossbredwithHolsteinbreedbulls.Thenewbreedisnoteworthyforitsincreasedliveweight,highmilkyieldandproductivityinconditionsofindustrialraising.ButtheuseofsemenofHolsteinbullscannotbeefficientifthedevelopedgenerationisnotkeptwithcareandinfavourableconditions.

Conclusions for Armenia

• AgriculturewillremainaveryimportantagriculturesectorinArmenia.Agriculturewillnotbetheengineforgrowthoverthelongterm.Armenia’sagriculturalproductioncapacityislimited.

• LivestockproductsproducedinArmeniacannotmeetthenationaldemand.• AmainprobleminthelivestocksectorinArmeniaistheweakcattlebreedingsystem.

References

TheGeorgianNationalFoodandAgricultureStrategy,2006.FoodandAgricultureNationalStrategy2006-2015,Tbilisi,GroupofExperts,ThirdProject,2006.

MillenniumChallengeGeorgiaFund,2006.DairyProductionandprocessinginGeorgia.AgribusinessDevelopmentActivity(ADA).Availableat:www.ada.ge/files/103_137_652293_DairyProductionEng.doc

Table 12.ChangesinofcattlepopulationinArmeniaintheperiod2004to2007(×1000)(AnGRNC,2008a).

Cattle Ofwhichcows2004 2006 2007 2004 2006 2007397.1 478.7 483.3 220.9 262.1 277.5


152

Saghirashvili,G.,Kartvelishvili,T,Kishmareishvili,N.andTsurtsumiaE,2006.DevelopmentsofcattlehusbandryinGeorgia,farmmanagementandextensionneedsinCentralandEasternEuropeancountriesundertheEUmilkquota.In:Kuipers,A.,Klopcic,M.andA.Svitojus(eds.),EAAPTechnicalSeriesNo8,WageningenAcademicPubishers,theNetherlands.

Saghirashvili,G.andKartvelishvili,T.,2006.Georgiannativedomesticanimalbreeds.Custom’sDepartment,2006.Yearbook.GeorgiaCustomsDepartment.StateDepartmentofStatistics,undated.Websitieavailableat:http:///www.statistics.ge/index.php?plang=1StateDepartmentofStatistics,2007a.GeorgiaAgricultureStatisticalAbstract2007.GeorgiaStateDepartmentof

Statistics.StateDepartmentofStatistics,2005a.GeorgiaAgricultureStatisticalAbstract2005.GeorgiaStateDepartmentof

Statistics.MinistryofAgriculture,2005.ThelawonFoodSafetyandQuality.Availableat:http://www.maf.ge/?class=3StateDepartmentofStatistics,2007b.AgricultureCensusofGeorgia2007.GeorgiaStateDepartmentofStatistics.StateDepartmentofStatistics,2005b.HouseholdsofGeorgia2005.GeorgiaStateDepartmentofStatistics.GeneticResourcesInstituteofNationalAcademyofSciencesofAzerbaijan,2006.Nationalreportonthestateof

theanimalgeneticresourcesinAzerbaijan.GeneticResourcesInstituteofNationalAcademyofSciencesofAzerbaijan,Baku.

AnGRNC,2008b.ReportofAnGRNCofAzerbaijan.Conferencematerialfor:MonitoringforfutureeffectivemanagementoffarmanimalgeneticresourcesinCaucasusregion/Armenia,Azerbaijan,Georgia/andKazakhstan.EuropeanRegionalFocalPointforAnimalGeneticResources(ERFP)&GeorgianNationalAssociationforAnimalProduction(GNAAP)bysupportGeorgianStateAgricultureUniversity,Bazaleti,Georgia10July,2008.

AnGRNC,2008a.ReportofAnGRNCofArmenia.Conferencematerialfor:MonitoringforfutureeffectivemanagementoffarmanimalgeneticresourcesinCaucasusregion/Armenia,Azerbaijan,Georgia/andKazakhstan.EuropeanRegionalFocalPointforAnimalGeneticResources(ERFP)&GeorgianNationalAssociationforAnimalProduction(GNAAP)bysupportGeorgianStateAgricultureUniversity,Bazaleti,Georgia10July,2008.

Rukhkyan,L.,Gasarjyan,N.andChitchyanT.,2005.CountryreportonthestateoftheArmenia’sanimalgeneticresources.MinistryofAgriculture,Armenia,Yerevan06June2003.

USAID,USDAandMinistryofAgricultureofArmenia,2006.ArmeniaAgricultureAssessment.TeamReport.


153

Cattle sector and dairy chain developments in Poland

J.�Fałkowski1,�A.�Malak-Rawlikowska2�and�D.�Milczarek-Andrzejewska1�

1University�of�Warsaw,�Faculty�of�Economic�Sciences,�Długa�44/50,�00-241�Warsaw,�Poland;�[email protected];�2Warsaw�University�of�Life�Sciences,�Faculty�of�Agricultural�Economics,�Nowoursynowska�166,�02-787�Warsaw,�Poland

Abstract

InthelastdecadethedairysectorinPolandexperiencedthoroughanddynamicchanges.Considerableinnovationswereobservedwithrespecttoproductionandmarketingpracticesatallstagesofthefood-supplychain.Theinstitutionalenvironment,inwhichalleconomicagentsoperate,changedaswell.Allthisaffectedimportantrelationshipsbetweendairyproducersandprocessors.Againstthisbackground,thispaperbrieflypresentsthemaindevelopmentsandadjustmentsthattookplaceinthelocaldairysector.Theanalysisisbasedontheresultsofqualitativeandquantitativeresearchconductedin2006and2007,respectively.

Keywords:�dairy�sector,�Poland,�vertical�coordination

Introduction

Theoverthrowofthecommunistsystemin1989andtheadjustmentstoamarketeconomydrasticallyaffectedthesocio-economicenvironmentinPoland.Theagriculturalsectorwasnoexception.Particularlyspectacularchangestookplaceinthedairysector.Thisisillustratedbythefactthat,sincethebeginningof1990’s,thenumberofdairyfarmsdecreasedbymorethanonemillion.Otherchangesincludedecreasesinthenumberofprocessingenterprises,necessaryqualityimprovementsandincreasedefficiencyofmilkproduction.Importantchangesoccurredalsointheinstitutionalenvironment,inwhichalleconomicagentsoperate.Thesecomprisedchangestobothinternationalregulationsanddomesticpolicies.Asanillustrationoftheformer,onecanmention,forinstance,decisionsmadeundertheauspicesofWorldTradeOrganisationorregulationsadoptedwithintheEuropeanUnion.Asfarasdomesticpoliciesareconcerneddecisionsconcerningformsandamountsofsubsidies,orthegeneralapproachtotheagriculturalsectorandruralareas,serveasexamples(Wilkinet�al.,2006).Takingintoaccounttheabove-mentionedphenomena,thispaperaimstodescribeindetailthemaindevelopmentsthatoccurredinthedairysectorinPolandinthelastdecade,thechangeswithintheproductionsphere,andresultsofananalysisofthedairysectorfromthedairysupplychainperspective.Specialattentionispaidtomilkmarketingandcooperationbetweendairyprocessorsandmilkproducers.Theinformationpresenteddrawsonseveralsourcesofdata.First,itusesdatacollectedbythePolishStatisticalOffice.Second,ittakesadvantageofqualitativeresearchconductedin2006(Wilkinet�al.,2006).Thisresearchincluded36semi-structuredinterviewswithexpertsandrepresentativesofallstagesofthedairyfoodchain.Inaddition,itdrawsontheinformationcollectedduring5focusgroupmeetingswithfarmers.Third,thepaperusesquantitativedatafromasurveyconductedamong397farmsin2007(Milczarek-Andrzejewskaet�al.,2007).Boththeseresearchinitiativeswerefocusedontworegionslocatedinnorth-easternPoland,namelyWarmińsko-MazurskieregionandPodlaskieregion.Theseregionswereselectedasstudysitesbecauseoftheirrelativeimportancefortherestructuringprocessinthedairysector.Thoughonehastobecautious


154

whengeneralisingabouttheresultsobtained,itisreasonabletoexpectthatregionsthatarelessadvancedintermsofrestructuringwouldfollowthepathchosenbythosetworegions.Thepaperisorganisedintofivesections.Thefirstsectionhassetoutthebackground.Thesecondpresentsthemaintrendsformilkproductionandmilkconsumptionusinga‘macro’perspective.Thethirdtakesacloserlookatcharacteristicsofhouseholdsproducingmilkandchangesthattookplaceintheprocessingindustry.Thefourthdiscussestheresultsofeconometricanalysesassessingthemaindeterminantsoffarmmodernisationaswellastheimpactofdairysupplychainmodernisationonhouseholds’incomes.Finally,thefifthsectionsummarisesthefindingsanddrawsmainconclusions.

Milk production and consumption during transition

Thissectionpresentsthemaindevelopmentswithregardtonumberofdairyproducers,dairycowherds,trendsinmarketedproduction,anddemandfordairyproducts.

