Dairy sector banking on kids meals, goat cheese
Published:Sunday | January 9, 2011 | 12:00 AM
Avia Collinder, Business Writer
A pending overhaul of the national school-feeding programme is likely to provide incremental revenue gains for the local dairy sector, says Dr David Lowe, who is also predicting that 2011 will see the hiking of value-added production within the sector, including for the first time, the making of goat cheese, which is in demand as a delicacy both locally and internationally.
"A goat cheese factory is planned for development in Hounslow, St Elizabeth, as part of the agro park concept," said Lowe, who is chairman of the board of governance for the Jamaica Dairy Development Board (JDDB) - a quasi government entity.
"It is anticipated that it will involve a private-sector interest, and the markets will include niche retail - potentially hotels - and export markets," he said last Thursday.
Turnover in the dairy sector in 2009 was estimated at $14.5 billion.
Similar outlook
Dr Paul Jennings, who resigned his job last Friday as chief executive officer of the Dairy Board after 11 years running it, has a similar outlook as Lowe on the potential business, and profit, opportunities for dairy farmers inside the meal programme.
The Golding administration is yet to sign off on proposals from the Dairy Board, however, which anticipates that the meal plan could open up the market for another nine million litres of milk supplies.
The budget for the School Feeding Programme (SFP) for 2009-10 was reported as approximately $1.96 billion in costs to the Government, said Jennings.
"Currently, the JDDB has in circulation a draft Cabinet submission seeking a rationalisation of the SFP towards greater utilisation of locally produced food - specifically milk - offered currently as a medium skimmed (2.5 per cent fat) flavoured drink," he told Sunday Business.
Lowe hopes that local content can be progressively increased to near 100 per cent in the long term, with no further changes in the money budgeted.
Said Jennings: "This is projected to be budget neutral with a public cost of approximately $204 million in 2011-12. This will require a 50:50 cost-sharing with parents. This is expected to generate an additional market of approximately nine million litres per year by year 2014."
Hoping for increased revenue
The JDDB is also hoping for increased revenue for the local sector through enhancement of the beef segment.
The contribution of beef to dairy farm revenues from culled animals is 10-12 per cent of revenue in Jamaica.
In more developed dairy industries, where farmers replace as much as 20 per cent of the breeding herd annually, contribution from beef is of the order of 15-20 per cent, Jennings said.
Currently, value-added production contributes no more than 3.5 per cent of total industry take, with the highest income earner for the segment coming from the sale of milk itself.
Based on 2009 production of 13.2 million litres and average farm gate price of $46.33 per litre, total farm gate receipts are estimated at $612 million.
Total value added is estimated at $2.14 billion.
"There is little value added beyond liquid milk in the local industry," Jennings said.
The JDDB has developed detailed plans, outlined in a medium-term strategic document on its website, but their execution has been hampered by budget cuts and the delayed implementation of a cess on milk and milk products, which only came into effect this January after a fight with producers, some of whom labelled the plan a job and investment killer.
However, JDDB chairman Lowe exudes confidence about 2011, noting that the goat cheese project is likely to see implementation by March.
The small ruminants development plan will be funded through a number of initiatives, he said, including the expansion of the goat herd for the goat dairy project with financing from the Commodities Fund.
"It is hoped that smaller dairy farmers may complement their existing cattle population with a potentially 'lower cost-higher return' dairy model (using) best practices methodology," said Lowe.
"The objective of the board is to encourage and influence policies to enable expanded markets, both for primary and valued-added opportunities, and exploit any potential competitive advantages."
Also in the works for 2011 is a business proposal by the Beef and Dairy Producers Association seeking to create a cluster operation on government lands.
The plan proposes a central dairy farm and a milk-processing facility, with small farmers leasing their cows to the entity for professional management at an annually agreed rate of return.
The proposal is being reviewed for feasibility, Lowe said.
The JDDB is also underwriting research, which promises the delivery of forage types which can be planted locally to reduce feed costs to the sector.
And the board is pushing for the wide-scale implementation of energy generation from biogas sources in the medium term, especially as electricity costs increased by 45 per cent in 2010.