Solutions to ASF challenges during COVID-19

SOLUTIONS TO ANIMAL SOURCED FOODS CHALLENGES DURING COVID-19 AUGUST 2020

Venture37 is a 501(c)(3) nonprofit helping communities around the world build economies by strengthening local agriculture, helping agribusinesses create jobs and linking farmers to markets. Since 1981, it has implemented over 315 integrated dairy, livestock and crop development programs in nearly 80 countries.

Land O’Lakes Venture37’s long-standing affiliation with Land O’Lakes, Inc.—one of America’s largest farmer-owned cooperatives, with nearly 100 years of expertise in dairy, animal nutrition, crop inputs and agricultural insights and technologies—sets it apart. Land O’Lakes, Inc. supports Venture37 projects as part of its enterprise purpose of ‘Feeding Human Progress’ at home and around the world.

TABLE OF CONTENTS

About this Report 2

Animal Nutrition 3-4

The key input sector identified during our survey and data review process that demonstrated the greatest need. Other inputs such as forages and veterinary pharmaceuticals are also key.

Producers 5-6

Producers are the central link in the value chain.

In the context of this work, producer value chains include: chickens, goats, sheep, pigs, and cattle for milk and meat.

Processors 7-8

This group of yogurt makers, meat processors, retail distributors and more represents the actors who aggregate, add value, and provide consumers with access to safe products.

Consumers 9-10

As the end user, the inclusive Farmer-to-Fork model demonstrates how the entire protein-based animal source foods system is required to ensure consumers have access to nutrition-sensitive diets.

ABOUT THIS REPORT Animal Source Foods (ASF) have an important role to play in inclusive, resilient, and nutrition-sensitive development. In July 2020, Land O’Lakes Venture37 conducted a pulse survey with 66 value-chain actors from four countries across three continents. The survey included a variety of participants in the ASF market system in Rwanda, Mozambique, Bangladesh, and Georgia, including farmers, processors, agro-input retailers and banks.

The goal was to understand the ASF market disruption caused by COVID-19 to inform current and future work.

130 MILLION THE N UMBER OF PEOPLE W HO W ILL BECOME FOOD INSECUR E A S A R ESULT OF COV ID-19

It is important to note that we understand that data collected is from a snapshot in time, place and value chain. We also know that globally we have entered an unprecedented “new normal,” where it is difficult to predict how organizations and people will affect local economies and food supply.

United Nations reports that an additional 130 million people will fall into the status of food insecure.

Access to affordable, safe and nutritious ASF – such as eggs, fish, meat, dairy products – are critical to reduce stunting and adequately feed global communities, as well as build resilience and create economic stability.

Development organizations, agribusinesses and private sector partners must adapt to COVID-19 by building more resilient livestock food systems to cost effectively supply these nutrient dense foods. But how? We are turning to data and local insights to help us navigate a way forward.

The work here represents a strategy to understand COVID-19 market distortions and disruptions in the competitiveness and resiliency of the ASF supply chain.

Our data shows that as COVID-19 continues to disrupt countries around the world, food security and livelihoods are at risk. Prior to COVID-19, roughly a third of the world’s population was not getting a correct balance of nutrition. And because of COVID-19, the

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ANIMAL NUTRITION | PRODUCERS | PROCESSORS | CONSUMERS

SURVEY FINDINGS KEY INSIGHT: Dependency on imported sources of raw materials — such as grains, vitamins and minerals — remains a central point of constraint in providing cost-effective access to animal nutrition.

ON AV ER AGE, FEED ACCOUN TS FOR

70% OF PRODUCER COSTS

One-hundred percent of the feed mills surveyed reported that the cost of raw materials for feed mixes and transport were primary drivers of business decisions. Cross border transactions and transport shutdowns were the primary reason cited for the reduced availability of feed materials and other inputs associated with the livestock sector.

Disruptions in the feed supply chain impacted both feed mills and producers.

Fifty-seven percent of producers reported increased feed costs and have begun to change animal nutrition practices (see next section). Driven by decreased producer demand, feed mills reported a corresponding drop in sales by 67%.

However, feed mills are demonstrating resilience to the changing conditions. According to the survey results, feed mills made the most significant changes to reduce COVID-19 supply chain disruption impact compared to other value chain actors. The sector identified cheaper sources of local raw materials, improved efficiencies, used bulk purchasing and long-term storage options. They also offered free delivery and sales promotions to accommodate farmer needs to reduce the impacts of cost increases. We expect to see these changes begin to increase producer demand and feed sales.

RECOMMENDATION

SUPPORT LOCAL COMMERCIAL FEED OPERATIONS AND SUPPLY CHAINS 3 L AND O'L AKES VENTURE37

Improved production capacity, as well as improved access to post-harvest grain storage, open trade of raw materials for commercially mixed concentrates are both critical. These improvements will enable private-sector businesses to maintain feed supply to producers during sudden and slow onset of shocks, such as drought, the resulting grain shortages, or the destruction of transport facilities.