Milk production

Production�trends

Themainchangesinmilkproductionfrom1989to2007areshowninTable1.Severalinterestingtrendsmeritmention.Duringthefirstsixyearsaftermarketreform,thedairyherddeclinedbyabout28%andmilkyieldpercowdecreasedbyover4%.Thesechangesresultedinseriousnegativeconsequencesformilkoutput.Milkproduction,adjustedtorealdemand,droppedby28%toreachitslowestlevelof11.3mtin1995(GUS,variousyears).Since1996,aftertheshockoftheearlierperiod5,thesituationhasstabilised.InthattimetheAgriculturalMarketAgency6openlyintervenedandpurchasedbutterandskimmedmilkpowder,andintroducedthefirstmeasurestoprotecttheinternalmarket.Realmilkpricesthenstartedtoincrease,andsodidmilkproduction(IERiGŻ,2005).DuringtheEUpre-accessionperiod,therestructuringofthedairysectoraccelerated.TheachievementofEUstandards(especiallysanitaryandveterinarynorms,andmilkqualityrequirements),aswellastheimplementationoftheCommonAgriculturalPolicy(CAP)instruments(mainlypreparationstoimplementthemilkquotasystem),stimulatedproducerstostartmodernisingtheirprocessesandtoincreasetheirscaleofproduction.Investments,financedfromfarmers’ownresources,loansgrantedbybanksanddairyprocessingenterprises,andpre-accessionsupport,resultedinanenormousimprovementinmilkquality.Intheperiod1999-2005,theshareofextra-classmilk(accordingtotheEUstandards)intotalmilkdeliveriesincreasedfrom35%to92%.FordairieswithanEUcertificate,thissharewasevenhigher,andaccountedfor98%ofmilkdeliveries(IERiGŻ,2005).Thesestrictqualityrequirementsalsobroughtnegativesocialconsequences,however.Manymainlysmall,inefficientproducerswerenotabletoadjust,andweretherebyforcedtoeitherquitmilkproductionorchangetosemi-subsistencefarming.By2005,eventhoughtherewere712,000farmswithdairycows,onlyabout48%ofthemweredeliveringmilkormilkproductstothemarket(seeTable2).Itisimportanttonotealsotherelativeabsenceofchangeindairyfarmingintensity.Thenumberofanimalsper100haofagriculturallandhasfluctuatedaround33-35withnosignificantdeviationsfromthisvalueinthelastdecade(GUS,2006).

5During1990-95periodnominalmilkpurchasepricesincreasedbyabout11foldwhilenominalfarminputpricesincreasedabout38foldandthepriceofconsumergoodsincreased35fold.Realmilkpriceindexonlyamountedto32percent,whichresultedinasignificantdecreaseintheprofitabilityofmilkproduction(IERiGŻ,2005,p.55).6TheAgriculturalMarketAgencyisaninterventionagencyforagriculturalmarkets.Itsmainroleistomanageallthegovernment’sinterventionmeasures.


155

Tabl

e 1.

Characteristicsofm

ilkproductioninPolandfro

m1989-2005(IER

iGŻ,variousvolum

es;G

US,variousvolum

es).

1989

1990

1994

1998

2000

2001

2002

2003

2004

2005

2006

2007

Num

berofdairycow

s[1,000heads]

4,994

4,919

3,863

3,471

3,098

3,005

2,873

2,897

2,796

2,795

2,824

2,787

Index%

100

98.5

77.4

69.5

62.0

60.2

57.5

58.0

56.0

56.0

56.5

55.8

Milkyields[litres/cow

/year]

3,260

3,151

3,121

3,491

3,668

3,828

3,902

3,969

4,083

4,200

4,200

4,300

Index%

100

96.7

95.7

107.1

112.5

117.4

119.7

121.7

125.2

128.8

128.8

131.9

Milkproduction[millionlitres]

15,926

15,371

11,866

12,178

11,494

11,538

11,527

11,546

11,478

11,600

11,633

11,750

Index%

100

96.5

74.5

76.5

72.2

72.4

72.4

72.5

72.1

72.8

73.0

73.8

Milkdeliveries[millionlitres]

11,385

9,829

6,269

7,070

6,583

7,025

7,219

7,316

7,997

8,831

8,419

8,380

Deliveriesintotalm

ilkproduction%

71.5

63.9

52.8

58.1

57.3

60.9

63.2

63.4

69.7

76.1

72.4

70.9

Tabl

e 2.Num

berofdairyfarmsin1990-2005(IE

RiGŻ,variousvolum

es;G

US,variousvolum

es).

1990

1996

2002

2003

2004

2005

2007

1.Num

berofproducers[x1000]

1,831

1,309

876

810

735

712

657

Index%

100

71.5

47.8

44.2

40.1

38.8

35.9

2.Num

berofproducersdeliveringtoprocessing[x1000]

835

560

376

356

312

294

247

as%oftotalproducers

45.6

42.8

42.9

44.0

42.5

41.3

37.6

3.Num

berofproducersdeliveringdirectlytothemarket[x1000]

n.a.

n.a.

n.a.

n.a.

7650

27.5

as%oftotalproducers

--

--

10.3

7.0

4.2

n.a.:N

otassessed.


156

TheaverageherdsizeinPolandisrelativelysmallcomparedwithWestEurope.Nevertheless,aconsiderableincreasehasbeenobserved.Theaverageherdsizeincreasedfrom2.7in1990to3.9in2005(GUS,variousvolumes).In2005,thetotalnumberofcattle(beefanddairycows)was5.4mhead.Dairycowsaccountforroughly50%oftotalcattleandthissharehasremainedmoreorlessstableduringthelastdecade.

Inputs�

Significantincreasesininputpriceshavebeenobservedforallrelevantcommodities(i.e.fertilisers,pesticides,energy,machineryandseedgrain).Itisnoteworthythatinthelastdecade(1995=100)thepricescissorsindex(i.e.anindexofpricerelationshipofmarketedagriculturalproductstogoodsandservicespurchasedbyprivatefarms)hasgraduallydecreased,andin2005reachedthelevelof69,4(GUS,variousvolumes).Therespondents,askedduringthequalitativeresearchproject,agreedunanimouslythattherehavebeenenormouschangesintechnologyandforageuseduringthepastdecade.Onefarmersaidthat,‘tenyearsagoIdidnoteventhinkthatIwouldeverhavea‘western’tractor’.Allourrespondentshadcoolingtanksontheirfarmsandlargerproducershadstartedtothinkaboutbuyingmilkingmachines.Asforforage,producershadswitchedfromhaytohay-silage.Althoughitismoredemandingintermsofmachineryandthusinvolveshigherexpenditure,itismucheasiertomanageandcertainlypaysoff.Oneoftherespondentsdescribedthischangeas‘[Itislike]movingfromacarriagetoacar’.Greenfeedismainlyproducedonthefarm,andconcentratesareboughtinthemarket.Thelargertheproducer,themoreforagethatisneeded.Asfarascontactbetweenfarmersandinputsuppliersisconcerned,forbothtechnologyandforage,farmershavenoproblemapproachingasupplier.Itisalsoworthmentioningthatsometimesthedairiesnegotiatewiththeinputsuppliersonbehalfofthefarmers.Thiscertainlyimprovesthefarmers’position.Ourrespondentssaythatthisisnotverycommon,however.Itismorecommonforcontactsbetweenfarmersandinputsupplierstotaketheformofcashlesstransactions.Inputsuppliersgettheirmoneyfromthedairyandfarmerspaythedairiesfortheirinputsuppliesviamilksales.Itseemsthatthistypeofarrangementhasnoeffectonthepowerrelationshipsbetweenthepartiesinvolved.

Breeds�and�advisory�services

ThemainbreedinPolandisthePolishHolstein-Friesian.Itaccountsforroughly97%ofthetotalrecordedcows7.OtherbreedsincludeSimmental,RedPolish,Jersey,White-back,Montbeliarde,PolishBlack-WhiteandPolishRed-White.DairyfarmsinPolandmaytakeadvantageofseveralsourcesofadvice.Forexample,theymayuseadviceprovidedbythePolishFederationofCattleBreedersandDairyFarmers.ThisorganisationisauthorisedbytheMinistryofAgricultureandRuralDevelopmenttokeepherdbooksfordairycattle.AdvisoryservicestofarmersarealsoprovidedbytheAgriculturalAdvisoryCentreswhicharelocatedineveryregionandhavelocalbranches,andbyalmosteverydairyprocessor.

Milk consumption

Thetransitionperiodwascharacterisedbyasystematicdecreaseinmilkconsumptionper�capita.In2004,theaveragemilkconsumptionper�capitaamountedto174litreswhichwas67litres(28%),lowerthanin1990.Thisdecreasecouldbeattributedtothefactthatalargenumberofhouseholdswithdrewfrommilkproduction.Itmaybeassumedthat,particularlythosehouseholdsformerly

7In2007numberofrecordedcowsamountedto541,307.


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producingmilkmainlyoronlyforsubsistencepurposes,considerablyreducedtheirconsumptionofdairyproducts.Anotherprobablereasonforthedecreaseinmilkconsumptionwastherelativeincreaseindairyproductpriceswhencomparedtopricesofotherfoodcommodities(IERiGŻ,2005).Infuture,milkconsumptioniscautiouslyandoptimisticallyprojectedtoincreaseslightly.

