Feed, fodder and forage production and storage
Feed, fodder and forage production and storage
Business Model Description
Establish and operate storage facilities for feed, fodder and forage, and invest in pasture development and management, where farmers, forage / fodder producers and community municipalities cooperate, community rents land, and private farms invest in pasture and forage plantation. The contracts may include obligations to invest in sustainable technologies.
Expected Impact
Strengthen dairy supply chain thanks to stable supply of feed, fodder and forage as well as reduced environmental impacts, also contributing to increased farmer incomes.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Armenia: Lori
- Armenia: Armavir
- Armenia: Tavush
- Armenia: Syunik
- Armenia: Shirak
Sector Classification
Food and Beverage
In 2018, agriculture was 13.7% of GDP, 28% of export and 32.2% of labor (9). Key challenges in the sector include inefficient water use and pollution (water stress of 57.43% (4)), inefficient soil use and soil damage (32% agri-land utilized) (7, 8, 13), high food waste and loss (15% in cereals; 19% in roots and tubers; 20% in fish, and 23% in eggs subsector (8)) as well as low farmer incomes.
The Government Plan 2019-2023 promotes the efficient use of agricultural resources and improved access of irrigation water for all. Pillars of the Plan are to enhance the productivity and food security, expand exports, promote effective farming technologies (intensive orchards, drip irrigation, anti-hail systems, modern storage and machinery), and increase income from agricultural activities (1).
In 2018, 48% of labor in agriculture were women. They are more engaged in informal (and less secure) low skill field work, e.g. harvesting, sorting, and packaging. Women have low access to land, technologies, knowledge and finance, and are less likely to run their own farm. They are paid 35% less than men for their work (10). The Ministry of Agriculture was dominated by men, i.e. 62% men and 38% women (14).
Government support tools in agriculture include low interest rate leasing or lending programmes for farmers to invest in agri-machinery and equipment, technologies (intensive orchards, drip irrigation) and hail protection systems and greenhouses. The Government also leads a programme on promoting agricultural insurance systems (1, 3).
Key bottlenecks in agri-food include prevalence of fragmented smallholders (330,000, with less than 1.5ha each) and low cooperation, low productivity due to low investment in and inefficient farming and marketing technologies and practices, underdeveloped market infrastructure (e.g. low storage capacity), and low use of sustainable practices (21, 23, 26).
Food and Agriculture
Dairy farming is important in mountainous areas with cheese export constituting 1% of total export (25, 26). Key issues in the subsector are a shortage of milk supply (0.5M l/year), insufficient milk collection capacity, low feed supply, unsustainable grazing and pasture management. This leads to low productivity of 1.5t / year / cow (26, 27) and low milk quality and price.
The Agriculture Development Strategy 2020-2030 aims at enhancing productivity and market operation in agriculture, development of agriculture data and forecasting systems. One of the key priorities is the promotion of modern facilities and technologies, including farming and post-harvest technologies (e.g. cold storage), modern greenhouses and irrigation, and disaster protection systems (14).
The Government provides subsidies (interest rate subsidy) for financing investment in modern dairy farms, milk collection points, and high quality animals. Investment in pastures is also promoted (1, 3).
Meat, Poultry and Dairy
Pipeline Opportunity
Feed, fodder and forage production and storage
Establish and operate storage facilities for feed, fodder and forage, and invest in pasture development and management, where farmers, forage / fodder producers and community municipalities cooperate, community rents land, and private farms invest in pasture and forage plantation. The contracts may include obligations to invest in sustainable technologies.
Business Case
Market Size and Environment
600,000 cattle and 700,000 sheep have insufficient supply of fodder / feed.
There are around 600,000 heads of cattle and around 700,000 heads of sheep in Armenia. The supply of fodder / feed is substantially lower that the demand in the market. The low supply of fodder / feed limits the growth of the animal husbandry sector (14, 25, 26).
Indicative Return
20% - 25%
For a medium-sized fodder / feed production business, the observed IRR is over 20% (21, 25, 26).
