Special report – December 2012
The dairy sector in the Caribbean:
Developments and challenges
Contents
1.
The scope of dairy production in the Caribbean ___________________ 2
2. The Caribbean dairy industry and trade liberalisation _______________ 2
3. The Caribbean dairy trade regime ______________________________ 3
4. Current dairy sector challenges: The case of Pine Hill Dairy, Barbados _ 4
5. Overview of the Caribbean dairy sector situation __________________ 5
Main sources __________________________________________________ 7
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1.
The scope of dairy production in the Caribbean
The main dairy producers in the Caribbean region are Jamaica, Guyana, Barbados, Trinidad and
Tobago, and the Dominican Republic. Among the countries of the Caribbean Community
(CARICOM), Trinidad and Tobago has emerged as the leading dairy producer, overtaking Jamaica
and Guyana, which dominated regional production up until the early 1990s.
Caribbean countries have traditionally hosted dairy industries that were pivotal to the supply of
fresh milk to domestic markets, and the region’s dairy industry is still dominated by a large
number of small-scale producers using a mix of hand and machine technologies for milking.
Feeding systems also vary, and usually include a mixture of pasture or concentrate, and cut-andcarry systems (where feed is cut/gathered close to the cattle).
Domestic milk production in Caribbean countries is very closely linked to government food
procurement programmes, mainly national school feeding programmes (SFP). This linkage is
evident in Guyana, Dominican Republic, Jamaica and Barbados, among others. An expansion in
national SFPs fuelled not only the increase in imported milk powder, but also an improvement in
consumer-ready milk packaging, most notably Tetra Pak packaging technology. Nestlé Trinidad
and Tobago Ltd first initiated production of evaporated milk in Tetra Pak packaging in 1989, a
new product concept developed with the assistance of their technical advisers.
According to press reports from the region, within the framework of globalisation and
liberalisation, the policies of multinationals such as Nestlé Jamaica, which has steadily reduced
local buying over many years while increasing imports of milk solids, have meant that
developments in the global dairy industry are replicated in the local Caribbean dairy sector.
Nestlé has subsidiaries in Trinidad and Tobago, Jamaica and the Dominican Republic. In these
countries, Nestlé is the main stakeholder in dairy processing operations. Barbados is the main
Caribbean milk producer where Nestlé does not play a role.
The Caribbean dairy industry is dominated by fresh milk production, with a range of dairy byproducts, including milk drinks and yoghurt. Local production of dairy products generally falls
short of domestic demand for fresh milk and processed products.
The shortfall of local production has traditionally been met through imports of milk powder for
processing from the United Kingdom, Canada, New Zealand, Denmark and the United States of
America, as well as other countries, although imports of liquid product are increasingly common,
including ‘fresh’ ultra-heat treated (UHT) and other milk drinks.
These imports have been growing steadily in all Caribbean countries, aided in large measure by
government policies to enhance access to ‘cheap foods’. Notwithstanding high production costs
and operational efficiency considerations, trade liberalisation is widely blamed by Caribbean milk
producers for the big contraction in the size of domestic dairy industries in all Caribbean dairy
producing countries. In Trinidad and Tobago, for example, local milk production fell from 52% of
consumption to 27% between 2000 and 2010. This can be taken as indicative of a general trend
across the Caribbean.
2.
The Caribbean dairy industry and trade liberalisation
In Jamaica: The Jamaica Dairy Development Board and Beef and Dairy Producers’ Association of
Jamaica openly stated in 2009 that ‘the Jamaican dairy sector has undergone severe attrition,
consequent to the adoption of a policy of trade liberalization in 1992, resulting in milk production
declining 64 percent to current levels bordering on 14 million litres per annum.’ From the late
1990s to the mid 2000s, Jamaican farmers saw their market share for local milk slip from 24% to
4.2%, and between 2000 and 2002 alone, production of liquid milk fell by 35%, from 27.5 million
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litres in 1999 to 20.5 million litres in 2002. These developments have taken place at the same time
as Nestlé Jamaica, which was established in Jamaica in the late 1940s, has been changing its
procurement practices. Traditionally, Nestlé Jamaica was the major purchaser of fresh milk, but
the company has steadily reduced its local buying while increasing its imports of milk solids.