Consumption�patterns

Itisimportanttonotethateventhoughpricesdriveconsumptiondecisions,thepatternofdairyproductconsumptionhasbeenchanging.AccordingtothedirectorofalocalsupermarketchaininWarmińsko-Mazurskieregionpeoplearebecomingmoreawareofwhattheyeatandinthelastfewyearsdemandfortraditionaldairyproducts(i.e.withoutartificialflavours)hasincreasedby20-30%peryear.Allthepeopleinterviewedstatedthatthereisanewtrendinconsumptionpatterns.Consumersarepayingmoreattentiontodairyproductquality.Oneoftherespondentssaid:‘before,consumerswantedtobuyyellowcheese,nowtheywanttobuy,forexampleGouda,andmoreoftenthannottheywanttobuyGoudafromagivendairyprocessor’.Consumersalsolookforfreshproducts,andhavestartedtoavoiddairyproductswithdistantexpirydates.Inaddition,regionalproductshavebecomemorepopular(eveninsomesuper-andhyper-marketchains).Accordingtothoseinterviewed,thiscouldbeamarketoutletforsmalldairyprocessors.Itmightbeworthnotingherethat,includingproductsmadeofgoatandsheepmilk,currentlythereare37traditionaldairyproductsofficiallyrecognisedbytheMinistryofAgricultureandRuralDevelopment.

Dairy farms and dairy processors

Dairy farms

Asnotedabove,asignificantdecreaseinnumberofhouseholdshavingcowswasobservedinPolandsincethebeginningoftransitionperiod.However,thiswasnottheonlyremarkablefeaturecharacterisinglocaldairyfarms.Farmsthatdecidedtostayinmilkproductionspecialisedandmodernised,andinhouseholdshavingcows,dairyproductiondominatedotheragriculturalactivities.Accordingtotheexpertsinterviewed,milkproductionhasrecentlybecomethemainagriculturalactivityinbothsurveyedregions.Althoughmilkproductionhasalongtradition,especiallyinPodlaskie,householdstendedtohavediversifiedagriculturalactivities,includingpigandsheepfarming,andgrowingoftobacco.Today,localfarmersspecialiseinmilkproduction.Intheopinionofourrespondentsthisholdstrueforbothsmallandlargeproducers,butsmall-scaleproducersalsoneedtocombineearningsfromfarmingwithsomeothernon-agriculturalincome,whilelargefarmerscanrelyonagriculturalincomealone.Accordingtoourrespondents,thereareseveralreasonsbehindthespecialisationinmilkproduction.First,thedairyindustryisoneofthefewprocessingindustriesintheseregionsthatsurvivedthetransformationtoamarketeconomy.Second,aftershuttingdownruralcollectionpointsduring1990s,theoutletsforagriculturalproductsotherthanmilkweresignificantlyreduced.Third,farmswithmixedproductionneedaccesstomachinesforspecificworkinthefieldsuchasploughingandharvesting.Thecollapseofcommunismresultedintheliquidationofmanyfarmers’organisationsthathadprovidedsuchservices,sotodaymixedproductionrequiresasubstantialinvestmentinmachines,whichonlyafewfarmerscanafford.Finally,theincreaseinbothinternalandexternalcompetitionforcedfarmerstolookforthemostefficientuseoftheirresources.Boththeseregionshaverelativelypoorqualitylandmoresuitedforgrassland,andhencemilkproduction,thantocropproduction.


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Dairy processors

Improvementsinthequalityandrangeofthefinalproductsandtheimprovementinthequalityofrawmilkwerethetwomainchangesintheprocessingsectoroverthepast10years.Theneedforconcentrationintheindustrywasalsoacknowledgedandthishasbeenparticularlyimportantduringthepast5-6years.Thenumberofprocessorsdecreasedinthelastdecadebyabout30%,andin2007amountedto232dairies(IERiGŻ,2005).Largedairycompanieswereoftentheinitiatorsofthisconsolidationprocess.Furthermore,importantchangesoccurredintheprofitabilityofthesectoratthetimeof,andintheperiodfollowing,theaccessionprocess.Afterbeingsomewhatmodestin1990s,profitabilityincreasedintheyearofEUaccession,asaresultofincreasedexportdemandandagoodEuro/Zlotyexchangerate.However,inthefollowingyearsthelevelofprofitabilityprogressivelydecreasedduetoincreasingrawmilkpricesandanincreaseinproductioncosts.Increasedcompetitioninthedairymarketforceddairyprocessorstowardsproductspecialisation.Inlargecompanies,thistakestheformofdividingproductionamongparticulardairyplants,whichallowsthemtoprovideconsumerswithawiderangeofproductstomeetcurrentdemand.Smallerprocessors,withalessdevelopedmarketingsystemandpooreraccesstofunds,havelimitedpossibilitiestointroduceinnovations,andthuscannotquicklyadjusttoconsumer(orretail)requirements.Therefore,notbeingabletocompetewithlargercompaniesintermsofsizeofdeliveriesorvarietyofproducts,smallercompaniesmustfindtheirownnicheandproduceuniqueproductsorproductsforfurtherprocessing,suchasskimmedmilkpowder(SMP).Somesmallprocessorsspecialiseinexports.Intheopinionofbothexpertsandsegmentrepresentatives,themostsignificantfactorsinfluencingchangesintheprocessingindustrywere:(1)thetransitionperiod,whichinfluencedthesituationmainlyinthe1990s,(2)thepre-accessionprocess,whichstartedin19988,and(3)integrationintotheEU.Alltheseaspectsrequiredsignificantadjustmentsforinstitutionsandpolicies.Thenecessarylegaladjustmentswerealsointroduced,andsupportprogrammesforprocessorsandproducerswerelaunchedtoassisttheminmeetingconsumerqualityrequirements.Respondentsalsomentionedthatthetransformationoftheretailsector(togetherwithitsinternationalisationandconsolidation)wasanimportantfactor.Retailexpansionopenednewoutletsfordairyproducts,butatthesametimeimposednewrequirementondairies.Difficultiesanddevelopmentconstraintsattheprocessinglevelareimportant,notonlyfordairies,butalsoforproducersdeliveringrawproducts.Forproducers,thedairyplantisthemostimportantsegmentofthemarketchain.Itwasobservedthatdairyprocessorsnotonlyplaytheroleofmilkpurchaser,butalsoassistinfarmdevelopment,forinstance,byorganisingtraineeshipsorprovidingshort-termloans.Inthiscontext,dairyprocessorscouldbeseenasoneofthemaindriversstimulatingrestructuringatthefarmlevel.Accordingtorespondents,themainproblemsprocessorsfacewhencompetingonthemarketcanbedividedintotwogroups:(1)barriersarisingfromthelegalregulations,and(2)barriersrelatedtotheloweconomicefficiencyofcompanies.Themilkquotasystemisthemostfrequently-mentionedlegalbarrier,bothforthemilkprocessorsandforproducers.Themainproblemswithmilkquotasaretheproduction9ceilingandregionalquotatradingrestrictions.Thequotaisallowedtobetradedonlybetweenfarmerswhohavetheir

8DespitethefactthatthePolishpre-accessionagreementwassignedin1994,themostsignificantarrangementsconcerningmilkmarketregulationtookeffectattheendof1990s.Therefore,restructuringthedairysectorbecamemoreimportant.9Deliveriestoprocessingplantsduringthefirstmilkquotayear(2004/2005)were13%lowerthanquotaassigned.However,duetorapiddevelopmentofmarketedmilkproductionthemilkquotain2005/2006wasexceeded.In2006/2007and2007/2008milkquotawasusedinca.97%.Itshouldbenotedthoughthatintheregionsstudiedmilkquotawasexceededandthereforetheimportanceofthisfactoractingasabarriertofurtherrestructuringisrelativelyhigherthaninotherregions.


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holdinginthesameadministrativeregion.Thisresultsinhighquotapricesindairydevelopingregionsandinhibitstherestructuringofmilkproduction.Theothergroupofbarriersrelatestofactorsinfluencingtheloweconomicefficiencyofdairyprocessing.Themainconstraintshereare:• aweakpositioninthechain(exceptforthelargestcompanies)beingsqueezedbetweenproducers’

pressure(especiallythosewithlargedeliveries)forhighmilkpricesandretailpressureforcheapproducts;

• thepoormanagementskillsandloweducationallevelofdairyemployees(especiallyindairyco-operatives);

• lowlabourefficiency,whichnegativelyaffectsdairies’comparativeadvantage;• thelowlevelofconsumptionduelowincomesresultinginpeoplebeingunabletoaffordexpensive

dairyproducts.Smallerdairyprocessorsespeciallyhavetocompeteonthelocalmarketsbyloweringprices.Thisisextremelydifficultwhentheprocessingmarginislow.

