Beef and dairy in Tajikistan Market opportunities Structural - - PowerPoint PPT Presentation

This project is funded by The European Union

Beef and dairy in Tajikistan

Market opportunities Structural bottlenecks and Strategic options for development

This project is funded by The European Union

The pull force of the market

This project is funded by The European Union

According to FAO/OECD, in the next decade 80% of the increase in world consumption of beef and dairy will come from emerging countries where there is strong income elasticity for food, especially better food (animal proteins, fruit and vegetables)

0,83 0,80 0,66 0,59 0,79 0,76 0,60 0,49 0,72 0,69 0,51 0,34 0,55 0,53 0,36 0,08 0,00 0,10 0,20 0,30 0,40 0,50 0,60 0,70 0,80 0,90 Dairy Meat Fruits Cereals

Average income elasticities for various food categories across 144 countries in 2005 (FAO, Milk and dairy products in human nutrition, 2013)

Low-income countries lower middle-income countries Middle-income countries High-income countries

This project is funded by The European Union

The best example of this “quality food” revolution is China

385 15.238 6.208

• 2.000

4.000 6.000 8.000 10.000 12.000 14.000 16.000 18.000 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Production of rice, beef and dairy in China (t, 1961=100, Faostat)

Rice (paddy) Meat, cattle Milk, whole, fresh

This project is funded by The European Union

In Tajikistan, per capita consumption of animal products fell abruptly in the 1990s because of the impact on household income of the end of the FSU and of the Civil war. It still remains much below former Soviet levels

26

5

15 171

47

58 88

6

72 20 40 60 80 100 120 140 160 180 200 1991 1992 1993 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Consumption per capita (kg/person/year, TajStat)

Meat Milk Eggs (number)

This project is funded by The European Union

Levels of consumption of beef per capita in Tajikistan are currently much lower than in most neighbour countries

28,2 26,1 23,4 19,7 17,0 14,9 12,7 11,6 9,0 6,0 4,4 3,6

• 5,0

10,0 15,0 20,0 25,0 30,0 Uzbekistan Turkmenistan Kazakhstan Armenia Russian Federation Kyrgyzstan Azerbaijan Turkey Ukraine Georgia Tajikistan Iran

Consumption of beef (kg/capita/yr, 2013, Faostat)

This project is funded by The European Union

The same applies to milk for which FAO recorded levels of 45 kg/capita/year are also much below the minimum level recommended by the WHO

258 203 163 152 144 128 125 119 102 90 45 18 50 100 150 200 250 300 Kazakhstan Kyrgyzstan Armenia Turkey Georgia Turkmenistan Uzbekistan Ukraine Russian Federation Azerbaijan Tajikistan Iran

Consumption of milk (kg/capita/yr, 2013, Faostat)

This project is funded by The European Union

These very low consumption figures reflect the fact that Tajikistan remains the poorest post Soviet Republic, even though its poverty rate has reduced from 96% of the population in 1999 to 31% in 2015

24.449 24.108 18.246 17.761 14.217 9.209 8.681 8.164 5.630 4.998 3.622 2.698

• 5.000

10.000 15.000 20.000 25.000 30.000

GDP per capita PPP USD 2014 (USD, WB)

This project is funded by The European Union

Reduction of poverty rates is a result of fast GDP growth, the fastest among post- Soviet countries that do not benefit from an oil-and-gas natural resource rent

9,9 8,4 8,3 6,8 5,2 5,1 4,8 4,3 2 4 6 8 10 12 Turkmenistan Azerbaijan Uzbekistan Tajikistan Kyrgyz Republic Kazakhstan Georgia Armenia

Average GDP growth 2006-2016 (%, source IMF)

This project is funded by The European Union

Growth in GDP has impacted the volume and structure of consumption. While in 1999, an astonishing 87% of expenses of households were for food only, and more than half of food consumption was for bread

bread & bakery products, 52.5 potatoes; 4,0 vegetables & melons; 7,3 fruits & berries; 4,5 meat & meat products, 10.6 fish & fish products; 0,1 milk & milk products; 5,1 sugar & confectionery; 4,4 eggs; 1,4 vegetable

• il, 7.9

tea, coffee, soft drinks; 2,3

Share of various products in household consumption of food (1999, TajStat)

