In May 2012, Cattle Hub | Nicaragua, S.A. (“Cattle Hub”) was incorporated as an independent company to establish Dairy Hubs in Nicaragua and to bring enterprise-based improvements to the cattle industry. Cattle Hub was seeded by funding from Centrolac, Industrial San Martin, and Dairies in Developing Communities (DIDC) totaling USD 100,000.
By providing technical training and support to local farmers, Cattle Hub focuses on improving the quality and quantity of the milk that smallholder dairy farmers sell each day. For financial subsistence, Cattle Hub takes a small fraction (2-3%) of the value of each liter of milk collected by the farmer network, in exchange for our technical services.
The Cattle Hub is managed by the General Manager (Romulo Alvarado), who has a background in dairy herd management, grazing management, and dairy nutrition. A network of veterinarians and agronomist technicians assist in the field by visiting farms regularly and holding training programs at model farms, with an average attendance of 25 farmers per session.
Our Model in Nicaragua
VDD’s investment vehicle in Nicaragua, Cattle Hub, has demonstrated the effectiveness and power of a market-based approach to create solutions within the dairy supply chain. Cattle Hub provides returns for investors and local communities while improving environmental conditions and the welfare of such communities.
Two key features characterize the VDD model in Nicaragua. The first is an investment in an anchor processor, which is a company that establishes responsible and efficient operation with a view toward expansion. The second is the establishment of a ‘Dairy Hub’ alongside such processors. We have seen success implementing this model and we are eager to introduce new technology that could modernize the industry.
The model has seen extraordinary success, helping farmers transition to consolidated herds of healthier cows, using less grazing area. Cattle Hub has trained a group of smallholder farmers in animal husbandry and begun to sell veterinarian supplies. Cattle Hub’s ongoing provision of services and training continues to both build trust between farmers and Cattle Hub, and to create a return on investment —which has in turn strengthened and informed the model.
Cattle Hub focuses on the following interventions:
- Consulting smallholder farmers to provide information and instructions on farming best practices to improve herd management, record keeping, milk quality/quantity, and land use.
- “Pulls” higher volumes of high-quality milk from the smallholder farmer. This high-quality milk is then introduced into the dairy value chain for high-quality dairy products to satisfy consumer demand and meet nutritional needs.
- Providing specific training and equipment sales for land management, year-round animal nutrition, animal husbandry, and economic welfare.
To date, the network of 160+ model farms has improved dairy production by over 25%, with a corresponding increase in farm income. The image below shows a farmer’s controlled experiment to compare our interventions in calf care to Nicaraguan traditional farming methods.
The Dairy Value Chain
The Nicaragua dairy (and beef) value chain presents many of the features required to implement a model that uses market-based approaches to improving milk and beef production, milk collection and cooling, and milk quality.
When domestic and export markets are combined, Nicaragua processes over 7.5 million L of milk each month. There are four large dairy processors of fluid milk in Nicaragua, producing either ultra-high temperature (UHT) or pasteurized milk products. In the domestic market, the largest processor is Eskimo, followed by Parmalat, and thirdly Centrolac. Other smaller processors make up another 90,000 L per month for a total of nearly 50 million L per year that are processed and sold in the domestic market.
The dairy industry around the globe faces numerous challenges related to supply, demand and weather volatility. These challenges are compounded in developing countries by the presence of a well-entrenched informal market as well as poor road and communication infrastructure. In Nicaragua we have identified the following challenges and are equipping farmers to manage and plan for such occurrences.
- Seasonal instability: The amount of milk produced in the rainy season usually increases; however, quality remains low. In the dry season, production typically drops significantly and farms produce half of what they produce in the rainy season. For processors wanting to source local milk, poor milk quality and large swings in production between the rainy and dry seasons present significant challenges.
- Subsistence Farming: Some smallholder farmers consume what they produce on their farm. Others sell excess milk and sometimes are members of a cooperative. Often, middlemen are involved in the milk collection chain, even where cooperatives exist. Market prices are typically set arbitrarily with no steady daily market demand as result of gaps in the chain from farm consumer. Where farms are connected to a processor, prices remain unpredictable and farmers are unable to rely on transparent prices for their milk.
- Gaps in the Value Chain: Nicaragua lacks a well-developed farm product and needs a services industry with professionals able to train and educate farms to make lasting improvements to production. Farmers in the milk-producing regions of Nicaragua have formed cooperatives with varying success.
Creation of Shared Value
Through each step of the value chain, contributions are made to the local economy by milk produced and knowledge transfer. Cattle Hub intervention and our latest technology results in an increase in milk production, knowledge to operate a modern system and herd management by smallholder farmers.
The benefit of the FitB initiative is not restricted to participating farmers only: the transfer of knowledge and improvement in practices will lead to gains in efficiency, productivity, and environmental stewardship throughout the regions surrounding participating farms.
Moreover, the community-focused approach involves the youth as the future farmers and those that assist a parent in farming. Women who own farms will be empowered to increase their technical knowledge base and management skills. Knowledge will be passed to other families, and they too will manage their own sustainable cattle enterprises.