Investment Timeframe
Short Term (0–5 years)
For a medium-sized fodder / feed production business, the pay-back period is 3-4 years (21, 25, 26).
Ticket Size
< USD 500,000
Market Risks & Scale Obstacles
Capital - Limited Investor Interest
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
Shortage of supply of fodder, forage, and feed and insufficient storage capacity leads to high seasonality of milk production, inefficient market, low productivity, low prices and poor quality of agricultural products (21, 25, 26).
Armenia's productivity in dairy, with 1.5-2 t/cow/year, lags behind the productivity of many peer countries, resulting inter alia in lower farmer incomes (21, 25, 26).
Low productivity leads to higher levels of greenhouse gas emission by the agricultural sectors. Agriculture accounts for 19.6% of Armenia's GHG emissions, of which the lion's share is from animal husbandry (12, 13).
Gender & Marginalisation
Women have less job opportunities and lower wages compared to men in agriculture.
Expected Development Outcome
Enhanced feed supply helps to address the seasonality in milk supply, increase productivity and enhance farm income.
Reduced logistical challenges and transport cost for moving animals to pasture, reduced soil degradation caused by overgrazing and poor pasture management, as well as reduced feed loss and waste.
Gender & Marginalisation
More and better job opportunities for women across the agricultural value chain involved with feed, fodder and forage.
Primary SDGs addressed
15.3.1 Proportion of land that is degraded over total land area
15.4.2 Mountain Green Cover Index
2.3.1 Volume of production per labour unit by classes of farming/pastoral/forestry enterprise size
2.3.2 Average income of small-scale food producers, by sex and indigenous status
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Outcome Risks
Improper crop rotation and unsustainable crop growing practices (such as use of fertilizer or pesticides) in fodder/forage/silage production may cause soil and water pollution and soil degradation.
Small farmers and fodder producers may not follow good farming and grazing practices, and, thus, increase GHG and pasture degradation, and diminish the positive effect of stable feed/fodder supply.
Impact Risks
Smallholder farmers may have difficulties in following good farming and grazing practices, and, thus, increase GHG and pasture degradation, and in turn diminish the positive effect of the production.
Impact Classification
What
The enhanced feed, fodder and forage production will improve the well-being of feed producers and farmers. Enhanced feed supply will address imperfections in the dairy supply chain.
Who
Small and mid-scale fodder/forage growers, and dairy farmers facing difficulties due to unstable supply of fodder.
Risk
The model is proven and technology for fodder and forage production is readily available and affordable.
Impact Thesis
Strengthen dairy supply chain thanks to stable supply of feed, fodder and forage as well as reduced environmental impacts, also contributing to increased farmer incomes.
Enabling Environment
Policy Environment
The Government Plan 2019-2023 promotes the efficient use of and access to agricultural resources to improve food security and increase income from agriculture (1, 3).
The Agriculture Development Strategy 2020-2030 prioritizes the enhancement of productivity and agri-market operations. One of the key priorities is the promotion of investments in modern technologies, including for fodder production (14).
Financial Environment
Financial incentives: The Government offers a programme for subsidizing the lending and leasing of agri-foods equipment with an interest rate of 4% (1, 3).
Fiscal incentives: Armenia extends VAT payments deferral of up to three years for imported agricultural equipment and goods within the scope of investment projects approved by the Government, including for the dairy industry (15).
Regulatory Environment
The Government Decree No 1477 of 28 October 2010 establishes the procedure for the use of state and community owned pastures and grassland (28).
The Government Decree No 389-N of 14 April 2011 outlines the rules for the use of pastures and grasslands (30).
Feed production is subject to safety requirements set out in the Government Decree No 471-N of 7 May 2015 (31).
The Pasture Monitoring Manual 2014-2015, developed within the framework of GIZ and the Strategic Development Agency (SDA), offers sustainable pasture management practices based on the study of pasture conditions in Armenia (29).
Marketplace Participants
Private Sector
Fodder, forage producers; dairy producers and exporters in target regions (Borisovka, Dustr Melanya, Dili, Igit, Marianna, Marila); pasture user associations; dairy hub operators; supermarket chains such as Yerevan City, SAS, Carrefour and Nor Zovq.