In Trinidad and Tobago: The Livestock and Livestock Products Board (LLPB), while lamenting
inadequate government support to the industry, has consistently blamed milk powder imports as
the main cause of the rapid decline in milk production. Supply of milk from dairy farmers was
estimated to have declined from 11,000 metric tonnes to 2,000 metric tonnes over the period
2009–2011. With only one of four established dairy stations (milk collection centres) operational,
the LLPB forecasts continued decline in milk production for the local market.
In the Dominican Republic: A similar outcome was reported for the Dominican Republic, where
the rising demand and substantial increase in consumption in the 1990s was met by and fuelled a
dependence on increasing quantities of ‘cheap’ imported dairy products. From 1974–75, when
the importation and rehydration of powdered milk by processing companies was permitted
(prior to this, all imported powder had to be sold as powder), domestic milk production has since
either stagnated or experienced slow growth relative to imports. Reconstituting subsidised,
imported powdered milk is seen as cheaper than collecting milk from producers throughout the
country, especially given the widely dispersed farms and poor road infrastructure.
In Guyana: In 2004, local production accounted for less than 5% of domestic demand. The country
at that time had only one processing plant, the St Stanislaus College Farm, processing a range of
products, including yoghurt and cheese. Since 2004, demand for products made from fresh cow’s
milk has been increasing steadily, driving an expansion in the dairy industry and an increase in the
number of value-added dairy products from an increased number of small scale pasteurisation
plants.
In Barbados: The local dairy consists of the lone domestic processor, Pine Hill Dairy (PHD), a
subsidiary of Banks Holdings Ltd. Despite the high tariff applied on milk, imports continue to
expand gradually. This reflects moves towards the removal of non-tariff barriers in line with WTO
requirements. Import licences, although still in place, are granted automatically, while non-tariff
measures were essentially converted to tariffs in 2000, with tariffs having been progressively
reduced between 1995 and 2004. While high tariffs on fresh milk imports to a certain extent
muted the impact of trade liberalisation on local production, national milk output in Barbados fell
from 14 to 7 million kg between 1991 and 2012. Indeed, global dairy sector developments appear
to be putting increasing pressure on the Barbadian dairy sector, processors and producers alike.
3.
The Caribbean dairy trade regime
According to the EC market access database (12), there is considerable variation in the tariffs
charged on dairy products by individual CARIFORUM countries (ACP members of CARICOM and
the Dominican Republic). Within CARICOM, duties range widely (see table).
Beyond CARICOM, the maximum MFN duty on dairy imports in Haiti is 5%, and in the Dominican
Republic 20%, a rate applied to most products.
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Table: Examples of tariffs charged on dairy products
Most-favoured nation (MFN) duties
Country
Milk and cream (% duty)
Milk powders (% duty)
Barbados
141
141
Guyana
40
0–20
Jamaica
75
75
St Lucia
0
0
Trinidad and Tobago
40
0–20
Source: EC, Market access database, available at:
http://madb.europa.eu/mkaccdb2/datasetPreviewFormATpubli.htm?datacat_id=AT&from=publi
On certain dairy products, tariff concessions are granted to the EU, mostly for yoghurts, whey
and various cheeses. These tariff concessions either marginally reduce duties, or where duties are
already low (e.g. 5%) waive the import duty. However, dairy products are generally excluded from
the process of market opening within free-trade area (FTA) negotiations, with exceptions for
specific products in some countries.
Almost all extra-regional dairy imports originate in the USA, Canada and UK, in that order.
Jamaica is the only Caribbean country with regular purchases of dairy products from France.
Milk powder continues to dominate imports, accounting for roughly one-third of total dairy
imports, with a long-term trend towards increased milk powder imports. However, imports have
been highly variable over the past 11 years, with sharp dips in imports linked to high global prices.
Within CARICOM, only Trinidad and Tobago and Barbados are major suppliers of the main dairy
products.to the rest of the Organisation of Eastern Caribbean States (OECS).
4. Current dairy sector challenges: The case of Pine Hill Dairy in
Barbados
Pine Hill Dairy (PHD) describes itself as a ‘market leader in Barbados, [a] presence in CARICOM’.