Someexpertshavealsosaidthatasignificantbarriertodevelopmentoftheprocessingsectoristheformofco-operativeownership10.Unclear,disaggregatedownershiprightsresultinmoredifficultmanagementandamorecomplicateddecision-makingprocess.Someexpertsmentionedthattheproblemliesintheco-operativelaw,whichhampersflexiblemanagementandrestructuringofdairyco-operatives.Thisformofownershipdominatesandin2005wasresponsiblefor80%ofprocessedmilkand70%ofsalesvalue(IERiGŻ,2005).Large-scaleprocessorsusuallylooktodelivertheirproductstosupermarkets/hypermarkets,wheretheycansupplyalargevolumeofproduce.Forthoseprocessors,large-scaleretailersarealsomorestablepartnersthanwholesalers,buttheydictatestrictertradeconditionsandnegotiatelowerprices.Theimportanceofthelargeretailchannelhasprogressivelyincreasedsincetheendof1990s,whenthedominantformwaswholesale,localcooperativechainsandindependentshops.However,accordingtoourexperts,onlyabout5%ofmilkproduceischannelledthroughsupermarketsandhypermarkets,althoughforfreshmilkproducts(yoghurts),specialcheesesandUHTmilk,itreaches20%.Accordingtoourresearchinbothregions,largedairiessellfrom30%to60%oftheirproductstolargeretailchains,35-50%ischannelledthroughthewholesalesegment,andabout5%isdeliveredtolocalchainsorindependentshops.Forsmalldairiesaswellasindependentshops,thewholesalesegmentisdominantshareofsales.Smallerdairiesusuallyhaveaninsufficientscaleofproductiontodelivertosupermarkets/hypermarkets.ItshouldbenotedthatthePolishdairyprocessingsectorisexceptionalcomparedtoitscounterpartsinothercountriesintheregionregardingtheroleplayedbyforeigncompanies.IncontrasttothesituationcommonlyobservedinotherCentralandEasternEuropeancountries,dairyprocessinginPolandisdominatedbydomesticenterprises.Theimportanceofforeigncompaniesonthemarketismoderatethoughitneedstobestressedthattheirpresencehasindirectlycontributedtotherestructuringprocessbyforcingdomesticcompaniestomaintaincompetitiveness(DriesandSwinnen,2004).

Determinants and benefits of dairy farms’ modernisation

Models

Inordertofurtherexploretheissueofdairyfarmmodernisation,thefollowingsectionhighlightsthemainfactorsstimulatingtherestructuringprocessatfarmlevelandassessesthebenefitsofmodernisation.TheresultspresentedbelowarebasedonthefindingsofMilczarek-Andrzejewskaet�al.(2007).

10Itshouldbenotedhowever,thatthelargestdairycompaniesinPolandaredomesticco-operatives.


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Oneoftheremarkablefeaturesofthedairysectorrestructuringwastheevolutionofthemodernmarketingchannel.Traditionally,milkwasdeliveredbyfarmerstocollectionpointsandlatercollectedbydairies.Inthemodernmarketingchannel,milkiscollecteddirectlyfromthecoolingtankatthefarmbyadairytruck.Obviously,joiningthemodernchannelrequiredconsiderableinvestmentsformodernisationatfarmlevel(buyingacoolingtank,expandingtheherdsizetoincreasescaleofproductionandinvestmentstobecomeprofitable).Itisinterestingthereforetoinvestigatewhichfactorswerecrucialindeterminingfarms’capabilitiestomoderniseandadjusttomodernchannelrequirements.Second,itisofimportancetocheckwhetherjoiningthemodernmarketingchannel,andthusundertakingthemodernisationeffort,wasbeneficialtofarmers.Inordertodoso,theincomesituationofmodernchannelfarmersiscomparedwiththatoftraditionalchannelfarmers.Thesecomparativeanalysesareexposedtotwokindsofproblems.First,duetothefactthatthephenomenaunderexaminationarelikelytobeinterdependent,itisdifficulttodistinguishbetweencauseandeffect.Toillustratethis,itcanbearguedthataccesstofinancialcapitalfacilitatesfarmmodernisation,butitcanalsobearguedthatfarmmodernisationmayfacilitateaccesstoexternalfundsthroughitspositiveimpactonfarmcreditworthiness.Similarly,onemayarguethatfarmmodernisationpositivelyaffectsfarmrevenuesbutitwouldbedifficulttoarguethattheoppositedoesnotalsohold.Tosolvethis‘interdependenceproblem’,retrospectivedataareusedtodefineexplanatoryvariables.Forexample,followingthedecisiontomoderniseafter2001,thefarmincomesituationin2006isexplainedbypastdata(gatheredfor2001).Bydoingthis,causeandeffectcanbemoreeasilydistinguished.Thesecondproblemreferstotheso-calledendogeneityproblem.Thisstemsfromthefactthatbothexplanatoryandexplainedvariablescouldbecorrelatedwithunobservedfactors.Inthiscasetheuseofstandardeconometrictechniquessuchasordinaryleastsquares(OLS)isinadequate.Toavoidpotentialproblems,aninstrumentalvariableapproachwasadopted(AngristandKrueger,2001).Threeinstrumentswereusednamelydistancetotheclosestdairy,distancetotheclosestcollectionpoint,andshareofsurveyedfarmsingivenregion11havingacoolingtank.Theassessmentofthedeterminantsforjoiningamodernmarketingchannelwascarriedoutusingasimpleprobitmodel.Themodelassessingtheimpactofmodernisationonfarmrevenueswascomposedoftwosteps.First,theprobabilityofbelongingtothemodernchannelwasestimated.Second,itwasthenusedinthemodelassessingdeterminantsoffarmrevenuesasanexplanatoryvariable(MODERN).TheresultsoftheformermodelarepresentedinTable3,column1,whereastheresultsofthelattermodel(secondstepOLS)arepresentedinTable3,column2.Inbothmodelsthesamenumberofexplanatoryvariableswasused.Variablesaimedatcapturingtheimpactofincentivesfacedbyfarmersincludedaccesstounearnedincome,off-farmjobandcredit.Theyalsoincludedummyvariablesforfarmsthatexperienceddelaysinpaymentfromthedairyandforrefusalofmilkbythedairyduetopoorquality.Farmcharacteristicsincludedphysicalcapitalresourcesnamelyassetsandothermachineryspecifictodairyproduction,herdsize,annualmilkyieldpercowandlandresources(ownedandrented).Householdcharacteristicsincludedageandeducationofthehouseholdhead,labourresources,dummiesindicatingfarmscooperatingwithotherhouseholdsand/orfarmsdeliveringtocooperative,aswellasvariablesapproximatingthefarmer’sattitudetowardsriskandhispropensitytoleavefarming.12Finally,localshiftersaimedatcapturing

11RegionconsideredhereisGmina,NUTS5accordingtotheEuropeanUnionclassification.12Riskvariablestookvaluesfromzerototwo,withzerodenotingriskaversefarmers,onedenotingriskneutralfarmersandtwodenotingrisklovers.Valueswereassignedbasedonthefollowingquestion:‘Providedthattherearenocostsofchangingthedairyyouarecurrentlysupplying,wouldyouchangeittosupplyanotherdairyoffering20%higherprice,havingnoguaranteethatthishigherpricewillholdinthefuture?’.Farmersanswering‘yes’wereclassifiedasrisklovers,thoseanswering‘donotknow’asriskneutralandthoseanswering‘no’asriskaverse.Propensitytoleavefarming,ontheotherhand,wasadichotomousvariableequaltooneifafarmerwouldleaveagriculturehavinganopportunitytofindoff-farmemploymentwiththesameremunerationandzerootherwise.


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theeffectoffarm’slocation,i.e.theregionwhereitislocatedaswellastheextentofdevelopmentofdairyfarmsinitscloserneighbourhood.

Results

Theresultspresenteddrawon323observations,ofwhich218belongedin2006tothemodern,and105tothetraditional,marketingchannels.First,determinantsofmarketchannelchoicearediscussed,followedbyadescriptionofbenefitsofjoiningthemodernmarketingchannel.

Determinants�of�joining�a�modern�marketing�channel

SeveralinterestinginsightscanbeobtainedfromthefiguresinTable3,column1.First,thepositiveandhighlysignificantimpactofCREDITclearlyshowsthataccesstoexternalfundsappearstobedecisiveforkeepingupwithdemandsofthemarketandofdairyenterprises.TheimportanceofexternalfinancialsourcesisfurtherstrengthenedbynonsignificantimpactofOFF-FARMJOBandLABOUR.Thelatterobservationscouldbeindicativeoftwothings.Theymayindicatethatoff-farmjobsaremainlylow-skilledjobs,andthusprovideonlylimitedremuneration,ortheycouldbeindicativeofinefficientuseoflabourresourcesinagriculture.Itisinterestingtonotethatthemarketchannelchoiceappearstobeunaffectedbyinitialphysicalnorlandresources.Onemayarguetherefore,thatbeingrelativelybackwardintermsofphysicalcapitalwasnotpreventingfarmsfromjoiningthemodernchannel.Itneedstobenotedthoughthatthedecisiontoshifttothemodernchannelwassignificantlydependentonhavinglargeherdsandhavingcowbreedsofbetterqualityintermsofmilkyields.AnotherresultworthnotinghereisthenegativeandstatisticallysignificanteffectofCOOPERATION.Thistendstoindicatethatpotentialcostsofremaininginthetraditionalchannel(e.g.lowerprice,higherriskofmilkrefusals,lowerqualitypremiums)maybeoutweighedbybenefitscreatedbycooperation.Thisresultisallthemoreinterestingasitsuggeststhatfarmers’collaboration,commonlyrecommendedasatoolhavinggreatpotentialforstimulatingfurtherrestructuring,doesnotnecessarilyhavethesedesiredeffects.

