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Title Exploring alternatives for milk quality improvement and more efficient

dairy production in a smallholder farming context – case study: Mantaro

Valley (Peru)

Author(s) Fuentes Navarro, Eduardo

Publication date 2014

Original citation Fuentes Navarro, E. 2014. Exploring alternatives for milk quality

improvement and more efficient dairy production in a smallholder

farming context – case study: Mantaro Valley (Peru). PhD Thesis,

University College Cork, Montpellier SupAgro.

Type of publication Doctoral thesis Rights © 2014, Eduardo Fuentes Navarro.

http://creativecommons.org/licenses/by-nc-nd/3.0/ Embargo information No embargo required Item downloaded http://hdl.handle.net/10468/2033 from Downloaded on 2016-05-23T13:09:50Z Thesis to obtain the Joint International Doctoral Degree from Montpellier Supagro (France) and University College Cork (Ireland) SIBAGHE Doctoral School (Integrated Systems in Biology, Agronomy, Geoscience, Hydroscience and Environment) and UCC Department of Food Business and Development Defended in public on 27th November 2014

by:

EDUARDO FUENTES NAVARRO

Exploring alternatives for milk quality improvement and more efficient dairy production in a smallholder farming context – Case study: Mantaro Valley (Peru)

Composition of the thesis jury:

Dr. Charles-Henri Moulin, Montpellier Supagro (France) – Jury President Dr. Marijke D’Haese, Ghent University (Belgium) - Reporter Dr. Philippe Lescoat, AgroParisTech (France) - Reporter Dr. Carlos Gómez, Universidad Nacional Agraria La Molina (Peru) - Examiner Dr. Stephen Onakuse, University College Cork (Ireland) - UCC representative Dr. Pierre-Yves Le Gal, CIRAD (France) – Supervisor

Co-supervisor:

Dr. Joe Bogue, University College Cork (Ireland) This thesis was elaborated within the framework of the European Erasmus Mundus Programme “Agricultural Transformation by Innovation (AGTRAIN)" Thesis to obtain the Joint International Doctoral Degree from Montpellier Supagro (France) and University College Cork (Ireland) SIBAGHE Doctoral School (Integrated Systems in Biology, Agronomy, Geoscience, Hydroscience and Environment) and UCC Department of Food Business and Development Defended in public on 27th November 2014

by:

EDUARDO FUENTES NAVARRO

Exploring alternatives for milk quality improvement and more efficient dairy production in a smallholder farming context – Case study: Mantaro Valley (Peru)

Composition of the thesis jury:

Dr. Charles-Henri Moulin, Montpellier Supagro (France) – Jury President Dr. Marijke D’Haese, Ghent University (Belgium) - Reporter Dr. Philippe Lescoat, AgroParisTech (France) - Reporter Dr. Carlos Gómez, Universidad Nacional Agraria La Molina (Peru) - Examiner Dr. Stephen Onakuse, University College Cork (Ireland) - UCC representative Dr. Pierre-Yves Le Gal, CIRAD (France) – Supervisor

Co-supervisor:

Dr. Joe Bogue, University College Cork (Ireland) This thesis was elaborated within the framework of the European Erasmus Mundus Programme “Agricultural Transformation by Innovation (AGTRAIN)"

–  –  –

Consumer demand is revolutionizing the way products are being produced, distributed and marketed.

In relation to the dairy sector in developing countries, aspects of milk quality are receiving more attention from both society and the government. However, milk quality management needs to be better addressed in dairy production systems to guarantee the access of stakeholders, mainly small-holders, into dairy markets. The present study is focused on an analysis of the interaction of the upstream part of the dairy supply chain (farmers and dairies) in the Mantaro Valley (Peruvian central Andes), in order to understand possible constraints both stakeholders face implementing milk quality controls and practices; and evaluate “ex-ante” how different strategies suggested to improve milk quality could affect farmers and processors’ profits. The analysis is based on three complementary field studies conducted between 2012 and 2013. Our work has shown that the presence of a dual supply chain combining both formal and informal markets has a direct impact on dairy production at the technical and organizational levels, affecting small formal dairy processors’ possibilities to implement contracts, including agreements on milk quality standards. The analysis of milk quality management from farms to dairy plants highlighted the poor hygiene in the study area, even when average values of milk composition were usually high. Some husbandry practices evaluated at farm level demonstrated cost effectiveness and a big impact on hygienic quality; however, regular application of these practices was limited, since small-scale farmers do not receive a bonus for producing hygienic milk. On the basis of these two results, we co-designed with formal small-scale dairy processors a simulation tool to show prospective scenarios, in which they could select their best product portfolio but also design milk payment systems to reward farmers’ with high milk quality performances. This type of approach allowed dairy processors to realize the importance of including milk quality management in their collection and manufacturing processes, especially in a context of high competition for milk supply. We concluded that the improvement of milk quality in a smallholder farming context requires a more coordinated effort among stakeholders. Successful implementation of strategies will depend on the willingness of small-scale dairy processors to reward farmers producing high milk quality; but also on the support from the State to provide incentives to the stakeholders in the formal sector.





