Impact analysis, Improving Competitiveness of the Dairy Sector in Ukraine

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1 o Impact analysis, Improving Competitiveness of the Dairy Sector in Ukraine A n h T h u N g o A p r i l This impact analysis proposes a systematic methodology for moving from conceptually anchored pre-project sample design to statistically valid post-project evaluation for the period of Project farmers, their close non-project neighbours, and distant non-project households were sampled in two dairy oblasts, Lviv and Dnipropetrovsk in Ukraine. Hypothesis testing was conducted through t-tests, time series data analysis, cross tabulations and linear regressions. The impact analysis reveals that project members, particularly in Eastern Ukraine, do stand out in many ways from their non-member and far village compatriots. We are no doubt witnessing a ripple effect outward from the project households which the refined initiatives, growing momentum and increasing expertise of the next seven years should serve to strengthen.

2 EXECUTIVE SUMMARY The challenge of this study is the construction of data sets to serve the comparatives analysis across oblasts and over time. We employ two data sets: the first collected for the baseline study Improving Competitiveness of the Dairy Sector in Ukraine in 2009, and the second for impact analysis of the same project in To be able to collapse these two data sets in one, we have had to make adjustments to variables of the 2009 data to make them compatible to variables of the 2014 data set, before unifying them. For variables relate to monetary term such as income, we have taken into account adjustment of the consumer price index from 2009 to 2014, to convert nominal 2009 values to real 2014 values in order to calculate the growth rate of those variables during the period We have succeeded in meeting these challenges to construct a reliable, balanced joint data set. This impact analysis has revealed that the evolution of milk production in the two target provinces of this project, Dnipropetrovsk and Lviv, has been significant and positive in terms of both output per cow and total annual output of milk per household. This in turn has contributed significantly to the levels of household and per capita income, as well as the accumulation of productive and consumption assets of the households. Even when corrected for inflation, income and wealth have increased substantially over the five years of phase I of this project. Cows, machinery and barn reconstruction to improve animal comfort have all been significant contributors to that growth, particularly the increase in cow numbers (and quality) through the expanded use of artificial insemination. Many contributing factors as depicted in Figure 1.2 of the main report have contributed to and reinforced these growth patterns. Feed selection, production, and techniques have increased markedly. Pasture improvement, the greater use of hay, even when it has to be purchased, and feed diversification have rounded out the nutrition and no doubt contentment of the cows, statistically boosting milk output. Marketing infrastructure has improved, with better marketing equipment through the dairy cooperative and marketing network, a modest increase in the use of refrigeration, reduced distances, and the diversification of marketing chains in parallel to private channels. These latter have been enhanced by the growing number and proximity of cooperative-run collection stations. There has been a major increase in the quality, availability, and use of veterinary services. Milk testing and evaluation laboratories have been put into active use with the invaluable assistance of Valacta. In terms of human capital, overall education has played a significant role. Dairy farm management knowledge, dairy technical knowledge, and total capacity of project clients increased significantly, during the period of 2009 to The current data demonstrates that knowledge on animal comfort positively contributes to milk yield per cow. Particularly, Lviv has invested substantial physical and financial effort in these training campaigns. The challenge and ultimate goal are to turn this technical knowledge into real growth in milk yield, with the right volume of training, while not overinvesting in these activities, considering the marginal rate of improvement such training could contribute to milk yield growth. Most new investments in small dairy businesses at the household level in the project areas are private. These investments, particularly in barns and barn accessories contribute to animal comfort, the reduction of disease,

3 and milk output. This implies that project activities have been attractive enough to activate local resources and draw certain investments from other donor agencies. Business and technical training activities have been frequent and varied; and there has no doubt been a spill-over effect of interest and knowledge to the nonmember neighbours of the project households. It is appropriate to conclude that the project Improving Competitiveness of the Dairy Sector in Ukraine has had a substantial positive impact in the project areas, and that the effects of the project have benefited the neighbours of participating households. Particularly, Dnipro project-members have the most balanced growth pattern among all six client-oblast categories of surveyed households. There has also been a major shift in labour use patterns. The most notable has been in the gender division of labour. The workload related to dairy production by women has decreased significantly by 30%. The absolute and percentage involvement of women in direct milk production has gone down, while the involvement of women in decision-making and record-keeping has increased. This shift in labour division has placed Ukrainian dairy production closer to the pattern found on Canadian and European dairy farms. It is established that price level and stability are driving forces for small dairy households to take dairy production seriously and select their marketing agents. More attention should be paid to practical mechanisms that provide better price (large quantity to enhance bargaining power, direct negotiation with processing plants) and stability of price (contracts with processing plants, guaranteed prices for summer and winter ). If cooperatives in the project areas are able to provide their clients with higher, stable price and better services, these motivations will attract more small dairy households to become coop members, thus further increasing market economics of scale and reducing individual market risk. Growth in quantity and quality of milk collected will enable cooperatives to become an even more dynamic agent in the dairy marketing chain. The second phase of the project should focus on two technical issues that directly address milk yield: feeding and animal comfort. Balanced diet and quality feeding for dairy cows are the most important. More attention should be paid by the project to working with small dairy farmers to achieve efficient formulation of animal feeds that best balance costs and productivity. Since it is proven that improvement of animal health and animal comfort have contributed positively to milk yield, more emphasis should be given to this dimension. Project phase II should also continue to provide close support and assistance to households led by woman for several reasons. Firstly, these female-led households have more women who need assistance. Secondly, dairy production in rural areas of Ukraine is often in the hands of women in the family. Finally, incomes of households led by women are still lower than that of households led by men. At the end of the project Improving Competitiveness of the Dairy Sector in Ukraine, target indicators in eight dimensions of the project s Performance Measurement Framework have been earmarked. These span ultimate, medium-term, and immediate project outcomes:

4 % of labour hours on dairy production by woman 59% 27% -31% % of labour hours on dairy non-production by woman 77% 83% 6% % of dairy labour hours by woman 61% 33% -28% 8. Percent of entire sample selling milk through cooperatives Sell milk thru coop (percent) 12% 26% 14% Source: Calculations from all surveyed households in Lviv and Dnipro in both 2009 and constant 2014 UAH 2014 Percent growth ULTIMATE OUTCOMES 1. Growth in physical wealth of the household Total value of productive assets per HH (UAH) % Income per capita (UAH) % Net income per capita (UAH) % 2. Increase in dairy productivity Milk yield per cow (litre/year) % Milk yield of the farm (litre/year) % Number of cows (head) % 3. Standard of living Value of household consumer durables (points) % Value of consumer durables per capita (points) % Facility score (points) % Water supply score INTERMEDIATE OUTCOMES 4. Level of responsiveness of cooperative Cooperative responsiveness (points) % Estimation of milk quantity (points) % Estimation of milk quality (points) % 5. Percentage increase in revenue generated per family farm measured in milk sales Income per cow (UAH) % Income from dairy production (UAH) % % of dairy income in HH income 27% 46% 18% IMMEDIATE OUTCOMES 6. Human resource development Farm management capacity (points) % Dairy technical capacity (points) % Information frequency (points) % 7. Reduction work load of women

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