Private and public costs and benefits of implementing a quality-based milk payment system in Kenya
This study (PDF) by Wageningen Livestock Research and 3R Kenya assesses the model of dairy processor Happy Cow Ltd as a pilot to introduce a quality-based milk payment systems (QBMPS) in Kenya that integrates smallholders as suppliers. QBMPSs could successfully control and improve the milk quality in Kenya along the dairy chain. Results of this pilot study reveal that among the milk value chain actors, farmers benefit the most from a well-functioning QBMPS, both financial as in terms of social inclusion. Meanwhile, collection and bulking enterprises (CBEs) and processors have additional costs, which will give them a loss for mixed milk. This will influence their commitment to QBMPS. The investments made in the project have improved the efficiency of milk collection, while better testing has improved the quality of milk. Apart from the private benefits to the value chain actors the QBMPS would result in reduced public health costs by reducing milk-related infectious diseases. Major external challenges proved to be: the lack of enforcement by relevant authorities, the lack of common strategy towards milk quality, no level playing field in regard to hawkers who buy milk directly from farmers and prolonged drought. Internal challenges were the low awareness, skill level and weak governance of the dairy value chain actors and inadequate basic infrastructure and milk quality policies. Recommendations on farm level include full level implementation of proper hygiene. CBEs should check the quality of milk delivered and develop and enforce strict standard operating procedures. These processes should be strictly monitored by processors, who should implement a robust milk quality tracking and tracing system. Governments should ban the use of plastic cans and phase out the raw milk market and implement entry barriers for CBEs. Furthermore, authorities should streamline the dairy sector towards a formal sector. Lastly, consumers should be duly informed about the difference in quality of milk that goes through a QBMPS.
A full report of the study can be found here.