Key words:

Informal market, supply chain management, dairy processing, husbandry practices, modeling.

–  –  –

Les demandes des consommateurs sont en train de révolutionner la manière dont les produits sont produits, distribués et commercialisés. En ce qui concerne le secteur laitier dans les pays en développement, les composantes de la qualité du lait reçoivent plus d'attention à la fois de la société et du gouvernement. Toutefois, la gestion de cette qualité doit-être mieux prise en compte dans les systèmes de production laitière, pour garantir l'accès des acteurs, principalement les petits exploitants, aux marchés laitiers. La présente étude se concentre sur l'analyse de l'interaction de la partie amont de la filière laitière (agriculteurs et laiteries) dans la vallée du Mantaro (Andes centrales du Pérou), afin de comprendre les contraintes possibles auxquelles ces deux acteurs sont confrontés pour la mise en œuvre des contrôles et des pratiques de qualité du lait, et d'évaluer "ex-ante" comment les différentes stratégies pour améliorer la qualité du lait pourraient affecter les revenus des agriculteurs et des transformateurs. L'analyse est basée sur trois études complémentaires menées sur le terrain entre 2012 et 2013. Notre travail a montré que la présence d’une double filière, combinant les marchés formels et informels, a un impact direct sur la production laitière aux niveaux technique et organisationnel, affectant les possibilités pour les petites laiteries formelles de mettre en place des contrats écrits impliquant des engagements sur la qualité du lait. L'analyse de la gestion de la qualité du lait, des fermes aux transformateurs laitiers, a montré sa mauvaise qualité hygiénique dans la zone d'étude, même quand les valeurs moyennes de la composition du lait sont élevées. Certaines pratiques d’élevage évaluées au niveau de l'exploitation ont démontré leur efficacité économique et leur impact sur la qualité hygiénique. Toutefois, l'application régulière de ces pratiques était limitée, puisque les petits agriculteurs ne reçoivent pas de prime pour un lait de meilleure qualité. Sur la base de ces deux résultats, nous avons co-construit avec des petits transformateurs laitiers formels un outil de simulation pour montrer des scénarios prospectifs, où ils pouvaient choisir leur meilleur produit, mais également concevoir des systèmes de paiement du lait pour récompenser les agriculteurs pour la qualité de leur lait. Ce type d'approche a permis aux transformateurs laitiers de comprendre l'importance d'inclure cette gestion de qualité dans leur processus de collecte et de fabrication, en particulier dans un contexte de forte concurrence pour l'approvisionnement en lait. Nous concluons que l'amélioration de la qualité de petits agriculteurs exige un travail plus coordonné entre les différentes parties prenantes. Une telle mise en place de stratégies dépendra de la volonté des petits transformateurs laitiers de récompenser les agriculteurs qui produisent un lait de haute qualité, mais aussi du soutien de l'Etat aux parties prenantes du secteur formel.

Mots-clés Marché informel, gestion de la chaine d’approvisionnement, transformation du lait, pratiques d'élevage, modélisation.

–  –  –

First and foremost I wish to thank my advisor, Dr. Pierre-Yves Le Gal, for the patient guidance, encouragement and advice he has provided throughout my time as his student. I have been extremely lucky to have a supervisor who cared so much about my work, and who responded to my questions and queries so promptly. I would also like to thank my esteemed co-supervisor, Dr. Joe Bogue, for the support during the whole period of the study. Go raibh maith agat Joe!!.

