Background

I have always been afraid of cows (called “ente” in the local language), especially during milking. As a child, I would watch from a distance while my grandfather milked. I couldn’t trust that the cow wouldn’t get angry (for having touched her mammary glands) and give a well-aimed kick to the gonads!

From a nutritional point of view (for those readers who don’t know, like aliens and martians), milk is an essential food necessary for our growth from infancy to adulthood, providing essential protein and calcium for the body.

In Uganda, a large number of families consume raw milk which is sold at the retail price of Shs. 1,400 shillings per liter compared to processed milk sold at Shs. 2,000 shillings per liter

Why invest in dairy farming in Uganda?

In Uganda, milk and milk products are obtained mainly from cattle and a small percentage from goats and sheep. The districts of Mbarara, Moroto, Bushenyi, Kotido, Masaka, Mbale, Kabarole, Mukono, Ntungamo and Kamuli dominate production in this sector.

The cattle population in Uganda was last estimated from the 2008 cattle census at 11.4m. It is estimated that indigenous breeds make up about 84%, while exotic and cross breeds make up the rest. It is also estimated that Uganda currently produces between 1 and 1.5 billion liters of milk per year, of which 30% is consumed on the farm (or in households) and 70% is sold.

While the domestic market is the main market for milk and dairy products, some value-added processed milk and dairy products are exported to regional markets such as Kenya, Rwanda, the Democratic Republic of the Congo, South Sudan, and Tanzania.

Where are the investment opportunities in the dairy sector in Uganda?

Considering that Uganda’s population will continue to grow at more than 3% per year, and become wealthier (with people falling below the poverty line), there are opportunities, especially in the distribution and processing of milk. In particular, the windows of opportunity that I point out for the Dairy Sector include the following:

1. Investment in milk collection centers
2. Investment in milk supply tanker trucks
3. Investment in a distribution system for packaged pasteurized milk
4. Transformation of informal actors into mini dairies
5. Modernization of existing dairy plants
6. Investment in integrated farming/processing dairy business
7. Investment in a transport tank cleaning facility.

So, with the above in mind, how do you try to make money (“sente” in the local language) from cows (“ente”)?

FIRST THE CONS

1. Bottleneck Marketing

It has been recognized that one of the most critical problems facing dairy farmers in Uganda is that of marketing their milk.

This is due to poor market access (eg due to poor roads and lack of information on market prices).

The solution for the “forward thinking” farmer would be to partner with regional cooperatives in the milk supply, since they already have well-established infrastructure and transportation systems.

There is also the option of contacting large-scale milk processors to supply them. The downside is that their prices are usually lower than retail prices, but the upside is the assured market for their product.

2. Low animal productivity

In Uganda, dairy farmers are mostly small farmers. Many produce for their own consumption and only offer the available surplus to the market. Most depend on the traditional indigenous herd, known for having very low productivity. In addition, they mainly depend on natural green pastures for food without feed supplements.

For the forward-thinking farmer, it would be prudent to use improved local and exotic dairy breeds that are known to produce large amounts of milk, while at the same time conducting zero grazing and offering feed supplements to improve animal nutrition.

I also recommend planting napier grass about 3 months before setting up the farm.

3. Availability of financing

Traditionally, the agricultural sector has been viewed as high risk and therefore there are limited financing options, for example from venture capital firms and private equity firms (some of which do not specifically lend to the sector).

However, a growing number of regional and international commercial banks, including development banks, are offering long-term financing for viable projects in the sector.

I would recommend that in order for the farmer to have the best chance of accessing loans, they keep records of their agricultural products to show that they do not have a high incidence of low milk yields (which is one of the factors that makes the sector high risk). . to end).

Another option is to join a cooperative or similar group where they can access group loans through SACCO schemes. Donors and other agricultural aid projects also often prefer to lend to cooperatives and similar groups of farmers.

Commercial banks’ lending rates in April 2013 averaged around 25%, while SACCOs appear to lend amounts in the 10% range.

THE PROFESSIONALS

1. High demand for milk in both the domestic and export markets

Reliable data on milk consumption in Uganda is lacking. However, there are strong indicators that the dairy market is growing at a fast and steady pace. The growth rate of milk production has been estimated at more than 8% per year. On the other hand, there is an unsatisfied supply of milk in the export market with the major processing and distribution companies unable to satisfy their supply markets. The largest milk processor, Sameer Agricultural and Livestock Limited (SALL), for example, claims to have existing markets in 17 countries, but is constrained by low supply in serving these countries.

The “forward thinking” farmer has the opportunity to partner with milk processors to produce for them. However, he will need to ensure that systems are in place to meet the rigorous quality control requirements of these processors.

2. Food and property security

A significant number of households in Uganda own a cow (although many own indigenous breeds) for the simple reason that both milk and cows are highly marketable and, in the event of financial difficulties, provide food security (milk for the family) and they can be easily sold, particularly the highly desired exotic breeds.

Oh, and let’s not forget (at the risk of feminists’ wrath) that these cows are a very important source of dowry (or “bride price”) in Uganda.

3. Return on investment

From a financial forecast model, I have developed; I estimate that the return on investment (ROI) for this sector is as follows:

Initial capital (A): Shs.44, 273,900

Profitability (B): Shs. 10,589,863

Return on Capital (A/B): 4.18 years

Now the basics that you must have well before investing in this sector.

1. Feeding. In addition to food supplements, plant elephant grass in advance. This will ensure that the cows are adequately fed. Feeding and milk production are directly related;
2. Purchase of cows. I suggest you buy pregnant heifers. My research shows that you can get them cheaper than non-pregnant ones. Thus, you will double your stock quickly. When buying, be sure to choose breeds (possibly cross breeds) that are suitable for the local area (weather and disease resistance);
3. Technical support. Visit a demonstration farm that practices good farm management to improve your knowledge;
4. records. Keep farm records to ensure you can assess your daily milk production and assess the quality of your milk. This will be particularly necessary as you expand and want to supply larger scale milk processors; and
5. Water. Make sure you have plenty of water nearby. Cows drink a lot of water and therefore you need a tank or as you go along build a well to provide the water.

last word

I’m still afraid of getting kicked by a cow being milked, so I keep saying, “No thank you sir, I’ll still hire a herder from a friend’s village in Nyakahita, Mbarara.”

Lighter humor aside, dairy farming has the potential to be a profitable business opportunity for farmers in Uganda. There is always room to grow, both for beginning farmers and more established players.