10 September 2007

Ethiopia: Searching for Milk in Addis Abeba

Molla Ayalew, 58, lives with 12 members of his family in a rented house in the Kirkos District. The lone breadwinner for his family, he nurtured nine of his offspring feeding them unprocessed milk supplied by the nearby cattle owner with his 700 Br monthly income.

However, the supply of milk he depended on for years later became a memory as the nearby rancher told him that he could no longer supply him the milk. Out of desperation, Molla's family started to buy the high-priced tetra packed milk for the last year.

However, the currently witnessed notable shortage and sky rocketing prices of industrially processed milk in Addis Abeba has confused Molla as he is constrained with the purchasing power of his budget. What makes the situation even worse for him is the birth of his last two children which necessitates the continuation of the supply chain no matter what.

"The last option I have is to feed my children powdered milk," Molla told Fortune dumbfounded.

Presently, in most of the big shops and supermarkets of Addis Abeba, milk is in short supply and their prices are soaring through the roof. Depending on the types of tetra packed milk, the average price per litre has shot up by nearly 40pc within a period of two years. This has affected a cross section of families at many levels of the social hierarchy in Addis Abeba.

A study conducted by Tefera Abraha, a senior expert in the Addis Abeba Urban Agriculture Office, indicated that the aggregate annual supply in Addis Abeba is 64.5 million litres per year while the biological demand of milk over five times this amount at 321.7 million litres per year.

Though the discrepancy between the demand and the supply is noticed in the city in all milk brands, the shortage in one of the brands, Mama, is remarkably high pushing its price to seven Birr from 4.50 Br per litre.

Scarcity of pasteurised milk, particularly Mama, in many supermarkets in Addis Abeba has been observed resulting in many selling Mama on a rationed schedule. At times, consumers bustle about the city and stocking the quantity of milk from supermarkets in the city.

An attendant of the Fafresh Supermarket on the road from Meskel Square to Gotera, Abera Seme agrees that his business' Mama Milk is sold to customers on ration. He further admitted that due to the duration with which Mama would last without being spoiled, most consumers prefer it over other brands. Hence, Farfresh stocks larger quantity of Mama whenever possible, though the availability of all brands of the processed milk have become even scarcer of late, he told Fortune.

Mama currently is the number one choice of most consumers in almost every corner of the city. In most of the supermarkets, the first brand of milk that consumers would like to pay for is Mama.

Melaku Berihun, the manager of Sebeta Agro Industry, which launched operation in April 1998 supplying Mama, believes that the fact that most consumers prefer Mama has to do with the way it is being produced to meet the satisfaction of consumers both in terms of taste and nutrition.

Melaku told Fortune that the shortage of raw milk supply from farmers living in the outskirts of the city brought the price hike in their product. The dairy farm, located 40Km west of Addis Abeba at Sebeta town of the Oromia Regional State, obtains the raw milk from milk collectors obtaining it through 2,000 dairy farmers in and around Sebeta and its own farm.

Commercial co-operatives and farmers living around the metropolis supply the majority of milk used in Addis Abeba. However, their supply has substantially dwindled these days following the price hike in frushika and fagulo produced by grain milling factories.

Manaye Desalegn, who runs a dairy farm in Debre Zeit (Bishoftu) told Fortune that animal feed has indeed become unaffordable. Most people that he knows previously winning their daily bread from selling milk have now chosen to be employees of factories.

The price of bi-products used for animal feed like frushika, which was available for 40 Br per quintal a year ago has now shot up by 300pc, as the price of a quintal is being sold at 120 Br. Another edible oil bi-product used for animal feed, fagulo, which was going for 90 Br per quintal one year ago, has hit a record high price when it is sold for 300 Br per quintal.

"As factories' animal feed bi-products became increasingly unaffordable, the lack of fertile grazing land to field the cattle has exacerbated the already deteriorating situation on the part of the dairy farmers," Tefera said.

However, it is not only the price hike in animal feed that caused the reduction in the supply of raw milk. The fact that the size of investment in the flower farms has significantly increased in the past six months on land previously used by the dairy farmers to graze their stocks over, have contributed to the decline of the number of farmers participating in milk production, Tefera emphasised. He further said that the booming construction works in and around the areas where most of these farmers are living and would be employed by, made them to look elsewhere to generate their incomes.

Over the past six months alone, flower farms in the country have grown to occupy 805hct of land up from 700hct. Moreover, within the past three years, more than 750hct of land has been transformed to flower farming, sources from the sector disclosed to Fortune.

The fact that cash crops such as wheat from which frushika could be obtained has increased its prices to 295 Br per quintal, mean that the bi-products such as frushika as well as fagulo obtained from oil-seed widely used for animal feed became unaffordable especially for those subsistent dairy farmers, said another expert in the dairy industry.

Tadelle Yilma, general manager of Ada'a Flour Factory, one of the largest suppliers of furshika, argued that the more the price of cash crops such as wheat inflates, the less the availability of its bi-product. For instance, frushika, which is the bi-product of wheat, constitutes 28pc of the crop's body. This means that with the same rate of increase in the price of wheat would directly cause its price to inflate Tadelle added. The same applies to other bi-products used by dairy farmers for animal feed; due to the high demand on oil-seed, the price of its bi-product such as fagulo would shoot up, he added.