This project is funded by The European Union

… in 2015 the share of food has fallen to 57% of total expenses and bread now accounts for only roughly one-third

34,5 3,7 9,4 6,1 16,9 0,3 3,6 11,4 2,8 9,3 2,0

Share of various products in household consumption of food (2015, TajStat)

bread & bakery products potatoes vegetables & melons fruits & berries meat & meat products fish & fish products milk & milk products sugar & confectionery eggs vegetable oil tea, coffee, soft drinks

This project is funded by The European Union

Until recently, growth was driven by remittances from Tajik migrants to Russia. In 2013, they accounted for 51% of GDP. Remittances led to an impressive increase in household income. But after the Russian crisis there was an abrupt reversal

1.203.846 1.443.030 2.071.512 2.748.688 2.616.184 3.026.484 3.512.148 4.235.504 4.923.061 4.907.911 3.704.526 3.423.711

• 1.000.000

2.000.000 3.000.000 4.000.000 5.000.000 6.000.000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Transfers inflows and household income (total, thousand USD, NBT, CBR)

Private transfers received ('000 USD, NBT) Household income (thousand USD equivalent, NBT)

This project is funded by The European Union

in H1 2017, remittances from Russia to Tajikistan have rebounded by 23% as the Russian economy is now back on track. We therefore expect a rebound in household income

4.173.000 1.929.000 2.388.000 4.304.657 1.203.846 4.923.061 3.423.711 0,00 1.000.000,00 2.000.000,00 3.000.000,00 4.000.000,00 5.000.000,00 6.000.000,00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (forecast)

Transfers inflows and household income (total, thousand USD, NBT, CBR)

Cross-Border Transfers of Individuals from Russia (CBR, '000 USD) Private transfers received ('000 USD, NBT) Household income (thousand USD equivalent, NBT)

This project is funded by The European Union

Tajik growth is also driven by the USD 200 bn (OBOR) Silk Road strategy of China. Apart from the construction of infrastructure, Chinese firms invest in industry which currently increases by 20% per annum

100 107 114 123 133 138 147 158 170 182 194 206 220 233 100 109 114 127 122 114 125 132 146 152 160 177 199 238 100 103 109 116 125 138 147 159 176 190 198 205 219 229 100 120 140 160 180 200 220 240 260 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (forecast)

Components of GDP growth (index 2004=100, NBT)

GDP (2004=100) Industrial production (2004=100) Agricultural production (2004=100)

This project is funded by The European Union

In dairy and meat processing, local investors have also increased their official output. But real growth is higher as firms are under-reporting because of an excessive tax

• burden. Total Tax and Contribution Rate is 65.2% according to the WB against a

regional average of 33.4%

1.065 661 412 374 354 231 191 150 136 71 57 50 32 32 17

• 200

400 600 800 1.000 1.200 Cheese Butter (t) Sausage (t) Sugar confectionery (t) Dairy products (milk equivalent, thousand t) Pasta (t) Non alcoholic drinks (thousand hectolitres) Meat processing (t) Mineral water (thousand hectolitres) Vegetable oil (thousand t) Dried fruit (t) Canned processed tomatoes (million units) Canned processed fruit (million units) Preserves (million units) Canned vegetables (million units)

Production of agro-food processed products (2015, index 2010=100, TajStat)

This project is funded by The European Union

Subject to better tax environment, there could be massive increase of local agro- processing as current volumes produced per capita are just microscopic. Only 3% of milk consumed in the country is officially processed by local dairy factories!

4,76 1,88 1,70 1,69 1,26 1,17 0,69 0,48 0,36 0,19 0,16 0,03 0,02 0,02 0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50 4,00 4,50 5,00

Processed agro-food products per person (kg, 2015, TajStat)

This project is funded by The European Union

The pull force of the market is also qualitative. Most food products are still sold informally, but modern retail in Tajikistan is growing quickly, following in particular the recent opening by Schiever TJ of the first hypermarket Auchan (Achan)

This project is funded by The European Union

The milk and meat supply side Recent evolution and key structural bottlenecks

This project is funded by The European Union

Agriculture generates 21% of Tajik GDP and employs most of the rural population (74% of total population). Since FSU, there has been robust growth in output

