Uganda’s low raw milk prices requires innovative solutions to increase margins above feed costs

The Inclusive Dairy Enterprise Project (TIDE) - II has launched an alternative ration balancing software - Rumen8 in Uganda.

Dairy farmers in Uganda are facing one of the roughest and most uncertain periods the sector has experienced. In the last half of 2019, Uganda’s farm-gate raw milk price drastically dropped from an average of UGX 800 to 500 per litre, with some farmers reporting as low as UGX 300 per litre.  Even worse, is the glaring possibility of a market collapse due to unfair and unconstitutional market protection by some East African Community (EAC) member states. At the regional level, there is the continued dairy trade war between Kenya and Uganda, with Kenya curtailing Uganda’s milk and dairy products from entering its market. Given the current stalemate between the countries this situation is likely to continue into 2021, thereby potentially affecting the market uptake, the price of raw milk, and the profitability of the dairy sector at large.

A review of the last four years however showed a promising future for the dairy sector. With the exception of a slight dip in milk prices in the last half of 2018, Uganda was recording an annual average farm-get price of UGX 800 per litre of milk with the period between 2014-2017 being the most profitable for the sector. The country’s presence on the world dairy market substantially grew as evidenced by an increase in export earnings from US$30M (2014) to about US$150M (2018). The rapid sector growth was in part due to (foreign) investment in the country’s processing capacity, stronger cold chain network and increased investment by farmers in farm infrastructure and herds.

There is no doubt that Uganda can potentially become a leading net exporter of milk and dairy products at the global level. This is due to its conducive agro ecological environment for pasture based dairy farming, ample land for grazing and availability of a wide variety of high quality forage crops. In addition, cattle keeping which forms the basis of the rural economy and culture in Southwestern Uganda - has seen ongoing commercialisation with investments in cross breeding, paddocking and other farm infrastructure, showing willingness and eagerness of farmers to invest in dairy intensification. A number of processors have set up base in Southwestern Uganda over the past years, or expanded their operations, with a total current processing capacity of over 1.2 million litres per day.

The pasture based dairy farming system gives Uganda a competitive advantage. Even under its current relatively inefficient production practices, Uganda’s cost of production is considered to be significantly lower than in other countries, standing at EUR 0.15 per litre (approx. UGX 600). Recent data collected from emerging commercially oriented dairy farmers in Southwestern Uganda by the SNV Inclusive Dairy Enterprise project (TIDE), show that some farmers have been able to reduce costs to less than UGX 430 per litre by employing more efficient feeding regimes, paddocking, investments in water for production, improving breeding cycles and better control of diseases on farms. For farmers that have made considerable investments on their farms, the current situation of low prices for raw milk is frustrating and can prompt a downward sector spiral and eventual pull-out by progressive farmers from dairy moving to beef or other commercial ventures.

Rumen8

To mitigate this possibility, The Inclusive Dairy Enterprise Project (TIDE) - II in partnership with the Netherlands East African Dairy Partnership (NEADAP) has launched an alternative ration balancing software - Rumen8. Rumen8 is a diet formulation tool that helps dairy advisors and extension workers to advise farmers on a well-balanced ration for the different cow groups in the farm, in order to improve milk yield and margin above feed costs (milk revenue minus feed costs) based on locally available feed sources. In advising on the optimal ration for the cows, the software takes into account (amongst other factors) the breed/weight of the cow, the farming system under which the cow is kept, the expected/targeted milk production, the ingredients (weight and price) of the ration (including forages), and the raw milk price.

Rumen 8 was first piloted by SNV in Kenya through the Kenya Market-led Dairy Programme (KMDP) between July 2018 and June 2019. Research findings on the pilot in Kenya showed an increase in the average daily milk yield per cow from 17 litres to 23 litres in the 13 firms that piloted the Rumen 8 software. The average daily margin above feed costs per cow also increased from by KES 90 (UGX 3,067) from KES 280 (UGX 9,541) to KES 370 (UGX 12,607) despite a sharp decline in milk prices from KES 41 (UGX 1,397) to KES 30 (UGX 1,022) towards the end of the pilot in 2019. The software thus proved that milk can be produced more efficiently by lowering the feed costs per litre of milk.

In Uganda, the software will be piloted in 30 dairy farms in Southwestern Uganda with support from ProDairy EA Ltd, PUM Netherlands Senior Experts, VICTAM Foundation and Rumen8 Nutrition Pty Ltd Australia. The farmers will be followed on a monthly basis with the Rumen8 package (farm visits, printed ration recommendation advice and general advisory services) with proper monitoring to report on the progress and changes attributable to the intervention.

By introducing the Rumen8 application, farmers will have more information to base on to adjust the feed costs and determine the optimum profit margins based on their current feeding costs. This tool is specifically useful for farmers that are already practising pasture management, feed their cows on hay or maize silage or use animal feed supplements like maize bran, brewers spent grain and other concentrates.

The software application is not only effective in reducing dairy production costs, it has also proved to be a climate smart technology. Rumen8 can calculate methane emissions by cows based on the ration fed and has the potential to help significantly reduce methane emissions by cows per litre of milk (what is referred to as emission intensity). In tropical livestock systems such as those found in Uganda and the whole of East Africa, methane emission is the largest contributor to the Green House Gas (GHG) footprint of the livestock sector. Rumen 8 optimizes feed digestibility and availability, balances and fine tunes feed rations thereby promoting better animal health while promoting increased milk yield. In the Kenya pilot project, there was an overall decrease in enteric methane emission intensity even as the milk yield increased.

The Rumen8 software for ration balancing for dairy cows will also be enhanced with a module for beef cattle in tropical areas. This will allow beef farmers to fatten their low productive cattle before selling them for beef.

TIDE-II project is funded by the Netherlands Embassy in Uganda and implemented by SNV Netherlands Development Organisation.

By Anton Jansen Project Manager TIDE-II, Joseph Kiirya Senior Investment Advisor and Paul Kimbugwe Senior Advisor Forage and Dairy Nutrition