Government
Ministry of Economy, Ministry of Environment, State Food Safety Agency, Community Municipalities.
Multilaterals
World Bank, European Bank for Reconstruction and Development (EBRD), United Nations Development Programme (UNDP), USAID, European Union (EU).
Non-Profit
Pasture users associations.
Public-Private Partnership
Cooperation model implemented under World Bank's Armenia Community Agricultural Resource Management and Competitiveness (CARMAC) project.
Target Locations
Armenia: Lori
Armenia: Armavir
Armenia: Tavush
Armenia: Syunik
Armenia: Shirak
References
- (1) Government action program 2019-2023, https://www.gov.am/am/Five-Year-Action-Program.
- (2) National strategy and action program to combat desertification in the republic of Armenia, Ministry of Nature Protection of Armenia, http://www.mnp.am/uploads/1/1551885091anapat_eng-1.pdf.
- (3) Ministry of Agriculture, www.minagro.am/պետական-օժանդակության-ծրագրեր.
- (4) FAO AQUASTAT, ges/pg_4062968307_22.pdf.
- (5) Agro-investment Guide Armenia, https://www.eda.admin.ch/dam/countries/countries-content/armenia/en/Investment%20Guide.pdf.
- (6) How can farming intensification affect the environmental impact of milk production, L. Bava , A. Sandrucci, 2014, Journal of Dairy Science, https://www.journalofdairyscience.org/article/S0022-0302(14)00316-6/fulltext.
- (7) State Cadaster Committee, Armenia, https://www.cadastre.am.
- (8) FAO, Food Waste and Loss in Armenia, http://www.fao.org/3/a-au842e.pdf.
- (9) World Bank, Development Indicators, https://data.worldbank.org/indicator/NV.AGR.TOTL.ZS?locations=AM&view=chart.
- (10) Statistical Committee of Armenia, Labor Market in Armenia, 2019.
- (11) Statistical Committee of Armenia, Food Security and Poverty in Armenia, 2019, https://www.armstat.am/am/?nid=82&id=2125.
- (12) Intended Nationally Determined Contributions of the Republic of Armenia under the UN Framework Convention on Climate Change (UNFCCC), https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Armenia%20First/INDC-Armenia.pdf.
- (13) Statistical Committee of Armenia, 2018, https://www.armstat.am/file/article/eco_booklet_2018.pdf.
- (14) The Strategy of Main Directions of the Development of Agriculture of Armenia 2020-2030, https://mineconomy.am/en/page/1467.
- (15) Tax Code, https://www.arlis.am.
- (21) UNDP interviews with stakeholders, 2019.
- (22) Investment Guide Armenia, Ministry of Economic Development and Investment, 2017, http://uk.mfa.am/u_files/file/invest/investinarm.pdf.
- (23) Voluntary National Report (VNR) of Armenia, for the UN High-level Political Forum on Sustainable Development, 2018.
- (24) Sustainable Development Report, 2019, https://www.sdgindex.org/reports/sustainable-development-report-2019.
- (25) Tackling the Challenge of Smallness in Agricultural Market, 2016, G. Gabrielyan et al, Center of Agribusiness and Rural Development (CARD), Armenia.
- (26) Cheese Production and Export Supply Chain: Armenia, Gagik Gabrielyan, International Finance Corporation, 2017, https://openknowledge.worldbank.org/handle/10986/29328.
- (27) Statistical Committee of Armenia. Annual Reports on Foreign Trade.
- (28) Government Decree no 1477 of 28 October 2010, https://www.arlis.am.
- (29) Manual for Monitoring of Pastures, Armenia - Yerevan. 2015, Sustainable Management of Biodiversity, South Caucasus, https://biodivers-southcaucasus.org/uploads/files/GIZ%20WP%20eng%20.pdf.
- (30) Government Decree No 389-N of April 14 2011, https://www.arlis.am.
- (31) Government decision No 471-N of 07 May 2015, https://www.arlis.am.