Effects�of�joining�the�modern�channel�

EstimatesofthemodelassessingdeterminantsoffarmrevenuesarereportedinTable3,column2.Mostimportantly,theresultsprovidestrongevidencethatinclusioninthemodernmarketingchannelcontributestoconsiderableimprovementinfarmfinances.ThisisclearlyindicatedbythepositiveandstatisticallysignificantcoefficientofthevariableMODERN.Thisresultconcurswiththeoreticalpredictionsaswellaswithresultsofotherstudiesexaminingrestructuringoftheagrifoodsupplychain(e.g.Swinnenet�al.,2006;WhiteandGorton,2005).Theeffectofbelongingtothemodernchannelholdsregardlessofherdsize.Therefore,inclusioninthemodernmarketingchannelappearstobebeneficialnotonlyforthelargestfarms,assuggestedbythepositiveandstatisticallysignificantimpactofHERD,butalsoforfarmsofmediumandsmallersize.However,thesituationinthisrespectisslightlydifferentforthesmallestfarmers,withfewerthanfivecows,forwhomjoiningthemodernchannelhasbeenonaverageslightlylessbeneficial.Notsurprisingly,farmrevenuesarepositivelycorrelatedwithmilkyieldsandherdsize.InterestinginsightsareprovidedfromtheanalysisofREFUSALandOFF-FARMJOB,bothofwhichentertheestimatedequationwithnegativesigns.Theformerfindingisasexpectedandreflectsthefactthatfarmshavingproblemswithsatisfyingqualitystandardshadonlylimitedopportunitiestogrow.Thelatterobservation,ontheotherhand,deservesmoreattentionsinceitmightappearcounterintuitive.Inallnormalcases,accesstooff-farmjobopportunitiesisexpectedtopositivelyaffectfarmrevenues.


162

Table 3.Factorsaffectingtheprobabilityofbelongingtoamodernmarketingchannel(MMC)anddeterminantsoffarmrevenues.

ProbitwithweightsDependentvariable:Marketchannelchoicein2006(1=modern,0=traditional)

OrdinaryLeastSquares(OLS)withweightsDependentvariable:Naturallogarithmoffarmrevenuesin2006

MarketchannelchoiceMODERN 0.236***

IncentivesUNEARNEDINCOME2001 -0.613** -0.067OFF-FARMJOB2001 0.084 -0.089**REFUSAL2001 -0.143 -0.069*DELAYS2001 0.364 0.018CREDIT2001 1.925*** 0.007

FarmsizeandassetsASSETSSPECIFIC2001 -0.082 -0.017ASSETSMACHINERY2001 -0.011 0.021HERD2001 0.328*** 0.012***YIELDS2001 0.001*** 0.000**FARMREVENUES2001 0.498***LANDOWNED2001 -0.008 0.004LANDLEASED2001 0.039 -0.001

HouseholdcharacteristicsAGE2006 -0.029 -0.002EXPERIENCE2006 0.032** -0.002EDUCATION -0.273 0.021LABOUR2006 -0.046 -0.005COOPERATION2001 -1.121** -0.096*OWNERSHIPCOOPERATIVE2001 0.170 -0.017RISK 0.497 0.035LEAVE -0.085 0.047

LocalshiftersNEIGHBOURSMAJORITY -1.120** 0.223NEIGHBOURSFEW -1.095** 0.350*PODLASKIE 0.227 0.133

InstrumentalVariablesDISTANCE_DAIRY_2006 -0.012DISTANCE_POINT_2006 0.339**COOLING_TANK_2001 3.414*

Constant -5.033* 4.873***Observations 323 322R-squared 0.805***,**,*denote1%,5%and10%significancelevelrespectively.Source:Authors’farmhouseholdssurvey,2007.


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However,itisreasonabletoassumethattherurallabourmarketinPolandisheavilybiasedtowardsagriculturalemployment.Underthesecircumstances,undertakingoff-farmworkmightbeanexpressionofseekinganyavailableemploymentinordertomakeendsmeet,ratherthanhavingastableandrewardingjob.Thishypothesisfindssupportinthenegativeandstatisticallysignificantcorrelationbetweenthelevelof2001farmrevenuesandaccesstooff-farmactivities.Interestinglynoneofthevariablesaimedatcapturingtheeffectofhumancapitalappearedtobestatisticallysignificant.Thefollowingaspectsshouldalsobementionedregardingtheeffectsofjoiningthemodernchannel.Comparinghouseholdsalwaysinthemodernchannel(MMC)withthosesupplyingthetraditionalmarketingchannel(TMC)andthosewhomadetheswitchfromTMCtoMMCatsomepointafter2001(CHANGED)revealedseveralinterestingfacts(Table4).First, theaveragegrowthofagriculturalrevenuepercapita(2001-2006)incaseofMMCandCHANGEDfarmerswasca.40%higherthanthatobservedforTMCfarmers.Similardifferenceswerenoticedwithrespecttogrowthratesofrevenuesobtainedfrommilksales.RemarkablealsoisthefactthattheincreaseinherdsizeintheclassCHANGEDwasalmostthreetimesgreaterthanthatobservedforTMC(ca.52%inCHANGEDvs.ca.18%inTMC).Itisworthnotingthat,althoughmilkyieldspercowweregrowingataboutthesamerateinallgroups,outputpercowinMMCandCHANGEDwasca.1000lhigherthaninTMC.Thesedifferenceswerealsoreflectedindifferencesinthemilkpricesobtainedbydifferentgroups.TheaveragemilkpriceincreaseincaseoffarmerswhoenteredMMCwasroughly36%whereasincaseofTMCfarmersitwasonly26%.Theotherstrikingdifferencebetweenthegroupsrelatestothelevelofspecialisationinmilkproduction.WhiletheshareofspecialisedfarmsdecreasedinTMC,itincreasedbyover50%inCHANGED,andby17%inMMC.ItcanthenbeconcludedthatoneofthemostimportantoutcomesofjoiningMMCisspecialisationinmilkproduction.However,thisismainlytrueforlargefarms.

Table 4.Farmdevelopmentasaffectedbythemarketingchannelsupplied.

TMC CHANGED MMC2001 2006 Increase

%2001 2006 Increase

%2001 2006 Increase

%1 Agriculturalrevenuepercapita[PLN]

10,240 16,317 59.3 14,874 30,027 101.9 19,306 37,794 95.8

2 Milksalesrevenue[PLN]

18,676 32,022 71.5 34,152 85,249 149.6 72,306 13,7218 89.8

3 Herdsize[head] 7.9 9.3 17.7 11.1 16.9 52.3 17.9 23.3 30.24 Yields[l/cows] 3,480 3,901 12.1 4,272 4,844 13.4 4,676 5,252 12.35 Averagemilkprice[PLN/100/l]

70.3 88.4 25.7 73.3 99.4 35.6 80.7 100.1 24.0

6 Specialisedinmilkproduction1[%]

47.3 42.4 -10.4 44.0 66.9 52.0 74.9 87.6 17.0

1Milkrevenue>60%oftotal.Reportednumbersareweightedaverages.Source:Authors’farmhouseholdssurvey2007.


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Onlyabout5%ofallfarmsdeliveringtoMMCandspecialisinginmilkproductionhadlessthan10cowsin2006.

Conclusions

Inresponsetothedynamicandthoroughtransformationswhichhaveoccurred,andstillaretakingplace,inthePolishdairysector,thispaperhashighlightedthemaindevelopmentsthatwereobservedduringthepastdecade.Moreover,itanalyseddeterminantsofthechoiceofmarketingchannelamonglocaldairyfarmsandinvestigatedthepossibleimpactsofthischoiceonfarmers’financialsituationandbehaviour.Themainconclusionsdrawnfromthisanalysiscouldbesummarisedasfollows.RestructuringofthePolishdairysectorwascharacterisedbyamarketdecreaseinthenumberofdairyfarms,adecreaseinthenumberofdairyprocessingcompanies,andhugeimprovementsinmilkqualityandefficiencyofmilkproduction.Aremarkablephenomenonobservedwastheevolutionofthemodernmarketingchannel,throughwhichmilkisdeliveredfromfarmstodairyprocessors.Enteringthemodernmarketingchannelseemstobeconditionedbyexogenousratherthanendogenousfactors.Accesstofundstopayforthenecessaryadjustmentsisthecriticalfactor,ratherthanhumancapitalorhouseholds’initialphysical-capitalresources.Giventhatfarmfinancialcapitalresourcesarelimited,themarketing-channelchoiceiscruciallydependentonhavingaccesstoexternalfunds.Enteringthemodernmarketingchannelisfacilitatedbyhavingherdsoflargersizeandimprovedbreeds.Nosystematicevidenceforsmallfarmsbeingexcludedfromthemodernchannelwasfound,althoughitseemsthatthesmallestfarms(withfewerthanfivecows)aremarginalisedthroughhavingnoaccesstoexternalfunds,eitherfromabankorfromadairy.Joiningthemodernmarketingchannelpositivelyaffectsthefarmfinancialsituation.Thiseffecthasbeenfoundforallfarmsregardlessoftheirsize.Forthesmallestones,however,theimpactisoflessermagnitude.Inthiscontext,furtherrestructuringshouldbeencouragedsinceitnotonlyimprovesaveragefarmwelfarebutalsohaspotentialtoreducetheincidenceofruralpoverty.Sincethenecessaryadjustmentsobviouslyrequiresubstantialinvestments,thereisaneedtobroadenfarmaccesstoexternalfunding.Thisisespeciallyimportantfortheverysmallproducers.Inthisconnection,ratherthanlump-sumtransfers,microcreditprogrammeswouldprovidefarmerswithappropriateincentivestousealoanefficiently,andshouldbefacilitated.Changingthemarketingchannelalsoinfluencesfarmlevelofspecialisation.Farmsdeliveringtothemodernchanneltendtoconcentrateonmilkproduction.However,thesearemostlylargerfarms(havingmorethan10cows).Smallfarmersandthosewhoremainedinthetraditionalchanneltendtosearchforoff-farmsourcesofincome.Apparently,thisstrategydoesnotallowthemtoreachthelevelofrevenuesenjoyedbylargerfarms.Therefore,thereisastrongneedfordevelopmentofnon-agriculturalincomeopportunitiesinruralareasinordertoimprovewelfareofthesmallestfarmsandtoencourageandenablelessefficientfarmerstoquitmilkproduction.