I must express my gratitude to the AGTRAIN Consortium for making it possible for me to study this amazing Erasmus Mundus programme. I give special thanks to Andreas de Neergaard, Didier Pillot and Stephen Onakuse who have supported me through this whole process.

Developing this work would have been impossible without the support and friendship provided by a lot of people during my fieldwork in Peru. I am very grateful for all the help received from Dr. Carlos Gomez and his colleagues from Universidad Nacional Agraria La Molina, specially Jorge Vargas, Ivonne Salazar, Waldemar Mercado, Teresa Alvarado, Mario Viera, Carolina de la Sota and Cindybell Gamboa. I would particularly like to express gratitude to all the participants, farmers and processors, for their willingness to take part of our research. To this effect, I would like to thank Gloria S.A., Joseph García, Leandro Lahura, Julio Requena and Efrain Chacon for having permitted us to work monitoring their collection centers or processing plants.

I want to express deepest appreciation to all my colleagues at CIRAD. They mainly speak french, so I write this small paragraph in this language: Je souhaite remercier tous mes collègues du CIRAD, particulièrement à Michel Dulcire, Guy Faure, Eduardo Chia, Bernard Triomphe, Thierry Ferré, Nadine Kelemen et Brigitte Gillet. Merci beaucoup, du fond du cœur, de votre soutien, votre amitié, vos conseils, et vos encouragements.

I also would like to thank all my friends who have always been there for me and made me feel like home during this time. Thanks Camille, Claudine, Muriel, Michelangelo, David, Patricia, Mayumi, Hugo, Mariana, Carlos, Anna, Ivana and Lapo for the joyful gatherings.

–  –  –

cherished with me every great moment and supported me whenever I needed it. So, I would like to thank them in spanish now: A tí Esther, muchas gracias por tu amor inmenso, por ser una madre ejemplar y por siempre estar conmigo ya sea celebrando mis éxitos o acompañandome en mis penas.

Gracias a tí tambien Elias, mucho de que he podido alcanzar te lo debo a tí. Me enseñaste con tu ejemplo a ser exitoso y a ver que no existen límites cuando uno se propone las cosas.

–  –  –

Chapter 3: Effects of the application of husbandry / manufacturing practices and the introduction of new dairy technology on the general status of raw milk quality 42

–  –  –

1. The impacts of differentiated markets on the relationship between dairy processors and smallholder farmers in the Peruvian Andes

2. Effects of dairy husbandry practices and farm types on raw milk quality collected by different categories of dairy processors in the Peruvian Andes

3. Supporting small-scale dairy plants in selecting market orientations and milk payment systems: A simulation approach ANNEXES

–  –  –

Table 1: Respective share of informal and formal trade in various national dairy sectors Table 2: Testing methods used for various milk quality components Table 3: Incentives or penalties applied worldwide to improve raw milk quality Table 4: Description of the thirteen supply channels identified at Mantaro Valley Table 5: Farmers’ production costs, profits per liter and per day ($) when they sell to formal and informal dairy processors, and General Sales Taxes (GST) balance per liter of milk at Mantaro Valley Table 6: Processors’ production costs and profits, and General Sales Taxes (GST) balance per liter of milk at Mantaro Valley Table 7: Descriptive statistics of the main variables describing milk quality at farm level (n=238) and recommended values for Peru Table 8: List of husbandry practices and their application according to farm size (% of monthly observations during the 12-month monitoring period) Table 9: Examples of diets supplied by three small-scale and three large-scale farmers Table 10: Correlations between average milk composition and average nutrients from diets supplied at Mantaro Valley (n=20) from pooled results over 12 month period with average of 12 observations each farm.

Table 11: Correlations* between husbandry practices and hygienic status of raw milk (n=238) Table 12: Comparison of milk quality values at processor’s gate according to the plant supplier Table 13: Commented list of the variables included in DairyPlant Table 14: Simulation of the variation of product portfolio and milk volume collected from two smallscale dairy processors at Mantaro Valley

–  –  –

Figure 1: Localization of Mantaro Valley Figure 2: Evolution of dairy production at National level and in the department of Junín (Mantaro Valley) from 1994 to 2011. The figure shows the similar trend in terms of increased volumes over time.



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