Written by: Enkhtuya Boldbaatar, Dairy Specialist, EMIRGE Mongolia
As a dairy sector specialist, I see that current chaotic competition for fresh milk at the sourcing stage is not helping anyone, including milk producers and dairy processors. Therefore I want to discuss this issue with you. I have been working as the EMIRGE program dairy specialist for 5 years now. Our program works with rural dairy cooperatives and groups as well as relevant organizations in the sector to build mutually beneficial relationships between dairy value chain actors. We are working towards improving opportunity for dairy cooperatives and farmers, to produce and supply the market with quality milk at favorable prices.
Experts and researchers point out that milk production in the dairy producing region of Mongolia is limited, it produces 45 million liter tons of milk annually. On the other hand, 5 large dairy processors in UB, with combined processing capacity of 450 tons per day, compete in this region to source milk, each of them following different competitive strategies. This competition has been increasing since 2014 and has intensified even further in 2017. The reason is declining milk production at the farm level.
Milk production in the main milk producing region declined by half in 2017 due to extremely dry summer and poor vegetation growth. Consequently, dairy processors pursuing high price strategy in their competition for scarce resources. Scarcity and fierce competition for milk resulted in the following: 1) price of fresh milk increased by 45%; 2) quality of milk declined; 3) dairy processors’ profit declined.
Furthermore, milk producers’ income did not increase and in fact it saw a decline. For example, a farmer used to make income of MNT20,000 per day in the summer of 2016 by producing 40 liters and selling at MNT500 per liter. Whereas, in 2017 the farmer is making MNT18,000 per day by being able to produce only 20 liters a day and selling at MNT900 per liter, making MNT2000 per day less than previous year.
Moreover, there seems to be a declining trend in fresh milk quality. For instance, in 2016 Suu JSC used to collect and test milk samples from its’ suppliers on a weekly basis, whereas, in 2017 the company is performing milk sample testing only once a month. APU JSC used to procure milk through its’ milk collection centers upon testing quality using lactoscans, rejecting low quality milk and performing somatic cell testing with milk samples at their processing plant.
Whereas in 2017, the company started to send its’ laboratory workers from milk cooling centers directly to dairy farm collection centers to procure milk. Additionally, the company is using 75% alcohol (previously 82% alcohol was used) to perform quick testing of milk quality. This shows that competition for fresh milk is forcing processors to apply lower quality standards in the procurement of milk and therefore creating conditions for a decline in milk quality.
Deterioration of milk quality, despite higher prices, is creating higher risk of quality decline in final dairy products; increased return of dairy products by sellers; lower sale; and consequently lower profits. These conditions have negative consequences such as increased use of milk powder by processors, reduced consumption of dairy products by consumers, and lower income generation by farmers.
The EMIRGE team believes that, during this age of increasingly frequent droughts and extremely harsh winters (dzud) due to global warming, Mongolian dairy sector participants need to work towards ensuring and increasing stable milk production. This can be achieved by jointly developing and implementing risk management programs, and starting irrigated pasture and hay farming, with the collaborative participation of local milk producers, processors and local government; as well as towards the introduction of good practices among milk producers to protect milk quality and development of quality based pricing system.
Currently approximately 80% transition to high school, and only 40% transition to universities. Last year, approximately 800,000 did KCPE, and those that sat for KCSE were approximately 500,000. This leaves about 150,000 primary graduates and about 300,000 secondary school graduates without a way of progressing their learning. This is the gap TVET must fill.
TVET training has not be correctly placed both in the minds of learners, tutors, parents, and even the public. Often, my teacher would tell us that if you fail the final exams, you will only be able to earn a place in the village polytechnic school - where tailoring, masonry, carpentry, welding and other skill-based courses were taught – solidifying the perception that artisans are a ‘last resort’ occupation. We must seriously and urgently counter these perceptions for the artisans and graduates of TVET to be able to earn a decent pay, and enhance policies that protect the remuneration of their craft.
Unlike other trades such as law, teaching, engineering, accounting, and medicine amongst others which are well organised into associations to foster the welfare of the members, artisans operate with no organized representation, a poor public image and little to no enforced national legislation for minimum labour standards or occupational safety regulations, the artisan and construction workers are vulnerable to exploitation. This has further been complicated by the fact there are many people who practice in this same space without any certificate. A way must be found to weed out the quacks from the industry. The genuine practitioners should be availed opportunity to get certification while on the job, and slowly progress to a situation where in order to practice, you must show certification. Furthermore, organized foreign artisans have been able to take advantage of this situation, win contracts and displace Kenyan workers. This is a losing situation for Kenya. Our artisans could literally be building our country and contributing to the Kenyan economy, but instead those jobs are going to foreign nationals who spend a small percentage of their wages inside the Kenyan economy. Knowing the numbers we are talking about, it should concern all policy makers to think of innovative ways to keep these TVET graduates in employment. This will significantly lower the unemployment pressure exerted by un-employed youths.
Some efforts to mobilize the artisans to achieve the above goals have been made, and we know there are many such efforts out there that could be consolidated to address this problem. Global Communities, an International Non-Governmental Organization, operating in over 20 countries in the world, is pioneering the concept of worker-owned cooperatives as one of the means to unite the artisans, and create a pool of talent which the public could run to for guaranteed quality service.
FundiTech, a pre-cooperative of artisans and craftsmen in Nairobi County, supported by the USAID/EMIRGE program, is endeavouring to change this status quo narrative. As an association of skilled artisans or “Fundis” they are coming together using the worker-owner cooperative business model, to build their own business of professionals that they know can change the face of fundis (artisans) in the country. FundiTech wants to become a “one stop shop” where clients can get any quality service in the building and construction industry, from project design to interior finishing.
As worker-owners, FundiTech members can set the terms of their own employment, ensure members know their rights and remove avenues for exploitation, while ensuring wages earned are commensurate to the skill provided. As a social enterprise the cooperative is envisioned to improve the standards of living of artisans and also providing soft skills on professionalism, customer service, workforce standards, and others that will improve the client interactions and the perception of the Kenyan Fundi. By providing ownership in the form of shares to the members (artisans) the worker-owner element incentivizes them to work to the best of their ability in order to enhance the reputation and profitability of FundiTech.
We hope the many efforts out there to this end could be shared and that a more robust TVET promotion and investment would be made to give the millions of our young people a chance in life, now and in the years to come.
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