Mexico: Dairy improvements in NW Michoacán.

Case study Mexico: Dairy improvements in NW Michoacán

Background

In 2004, at the request of the government of the State of Michoacán, Mexico, a team of the staff and students of the University of Chapingo carried out a study in the north-western part of the state, aimed at identifying the current status of the agricultural activities in the region, and how these activities interact with other economic sectors of the region.

This region was chosen because integrates a set of environmental and physical infrastructure conditions that have a good potential to establish sustainable development programs, which can be latter multiplied –with some adjustments- in other regions of the state. The conclusion of the study was that the model of development applied so far is unsustainable, because it has generated a large income polarization of the rural and urban populations, deforestation, soil erosion, water pollution and rural migration, mainly to the United States. Despite these problems, the regional agriculture is highly diversified and it is the main source of income for 26% of the population (working directly in farm activities). In addition, 46% of the economically active population works in family and multinational agro-corporations. Historically, cattle production has been an important source of employment for a high number of family production units; it is also important because it has been a social buffer in harsh economic and climatic situations.

Later, during 2006 a group or four members of the Mexican Study Case was appointed by the University to carry out a study in order to outline policies to be suggested to governmental institutions in order to stimulate the sustainable development for small dairy producers, considering north-western Michoacán as a paradigmatic example.

The situation of the Mexican dairy sector was analysed, considering aspects of the demand and the import of dairy products, the evolution of the market and the industrial sector, the price paid to farmers, the evolution of the world dairy market, the evolution of the four main Mexican dairy production systems and a brief outline of perspectives for dairy production in Mexico was issued. The main features of dairy production in the Municipality of Marcos Castellanos (where the Mexican Study Case is located) were briefly descried along with an outline of the relationship with the local dairy industrial sector.

These analyses were the basis for the definition of objectives to be taken into account by the definition of policies at a national level, which should be:

To improve economic feasibility of farms; this change will in turn improve the chances of young people to stay in the farms instead of emigrating (mainly to the US). This improvement requires policies affecting both ends of economic feasibility, production costs and product price.

To reduce feeding costs which regularly imply more than 60% of production costs. Capacity building in the design of alternative feeding strategies should receive high priority including aspects of forage production and conservation and design of regional concentrates.

To protect price paid to farmers by means of i) establishing a minimum (support) price as proposed by Cervantes-Escoto (2003), ii) inhibiting import of milk above that needed to carry out the social supply programme (i.e. avoiding import of dry skim milk (DSM) and whey powder used by the dairy industry for products of low quality), iii) establishing a tax on imports of DSM and iv) encouraging LICONSA to carry the social supply programme as far as possible based on purchasing milk of small (non-integrated) dairy farmers instead of imported DSM.

To avoid contradictions between different institutions, such as that between the Ministry of Agriculture (which stimulates productivity programmes for farmers) and the Ministry of Economics (which stimulates the import of cheap DSM in order to achieve a “competitive” dairy industry).

To encourage the search for achieving appellation controls for regional dairy products or the simpler “regional brands” as proposed by Chombo et al. (2004) because it implies a process of recruiting self esteem of the values and resources of the region and it means a potential way to improve price paid.

To reduce potential risks for human health related to brucellosis and tuberculosis, improving application of existing regulations aimed at increasing food safety of dairy products.

To encourage and support strict application of new regulations concerning quality and safety of dairy products (favouring those products made from fresh milk).

To halt the process of deterioration of natural resources involved with actual dairy production practices by the development and implementation of technologies aimed at the reduction of the environmental impact of dairy production systems (crop, grazing and whey management).

To improve self governance organisation of farmers under principles of equity as a means to increase their ability to manage their own development, taking advantage of the opportunities that organisation lends in terms of reducing prices of inputs, facilitating capacity building and technology transfer, development of projects aimed at increasing added value, acquiring governmental support and negotiating prices or products.

To improve communication channels between farmers and regional authorities in charge of programmes, encouraging a higher degree of integration and cooperation among different institutions.