Acknowledgements

ThispaperisbasedontheresultsobtainedintheRegoverningMarketsproject.Formoreinformationseethewebsite:www.regoverning.markets.org.AuthorswouldliketothankJerzyWilkin,LiesbethDries,CsabaCsaki,JikunHuang,TomReardonandallparticipantsoftheseminarsinWarsawforhelpfulcommentsandvaluablesuggestions.

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Cattle sector and dairy chain developments in Kazakhstan, Kyrgyzstan and Uzbekistan

T.�Karymsakov1,�A.�Svitoys2�and�K.�Elemesov3�

1Scientific�Industrial�Center�of�Animal�Production�and�Veterinary,�Department�of�Dairy�Cattle�Breeding,�O.�Zandosov�street�51,�050035�Almaty,�Kazakhstan;�[email protected];�2Baltic�Foundation,�S.�Konarskio�str.�49,�03123,�Vilnius,�Lithuania;�3Kazakhstan�Association�of�Animal�Production,�Astana,�Kazakhstan

Abstract

Inthelast18yearsthereformsintheagriculturalsectorsinthethreecountriesaredescribed.Thereweremanybasicchangesthattookplace.Intheyearsofeconomictransformation,thesocialistagriculturalenterprisesraisingscheduledbreedsofcattleweretransformedintovariousformsofprivateenterprises.Thisresultedinthedispersaloflivestocktoindividuals,andonlyinthosecaseswhereherdsaretransferredcollectivelytoprivatepropertywasahighconcentrationoflivestockmaintained.Inlateryears,withadaptationtothemarketeconomyandrigidcompetitionbetweenproducers,someunitsgraduallyincreasedtheirnumbersoflivestock,improvedtheefficiencyofmanagementoftheherds,andincreasedtheirprofitability.Thenumberoflivestockgraduallyincreasedandwillsoonreachthesamelevelasinthehighestyearof1991.Totaloutputofmilkhasalreadyexceededtheearlierhighestlevelwith10.23t.Theincreaseinproductioninrecentyearsisconnectedwithanincreaseinefficiencyofcowsinallcategoriesoffarms.Theincreaseinproductionisalsoduetotheuseofsemenfrombulls,whichareimprovedbyforeigngenetics,leadingtoanincreaseinmilkyieldpercow.Thisway,newbreeds,typesandlinesofcattleareemerging.Followingtheprivatisationofthestatefarmsnoeffectivebreedingprogrammewasretained.Upto70-80%ofthestatefarmshavebecomeoutdatedinmechanisationandthetechnicalequipmentispoorasisthequalityoftheforagereserves.Inthiscontext,ineachcountry,stateprogramsarecarriedoutwiththeobjectiveof(1)creatingastationforartificialinseminationineacharea;(2)trainingyoungexpertsinanimalbreeding;(3)improvingthepedigreestructureofcattleinhouseholdfacilities;(4)managingthebreedingaccountonapersonalcomputer;(5)modernisingtechnicalequipmentandmilkingmachines;(6)modernisingfactoriesforprocessingmilk;(7)increasingfinanceforthesupportanddevelopmentofagrarianandindustrialenterprises;(8)decreasingthevalueaddedtax(VAT)onimportedbreedingcattle;(9)givingspecialequipmentonlease;and(10)givinglong-termcredit.

Keywords:�state�programs,�livestock�population,�milk�production,�animal�breeding

Introduction

Asiswellknown,somerepublicsofCentralAsia(Kazakhstan,KyrgyzstanandUzbekistan)werepartoftheSovietUnionwhereallagriculturalconcerns,includinganimalproductionhadthestatemarketsystem.Inthesethreecountries,asinallSocialistRepublics,agriculturewasoperatedwithinthestatesysteminKolkhozandSovkhoz.BothKolkhozesandSovkhozeswereinvolvedinbreedingfarmanimals,includingcattle,whichwerebredonthebasisofscientificselectionwithaviewtoincreasingproduction.Thishasledtothedevelopmentofnewdomesticbreedsandadifferentdirectionofproduction.Inthemiddleoflastcenturyinthethreerepublics,morespecialisedcattlebreedsemergedfromcrossbreedinglocalanimalswithmoreproductivebreeds.Theseincluded2dairybreeds,3dairyandmeatbreeds,and5breedsspecialisedformeatproduction.


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In1991,thepopulationofcattleinthesethreerepublicsreached15.5m,comprising4.6minUzbekistan,1.2minKyrgyzstanand9.8minKazakhstan.However,afterindependencethepopulationofcattlesharplydeclined.Thiswasconnectedwiththereorganisationofallagriculturalstatesystemsandsomekolkhozesandsovkhozes,becauseoftransitionfromstateownershipintoprivateownership.Afterthis,herdswithahighnumberoflivestockand85-90%oftheindustrial-technologicalcattleholdingswereliquidated.However,someanimalsweretransferredtocollectiveandco-operativefarmswhereeveryonewhohadtheproperty,hadbeenentrustedwithonehead.Afterthis,thesefarmsexperiencedaverycomplexprocessoftransitiontoamarketsystem,resultinginariseinpopulationofcattleandanincreaseincattleproduction.AsummaryofthechangesincattlenumbersandmilkproductionisshowninTable1.Thetrendtowardsanincreaseinthecattlepopulationandthetotaloutputfromcattleinthethreecountrieswasfirstobservedattheendof20thcentury.Ineachrepublic,raisingofcattlewasbasedonacertainconceptionandincreasingeconomicexpectations.

Kyrgyzstan

CattleraisingintheRepublicofKyrgyzstanisoneofthemainbranchesofagricultureItrepresents60%ofgrossoutputoftheanimalindustries.Raisingofcattleisfavouredbygoodclimaticconditionsandsocialfactors.Itoccurson83%offarmland,ofwhich9.6millionhaisinnaturalpastures.Cattlebreedingisoneofthemainbranchesofanimalproduction.Intherepublic,twobreedsofcattlenamelyAlatauandAulietinscexist,andinthehighmountainsyakspredominate.TheAlataubreedrepresentsthedairy-meattypeandwasapprovedin1950.Inhighmountainconditions,thisbreedsurpassesthelocalKirghizcattleondairyandmeatproduction.Nowadays,itisraisedinallregionsoftherepublic.TheAulietinscbreedisadairybreedandwasestablishedasanindependentbreedin1974.ItwasformedbycrossinglocalcattlewithbullsofaDutchbreed.Yaksareraisedinhighmountainousareaswhichareunsuitedtootherkindsoffarmanimals.Thelocalpopulationhasbeenengagedintheraisingofyaksforalongtime,butrecentlythenumbersofyakshasdecreased.Afterindependence,thenumberofyaksdecreasedby39,000intheperiod1991to2000.However,since2001thepopulationhasgraduallyincreasedagain,andin2007ithadgrownby6,100toatotalof22,400animals(Figure1).AscanbeseeninFigure1,thepopulationofcattledeclinedby3.14mfrom1991to1996.From1997on,atendencytowardsanincreasewasobservedandby2007,thepopulationofcattlewas1.21mhead.Milkproductionfellto251,400tintheperiod1991to1996,butfrom1997to2000,milkvolumeincreasedby169,000tandbythenhadreached1.06mt.From2001to2007,volumeincreasedby149,500tandhasnowreached1.21m(Figure2).Thismeansthatthecountryhasextraproductionincomparisonwith1991by42,000t.Theincreaseofmilkproductionhasoccurred,notfromincreases

Table 1.Cattlenumbersandmilkproductionfor1991,2000and2007inKazakhstanан,UzbekistanandKyrgyzstan.

1991 2000 2007Populationofcattle(m) 15.53 10.47 13.89Milkproduction(mt) 9.73 8.36 10.75


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inproductionpercow,butbecauseofanincreaseinthepopulationofcows.Theaveragemilkyieldpercowremainsratherlowat2,118kg.Therearemorethan183farmsinvolvedintheproductionoffarmanimals,including65breedingfarmsforcattleand7foryak.Atthepresentstageofbreedingdevelopmentthemaintaskisimprovingexistingbreeds.TherearetwostatebreedingfarmsfortheAlataubreedandfourfarmerbreedingenterprisesfortheAlatauandHolstein-Friesianbreeds(Figure3).AscanbeseenfromFigure3,thedistributionofbreedingenterprisesshowsthatthemainoperatorspreferbreedingofhighlyproductivecattleformilkandmeatproduction.Now,cattlebreedingisimprovingwiththeassistanceofworkcarriedoutbytheCentralAsianbreedingservice,LTD,whichwascreatedwithsupportfromtheKyrgyz-Swedishagricultureproject‘Helvitos’.Today,30cattlebreedingfacilitiesareoperatingaprogramofgeneticimprovementofqualityofcattleandallareprovidedwithsemenfromSwedishcompanies.Inthelongterm,thedevelopmentoftheanimalindustriesshouldfocusespeciallyonmeatanddairycattlebreeding.