In practice: An alliance focused on animal nutrition as a pathway to human food security amid pandemic There are many ways to improve productivity and profitability of dairy farms, but the most immediate and often cost-effective way is through improved animal nutrition. Combined with improved livestock practices and other quality feed sources, utilization of cost-effective forages can empower farmers to significantly increase the quantity and quality of the milk they produce.

Corteva Agriscience™, Land O’Lakes Venture37, Bidco Land O’Lakes, Forage Genetics International, and the International Livestock Research Institute have forged a private-sector-driven alliance that will use data-driven approaches to support smallholder farmers to get the right types of forage into dairy animals to improve animal nutrition and human food security. Using data from in-country and regional forage trials and testing, this alliance is committed to getting the forage link of the chain right. The alliance combines Corteva and FGI’s private sector leadership in the forage industry with ILRI’s locally-based, world-renowned forage R&D capabilities and Land O’Lakes Venture37’s extensive experience adapting advanced technologies and techniques to the smallholder farmer level and facilitating last-mile delivery of key inputs. Bidco Land O’Lakes, a Kenya-based feed mill, is working closely with these partners to offer compound feed that complements effective forages.

This alliance aims to empower 5,000 women smallholder dairy farmers in Kenya to increase their productivity and incomes, as well as enhance the quality and quantity of milk for consumers.

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ANIMAL NUTRITION | PRODUCERS | PROCESSORS | CONSUMERS

SURVEY FINDINGS KEY INSIGHT: Higher prices drove producers to make decisions that will have lasting consequences, including sustained higher consumer prices.

Due to high feed prices, our data shows that farmers began to feed less to their milking herds and layer flocks.

Less feed and nutritional diversity leads to less production. In the survey, poultry producers also reported decreases in broiler numbers to refill houses as these birds reached market weight. They also introduced alternative feeds (i.e., lower quality) and started to make their own feed mixtures rather than purchasing from the feed mills.

This has resulted in a long-term reduction in production and therefore the total availability of ASF in the processor and consumer supply chain. This loss of production will not be regained overnight as feed prices stabilize.

We recorded the lowest increase, or least amount of COVID-19 impact, in the cost and production of forages.

Forages are unique as a feed resource.

Only ruminants such as cattle and goats have the physical capacity to digest plant materials such as grasses and

convert them to high density nutrients needed by the human body. These ruminants can obtain as much as 90% of their requirements from high quality forages. However, high producing ruminants still require the concentrated protein and energy found in commercial feed mixes. Forage resources are mostly grown on the producers’ farms and are only limited by land size and rainfall when access to seed and cuttings of improved varieties are made available. Because the cost of forages is so much lower than the cost of concentrated feed mixes, forages represent the most cost effective option to ensure a resilient supply of ASF. COVID-19 social distancing policies have also limited interactions between producers and extension personnel.

However, over time they have found ways to communicate with phone services, SMS, WhatsApp and social media.

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57% OF PRODUCERS HAD INCREASED FEED COSTS

75% CAUSED BY GR AIN

3%

ASSOCIATED WITH FOR AGES

“I HAVE DIVERSIFIED THE TYPES OF FEED I PROVIDE MY CATTLE. I NO LONGER BUY FROM ONLY ONE MILL BECAUSE OF SHORTAGES.�

Dairy farmer, Sofala Province, Mozambique

RECOMMENDATION

SUPPORT THE AVAILABILITY OF FORAGE AND OTHER INPUTS

development of nutrient-dense forages that will provide both a lower cost of production and increase the resiliency of livestock producers. There are many forages species that have been bred by researchers and private-sector companies, which need to be scaled-out for commercial uptake by producers.

We also recommend support of additional inputs, including animal feed (commercially mixed concentrate rations and forages), improved genetics, and producer access to animal health products and veterinary service delivery. These recommendations will improve efficiencies that reduce the cost of production. In turn, the value chain becomes more resilient and prices will be more affordable for the consumer.

We also recommend additional development of digital communication systems to support both market access and the transfer of knowledge.

Because some of the ruminant livestock farmers surveyed were growing their own forages, they experienced less of a cash flow shock than those who were either using poor quality forages or were more dependent on commercial feed mixes. We recommend the

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ANIMAL NUTRITION | PRODUCERS | PROCESSORS | CONSUMERS

71% OF PROCESSORS MADE NO PRODUCT ADAPTATIONS TO ADDRESS CHANGING CONSUMER BEHAVIOR

33%

MADE CHANGES TO MARKET ACCESS NETWORKS, SUCH AS DEVELOPING ONLINE SALES PL ATFORMS AND INCREASING DELIVERY SERVICES

SURVEY FINDINGS KEY INSIGHT: ASF processors were not able to quickly adapt their products to changing supply and consumer demand, which has reduced consumer access to ASF products.

As documented in other surveys, cash flow shortages and the challenge of staying in business is one of the reasons processors were unable to adapt products. COVID-19 forced a change in consumer spending due to loss of income for many reasons, which resulted in lower purchases of ASF products. Consumers reported buying ASF less frequently to cope with the shock. Processors did not respond by changing package sizes and modifying inventory within their sales network. In Georgia and Bangladesh, processors did work to improve their online sales platforms. And in Bangladesh only, unsellable quantities of milk were later processed into long-shelf-life UHT milk. However, storage shortages for products such as UHT milk and cheese quickly became a need and a finance problem.