194 183 180 170 154 150 128 115 109 93 87 79 60 80 100 120 140 160 180 200 220 Uzbekistan Armenia Tajikistan Iran Azerbaijan Turkey Kyrgyzstan Belarus Ukraine Russia Kazakhstan Georgia

Gross Agricultural Output 2014 (1992=100, FAOSTAT)

This project is funded by The European Union

Since FSU, a radical change from collective farming to family farming has been

• implemented. There were only 587 farms in 1991 and123,395 in 2015

1750 2386 8023 10223 9293 12639 11934 14775 16433 19416 23101 24901 26518 30842 37966 51372 58313 73806 87594 108035 123379 20.000 40.000 60.000 80.000 100.000 120.000 140.000 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Number of farms in Tajikistan (source: TajStat)

Dekhan farms Mezhhozes Sovkhozes Kolkhozes

This project is funded by The European Union

62% of output is produced by households who control 28% of arable land, 32% by Dekhan (family farms) farms and 5% by collective and corporate farms. Pressure on land has increased mainly because of demographic growth with only 0.10 ha of arable land per rural inhabitant in 2015 against 0.21 ha in 1992

62 5 32 28 18 55 10 20 30 40 50 60 70 Household plots Collective and corporate farms Dekhan farms

Share in output and arable land of various types of farms in Tajikistan (%, 2015, Tajstat)

2015 GAO 2015 arable land

This project is funded by The European Union

While grains and cotton are mostly produced by Dekhan farms, household plots provide 94% of animal production and control 93% of cows. Most of their output is self-consumed or sold informally without real care for food safety standards

62 5 32 48 6 46 94 3 3

• 10

20 30 40 50 60 70 80 90 100 Household plots Collective and corporate farms Dekhan farms

Share in crop and animal output of various types of farms in Tajikistan (%, 2015, Tajstat)

Share in GAO 2015 Share in crop production Share in animal production

This project is funded by The European Union

Since the end of FSU, there has been a switch from cotton towards wheat. Areas dedicated to fodder crops have also more than halved

232 422 299 159 227 102 50 100 150 200 250 300 350 400 450 500 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Land use per type of crop (thousand ha, GKS)

Grains and beans Cotton Fodder crops

This project is funded by The European Union

Wheat makes not much sense as Tajikistan is faced with the tough competition of

• Kazakhstan. High value activities such as dairy or vegetable production could ensure

better use of its scarce arable land resources which account for only 4.6% of the total territory and of its pastures which are much bigger (19.4%)

408 383 344 340 322 275 191 189 181 164

• 50

100 150 200 250 300 350 400 450 Tajikistan Armenia Turkey Iran China Kyrgyzstan Russian Federation Kazakhstan Ukraine Belarus

Wheat producer prices average 2011-2012 (USD/t, FAOSTAT)

This project is funded by The European Union

But despite endowment of pastures animal production has progressed much less than vegetal production and levels of production per capita are lower than in FSU

179 149 168 20 40 60 80 100 120 140 160 180 200 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Gross agricultural output 1991=100 (in constant 2015 prices, Tajstat)

Vegetal production Animal production Total

This project is funded by The European Union

Poor performance of animal husbandry has been associated with a strong increase in the number of cattle (1.4 million heads in 1991, 2.2 million in 2015), largely because households use cattle as a “storage of value”

500 1000 1500 2000 2500 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Cattle: number of heads (Tajstat)

This project is funded by The European Union

The combination of much bigger number of cattle and much lower acreage of fodder crops has led to a scissors effect, putting at risk the environment (overgrazing and land degradation) and leading to low yields

100 89 80 78 71 57 47 40 40 44 47 43 42 43 48 58 58 48 54 39 38 42 41 46 45 159

• 20

40 60 80 100 120 140 160 180 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Evolution of number of cattle and number of ha dedicated to fodder crops (1991=100, TajStat)

Fodder crops (number of ha) Cattle (number of heads)

This project is funded by The European Union

As a matter of fact, milk yields in Tajikistan are extremely low at 800 kg/cow/year

12.688 10.150 8.221 7.541 6.850 4.509 4.387 4.119 4.029 3.031 2.994 2.781 2.300 2.090 2.061 1.895 1.771 1.446 1.402 1.230 1.008 800 612 353

