Beef value chain study

199 Pages·2013·2.68 MB·English

Botswana Agrifood Value Chain Project
Beef Value Chain Study

By

Anton van Engelen
FAO Consultant

Patrick Malope
FAO Consultant

John Keyser
FAO Consultant
and
David Neven
Marketing Officer, FAO

Published by
the Food and Agriculture Organization of the United Nations
and
the Ministry of Agriculture, Botswana
The designations employed and the presentation of material in this publication do not imply
the expression of any opinion whatsoever on the part of the Food and Agriculture
Organization of the United Nations, or of the Ministry of Agriculture, Botswana, concerning
the legal status of any country, territory, city or area or of its authorities, or concerning the
delimitation of its frontiers or boundaries. The mention of specific companies or products of
manufacturers, whether or not these have been patented, does not imply that these have been
endorsed or recommended by FAO or the Ministry of Agriculture, Botswana, in preference to
others of a similar nature that are not mentioned. The views expressed herein are those of the
authors and do not necessarily represent those of FAO or the Ministry of Agriculture,
Botswana.

ISBN 978-92-5-107446-6

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© FAO and Ministry of Agriculture, Botswana 2013

All photos are copyrighted by the Ministry of Agriculture - Botswana, except for the hardveld
picture on the cover and pictures 5, 7, 11, 12, 15, 17, 22, and 25 which are copyrighted by
Neven, pictures 8 and 13 which are copyrighted by Van Engelen, and picture 10 which is
copyrighted by the Meat Board of Namibia. Cover pictures: cattle hoof prints in the hardveld
– bull and calves of Botswana’s Musi cattle breed.

Contact Information:

