Analysis of the dairy value chain in the Dar es salaam milk shed, Tanzania

Abstract

The general objective of this study was to analyze the dairy value chain in the Dar es Salaam milk shed in order to provide information for improving linkages between actors and efficiency in the value chain. Both primary and secondary data were used. Primary data were collected using Participatory Rapid Appraisal method and structured questionnaires administered to a sample of 125 dairy value chain actors. Concentration ratios were estimated to assess market power. Market margin was used to estimate the proportion of consumer price against producer prices while profit margin was estimated to assess efficiency at different nodes of the dairy value chain. The results of Descriptive statistics indicated that the dairy value chain was characterized by little value addition activities, small scale operations at all stages of the chain, seasonality of milk supply, poor quality control systems, poor handling, preservation and packaging practices of dairy products. Overall, the dairy value chain was weakly organized and coordinated. Analysis of market power using concentration ratio revealed higher market power for processors in terms of controlling prices and output than producers and marketing agents. Results of profitability analysis indicated variation in profit per liter of liquid milk equivalent with the highest profit obtained by processors, suggesting that, value addition could be a means of generating higher profits. However, opportunities for value addition were limited by several constraints including poor organization and coordination of the value chain, pricing constraints, low levels of milk hygiene, high operating costs, lack of milk collection centers, unreliable markets and poor infrastructure. These results suggest the need for promoting actors’ groups to encourage coordination between actors, promoting value addition through processing and proper packaging, promoting managerial skills in controlling costs of milk production and processing, promoting establishment of milk collection centers, improving road infrastructure and public transport systems.