• 2.000

4.000 6.000 8.000 10.000 12.000 14.000

Yields of milk (Kg/cow/year, 2014, FAOSTAT)

This project is funded by The European Union

The general situation of beef-and-dairy is therefore problematic. But there are also positive signs with a re-emerging and fast-growing segment of large farms which aim at reaching high quality volume and quality in milk production on the basis of close integration with dairy processors. These modern farms constitute a nucleus for building and disseminating advanced practices in animal husbandry

This project is funded by The European Union

Processors get 50% of their milk from these large farms. The further development of their procurement base will allow them to cope with the increase in domestic

• demand. Imports of powder milk is not an option as global prices are too volatile and

as local consumers want fresh products

50 100 150 200 250 300 350 1.2.03 1.6.03 1.10.03 1.2.04 1.6.04 1.10.04 1.2.05 1.6.05 1.10.05 1.2.06 1.6.06 1.10.06 1.2.07 1.6.07 1.10.07 1.2.08 1.6.08 1.10.08 1.2.09 1.6.09 1.10.09 1.2.10 1.6.10 1.10.10 1.2.11 1.6.11 1.10.11 1.2.12 1.6.12 1.10.12 1.2.13 1.6.13 1.10.13 1.2.14 1.6.14 1.10.14 1.2.15 1.6.15 1.10.15 1.2.16 1.6.16 1.10.16 1.2.17 1.6.17 1.10.17

Prices for agricultural commodities and milk (IMF, University of Wisconsin)

Commodity Agricultural Raw Materials Index, 2005 = 100, includes Timber, Cotton, Wool, Rubber, and Hides Price Indices, IMF International 26% Whole Milk Powder Price, Europe, US Dollars per Metric Ton

This project is funded by The European Union

The way forward Less cows, better cows and better fed cows?

This project is funded by The European Union

The best development model for Tajikistan is that of near-by Iran where there has been a committed strategy towards less animals and better/better fed animals leading to much bigger yields and output

100 106 112 119 130 132 137 143 109 93 102 101 105 107 108 109 97 115 117 89 87 84 83 100 98 98 102 103 104 105 108 154 184 171 166 196 191 204 209 215 205 179 235 235 235 242 50 100 150 200 250 300 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Number of milk animals and milk yields in Iran (1992=100, Faostat)

Number of milk animals Iran (1992=100, Faostat) Milk yields Iran (kg/year/cow, 1992=100, Faostat)

This project is funded by The European Union

Some consider that the key element in improvement of yields is improvement in fodder and feed. But in current conditions, if there is only more fodder and feed, households will keep on increasing the number of their poor quality animals

This project is funded by The European Union

And we will have just a multiplication of these types of cows

This project is funded by The European Union

We need therefore a form of “cultural revolution” where breeders will be proud of their animals. This proudness for animals already exists for horses, in particular for those used in social events such as Buzkachi

This project is funded by The European Union

This proudness also exists, to a certain extent, with sheep whose genetic quality is well-appreciated, especially for the Gissar breed, the biggest in the world

This project is funded by The European Union

There is also living memory of Soviet times when quality of genetics was promoted by well-trained staff of large breeding complexes

This project is funded by The European Union

Against this background, there is no reason why Tajik breeders could not be empowered as their European counterparts through dedicated events such as competition for best quality cattle

This project is funded by The European Union

There are two main ways to rebuild the genetic potential of Tajikistan. Import of live pedigree animals, which is a costly exercise, or artificial insemination with quality genetic material improving progressively local cows

This project is funded by The European Union

Currently, the number of inseminations of local cows not owned by large-scale farms is minimal (around 30,000 per year). But there is strong willingness of veterinarians to promote this technology as part of their private activities

This project is funded by The European Union

Results of pilot projects of introduction of modern genetics through artificial insemination have proven to give excellent results. Here for instance a cross-bred F1 heifer with Tarentaise and its mother in a mountainous region of Tajikistan

This project is funded by The European Union

In remote and under-used mountainous pastures, better genetics can have immediate

• effect. But in other areas, the impact of better genetics will be limited if not associated

with better access to fodder and feed

This project is funded by The European Union

Acreage dedicated to hayfields, fodder maize and fodder beets remains much below Soviet levels and needs to increase to put animal husbandry on a better track