FAO/AGS Ministry of Agriculture, Botswana
Viale delle Terme di Caracalla Agricultural Hub, Private Bag 003
00153, Rome, Italy Gaborone, Botswana
Table of Contents
Preface ............................................................................................................................................. vii
Acknowledgements ........................................................................................................................ viii
Executive summary ......................................................................................................................... ix
Background to the study ............................................................................................................... ix
Value-chain approach ................................................................................................................... ix
End markets for Botswana beef ...................................................................................................... x
The beef value chain in Botswana ................................................................................................ xi
Conclusion ................................................................................................................................. xvii
Acronyms ....................................................................................................................................... xix
PART I Introduction ............................................................................................................... 1
1 Study background and objectives ............................................................................................ 1
2 Value-chain methodology ......................................................................................................... 2
3 Brief history and review of Botswana’s beef subsector .......................................................... 3
3.1 Pre-independence era ........................................................................................................... 3
3.2 Emergence of the Botswana Meat Commission, 1965–1983 .............................................. 5
3.3 The beef subsector in crisis and structural change in the economy ..................................... 6
3.4 Government response strategies .......................................................................................... 8
3.5 BMC response strategies ................................................................................................... 10
3.6 Disease management in Botswana’s beef subsector .......................................................... 12
3.7 Botswana’s beef subsector today ....................................................................................... 13
PART II Value-chain analysis .......................................................................................... 14
4 End markets for Botswana beef ............................................................................................. 14
4.1 Introduction ........................................................................................................................ 14
4.2 Dynamics of the global beef market .................................................................................. 14
4.2.1 Current status ............................................................................................................... 14
4.2.2 Key trends .................................................................................................................... 16
4.3 Botswana’s beef trade patterns .......................................................................................... 20
4.3.1 Fresh and frozen beef .................................................................................................. 20
4.3.2 Other beef value-chain products .................................................................................. 22
4.3.3 Comparing Botswana to Namibia ............................................................................... 23
4.4 Markets outside sub-Saharan Africa .................................................................................. 25
4.4.1 European Union market ............................................................................................... 25
4.4.2 Other markets outside of Africa .................................................................................. 31
4.5 Sub-Saharan African markets ............................................................................................ 35
4.5.1 South Africa ................................................................................................................ 35
4.5.2 Other sub-Saharan African markets ............................................................................ 36
4.6 The domestic market .......................................................................................................... 39
4.7 Summary and conclusion ................................................................................................... 42
5 Value-chain map and channels ............................................................................................... 43
5.1 Value-chain map ................................................................................................................ 43
5.2 Various channels ................................................................................................................ 43
5.2.1 Introduction ................................................................................................................. 43
5.2.2 Export channels ........................................................................................................... 43
5.2.3 Domestic channels ....................................................................................................... 45
5.3 Points of leverage .............................................................................................................. 46
6 Production ................................................................................................................................ 48
6.1 Introduction ........................................................................................................................ 48
6.2 Communal system ............................................................................................................. 53
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6.3 Ranch system .................................................................................................................... 55
6.4 Feedlot system .................................................................................................................. 56
6.5 Profitability of the different production systems .............................................................. 60
6.5.1 Farm-level analysis ..................................................................................................... 61
6.5.2 Feedlot-level analysis ................................................................................................. 69
6.5.3 Summary of main findings ......................................................................................... 73
7 Processing ................................................................................................................................ 75
7.1 Slaughtering ...................................................................................................................... 75
7.2 Secondary processing........................................................................................................ 79
7.3 Profitability of beef processing ......................................................................................... 80
7.3.1 Profitability of the BMC ............................................................................................. 80
7.3.2 Profitability of a butcher ............................................................................................. 82
