Watch and listen: building a dairy industry from the ground up in Kenya
Private companies and family farms have embarked on a massive dairy development drive in the highlands of Kenya. Thomas Hubert reports from the Mt Elgon area.

Under a baking sun in the northwestern Kenyan village of Kiminini, Christine Musiasia grabbed a bunch of freshly chopped feed – a mix of tropical Rhodes grass and protein-rich desmodium and calliendra crops – and brought it to her four animals. The two milking cows and two heifers rushed to the troughs. One year ago, they produced just enough milk for the family. This year, they are netting Christine a steady cash income.

“I used to take my cows along the road,” Christine told the Irish Farmers Journal. Skinny Kenyan cattle are often seen grazing on patchy grass verges or even trash, while farmers focus on growing maize – a crop in high demand in Kenya, but one vulnerable to drought, pests and price volatility.

In just 12 months, Christine’s farm has changed radically. She has ditched maize for a mix of fodder and food crops, used AI for the first time and built a simple but efficient housing unit for her cows. She dumps their manure into a small anaerobic digester which gives her cooking gas and nutrient-rich slurry. The farm supports Christine, her husband and six children, and two farm workers. “I also have more free time,” she says.

One of her neighbours, John Wakeli, has also started to grow fodder crops for his two goats and two in-calf heifers. “This is the first time we have cattle,” he said. “We will start milking soon.”

Another local farmer, Nathan Rono, made similar changes and proudly showed his milk dockets of the past year. From under five litres, his daily deliveries have grown to above 11 litres.

These are some of the 30,000 family farms targeted by the Livelihoods Mt Elgon project, which kicked off last year to develop dairying in this region over the next decade – all from private sector resources. VI Agroforestry, a farm support organisation operating across East Africa, is training farmers into new technologies and providing seeds for the new crops.

Listen to an interview with VI Agroforestry deputy regional director Wangu Mutua in our podcast below:

Finance comes under the form of a €3.5m investment from the Livelihoods Carbon Fund, an investment body for multinationals looking to achieve social impact and offset their greenhouse gas emissions.

Sustainable farming practices will avoid the emission of 1m tonnes of CO2 through sequestration in soils and increased cow efficiency

“There are three main benefits to the Livelihoods Mt Elgon project: the first one is its positive impact on the lives of farmers and their families, starting with increased and more stable revenues over time. The second is the additional milk produced for Brookside, contributing to more economic activity. And the last one is climate action as sustainable farming practices will avoid the emission of 1m tonnes of CO2 through sequestration in soils and increased cow efficiency,” said Livelihoods Venture president and co-founder Bernard Giraud.

The French dairy giant Danone is a major player here: it was the first investor in the Livelihoods Funds and owns 40% of Brookside Dairies, the largest milk processor in Kenya. The other 60% belongs to the Kenyatta family of the first and current presidents of Kenya.

Brookside has committed to buying all the milk from the farmers involved in the project for the next ten years as long as it meets quality criteria. Kenyan consumers are spending more and more on dairy products and the company can barely meet the demand for its liquid milk, yoghurt, cream, butter and ghee.

“We have an installed capacity of 1.5m litres/day, but we process between 300,000 and 800,000l/day,” said Emmanuel Kabaki, Brookside’s head of milk procurement and extension services. The drought that hit east Africa in the past year curtailed milk supply. Importing is not an option as it would attract a 60% tariff. A new drier built to transform any oversupply into milk powder remains idle.

“This year, a bonus had to be paid. It’s challenging,” Kabaki said, even though Brookside trains 20,000 farmers each year to increase productivity. According to Kabaki, most Kenyan dairy farmers milk one to three cows on 3ac to 5ac, with the average daily yield just six litres/cow.

Brookside is offering co-ops in the Mt Elgon project its current top price of 35c/l on one-year fixed-price contracts, investing in their bulk tanks and dispatching staff for maintenance and quality control. The company hopes to lift its daily collection from the area from 5,000 litres to 135,000 litres.

Co-ops are a key link in this emerging value chain, and 15 of them are involved in this project. During the Irish Farmers Journal’s visit to Mubere, farmers brought their milk and staff offloaded creamery cans from local collection points. A Brookside employee performed density and alcohol tests before accepting deliveries into the 3,000-litre communal bulk tank. The scene was reminiscent of Ireland 60 years ago.

Mubere Dairy Farmers’ Co-operative Society started informally in 2009 but registered as a co-op just two months ago. It is targeting 3,000 registered members and more than 3,000 litres/day in collection by the end of this year. It secured a government grant to fund its bulk tank and received assistance from VI Agroforestry to establish sound governance– a key point after many Kenyan dairy co-ops collapsed 30 years ago, exposing farmers to heavy losses.

