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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Zambeef reports a fourfold increase in profits
The fully integrated food processing and retail business saw profits increase dramatically in 2018.

Zambeef, the vertically integrated agri-food PLC with operations in retail, cold stores, cropping, meat and dairy processing, reported a fourfold increase in pre-tax profits for its 2018 financial year to just under $2.4m (€2m).

Founded in the early 1990s by Irish man Francis Grogan, Zambeef has grown to become the largest integrated food company in Zambia. Zambeef is listed on the London stock exchange and today accounts for over 20% of Zambia’s wheat production, 25% of its soya and accounts for about a third of its poultry production, as well as being the country’s largest pork and beef processor.

For its 2018 financial year, operating profits at Zambeef increased by more than a third (+36%) to $10m (€8.8m), as profit margins in the business expanded from 3.6% last year to 4.3% in 2018. Sales for the year grew by 14% to just under $235m (€206m), primarily as a result of strong sales growth in its retail stores and higher sales of animal feed.

In 2018, the group reported a near 8% increase in the sales volume of beef to 18m kg, while chicken volumes increased 13% to 13m kg. Zambeef said milk collections during the year fell by 4% to 19m litres, while pork volumes declined 8% in the year to 10m kgs.

Zambeef’s 25,000ha cropping division harvested almost 45,000t of soya beans and 44,300t of wheat during the year. This raw material was then used in the company’s stock feed business, which sold over 200,000t of animal feed to farmers and agri-stores in 2018.

Industry insight: finding a better way to deal with factory trim
Carcase trim in meat factories is under the spotlight but how big a problem is it and what can be done to improve it?

The report of €200 penalties being handed out 21 times so far this year has generated huge debate among farmers. Just as it is important to highlight that these penalties have been applied, it is equally important to keep the issue in context and suggest how the issue of carcase trim scrutiny could be delivered in a way that would maximise farmer confidence that the system was delivering them full value for their livestock.

Context

It is worth looking at the numbers again. In the calendar year 2017, there were almost 1.8m cattle graded in Irish meat plants and department inspectors made 662 visits to factories across the country, checking 59,227 cattle in the process. While 21 major non-compliances have been found so far this year, there were actually none in 2017. There is no data available yet on the number of visits carried out in 2018 nor the number of cattle checked. However, assuming that it will be broadly similar to last year, then putting 21 cattle in the context of over 59,000 inspections means that less than half of 1% received the penalty.

The problem is that farmers don’t know what 21 cattle are being referred to and no doubt every farmer who has killed cattle this year, and has been disappointed with how they weighed, will be wondering was his among them. This is where full transparency would benefit both factories and farmers

The farmer whose animal was dressed so poorly that it merited a €200 penalty surely has a right to know what happened. We can be sure that Department inspectors will only take this course of action in the most extreme cases and in fact in both 2015 and 2017 there were no €200 penalties issued at all, with 28 given out in 2016. There are likely to have been several warnings issued along the way for more minor non-compliances.

In Northern Ireland, for example, there is no financial penalty but a system of warnings, both verbal and written, which is used sparingly. The ultimate sanction is an inspector stopping the line if he finds shoddy dressing of carcases during the visit. Another feature of the inspection process in the North is the publication of every factory’s performance on a bi-monthly basis. Unfortunately, the factory identity isn’t revealed, with each represented by a letter – A, B, C etc. What is interesting to note is that there is a variation between factories and the general rule of thumb is that a 90% satisfaction rate with dressing is typical. This means that one animal in 10 is dressed in a less than perfect way, ranging from minor to major non-compliance.

Better solution

In terms of delivering maximum transparency and building confidence in the process, it seems that a hybrid model using the best of both Northern Ireland and Republic of Ireland systems would be the way to go. In fact, if individual factory results were published with the factory identified on a regular basis, farmers would quickly see which factories were performing best. Factories too could watch each other and if a factory manager had a couple of bad reports in a row, you could be almost guaranteed that improvement would follow for the next time. There is nothing like peer pressure to drive performance.

It should also be recognised that after five years campaigning in the beef forum, additional monitoring of trim on an ongoing basis and in addition to the unannounced department inspection, will be rolled out in the new year. This will be carried out by DAFM veterinary public health staff AOs as they are commonly known and no doubt will enhance the scrutiny provided on carcase dressing.

Camera solution

Using modern technology, it should be possible to have every carcase recorded in sufficient detail that would enable a review by all parties after the event if there was any doubt in the standard of trim. The industry isn’t at that point yet though a trial on camera upgrade has been running for some time.

Much is said about the difficulty in developing technology that will operate satisfactorily in a meat factory environment. It is also a reality that Government meat hygiene inspectors can trim carcases as they move past their point on the line which would distort the final picture. However, a proper camera monitoring system would pick up issues such as hide puller damage and contribute to further enhance carcase trim monitoring.

Comment

Making sure the correct standard of carcase dressing is applied is a challenge. Enhanced technology plus additional supervision will all contribute to improve the standard. However, the ultimate control is robust inspection with the results published for non-compliances, and publication of these will drive improvement.

Bayer to cut 12,000 jobs and exit animal health business
Some 12,000 jobs are to go at Bayer and it will exit the animal health business as it aims to sustainably enhance its performance and profitability.

Bayer will reduce its workforce worldwide by 12,000 jobs by the end of 2021 in a bid to enhance its performance and profitability.

Bayer employs 118,200 people worldwide, with a significant number of jobs to go in Germany.

Jobs in its pharmaceuticals section, approximately 900 jobs in R&D and around 4,100 positions in its crop science division will go as the result of integrating Monsanto. A further 5,500 to 6,000 jobs in will go in the corporate functions sector.

Meanwhile, the company also announced that it intends to exit the animal health business and is assessing available options.

Bayer said that although this business offers growth options in an attractive market, it intends to allocate the investment resources necessary to support animal health to its core businesses of pharmaceuticals, consumer health and crop science.

Changes

These changes are two of a number of changes Bayer plans to make in the coming years.

Werner Baumann, chair of the board of management of Bayer AG, said that these changes are necessary and lay the foundation for Bayer to enhance its performance and agility.

“With these measures, we aim to take full advantage of the growth potential for our businesses. We are aware of the gravity of these decisions for our employees. As in the past, we will implement the planned measures in a fair and responsible way,” he said.

Shares

Assuming a constant portfolio and stable exchange rates, the company expects core earnings per share of €6.80 in 2019 (2018: €5.70 to €5.90), with a target of around €10 in 2022.

The group EBITDA margin before special items is targeted to increase to over 30% in the period through 2022, it said.

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