8 Distribution ............................................................................................................................. 83
8.1 Wholesale distribution ...................................................................................................... 83
8.2 Retail ................................................................................................................................. 84
PART III Systemic and sustainability issues ........................................................... 86
9 Support services ...................................................................................................................... 86
9.1 Inputs ................................................................................................................................ 86
9.1.1 Feed and fodder .......................................................................................................... 86
9.1.2 Veterinary drugs ......................................................................................................... 88
9.1.3 Breeding animals and artificial insemination ............................................................. 88
9.2 Public veterinary services ................................................................................................. 89
9.2.1 Introduction ................................................................................................................ 89
9.2.2 Animal-disease prevention ......................................................................................... 89
9.2.3 Livestock Identification and Trace-back System ....................................................... 90
9.2.4 Cattle movement and foot-and-mouth disease control ............................................... 94
9.2.5 Food-safety inspection ................................................................................................ 96
9.2.6 Quality-control and management systems .................................................................. 97
9.3 Finance and insurance ....................................................................................................... 98
9.3.1 Investment finance ...................................................................................................... 98
9.3.2 Working capital .......................................................................................................... 99
9.3.3 Livestock insurance schemes .................................................................................... 100
9.4 Transport ......................................................................................................................... 100
9.5 Extension ........................................................................................................................ 102
9.6 Research and development ............................................................................................. 102
10 Policy issues ........................................................................................................................... 104
10.1 National Development Plan ............................................................................................ 105
10.2 Laws and regulations ...................................................................................................... 106
10.3 The BMC Act .................................................................................................................. 107
10.4 Rangeland and wildlife management .............................................................................. 109
11 Governance, margins and impact on smallholder farmers ............................................... 111
11.1 Governance mechanisms ................................................................................................ 111
11.2 Pricing and margin distribution ...................................................................................... 114
11.2.1 Pricing ....................................................................................................................... 114
11.2.2 Margin analysis......................................................................................................... 115
11.3 Impact on smallholder farmers ....................................................................................... 117
PART IV Strategic analysis and recommendations ........................................... 118
12 Vision for the subsector ........................................................................................................ 118
13 SWOT analysis ...................................................................................................................... 119
13.1 Strengths ......................................................................................................................... 119
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13.2 Weaknesses ...................................................................................................................... 119
13.3 Opportunities ................................................................................................................... 121
13.4 Threats ............................................................................................................................. 121
14 Strategic options and recommendations.............................................................................. 121
14.1 Production level ............................................................................................................... 123
14.2 Trade and transport level ................................................................................................. 126
14.3 Slaughter level and the BMC ........................................................................................... 127
14.4 Processing level ............................................................................................................... 128
14.5 Market level ..................................................................................................................... 129
14.5.1 EU, yes or no? Or not only? ...................................................................................... 129
14.5.2 Other export markets ................................................................................................. 131
14.5.3 The domestic market ................................................................................................. 132
14.6 Support services level ...................................................................................................... 132
14.6.1 Input supply ............................................................................................................... 132
14.6.2 Veterinary services .................................................................................................... 133
14.6.3 Livestock Identification and Trace-back System ...................................................... 134
14.6.4 Extension ................................................................................................................... 135
14.7 Policy level ...................................................................................................................... 136
14.7.1 Restructuring of the beef subsector and the BMC ..................................................... 137
PART V Conclusions .......................................................................................................... 139
Annex 1 – Issues covered in this study ........................................................................................ 141
Annex 2 – Additional end-market information .......................................................................... 144
Annex 3 – VC mapping quantitative analysis details ................................................................. 152
Annex 4 – Domestic cattle price data by region ......................................................................... 154
