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Analysing milk price incentives to strengthen policies for dairy production and exports in Uganda

Technical note









Nkuingoua Nana, J.C., Pernechele, V., Meilland, T., Munyuka Ariong, R. & Otikal, K. 2022. Analysing milk price incentives to strengthen policies for dairy production and exports in Uganda Technical note. Monitoring and Analysing Food and Agriculture Policies (MAFAP). Rome, FAO.



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    In Uganda, 58 percent of households depend on livestock for their livelihoods, with cattle being the most important livestock subsector in the country. Despite natural pastures, water resources, and big demand in national and world markets, beef production in Uganda grew by only 1 percent in the last decade, and lags behind local demand. In the last decade, the government has adopted several policies within the framework of the National Development Plan, aimed at increasing domestic beef production and exports. This report assesses the effects of policy support on the beef sector in Uganda over the last four years (2017–2020), and also includes previous analysis on live cattle for the period 2005–2016. To measure price incentives, the study relies on renowned indicators; the nominal rate of protection, nominal rate of assistance and the market development gap. The results reveal that in the past (2011–2016) breeders were penalized by low prices, while recently they benefitted from prices above the international-equivalent, mainly due to restrictions on cattle movement due to a foot-and-mouth disease (FMD) outbreak, which increased domestic prices. The persistent gaps between domestic and international prices can also be explained by the very limited price transmission and weak market integration of the beef value chain in Uganda. FMD is a critical issue to tackle to improve beef commercialization and competitiveness, together with the significant value chain inefficiencies, such as high transport costs and the presence of informal fees, that still hinder marketing and profitability of this sector.
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    The technology of traditional milk products in developing countries 1990
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    milk as a raw material. Traditional milk products are prepared from milk from several species:- indigenous cattle and exotic dairy breeds, buffalo, sheep, goats, yaks and camel. The role of the individual species varies dramatically from region to region and within countries of the same region. The composition of milk of different species has important influences on the yield of traditional milk products e.g. high fat-producing species are of major importance in countries where ghee is an i mportant product. The availability of milk for the preparation of traditional milk products depends not only on the total amount of milk produced in a country but also on how much of the milk is dispatched to industrial dairy factories and how much is retained by the milk producer for the direct use of the household, or for the preparation of milk products for local sale, or for use in calf rearing. Countries with proportionally the highest quantities of milk being used for preparation of traditional milk products on the producer's farm or household, or local small processing units tend to have the less well developed dairy industry. It should be recognised that factors such as the standard of road and rail links between the milk-producing areas and the urban areas is of importance in determining how milk is utilised. Animal breeding and feeding pose major problems to the small milk producer where traditional milk products are important and technical support services are comm only absent or insufficient. milking conditions and hygiene. The general standard of hygiene applied to milk production in developing countries is poor and as a result the quality of milk is poor.
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    The FAO Dairy Price Index recorded 192 points in October, an increase of 9.8 points (5.4 percent) since January, but 83.4 points (30.3 percent) below its peak reached in February 2014. From January to May, the index value rose by 24 percent, but from June to October, the value dropped by 15 percent. Dairy price increases in the first three months in 2019 primarily stemmed from limited export supplies along with strong internal demand in Europe and seasonally tight export availabilities from Oceania. From April to May, international demand for dairy products remained robust, while export supplies were relatively limited due to drought in Oceania, especially Australia, but also dry weather in Europe during the summer. Since June, dairy prices weakened, reflecting a market optimism over possible increases in export supplies from Oceania, mainly New Zealand, in its 2019/20 production season. Milk production in the North and South America was stable, providing stability to international prices. In Europe, prices weakness stemmed from relative inactivity of dairy markets due to summer holidays. Increased export availability further added to price weakness towards September and October.

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