(7) In order to maintain its leadership in a ‘mature and competitive market place’ characterised by
‘low consumption of freshly produced cow’s milk’ where ‘chilled products are the preferred
choice’ compared to ‘UHT white milk’, PHD states that it recognised the need for change. The
company’s strategy was to ‘revitalise the category by differentiating, whilst maintaining
affordability for the consumer’ through innovative processing, packaging and distribution
solutions linked to its strong brand image. A key solution was the move to an ultra-pasteurised
process, alongside the use of Tetra Gemina Aseptic packaging.
In 2010, to improve efficiencies and yields and increase the quality of products, in order to
compete in a liberalised market (both domestic and regional), PHD invested B$14.2 million
(approx. €5.48 million) in a major re-engineering project to consolidate its two production
facilities – dairy and juices – into one. The consolidated facility was described as one of the ‘most
modern and automated facilities in the region’. Production of the new ‘ultra-pasteurised’ milk
commenced in May 2010. After an initial adverse consumer reaction, sales figures became more
encouraging.
The PHD brand has already achieved regional recognition, and with product improvements under
way, further regional export growth is anticipated. In 2009, the markets of Antigua, St Lucia and
Guyana together accounted for 73% of PHD’s milk and juice export sales, compared to a mere 9%
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export market share for Trinidad. Exports to Trinidad and Tobago have become particularly
problematical, with food safety and labelling requirements leading to the closure of the Trinidad
and Tobago market to the new PHD milk products using Tetra Gemina Aseptic (TGA) packaging.
With no similar actions taken in other CARICOM countries, this was seen by Barbadian exporters
as a ‘discriminatory non-tariff barrier’. In July 2012, it was announced that the issue was being
resolved, with the Trinidadian authorities having ‘agreed to allow the Barbados company to sell
its existing “disputed” packaging of evaporated milk, fresh milk and flavoured milk, until it could
change the labels’. In return, ‘Pine Hill Dairy (PHD) had agreed to change its “non-compliant”
labelling within six months’. This is seen as opening up new export opportunities (see Agritrade
article ‘Food trade dispute between Barbados and Trinidad and Tobago rumbles on’, 3 September
2012).
However, this resolution did not come before local milk producers in Barbados were asked to cut
back supplies by 30% to address the glut of milk which had accumulated on the local market. PHD
had earlier factored in an increased production from local dairy farmers to allow the company to
fully utilise its manufacturing capabilities and focus on export growth for an expanding range of
dairy products. As part of this, in December 2010 PHD increased the price paid for fresh milk by
6.5% and then in July 2011 suspended the previous milk production quota system that it had
operated.
In 2010–11, Barbadian dairy farmers came under increasing pressure from high input costs,
notably animal feed and growing competition from low-priced milk powder imports. This cast a
shadow over an otherwise optimistic outlook, given the investment in dairy processing that had
taken place. This left Barbadian dairy farmers poorly placed to cope with the current market crisis
and led to stark warnings from the president of the Barbados Dairy and Beef Producers
Association that if purchases of fresh milk were cut back, there would be ‘no industry by the end
of the year’.
Overall, despite the investments made and the proactive strategic market repositioning adopted,
2011 was described by PHD as an extremely challenging year, with sales revenues of B$59.14
million (approx. €22.83 million), down 5.8% over 2010, with a loss of B$6.65 million (€2.57 million)
for the year reported.
5.
Overview of the Caribbean dairy sector situation
The Governments of Jamaica, Trinidad and Tobago, Barbados and Guyana have all
established that the local dairy industry is essential to food and nutrition security,
employment and rural incomes in their respective countries. However, despite the efforts of
dairy farmers, local processors and governments, by the end of 2011 the dairy industry in
Caribbean countries, particularly local fresh milk production, was described as one of crisis,
with dwindling profits, shrinking markets, no incentives and a lack of clear rules for the
management of milk powder imports.
For example, in the Dominican Republic, milk producers affirmed in September 2011 that
their sector was ‘near the brink of collapse’, and in Trinidad and Tobago, a director of the
Livestock and Livestock Products Board described the local dairy industry in December 2011
as being ‘in crisis’, with ‘a constant decline both in milk production and the supply of beef for
the local market’, adding that ‘imported milk powder was largely responsible for the decline
in milk production’.
