Exposed and penalized
But smallholder dairy production will only be able to reach its full potential if some of the threats and challenges the sector is currently facing are addressed. In many developing countries, smallholders lack the skills to manage their farms as ‘enterprises'; have poor access to support services like production and marketing advice; have little or no capital to reinvest with limited access to credit; and are handicapped by small herd sizes, low milk yields and poor milk quality.
Massive policy interventions (price support, milk quotas, direct payments, investment support programmes, export subsidies) in developed countries create a competitive advantage for the OECD dairy sector and penalize dairy farmers in developing countries, the report noted.
Smallholders are also affected by trade liberalization which increasingly exposes them to competition from large-scale corporate dairy enterprises that are able to respond more rapidly to changes in the market environment.
Environmental concerns are another threat to smallholder production. Low-yield dairy systems in Africa and South Asia are estimated to have higher carbon footprints per 100 kilogram of milk produced than high-yield systems in the United States and Western Europe. This carbon footprint could be significantly reduced through improved animal feeding.
Any dairy development strategy, the FAO/IFCN study recommends, must not exclusively focus on dairy producers but improve competitiveness throughout the entire dairy production chain, targeting farmers, input suppliers, milk traders, processors, retailers and others.
Creating value in every part of the chain ultimately also benefits consumers who are then able to obtain more dairy products for the same amount of money or need to spend less for the dairy products they consume.
"Smallholders are generally very resource-efficient," said Joachim Otte, one of the co-editors of the report. "Access to credit, improved animal genetic resources and animal health services, together with supportive political measures enabling them to participate in changing markets, are crucial."