Annex 5 – Profit and loss analysis background .......................................................................... 155
Annex 6 – Key informants ............................................................................................................ 167
Annex 7 – Botswana’s agro-ecological zones and crop suitability ............................................ 169
References ...................................................................................................................................... 172
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List of Figures
Figure 1: Agriculture in Botswana's gross domestic product (GDP), 1960–2008 (in real terms) ...... 7
Figure 2: Global beef imports, 2003–2010....................................................................................... 17
Figure 3: BMC exports by country (share of value), 2010 ............................................................... 22
Figure 4: Botswana’s imports of processed beef products (US$ ‘000) ............................................ 23
Figure 5: Live bovine animal imports into Botswana (US$ ‘000) ................................................... 24
Figure 6: Namibia’s Meatco’s shifting customer profile ................................................................. 26
Figure 7: Imports of frozen beef into South Africa, 2003–2010 ...................................................... 36
Figure 8: Gross national income in sub-Saharan Africa, 2003–2009 ............................................... 37
Figure 9: Cattle slaughtered at municipal abattoirs, Botswana, 1984–2009 .................................... 41
Figure 10: Share of municipal abattoirs in total slaughters, Botswana, 1984–2009 ........................ 41
Figure 11: The Botswana beef value chain map, 2010 .................................................................... 44
Figure 12: Number of cattle in Botswana, 1995–2010 (thousands) ................................................. 49
Figure 13: Calving percentage and offtake and mortality rates for communal farms in
Botswana (%) .......................................................................................................................... 51
Figure 14: Calving percentage and offtake and mortality rates for large commercial farms in
Botswana (%) .......................................................................................................................... 51
Figure 15: Carcass weights for Botswana and selected beef exporters, 2000–2010 ........................ 57
Figure 16: Number of cattle slaughtered per quarter, Botswana, 2000–2009 .................................. 78
Figure 17: Aggregated commercial loans to the beef value chain in Botswana (in BWP) .............. 99
Figure 18: SWOT Analysis for the Botswana beef value chain ..................................................... 120
Figure 19: Strategic activity options for Botswana’s beef value chain .......................................... 122
List of Tables
Table 1: Selected data on the top 30 net exporters of beef in 2010 .................................................. 15
Table 2: Predictions of world beef trade volume by country, 2011–2025 ....................................... 18
Table 3: Beef exports from Botswana by product type, 2001–2010 ................................................ 21
Table 4: Export of frozen and chilled bone-in and boneless beef cuts from Botswana by
destination market, 2005 and 2010 .......................................................................................... 21
Table 5: A comparison between beef exports from Botswana and Namibia ................................... 24
Table 6: Forecast net trade in beef and veal, Europe, 2011–2020 .................................................... 27
Table 7: Selected data on the import of boneless beef cuts by EU countries, 2010 ......................... 27
Table 8: Sources of EU imports of beef and live cattle, 2006–2009 ................................................ 30
Table 9: Trade data for importers of boneless bovine cuts in non-EU Europe ................................ 31
Table 10: Trade data for importers of boneless beef cuts in North Africa and the Middle East ..... 32
Table 11: Forecast net trade in beef, Russia, 2011–2020 ................................................................. 33
Table 12: Beef import quotas set by Russia, 2008–2012 ................................................................. 33
Table 13: Forecast net trade in beef, South Africa, 2011–2025 ....................................................... 35
Table 14: Main sub-Saharan African imports of frozen boneless cuts by country, 2010 ................ 38
Table 15: Selected beef and cattle prices in Botswana ..................................................................... 40
Table 16: Potential impact of improved production parameters in Botswana’s beef value chain ... 52
Table 17: Communal livestock holdings by region, Botswana, 2008 .............................................. 55
Table 18: Number of cattle passing through feedlots operated under the direct cattle purchase
scheme, Botswana, 2009–2011 ............................................................................................... 59
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Table 19: Types of enterprises analysed, Botswana ......................................................................... 61
Table 20: Driving assumptions, farm-level analysis, Botswana ...................................................... 62
Table 21: Farm-level analysis, key management variables, Botswana ............................................ 64
Table 22: Live-weight assumptions for finished farm product (kg per head), Botswana ................ 64
Table 23: Total annual sales of livestock by management level, Botswana .................................... 65
Table 24: Live-weight price assumptions, Botswana ....................................................................... 65
Table 25: Farmer costs and profits from cattle production at current base prices, Botswana .......... 66
Table 26: Total costs, including government vaccinations, borehole development and value
of the standing herd, and profits from cattle production at current base prices ....................... 67
Table 27: Costs and returns from cattle production per unit at current prices, Botswana ................ 68
Table 28: Sensitivity analysis of previous price range, current and old prices, Botswana .............. 68
Table 29: Financial analysis of a commission-based feedlot, Botswana ......................................... 71
Table 30: Financial analysis of an independent feedlot (at base cost of feed), Botswana ............... 72
Table 31: Sensitivity analysis of an independent feedlot (required feed price to give target
profit of BWP150 per head), Botswana................................................................................... 73
Table 32: Financial analysis of small butchery, Botswana .............................................................. 82
Table 33: Cattle development goals in Botswana’s National Development Plan .......................... 105
Table 34: Summary of gross margins for selected value-chain activities, Botswana .................... 116
Table 35: Summary of net margins for selected value-chain activities, Botswana ........................ 116
Table 36: Selected data on the top 25 global exporters of frozen beef, 2010 ................................ 144
Table 37: Selected data on the top 25 global exporters of fresh/chilled beef, 2010 ....................... 145
Table 38: Selected data on the top 25 global net exporters of fresh/chilled beef, 2010 ................. 146
Table 39: Selected data on the top 25 global net exporters of frozen beef, 2010........................... 147
Table 40: Selected data on the top 25 global exporters of fresh boneless cuts, 2010 .................... 148
Table 41: Selected data on the top 25 global exporters of frozen boneless cuts, 2010 .................. 149
Table 42: Regular duties for EU beef imports ............................................................................... 151