Beyond the problem of effective management of milk powder imports, the regional dairy
sector continues to be plagued by rising input costs and high levels of inefficiencies.
Nevertheless, the view prevails in the region that there are still good prospects for local fresh
milk production if efficient, vertically integrated operations can be established, targeting key
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market components. Wider self-sufficiency in dairy product manufacturing based on locally
produced fresh milk supplies is, however, seen as largely impractical in most Caribbean
dairy-producing economies.
For a more limited dairy economy that stabilises and maintains domestic fresh milk
production to be maintained, the right mix of domestic and trade policy measures will be
required, backed up by technological innovation and clear marketing and sector
development strategies. At the interface of technology and public sector interventions, this
will need to address such agro-economic issues as land utilisation, improving pasture
management, and strengthening the genetic basis of the dairy herd to improve yields. More
widely it suggests a need for a review and evaluation of the various industry-led and public
policy measures in place to ensure the establishment of the right policy mix at national and
regional levels.
Developing integrated dairy production
The Beef and Dairy Producers Association of Jamaica (BDPAJ) has proposed a ‘cluster model’
deemed to offer the best available option for future dairy industry development, built on
integrating small farmers into a large farm model. The model incorporates small farmer
investment in professionally managed nuclear farms and the adoption of non-traditional
financing approaches (within the local context), such as capital (equipment) leasing and cowleasing. Indeed, for Jamaica and the rest of the Caribbean, the concept of cow-leasing, which has
become popular in countries such as Argentina, New Zealand and the United States, will certainly
be a novel industry development strategy.
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Main sources
‘Revitalisation of the Jamaica dairy sector: Strategies for financing new
investments in dairying’, P.G. Jennings et al., 2009
http://www.moa.gov.jm/Speeches/data/UWI%20FOOD%20SECURITY%20
CONFERENCE%20Dr%20Jennings.pdf
IPS, ‘Dairy farmers pit “Jamaica Hope” against subsidies’, 17 March 2004
http://www.ipsnews.net/2004/03/globalisation-dairy-farmers-pit-jamaicahope-against-subsidies/
Louis B Homer South Bureau, ‘“Crisis” in dairy industry’, 13 December
2011
www.trinidadexpress.com/business/_Crisis__in_dairy_industry135557003.html
Third World Network (TWN), ‘Effects of agricultural liberalisation:
Experiences of rural producers in developing countries’, by M. Raman,
Trade & Development Series 23, 2004
http://www.twnside.org.sg/title/td23.htm
Virginia Polytechnic Institute and State University,
‘Factors influencing the reproductive efficiency of
dairy herds in the Dominican Republic’, by A.R. Billings, 4 February 2002
http://scholar.lib.vt.edu/theses/available/etd-02192002143551/unrestricted/arbillingsthesis.pdf
University of British Columbia, ‘Spilt milk: Trade liberalisation and the
Barbados dairy industry’, by S.N. Kellman, MSc thesis submission,
October 2011
https://circle.ubc.ca/bitstream/handle/2429/38432/ubc_2012_spring_kellma
n_sophia.pdf?sequence=3
‘PHD continues tradition of innovation’, access point to ‘Download
presentation’, undated
http://www.thebhlgroup.com/showsubsidiary.cfm?p=phdtradition
Jamaica Gleaner, ‘T&T moves to stave off trade dispute with Barbados’, 24
June 2012
http://jamaica-gleaner.com/gleaner/20120624/business/business7.html
Barbados Nation, ‘Farmers fear new PHD plan’, 6 July 2012
http://www.nationnews.com/articles/view/farmers-fear-new-phd-plan/
Barbados Dairy Industries Ltd, ‘Pine Hill Dairy Annual Report 2011’, available at:
http://www.thebhlgroup.com/pdf/BdosDairyIndLtdFs2011.pdf
Jamaica Dairy Development Board, ‘A perspective on the Jamaican dairy industry: Challenges for the
Jamaica Dairy Development Board, by P.G. Jennings, September 2009 (also see source no. 1 for
more detailed explanation of the ‘large-scale cluster dairy farm’ model)
http://www.jddb.gov.jm/files/Publications/A%20Perspective%20-%20Jamaica%20Dairy%20Sector.pdf
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