1190

518.8

55.3

876.1

459.9

22.7

1062.6

523.8

16.3

1212.1

584.9

22.40

200400600800

1,0001,2001,400

7002000269911991

Cattle

Cows

Yak

Figure 1.Changeinpopulationofcattlefrom1991to2007(×1000head).

0200400600800

1,0001,2001,400

7002000269911991

Figure 2.Changeinthemilkproductionvolumefrom1991to2007(t).

65

7

48

8

38

512

0

10

20

30

40

50

60

70

Cattle Yak Sheep Goat Horse Poultry Combined

Figure 3.Numberofmanagemententerprisesforvariousfarmanimalspecies.


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Uzbekistan

IntheRepublicofUzbekistan,onthemountainandfoothillzones,thereisenoughpastureforprofitablerearingofcattleasitdoesnotincuranycostsotherthanpasture.Inthesezonestherearemanydifferentbreedsandsystemsofcattleproduction:Black-Motley,RedSteppe,Swiss,Bushu,Santa-Gertruda,aswellaslow-producinglocalbreeds.From1991to1995,ascomparedwithotherformersocialistcountries,thepopulationofcattledidnotdecrease,butinfactincreased(Figure4).From1990to1995,thecattlepopulationincreasedby920,000,butfrom1996to2000,itdeclinedby200,000.Thiswasassociatedwithlowproductivityandinadequateforagereserves.From2001onwards,thetrendwasforanincreaseofpopulationeachyearuntil2007whenthepopulationofcattlewas6.82m.Suchahighrateofgrowthincattlenumberswasassociatedwiththeattentiongiventothedevelopmentofpersonnel,andfarmswereamajorfactorinthegrowthofemploymentforthepopulation.Therewereincreasesinincomesandaswholeinthestandardofliving,resultinginasteadysaturationofhomemarketbyvitalfoodstuffssuchasmeat,milkandmanyothers.Specialattentioninthiscontextwasgiventostimulatingincreasesinthepopulationofcattle.Itislegislativelydetermined,thatpeoplewhoraisecattleinapersonalcapacity,andonfarms,qualifyforawork-recordcardandapension.Forthepurchaseofhighlyproductivecattlebythepopulationandleadingfarmenterprisestherewasanexpansionofcreditfacilitiesbybanks,and‘Fundofassistanceofemployment’isaccepted.Realisationoftheacceptedmeasureswillleadtoalivestockpopulationin2010of8.6m,resultinginaconsiderableincreaseinthenumberofthepersonsinvolvedincattleproduction.Thiswillenhancetheleveloftheirmaterialwell-being.

Kazakhstan

TheRepublicofKazakhstanhashugeterritory,differentnaturallandscapesanddifferentclimates.Therepublicisrichinsteppes,densewoods,mountaintops,desertsandsemideserts.Inthiscontextlocalcattlebreedsareraisedwhichareadaptedtothenaturalandclimaticconditions.Thereare5mainlymeatproducingbreedsand4milkplusmeatproducingbreeds.Themeatbreedsare:Auliakol,Kazakh-wait-head,Santa-Gertruda,KalmikandGalloway.Themilkplusmeatbreedsare:Alatau,Simmental,RedSteppeandAuliakol.Afterindependencethecattlepopulationdecreasedsharply,butsince2001anincreaseinlivestocknumbershasbeenobserved(Figure5).From1991to2000,livestocknumbersfellfrom9.76mto4.11m.However,since2001therehasbeenanincreaseinthepopulationoflivestock,andfrom2001to2007itincreasedby982,000.Nowthecattlepopulationis5.85m.

0

1,0002,000

3,0004,000

5,0006,000

7,000

1990 1995 2000 2005 2007

Figure 4.Changeinpopulationofcattlefrom1990to2007.


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Thesametendencywasobservedinmilkproduction.From1991to2000,totalmilkproductiondecreasedfrom5.6mto3.7m(i.e.by1.9m).Milkyieldpercowduringthisperioddecreasedby19kgto1,988kgbutsince2000,ithasincreasedby233kgto2,202kg.Todaythecountryhas461economicenterprisesthatraisefarmanimalsofmanyspecies(Figure6)butthepopulationpreferstobeengagedincattleproduction,mainlydairying.Ofthe166enterprisesengagedincattleproduction,109areengageddairying(Figure7).Ofthe109dairycattleenterprises,16havebreedingenterprisestatuswhichentitlesthemtostatesupportforbreedinganimals,buyingbreedingbulls,anddevelopmentofbreedingstations.Today,aprogramofimprovementforincreasingproductionofmilk-meatbreedsisongoing.ByusingfrozensemenfromHolsteinbulls,workisprogressingonproducinganewtypeofBlack-MotleycattleofKazakhstan.Inthenorthernregion,crossingoflocalRedSteppeandtheRed-DanishcattlebreedsiscreatinganewtypeofRedSteppecattle.Intheeastandinthenorthernpartofthecountry,

9757.2

3368 3998.2

165.9

4106.6

172.5

4293.5

2077.2

4871

2267.3

5853

2600.4

0

2,000

4,000

6,000

8,000

10,000

1991 1999 2000 2001 2003 2007

Figure 5.PopulationofcattleinKazakhstan1991to2007(×1000).

166

143

22

8627

cattlesheep breedingswine breedinghorse bredingcamel breeding

Figure 6.NumberofeconomicenterprisesraisingfarmanimalsinKazakhstan.

0

20

40

60

80

100

120

dairy cattle meat cattle

TotalBreeding farmsBreeding enterprises

Figure 7.Numberoffarmswhichreardairyandmeatcattle.


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workisatanadvancedstageonproducinganewRed-Motleytype,basedoncrossingSimmentalandtheHolstein-Red-Motleybreed.Inthesouth-eastbasedonthelocalAlataubreedandSwissbullsofAmericanorigin,anewtypeofKazakhstanbrowndairycattle‘Akirys’hasalreadybeenproduced.Suchtypesofdairycattledifferfromtheirpredecessorsinthattheyhavebetterdairytype,amoredesirableshapeofudder,andmilkproductionthatexceedstheirpredecessorsby1,500-2,000kg.Thepopulationofbreedingcattle(accordingto2007statistics)is253,500,or4.1%oftotal.Workisnowinprogresstoincreasethepopulationofbreedinglivestockandimprovethepedigreestructurewiththeobjectiveofincreasingmilkproduction.Inthiscontext,in2007,1,700cowswereimportedfromCanada.In2008,thenumberofbreedingenterprisesisexpectedtoincreaseto500units.

Part 3 Concluding remarks


175

Remarks and recommendations of the workshop

M.�Zjalic

EAAP,�Via�G.�Tomassetti�3,�00161�Rome,�Italy

Cattle sector in Central Europe

InreviewingthesituationandtrendsinthedevelopmentofcattleproductioninCentralEuropeantransitioncountries,theworkshopnotedthattheprocessoftransitionofthecattlesectorfromcentrally-plannedtomarketeconomysystemwascharacterisedbyasharpdeclineinproductionandconsumption,aswellasinthenumberofcattle.Thesedevelopmentshavebeenaccompaniedbychangesinfarmstructuresasaconsequenceofprivatisationandde-collectivisation.Theendofthelastcenturywasmarkedbyfurtherchangesinfarmstructure,herdsizeandproductivity:thenumberofdairyfarmsanddairycowscontinuedtodecline,whileherdsizeandpercowmilkproductionareincreasing.Thetrendofspecialisationofcattleproduction–separationofbeeffromdairyproductionandestablishmentofbeeffarms,introductionofnewbeefbreedsanduseofdairyherdsforbeefproduction–althoughnotevenlymarkedinallcountries,isexpectedtocontinue.Thesystemofmilkquotasandtheadjustmentofagrarianpolicies(throughtheCommonAgriculturalPolicy),whichstartedevenbeforetheaccessionofthesecountriestotheEuropeanUnion,haveimposedtheneedforanewtypeoffarmmanagement.Technologydevelopmentandincreaseinfarmsizecontributedtotheestablishmentofcloserlinksbetweenmilkproducersandthemilkprocessingindustryandtothegradualintegrationofprimaryproductionandprocessing.Horizontalintegration–establishmentofcooperativesandproducers’associations–isdevelopingrelativelyslowly,becausesmallfarmersarereluctanttojoincooperativesafterthenegativeexperiencetheyhadunderthepreviousregime.Insomecountries,producers’associationsplayanimportantroleasrepresentativeorganisationsandpartnersofindustryandadministration.Participantsattheworkshopunderlinedtheneedforregularandcontinuousmonitoringofthestructuralchangesinthesector.Adjustmentsinpoliciesshouldtakeintoaccountmarketdemandandtrendsaswellasthesocialroleofagriculture,particularlyinviewofthelargenumberofsmallsubsistencefarmsinsomecountries.Manyofthesesubsistencefarmshaveapotentialtobecomemarket-orientedproducers,whileacertainnumberofthemwillabandoncattleproduction.Thosewhowillremaininproductionneedsupportandtraininginmoderntechnologiesandmanagement.Participantsconsideredthatthesystemofmilkquotashascontributedtothesurvivalofmilkproductionintheregionswiththelowerproductivityoflandandanimals.Theannouncedgradualabolishmentofmilkquotas(softlanding)wasmetwithsomeunderstandingasameasurethatwouldcontributetothebetteradjustmentofthedairysectortomarketdemand.Ontheotherhand,thespecificpositionofthesectorinCentralEuropeanditslowereconomicpowerandproductivityshouldbetakenintoaccountindesigningfuturepolicymeasures.ItwasagreedthatpartnerswithintheCattleNetworkshouldcontinuetomonitorpolicydevelopmentsoftheCAPaffectingthedairysector,soastobeinthepositiontocontributethroughcompetentbodiestotheassessmentofthesituationandtotheformulationofnewproposals,whenrequired.NotingthatdairyherdsarethebasisforbeefproductioninCentralandEasternEurope,asregularsuppliersofcalvesforfatteninginotherMemberStates,participantsagreedontheneedtomonitortheimpactofthedeclineinthenumberofdairycowsonEUbeefproduction.ThegeneticimprovementofdairyherdsinCentralEuropegreatlycontributedtotheconsolidationofthedairysectorandtoasignificantincreaseinproductivity.Thefuturebreedingobjectivesshouldtakeintoaccountalltraitsrelevanttotheefficiencyandprofitabilityofmilkproductionand