Table 43: Average cattle prices in BWP/head by district/region, Botswana, 2007–2008 .............. 154
List of Pictures
Picture 1: Borehole with pump ........................................................................................................... 4
Picture 2: Traditional well with pump ................................................................................................ 4
Picture 3: A cordon fence in Botswana .............................................................................................. 4
Picture 4: Cattle Herding in Botswana ............................................................................................... 5
Picture 5: ECCO beef and competing products.................................................................................. 8
Picture 6: Water supply at a cattle post .............................................................................................. 8
Picture 7: Loading ramp for cattle ...................................................................................................... 9
Picture 8: Cattle wandering on communal land ............................................................................... 10
Picture 9: Cattle in a Feedlot ............................................................................................................ 11
Picture 10: Meatco products in Europe ............................................................................................ 26
Picture 11: Halal beef in a Botswana butchery ................................................................................ 42
Picture 12: Farmer making a purchase at a Livestock Advisory Centre .......................................... 47
Picture 13: Bull at a breeder ............................................................................................................. 53
Picture 14: Half carcasses at the BMC ............................................................................................. 57
Picture 15: A cattle lick sold in Botswana ....................................................................................... 62
Picture 16: View at feedlot operation ............................................................................................... 69
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Picture 17: A rural slab butchery ...................................................................................................... 75
Picture 18: Small beef-processing operation .................................................................................... 77
Picture 19: Storage at a small processing operation ......................................................................... 77
Picture 20: Processing at the BMC ................................................................................................... 79
Picture 21: Small butchery in Botswana .......................................................................................... 84
Picture 22: Supermarket butchery in Gaborone, Botswana .............................................................. 85
Picture 24: Portable computer and scanner used in the Livestock Identification and
Trace-back System .................................................................................................................. 91
Picture 23: Tool for bolus insertion .................................................................................................. 91
Picture 25: Boluses recovered at a slab butchery ............................................................................. 93
Picture 26: Foot-and-mouth disease checkpoint with dipping basin ................................................ 94
Picture 27: Cattle truck at a loading ramp ...................................................................................... 101
Picture 28: Buffaloes are carriers of foot-and-mouth disease ........................................................ 110
Picture 29: Competition at an auction facility ................................................................................ 112
List of Maps
Map 1: Rainfall distribution in Botswana ........................................................................................ 49
Map 2: Potential grazing capacity in Botswana ............................................................................... 50
Map 3: Livestock zones in Botswana ............................................................................................... 95
Map 4: Map of the livestock advisory centres, Botswana .............................................................. 103
List of Boxes
Box 1 - Bones and hides ................................................................................................................... 76
Box 2 - Impact of the use of licks .................................................................................................... 87
Box 3 – The cost of large-scale vaccination ..................................................................................... 90
Box 4 – Sales of cattle ear tags boom in Namibia ............................................................................ 92
vi
Preface
Beef is the most important component of the agrifood sector in Botswana. It is an important foreign
exchange earner, has many linkages along the chain, and is a source of income for a large segment
of the country’s population. As such, the beef value chain is important in terms of food security.
But, despite its importance, the value chain has been facing a series of challenges that have
constrained its performance. Productivity has stagnated or decreased over the last decade. The
number of cattle entering the chain is constrained resulting in significant overcapacity in the
processing sector and consequently low profitability for processors. Existing opportunities in local,
regional and international markets are largely unexploited. In today’s highly competitive and
globalizing agrifood sector, including the livestock subsector, quality-based differentiation is a key
success factor and branding is essential to signal the quality of the product. Also key is reliability of
supply in terms of volumes, prices and quality throughout the year and from year to year. While
Botswana struggles with these aspects, it is losing market share to its competitors.
To address these challenges, the Ministry of Agriculture of Botswana requested the collaboration of
the Food and Agriculture Organization of the United Nations (FAO) to apply the value chain
framework to analyse the beef subsector and to provide a set of strategic recommendations aimed
at promoting its sustainable development and competitiveness. Funded through an FAO Technical
Cooperation Programme facility, the study represents the first work under a new Botswana
Agrifood Value Chain Project which is being driven by the Botswana Agricultural Hub. The beef
value chain study will stand as a template for development support to other agrifood value chains.
The study is based on extensive consultation with stakeholders throughout the value chain: input
suppliers, producers, processors, retailers, government officials and other support providers.
This timely study has been developed as part of FAO’s technical assistance and demonstrates a
continued commitment to the Ministry’s approach to supporting the agricultural sector. It is
expected that the recommendations – organized around public–private partnerships, institutional
change, trade and market liberalization and knowledge-driven development – will provide a solid
foundation from which Botswana’s beef subsector can grow strongly toward a rewarding future for
all its stakeholders. It is also hoped that through this study a wider audience can benefit from the
information and analysis provided.

Honourable Christiaan de Graaff Mr Gavin Wall
Minister Director
Ministry of Agriculture Rural Infrastructure and Agro-Industries Division
Government of Botswana Food and Agriculture Organization of the UN
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