Changes in the national perspective of the dairy sector during 2007

By the end of 2006 a huge rise in the costs of feedstuffs, particularly maize, brought the sector in a perspective of acute profitability crisis (Table 1). This perspective of crisis worried of stakeholders in the dairy sector not only in Mexico, also in different countries particularly the USA.

Table 1. International prices of main components of dairy cattle rations (http://www.siap.gob.mx/).

US$/ton

% Increase

Abr-06

Abr-07

Soybean meal

190.56

221.75

16%

Maize

93.23

142.34

53%

Sorghum

114.16

145.06

27%

However, by the beginning of 2007 another impact of the international market brought in a new perspective. The prices of dry skim milk (DSM)  were subject of enormous rises (Figure 1).

precio_leche_mx

Figure 1. Evolution of the price of dry skim milk in European markets

This increment had a dramatic effect on the Mexican dairy industry which was used to import low priced DSM in order to reduce costs and increase margins. The Mexican government so reluctant to react in favour Mexican dairy farmers and protect the price paid to farmers, rapidly reacted. Liconsa (state owned enterprise capturing milk from small dairy farmers, importing DSM and butterfat, and in charge of the Program of Milk Social Supply) raised the price paid to farmers and while in the past few years was reluctant go increase the amount of milk “captures” started an intense seek for farmers ready to deliver their milk to the state owned enterprise. Even though until now the Mexican market at the moment only absorbed 1/5 of the increase in the international milk price, the perspective for price paid to farmers is by far much better than at the beginning of the year (Figure 2) and further increments in prices could also be expected. Even though for these prices perspective is uncertain (e.g. Hardin, 2007), due to the low levels of global supplies a sharp decline in prices in the short term should not be expected. Therefore, the rather favourable present situation for profitable dairy production should be used by farmers to capitalize their enterprises and for technological improvevement in order to face not so favourable situations in the future. That appears to be the bet of the cooperative in SJG.

precio_leche_a_productores_mx

Figure 2. Evolution of the price paid to farmers.

The NAFTA and the dairy sector

Many researchers in Mexico appear to be extremely concerned about the consequences that the 2008 NAFTA scenario is going to have on the dairy sector. Such a concern ignores many factors originating in the world market, the USA and Mexico itself. From the point of view of the world dairy market because it is not longer controlled by countries of the Northern Hemisphere, from the point of view of the USA because for that country DSM is a collateral damage originating in supporting policies they are already changing and they are a relatively small DSM producer (only 1/5 of the world export of DSM), on from Mexico because the dairy sector has been exposed to unfair competition since 1982 and during the time of NAFTA Mexico always imported much more than agreed (no need to be scared because perspective is just the same that daily reality).

Work plan

The results of the initial meeting (Mexico, December 2006) and the IP Workshop (Mexico, March 2007) were rather consistent with those previous diagnosis and current problem description and research objectives and approaches are depicted in Figure 3.
Main objectives are to counteract the lack of sustainability of small dairy farms by means of coinnovation in the two components of that problem: lack of economic feasibility and negative environmental impact. We are aware that the work within EULACIAS will not be counteracting one of the main causes of the lack of sustainability of these systems: national governmental policies in the frame of NAFTA and trade globalisation (Salcedo et al., 2006). Nonetheless, enhancing the sustainability of the system may contribute to mitigate the main social problem in this region: the dramatic increase in migration to the USA.

diagrama_relaciones_mx

Figure 3.  Diagram of relationships between research leading to integral development of dairy farming in North West Michoacán.
In the following no attention will be paid to common issues as: i) the general challenge of EULACIAS, to increase ustainability of farming systems, developing tools and strategies to do so, ii) the shared vision of contributing to an “inside generated process of development of sustainable farming systems and to capacity building at different levels and iii) common results of adapting or developing co-innovation methods, changing the way farmers make strategic decisions and researchers get involved in the development of technologies for sustainable production systems.
What is to be considered “the region” within the frame of the present study is the municipality of Marcos Castellanos, within this region most of the coinnovation actions will be carried out with two groups of farmers a recently formed cooperative and a GGAVATT of 9 and 12 members, respectively.

