In Central America, dairy products are an important dietary component for consumers from all social strata. The potential to increase the consumption of dairy products is high, with domestic consumption growth rates in Honduras and Nicaragua of 6.7 and 11.7%, respectively.

The majorityof the poor in Latin America live in tropical lowlands or hillsides. Within the rural sector, dual-purpose livestock systems (meat and milk) constitute a principal economic activity of small producers. About 400,000 small-scale producers in Central America own livestock, with more than 75% of income being generated by milk sales.

Nicaragua and Honduras, with more than 200,000 poor smallholder livestock producers, are key players for developing the dairy sector in the region.

After the poultry sector, milk production and marketing, and the dairy-products industry constitute the fastest growing livestock subsector in the region and continue offering valuable opportunities for small producers. Interventions to increase small-farm productivity should therefore be based on milk production, the creation of value-added products in the dairy industry and the improvement of linkages along this increasingly dynamic value chain.

However, several factors limit the participation of small-scale farmers in dairy value chains. The quality of milk produced by small farmers is usually poor, due to a lack of adequate on-farm infrastructure, inappropriate milking practices, and collective investment in cooling systems on the farm and for transportation. In addition, links of individual farmers to associations and from these to buyers remain weak. The lack of strong links along the value chain inhibits not only the flow of information on what constitutes product quality and how to achieve it but also the establishment of quality-based incentive systems that benefit both producers and buyers.

This suggests a need for tools to improve small-scale producer efficiency, links between actors in the value chain and increasing the level of added value generated by the dairy sector overall.

More on our work on smallholder dairy value chains and in Nicaragua

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