However, attention should be given to correct feeding and feeding practices, to the animal housing, production environment and the introduction of modern dairy management package as well as coming up with better incentive to get investors involved in the dairy industry, a milk expert suggested.

Desalegn Tassew, general manager of Shola Dairy Development Enterprise, shares the idea that the main reason for loss of the supply is the high increase of prices in animals feed, besides the fact that the majority of farmers in the country are subsistent farmers and do not farm the dairy product in commercial capacity to meet the growing demand.

Shola Dairy is the first milk processing enterprise in Ethiopia. It came into existence in 1979 at a project cost of 4.4 million dollars and employs 358 workers. Located in Lamberet, the Enterprise was producing 60,000lt per day. However, for the combination reasons mentioned, currently, the production has declined by 42pc, as it produces only 25,000lr of pasteurized milk each day.

The increase in animal feed affected the dairy industry in terms of production, causing a price hike beyond the means of many people's budgets, Desalegn argues.

According to Biruk Kidan, deputy manager of MB Plc (Family Dairy), if more and more milk processing plants would be encouraged to come into the market, prices would be determined by market forces rather than being monopolised by large scale processors such as Mama and Shola.

"The more milk processors enter into the market, the better for those farmers who earn for living from producing dairy products to set their own prices," he added. "The trend by which the prices of fresh milk set by the two larger plants that hardly benefit the milk producing farmers, producers have been forced to divert their production line."

Family Dairy, owned and managed by Machal Argaw, was established in 2005. From its location in Lafto Industrial Zone, Family's supply chain exists through the Debre-Zeit Ade'a Cooperatives. Although initially the company had managed to process 20,000lt of milk per day, currently, the capacity has declined to 5,500lt a day, due to the decrease in supplying of milk from the farmers. These milk processors are working below their capacity due to the decline in milk supply from the dairy farmers.

Biruk stressed that if investors would be encouraged to enter the sector by way of incentive, the increase in the production of milk would be beneficial to consumers. More and more investments in the sector would have the impact in declining the steady increases of prices in pasteurized milk, for there would be competition between suppliers.

Another milk processor, relatively new in the industry, Lema, owned by Marco Vigano (Professor), is processing 1,500lt of milk per day. According to Mr. Vigano, in addition to the shortage of animal feed, the recently introduction of surtax by the Ministry of Finance and Economic Development (MoFED) has seriously affected the capacity of production, as paying more to import crèmes from overseas would limit the volume of production that the new companies such as Lema could process.

With things being improved to encourage the small processors, however, Mr. Vigano expressed optimism, since the demand on fresh milk tends to increase as far as consumers in Addis Abeba are concerned; he believes there are lots of opportunities for business in the dairy industry.

The growth of population is one factor to play against the equilibrium of the existing high gap between the demand and supply balance of the milk market. As the fertility rate grows, the demand for such basic commodities like milk is expected to grow exponentially.

The research conducted two years ago by TAM and HNV consultants at the cost of 50,000 Br on behalf of MB Plc stated that there is a 50pc deficit between the demand and supply of fresh milk in Addis Abeba. Consumers in the city require 150,000lt of milk each day vis-a-vis the combined production of 75,000lt of milk being produced per day.

Consumers such as Mola, whose income deprives the ability to feed his kids with fresh milk would be very happy to see the increase on the production of milk by way of encouraging more investors in the sector as well as those involved in the production of the milk all the way from the dairy farming families in the rural areas to the processors in the city.

When the issue of milk was raised for discussion, Tsige Hailu, who owns a grocery store in Olympia, grumbled and checked her wristwatch as if she would not want to waste time talking about it. For her, affording and finding pasteurised milk such as Mama became a source of concern and she had to opt for powdered milk to feed her three children.

Importers of powdered milk such as NIDO, however, are enjoying the shortage in the market as consumers consider it cost effective now.

Rather than spending seven Birr for a litre of packed milk that would not sustain his two children for more than a day, Mola buys NIDO at 25 Br and feeds the kids for five days that would save him at least 60 Br every month, eight per cent of his gross income.

Abdul-Karim Bedri, who owns Petram, the sole company importing NIDO in Ethiopia from the Netherlands, says his company has, since January 2007, increased the supply by 30pc.

"Because fresh milks are becoming not only costly but also they are rare in the market due to the decline in production, NIDO becomes the convenient commodity to replace the need on the fresh milk, Abdul-Karim told Fortune.

The four major fresh milk processing plants in Ethiopia, Shola, Mama, Lema, and Family Dairy, have combined production capacity of 50,835lt per day.

Despite the fact that Ethiopia has the largest livestock population in Africa, the dairy industry in the country has long been inefficient in exploiting the local and foreign demands.

An expert told Fortune that the fate of this potentially vital sector depends on the attention given to it in terms of having to transform the existing dairy farming in the country into an industrialised system, creating optimal integration between the production unit (the cow), technologies and equipment (engineering), the operator (the farmer) and the production environment (the dairy farm).

Copyright © 2007 Addis Fortune. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.