Reduction of the impact of dairy production on water, soil and vegetation

In the proposed Municipal Development Plan (2005), the municipal authority of Marco Castellanos (NW Michoacan) shows concern about the environmental impact of dairy production such as, soil erosion, water pollution, reduction in water recharge, reduction of biodiversity and ground-cover all of which directly affect the environmental functionality in the region.
Work on this topic will be carried out within the frame of a PhD proposal on the environmental impact of current and alternative technologies. The candidate for this proposal is José Cortez, who will be working under local supervision by Dra. Edna Álvarez Sánchez. Within the frame of EULACIAS, José will work in close collaboration with WP3 (Johannes Scholberg ) and WP5.3 (Eduardo Cittadini). The following objectives have been defined for this study:

General objectives:

To evaluate the current level of natural resources degradation due to current management.
To evaluate the impact of alternative technology.

Specific objectives:

To diagnose the traditional dairy production system, evaluating the environmental effects.
To select appropriate alternative technologies in order to achieve the sustainability of dairy production.
To build an evaluation framework based on criteria and indicators in close collaboration with local stakeholders using a methodology that is consistent across the other EULACIAS case-studies.
To evaluate, with the criterions and indicators selected, the degree of sustainability achieved with alternative technologies.

Feeding strategies: alternative systems and techniques

Feeding costs usually represents more than 60% of production costs implying that in order to improve economic feasibility of production systems, the analysis of feeding strategies is a key issue. Furthermore, according to Amendola (2002) improper feeding strategies lead to problems in the seasonal distribution of production (which in turn become a disadvantage in marketing of the product), health and reproduction problems of cows, and affect milk composition. Therefore, the design of an economically and technically sound balance of energy, protein and minerals becomes a priority in system design. The following objectives have been defined for this study:

General objectives:

  • Co-innovation of feeding strategies stressing cost effectiveness, eliminating seasonal fluctuations and reducing the use of external inputs.
  • Development of tools to evaluate impact of alternative feeding technologies.

Specific objectives:

  • To classify farms in the case-study area according to representative indicators in close collaboration with local stake-holders (with special reference to economic indicators, including wealth ranking).
  • To identify through literature review the most appropriate method for sustainability evaluation with accent on economic viability.
  • To build an evaluation framework based on economical and technical criteria and indicators in close collaboration with local stake-holders using a methodology that is consistent across the other EULACIAS case-studies.
  • To design alternative feeding strategies using a co-innovation approach.
  • To evaluate technical-economical feasibility of current and alternative feeding strategies of dairy farming systems in Michoacán, Mexico.

References

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Brunett P., L., C. González E. and L. A. García H.. 2005. Evaluación de la sustentabilidad de dos agroecosistemas campesinos de producción de maíz y leche, utilizando indicadores. Livestock Research for Rural Development Vol. 17, articule Nùm. 78. retrieved January 7, 2007, from http://www.cipav.org.co/.lrrd/lrrd17/7/pere17078.htm.

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Hardin P. 2007. Sky-High Global Prices = Future U.S. Prices. The Milkweed. Issue No. 337, August 2007. Available at http://w.w.w.themilkweed.com

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Val-Arreola D., E. Kebreab, J. A. N. Mills, S. L. Wiggins and J. France. 2004. Forage production and nutrient availability in small-scale dairy systems in central Mexico usin linear programming and partial budgeting. Nutrient Cycling in Agroecosystems 69: 191-201.

Salcedo B., R., Perales R., M. A., Améndola M., R., and Santos M., A. 2006. Hacia una política de desarrollo sostenible de la ganadería bovina de leche para pequeños ganaderos en méxico. Caso piloto Michoacán 2005-2006. AGIP. UACh, Chapingo, México. 81 p.