Across all four countries surveyed, all processors indicated that they had made operational changes to manage costs. Examples cited include: buying lower amounts of ASF raw materials and animals from producers.

Their reasons were emphasized in a larger food processing survey, which identified the cost of imported materials, such as packaging supplies, loss of institutional buyers such as schools, hotels and restaurants and transport as causes of increased cost and cash flow demands. Fifty-seven percent of the processors surveyed by Venture37 indicated increases in costs associated with need for additional cleaning and disinfects for COVID-19 prevention measures.

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In practice: Femaleoperated Georgia dairy processor increases capacity with co-investment

RECOMMENDATIONS

SUPPORT PRODUCT AND PACKAGING ADAPTATION, AND SHELF-LIFE

Tsipora-Samtshe buys milk from neighboring farmers to act as an important market outlet for the community. The co-investment has raised their cold storage capacity by 70%, which will double the amount of milk purchased from their neighbors.

Coupled with HACCP training, both improved infrastructure and hygiene will contribute to the resiliency of this community’s food security. This processor also shortens the supply chain by marketing the products to retail outlets in a 40 km radius.

By modifying the product and cost options, processors can meet the new needs of ASF consumers. This will help prevent the loss of access. It can also be an avenue for new distribution outlets such as the UHT milk adaptation reported in Bangladesh.

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PRIORITIZE FARMER-TOFORK FOOD SAFETY IMPROVEMENTS

Food safety and quality are important to consumers. For that reason, we encourage food businesses to emphasize employee trainings on appropriate hygiene procedures as well as the transition of informal processors into the formal sector where they can be held to higher levels of food safety.

The private sector often leads the way with self-regulation to standards that exceed public safety standards. We see now as the time to introduce new and appropriate technologies which mitigate hygiene risks. This includes 8 L AND O'L AKES VENTURE37

improved safety protocols and labor behavior changes with handling and using raw materials and inputs (cleaning agents, packaging, etc.).

The informal markets are a leading cause of foodborne disease outbreaks. These markets normally lack cold chains, have dirty and contaminated equipment, poor employee health and hygiene, and foods from unsafe sources. With food safety top-of-mind due to COVID-19, there is a consumer industry push to formalize the processing of ASF products with more safety procedures and regulation.

ANIMAL NUTRITION | PRODUCERS | PROCESSORS | CONSUMERS

SURVEY FINDINGS KEY INSIGHT: Price, food safety and quality were rated at the same level of importance when consumers were making their purchase decision.

The greatest decrease in ASF products consumed was shown as red meat at a 50% decline, followed by poultry meat and eggs. The lowest rate of decline was fish, milk and milk products at 29%.

Reasons stated for the decline of ASF in consumer diets reflected those heard worldwide: price increases, market closuresand the need to purchase staple foods and self-stable goods for long-term storage.

Many of the survey responses from consumers, processors and producers expressed a decrease in access to markets where they buy and sell ASF. Most of the recommendations included in each section of this report are meant to lower or maintain a lower cost of ASF to the consumer. ASF are viewed as a luxury item in many countries and price represents a key decision point.

RECOMMENDATION

PRIORITIZE FARMER-TO-FORK FOOD SAFETY IMPROVEMENTS Recommendations from previous sections — which will improve production and processing of ASF — will inevitably increase the supply of ASF available to the consumers. The same is true for the transfer of food safety knowledge throughout the value-chain through consumer

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behavior campaigns, including best practices for in-home storage and cooking.

Safety is top of mind for consumers. They want to know where their food comes from.

Development of cost-effective food safety measures throughout the food supply chain will benefit all parts of the system, including consumers. This is especially true for wet markets featuring livestock products. Improvements along with transparency will provide consumers with a greater level of confidence in their ASF purchasing decisions.

To increase market access, we recommend improving the capacity of retail market hygiene and food handling procedures as well as the hygienic slaughter and processing of ASF products.

In practice: Consumption of eggs in Rwanda Throughout the pandemic, there has been an outcry from Rwandan farmers in Gakenke whose markets have been constrained and are currently at risk of closing their egg production businesses.

The COVID-19 response is a coordinated effort by USAID, the Feed the Future Rwanda Orora Wihaze Activity, Government of Rwanda, the Ministry of Agriculture and Animal Resources (MINAGRI).

MINAGRI requested that resources be mobilized in the short term to purchase eggs from producers in Gakenke district (one of Orora Wihaze districts), in support of Rwanda’s National Early Childhood Development Program (NECDP). This effort supports target districts across the country where children are at a risk of severe malnutrition especially during this pandemic period.

Twenty-one egg producers have benefited from this activity.

OVER ALL, CONSUMPTION OF ASF HAS FALLEN BY

MILK

FISH

37% EGGS

POULTRY

MEAT

29% 29% 36% 43% 50% 10 L AND O'L AKES VENTURE37

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