128 117 111 104 97 77 73 54 47 44 44 41 41 43 45 48 51 41 41 48 46 48 49 58 58 43 37 31 32 28 17 11 12 15 14 14 13 11 14 17 18 20 24 28 26 22 23 18 21 18 20 40 60 80 100 120 140 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Evolution of fodder crops (thousand ha, TajStat)

Permanent hayfields Fodder corn (silage) Fodder beet

This project is funded by The European Union

For fodder, the biggest constraint now is the massive decrease in the availability of equipment since FSU

33 30 29 27 26 25 12 12 10 10 5 10 15 20 25 30 35 Seeders Cultivators Ploughs Combine harvesters Trailers Tractors Silage harvesters Rakes Mowers Presses

Agricultural equipment 2015 (1991=100, TajStat)

This project is funded by The European Union

The way forward Recommendations for well-coordinated targeted actions

This project is funded by The European Union

Beef-and-dairy: a splendid window of opportunity for rebuilding of competitive beef-and- dairy value-chains through efficient coordination of key stakeholders

• Role of the State: a better tax treatment all along the value-chain to ensure its capacity for

economic diversification and continuing improvement of the regulatory environment for the sector, in particular in the field of pasture management and cooperative development

• Role of donors: the need for optimal coordination of unprecedented volumes of financial

support to the sector

• Role of the private sector: close coordination with the State and donors to identify key

bottlenecks through inter alia the promotion of the recently created Tajik dairy association

• Role of private companies: rebuilding of value-chains linkages through a reverse cascading

approach, from the fork of the consumer to that of the farmer

This project is funded by The European Union

The final consumer defines the way forward through modern retailers, who get their processed products from modern dairy and meat processors, who must get their supply from modern local farmers. But there are too few of them… The State and development

• rganizations can increase their capacity and number at four different levels

This project is funded by The European Union

• 1. First element of the reversing cascade: Support to large farms controlled by dairy factories

to transform them into “nexus” farms

• Test new technologies through connection with foreign providers of technology
• Train a new generation of farmers as part of off-take contracts as in advanced countries
• Transfer their access to modern inputs to these farmers
• For financial institutions, off-take contracts of milk backed by dedicated technical

assistance allow for the development of so-called value chain finance schemes for which projects like ECTAP can be a catalyser

This project is funded by The European Union

• 2. Second element of the reversing cascade: Support to high quality and independent

large farms

• Better connect these farms with local and international research institutes and with

foreign providers of technology and inputs

• Use these farms to introduce and evaluate new varieties of seeds, and new types of

plants or associations of plants

• Use these farms to test and promote innovative genetic practices such as embryo

transfer and sexed semen

• Use these farms to evaluate the performance in Tajikistan of pure-bred animals from

different races

• Build the capacity of these farms to produce locally-sourced genetics both for live

animals and for local production of semen

This project is funded by The European Union

• 3. Third element of the reversing cascade: Support to Dekhan farms in beef-and-dairy
• Financial support to technical assistance for beef-and-dairy provided by dairy processors

involved in off-take agreements

• Technical support for the development of value-chain finance
• Institutional and financial support for the organization of cooperatives of use of agricultural

machinery and cooperatives involved in the setting-up of milk collection centres

• If Government of Tajikistan wants these types of cooperatives to develop, they should be tax

exempt for the activities conducted with their members as it is custom practice worldwide

This project is funded by The European Union

• 4. Fourth element of the reversing cascade: Support to households involved in beef-and-

dairy

• Technical and financial support for the development of modern feedlots interacting with

households in the meat sector (simple entry point for households)

• Use of the feedlots as training centres for best practices for households
• Use of the feedlots to disseminate better genetics (artificial insemination, pedigree bulls) including

terminal cross breeding helping to reduce the number of animals

• Use of the feedlots to disseminate better feed and fodder
• The best households should be able to join cooperatives set-up to support Dekhan farmers

This project is funded by The European Union

52

THANK YOU!

ECTAP 19/2 Istaravshan Street 734003 Dushanbe Tajikistan ectap@int.fs.de +992 93 511 05 09 Website: www.ectap.org