Background

I was always afraid of cows (called “entity” in the local language), especially during milking. As a child, I watched from a distance as my grandfather milked. She couldn’t trust that the cow wouldn’t get angry (for having touched her mammary glands) and give an accurate kick in 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. Indigenous breeds are estimated to account for approximately 84%, while exotic and cross breeds account for the remainder. 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 at home) and 70% is sold.

While the domestic market is the main market for milk and dairy products, some of the processed milk and value-added 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 by more than 3% per year, and become richer (with the number of 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 packaged pasteurized milk distribution system
4. Transformation of informal actors into mini dairies
5. Modernization of existing dairy plants
6. Investment in the farming/processing integrated dairy business
7. Investment in transport tanker cleaning installation.

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

CONS FIRST

1. Bottleneck Marketing

It has been recognized that one of the most critical problems faced by 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 milk supply, as they already have well-established transport systems and infrastructure.

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

2. Low animal productivity

In Uganda, dairy farmers are mostly small farmers. Many produce for self-consumption and only offer the available surplus to the market. Most depend on the traditional indigenous herd, known to have very low productivity. Furthermore, they mainly rely on natural green grasses for food without feed supplements.

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

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

3. Availability of financing

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

However, more and more 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 a better 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 aid projects for agriculture also often prefer to lend to cooperatives and similar farmer groups.

Commercial bank 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 showing that the dairy market is growing at a fast and steady rate. 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 major processing and distribution companies unable to meet 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 he has systems 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 the milk and the 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 the wrath of feminists) 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 fed properly. 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. Therefore, you will double your stock quickly. When buying, be sure to choose breeds (possibly cross breeds) that are suitable for the local area (resistance to weather and disease);
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 wish to supply milk processors on a larger scale; Y
5. Water. Make sure you have enough water nearby. Cows drink a lot of water and so you need a tank or as you go build a well to provide the water.

last word

I’m still scared I’ll get kicked by a cow being milked, so I keep saying, “No thank you sir, I’ll keep hiring 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.