176

sustainabilityoftheherd,lookingalsoattraitsrelatedtofertility,longevityandanimalhealth.Thegeneticpotentialoflocalbreedsshouldbeincreasedparticularlyintheproductionoflocalproductsandsupplyofnichemarkets,includingorientationtowardsorganicproduction.

Cattle sector in Eastern Europe

Aftertheinitialdeclineinnumberandproductivity,thepresentsituationofdairycattleintheRussianFederationhasbecomemorestableandpredictablethanitwasinthe1990s.Thetotalmilkproductionhasbeenstabilisedwhiletheaveragemilkyieldpercowisconstantlyincreasing,withapotentialforfuturegrowth.Theofficialpolicydocument‘Concept-ForecastforRussia’sAnimalHusbandryDevelopmentuptoYear2010’envisagesthefollowingactions:• Restorationanddevelopmentofthepopulationandstructureaswellaspreservationoftheunique

genestockofbreedinganimals.• Creationoffavorableconditionsforinvestmentpolicyinthissector.• Raisingtheeconomicefficiencyofactivitiespursuedbybreedingorganisationsandenterprises.Toresolvetheseissues,ithasbeendecidedfirstofalltoimprovethenormative-methodologicalaswellaseconomicalandmaterialfoundationofcattlebreeding,whichwillbeaimedat:• Increasingthenumberofbreedingherdsandanimalsunderregistration(identification,maintaining

thedatabasetobeusedasabasisforofficialherdbooksofpedigreeanimals).• Increasingthepaceofgeneticprogressforbreedinganimalpopulationsaccordingtotheselected

characteristicsduetotheintroductionandoptimisationofbreedingprogramswiththepopulationsoffarmanimals.

• Optimisationofthebreedingorganisationsinfrastructure(breedassociations,systemsforfarmanimalsartificialinsemination,independentlaboratoriestoregisterphenotypicalcharacteristicsandestimationoftheanimals’geneticvalue).

• Increasingtheeffectivenessofdistributionofthebestgeneticresources,itsrationaluseandrealisationofthepotentialundertherealconditionsofagriculturalproduction.

• Conductingtheobjectivemonitoringofthebreedinglivestocksector,projectionofitsdevelopmentandoptimisationofbreedingprograms.

• Russia’saccessiontointernationalorganisationsdealingwithpedigreeanimalhusbandry.ImplementationofthesestepsintothepracticeofdairycattlehusbandryintheRussianFederationofferstheopportunitytolookaheadtothefuturewithdefiniteoptimism.InotherformerUSSRcountries,thedairysectoraccountsforupto25%oftotalagriculturalproduction.Animalproductioninthesecountriessufferedseriouslyduringthetransitionperiodinthe1990’s.Forinstance,inUkrainemilkinglivestockhavedecreasedtolessthanhalfin15years,andbytheendof2005amountedtoonly45%ofthe1990number.Afterthatrapiddecreaseinthecattlepopulationandthecorrespondingdecreaseinmilkproduction,agradualimprovementinthesituationhassincebeenobserved.Somecountries,likeBelarus,havestabilisedthenumberofcows,attainedsustainablegrowthinyieldsandtotalmilkproductionincludingasignificantexportofmilkandmilkproducts.Inothercountries,themostimportantproblemsandconstraintsindairysectordevelopmentincludetheprevalenceofsmall-scalefarmsinthetotalrawmilksupplyoftenresultingintheproductionoflowqualityrawmilk,constraintstoaccessingcredit,lowpricesformilk,lackofinvestmentindairyfarming,andunderdevelopedlogisticsandinfrastructuresuchasmilkcollection,storinganddistribution.Theproductionoffeedsandfoddershasdecreasedsignificantlyandpasturesarenotwellmanaged.Theextentofartificialinseminationusehassharplydeclinedascentralisedbreedingfarmshavebeenabandonedandthecorebreedingstockhavebeendistributedtoprivateindividuals,whoareoftennotexperiencedinlivestockbreeding.Thishasledtothedeteriorationofthegeneticcharacteristicsofcattle.Inaddition,thehighprevalenceofzoonoticandtransboundaryanimal


177

diseases,suchasbrucellosis,tuberculosis,footandmouthdisease,hinderthedevelopmentofthedairysectorinsomecountries.ThecurrentexternallyfundedprojectsinCaucasiancountries(e.g.severalsmalltechnicalprojectsinGeorgia,FAOprojectonstrategyforlivestockdevelopmentinArmenia)indicatethemainlinesoffuturepoliciesanddevelopments:establishmentofaninstitutionalandlegalframeworkforanimalproduction,establishmentoftechnicalcapacitiesforgeneticimprovement,animalfeeding,meatandmilkprocessing,andtradeinanimalsandanimalproducts.


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Appendix. Short history of the EAAP Cattle Network Working Group

In2003,theEAAPCouncilestablisheditsWorkingGroup‘BusinessSupportInformationNetworkforCattleSector’(CattleNetwork)tofacilitatebusinessandtechnicalco-operationamongcattlebreedersandproducersfromitsMemberOrganisations.TheWorkingGroupwasestablishedafterthesuccessfulcompletionoftheBABROC13projectfundedbytheEuropeanCommissionandimplementedbyEAAPanditsmembersfromtheCentralandEasternEuropeancountries–formercandidatesfortheEUmembership.ThebasicscopeoftheCattleNetworkistheexchangeofinformationtopromoteandfacilitatebusinessoperationsamongbreeders’andproducers’associations.TheNetworkmonitorsanddiscussestrendsinproductionandconsumptionofcattleproductsandpolicymeasuresaffectingthecattlesector.Indoingso,itreliesonstudiesandanalysesproducedbyexistinginstitutionsandorganisations.ActivitiesoftheNetworkarecomplementarytotheexistingrepresentativestructuresatEUlevel(COPA/COGECA),theexistingEuropeanandinternationalscientificandtechnicalentities,suchasEAAP,ICAR/INTERBULLandtheEuropeanbreedassociations.TheCattleNetworkhasestablisheditswebsitehttp://www.cattlenetwork.netasavirtualgatewayofferingacompleterangeofbothmarket-andconsumer-orientedinformationaswellasmoderncommunicationtools.Ithasalreadybecomeanonlinemeetingpointforresearchers,professionals,producersandconsumersinthecattlesector.MeetingsandworkshopsoftheNetworkareheldontheoccasionoftheEAAPAnnualmeetingsandontheoccasionofotherimportantevents,suchasinternationalfairsandimportantcattleshows.Since2003,theNetworkhasorganizedtwomeetingsandfourworkshops:• 2003–1stmeetinginRome:EstablishmentoftheCattleNetworkWorkingGroup.• 2004–2ndmeetinginParis:Workplanfor2004-2005.• 2005–1stCattleNetworkWorkshop‘PerspectiveofbeefproductioninEurope’,Sweden.• 2006–2ndCattleNetworkWorkshop‘Developmenttrendinsmallcattlefarms’,Turkey.• 2007–3rdCattleNetworkWorkshop‘AdaptationandconformationofEUbeefsystemstoCAP

regulations’,Ireland.• 2008–4thCattleNetworkWorkshop‘CattlesectordevelopmentintransitioncountriesofCEE’,

Lithuania.

13‘Supporttotherestructuringandstrengtheningofcattleproducers’andbreeders’associationsasbusinessrepresentativeorganisationsinCentralandEasterEuropeancountries’

the cattle sector in central and eastern europe: developments and opportunities in a time of...

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