Risk management and the potential of cattle insurance in Tigray, Northern Ethiopia

This study explores the role of livestock insurance to complement existing risk management strategies adopted by smallholder farmers. Using survey data, first, it provides insights into farmers’ risk perception of livestock farming, in terms of likelihood and severity of risk, attitude to risk and their determinants. Second, it examines farmers’ risk management strategies and their determinants. Third, it investigates farmers’ potential engagement with a hypothetical cattle insurance decision and their intensity of participation. Factor analysis is used to analyse risk sources and risk management, multiple regressions are used to identify the determinants; a Heckman model was used to investigate cattle insurance participation and intensity of participation. The findings show different groups of farmers display different risk attitude in their decision-making related to livestock farming. Production risk (especially livestock diseases) was perceived as the most likely and severe source of risk. Disease control was perceived as the best strategy to manage risk overall. Disease control and feed management were important strategies to mitigate the production risks. Disease control and participation on safety net program were found to be important to counter households’ financial risks. With regard to the hypothetical cattle insurance scheme, 94.38% of households were interested to participate in cattle insurance. Of those households that accepted cattle insurance, 77.38% of the households were willing to pay the benchmark annual premium of 4% of the animal value while for the remaining households this was not affordable. The average number of cattle that farmers were willing to insure was 2.71 at this benchmark. Results revealed that income (log income) and education levels influenced positively and significantly farmers’ participation in cattle insurance and the number of cattle to insure. The findings prompt policy makers to consider livestock insurance as a complement to existing risk management strategies to reduce poverty in the long-run.

Exploring alternatives for milk quality improvement and more efficient dairy production in a smallholder farming context – case study: Mantaro Valley (Peru)

Consumer demand is revolutionizing the way products are being produced, distributed and marketed. In relation to the dairy sector in developing countries, aspects of milk quality are receiving more attention from both society and the government. However, milk quality management needs to be better addressed in dairy production systems to guarantee the access of stakeholders, mainly small-holders, into dairy markets. The present study is focused on an analysis of the interaction of the upstream part of the dairy supply chain (farmers and dairies) in the Mantaro Valley (Peruvian central Andes), in order to understand possible constraints both stakeholders face implementing milk quality controls and practices; and evaluate “ex-ante” how different strategies suggested to improve milk quality could affect farmers and processors’ profits. The analysis is based on three complementary field studies conducted between 2012 and 2013. Our work has shown that the presence of a dual supply chain combining both formal and informal markets has a direct impact on dairy production at the technical and organizational levels, affecting small formal dairy processors’ possibilities to implement contracts, including agreements on milk quality standards. The analysis of milk quality management from farms to dairy plants highlighted the poor hygiene in the study area, even when average values of milk composition were usually high. Some husbandry practices evaluated at farm level demonstrated cost effectiveness and a big impact on hygienic quality; however, regular application of these practices was limited, since small-scale farmers do not receive a bonus for producing hygienic milk. On the basis of these two results, we co-designed with formal small-scale dairy processors a simulation tool to show prospective scenarios, in which they could select their best product portfolio but also design milk payment systems to reward farmers’ with high milk quality performances. This type of approach allowed dairy processors to realize the importance of including milk quality management in their collection and manufacturing processes, especially in a context of high competition for milk supply. We concluded that the improvement of milk quality in a smallholder farming context requires a more coordinated effort among stakeholders. Successful implementation of strategies will depend on the willingness of small-scale dairy processors to reward farmers producing high milk quality; but also on the support from the State to provide incentives to the stakeholders in the formal sector.