Eastern Dairies unites cooperatives and improves market

USDA jump-starts new business through Food for Progress program

Eighteen months ago, 11 primary dairy cooperatives in Eastern Uganda faced challenges in marketing their members' milk; milk prices were low; demand for milk was volatile; and some buyers were unreliable in paying for deliveries. Acting independently, the cooperatives lacked the ability to mitigate the situation, resulting in insufficient household incomes for their more than 500 members, of which nearly 50 percent are women.

Recognizing its leveraging power, the Eastern Uganda Dairy Farmers and Breeders Association (EUDFBA), which represents the cooperatives, responded by forming a business to collect and market the milk under one name. Through technical assistance provided by Land O'Lakes, the new company, Eastern Dairies, has since increased the household incomes of its farmers by more than 50 percent.

In October 2006, Eastern Dairies set up a 2,000-liter milk cooler, financed in part by a grant from the United States Department of Agriculture's Food for Progress Program, which is managed by Land O'Lakes. During the new dairy's first year, the volume of milk collected from local smallholders and sold at the market in Mbale town quadrupled. Of the 55,000 liters of milk now produced each month by the 11 primary cooperatives, over 75 percent is bulked and sold collectively through the new dairy's milk cooler.

Through technical assistance provided by Land O'Lakes under the USDA program, Eastern Dairies also implemented a rigorous quality assurance system. This system improved the results of a water adulteration test from an average lactometer reading of 22 to an average of 28, enabling Eastern Dairies to meet the milk quality standard set by the Uganda National Bureau of Standards. The Dairy Development Authority has subsequently given Eastern Dairies the highest approval rating of all milk collection centers in the Mbale area.

The USDA program further enabled Land O'Lakes to introduce modern accounting software to Eastern Dairies, which has allowed the company to track its profitability since August 2007. As a result of these development initiatives, the price received by Eastern Dairies for bulked, chilled milk is 60 percent higher than the price received by primary cooperatives for milk. Nearly all of the financial benefits are passed directly to individual farmers, who now receive US$ 0.23 per liter of milk, up from the US$ 0.15 per liter previously received.

Because of assistance received through the USDA Food for Progress program, the company that launched 18 months ago with only one employee now employs six full-time workers. Local jobs have also been created by the input and service provider enterprises that have sprung up, including fodder production, extension services, and transport. The dairy now realizes an average monthly profit of over US$ 1,500. To date, Eastern Dairies has reinvested profits and member contributions totaling US$ 12,400 into the purchase of assets and an upgrade of the milk bulking center, and looks forward to further growth as it closes the second quarter of its second year.