“People had lost faith in the co-op movement with the mismanagement of the 1980s,” said project manager Edward Masinde. “We’re bringing them back.”

Of the 35c/l paid by Brookside, Mubere co-op keeps 3c/l to pay its eight staff and other costs. Farmers get 32c/l in cash, bank wire or mobile phone transfer – a common form of payment in Kenya. To become members, suppliers buy a €5 share. The co-op has weathered the recent drought well and volumes are picking up again, allowing it to set money aside.

“We want to buy our own premises,” said its chair Robert Makhanu. “We will also start a health service with a vet available,” he added.

Maximising output from land

The farmers taking part in the Mt Elgon project are transforming their maize-only farms into dense patchworks of crops designed for maximum yield. On just 1.5ac, John Wakeli grows green beans between maize rows, fodder and protein crops, bananas and sweet potatoes, a combination of trees controlling soil nutrients, moisture and erosion while providing firewood and timber, and a few coffee bushes. He also keeps rabbits, laying hens, and has a nursery with dozens of seedlings. This is a reminder that a farm’s main pasture or tillage production area always leave gaps – however tiny – to pack in additional sources of output and income.

Reporting supported by the Simon Cumbers Media Fund.

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Specialised nutrition drives sales growth for Danone
Infant formula sales decline slightly in 2018 as Chinese sales fall in the final months of 2018.

French dairy giant Danone reported like for like sales growth of 3% for 2018, as total group revenues reached €24.7bn.

This was driven by strong like for like sales growth of 6% in Danone’s specialised nutrition division, to reach €7.1bn.

Specialised nutrition, which includes Danone’s infant formula business, had operating profits of just under €1.8bn as profit margins in the division widened from 23.8% in 2017 to a lucrative 24.8% in 2018.

Specialised nutrition accounts for less than 30% of Danone’s total sales, but the division brought in almost half of the group’s €3.6bn in operating profits last year.

Danone said its infant formula business recorded a slight decline in sales during 2018.

In China, which accounts for 30% of all the group’s infant formula sales, Danone said it saw sales decline for the final months of 2018.

Danone blamed this decline on falling sales of infant formula via indirect sales channels, such as supermarkets.

However, Danone said it was seeing very strong sales growth in direct channels such as specialised mother and baby stores in China.

Arla to pay all of its €290m in net profits to farmer members
The Danish dairy co-op said it had taken the exceptional decision to pay out all its profits to farmers after the drought in 2018.

Arla, the farmer owned dairy co-op, will pay out all of its net profits from 2018 to its farmer members. The co-op will distribute €290m to its farmers, in the form of a 2.3c payment for every litre of milk supplied to the co-op during 2018.

With 11,200 owners, this will equate to an average once-off payment in the region of €26,000 for each Arla farmer.

Arla said this exceptional payment was in recognition of the difficult weather in 2018, when drought conditions last summer hit farms hard and left many in a difficult financial position.

The co-op is forecasting sales for 2019 to be in the region of €10.2bn to €10.6bn

Arla made the announcement as it reported a 1% increase in full-year sales for 2018 to €10.4bn, which was driven by 3% growth in sales of branded consumer products.

Over 45% of Arla’s business now comes from branded consumer dairy. Profits (EBIT) for the year grew by 6% to €404m.

For 2019, Arla said it plans to invest €458m in capital projects, including a new milk powder facility in Germany, as well as the expansion of several sites in northern Europe. The co-op is forecasting sales for 2019 to be in the region of €10.2bn to €10.6bn.

The co-op recently implemented a cost-cutting programme across the business known as Calcium, which aims to deliver €400m in savings by 2021.

This programme delivered €114m in cost savings during 2018, which was well ahead of the €30m savings target for the year.

First quarter profits fall sharply at Tyson Foods
The largest meat company in the US said profit margins on pork and chicken are tightening.

First quarter profits fell sharply for US meat giant Tyson Foods thanks to low chicken and pork prices.

Tyson, which is the largest meat processor in the US, reported net profits for the first quarter of its 2019 financial year of $551m (€487m), which is down 66% on the same period last year.

Tyson blamed the drop in profits on tighter margins as a result of rising labour costs and higher animal feed costs for chicken and pigs.

Tyson said sales in its beef division fell due to reduced cattle supplies

The company reported sales of $10.2bn (€9bn), which was in line with the same period last year.

Adjusted operating profits for the period fell 11% to $841m (€745m), as profit margins fell from 9.2% last year to 8.3% in the first quarter of its 2019 financial year.

Tyson said sales in its beef division fell due to reduced cattle supplies.

However, profits from its beef division grew by 20% to $305m as a result of higher sales prices for beef and strong export demand.

Profits from Tyson’s chicken and pork divisions were both down 40% on last year to $160m (€142m) and $95m (€84m) respectively.