Source: Asia Development Bank
A recent study by the Asian Development Bank indicates that developing modern milk production based on inclusive contractual arrangements has the potential to address seasonal fluctuations in milk supply, while alleviating the overgrazing problem and supporting the livelihood of herder households at the same time.
As part of the private sector-led Inclusive Dairy Value Chain Investment Project, which was implemented from 2019 to 2023, ADB supported the Mongolian dairy processor, Milko Limited Liability Company, in expanding the collection of raw milk from herder households in six soums (sub-provinces) in three aimags (provinces) of Mongolia. With this project support, collection points were installed in soum centers located as far as over 400 kilometers from Ulaanbaatar, where Milko’s processing plant is located. Each collection point was strategically identified to gather raw milk from around 200 herder households located within a radius of around 70 kilometers. Once sufficient milk is collected, it is transported to the processing facility in Ulaanbaatar by a larger truck. This system ensures that the raw milk can reach the processing facility in less than 24 hours after milking during the peak milk production months.
The impact study reveals that herder households supplying raw milk to Milko could increase their inflation-adjusted household income by 3.6% per year, compared to 2.6% of the comparison group or non-supplying herders, while controlling for other factors. Despite having smaller herd sizes, milk supplier households earn 20% more in monthly income than non-suppliers on average.
The Milko-type supply chain enables herders to sell milk and improve their livelihood while still engaging in traditional livestock herding. This helps reduce grazing pressure on grasslands as they can earn more from milk production even with a small number of livestock units. When herders have the opportunity to earn income from milk sales, they take full advantage of it. They often move closer to the collection route, diligently protect their milk from spoiling, and aim for maximum milk output by any means possible.
Herders can supply milk to dairy processors only if they have access to collection points. Collection by Milko and other large dairy processors is feasible only if there are paved roads that allow for fast and efficient transport. Other factors, such as availability of sufficient milk resources and electricity, also influence this decision. To facilitate milk collection, improvements in road infrastructure, electricity supply, herd structure, and breed quality are needed. These can be encouraged through targeted government policies.