Case Study #6-12 of the Program: ''Food Policy For Developing Countries: The Role Of Government In The Global Food System''

19 pp.©Cornell University, Ithaca, New York. All rights reserved. This case study may be reproduced for educational purposes without express permission but must include acknowledgment to Cornell University. No commercial use is permitted without permission.Agriculture plays a special role in transition economies, in both economic and social terms. The sector produces a major portion of the country's GDP and not only provides food but often serves as the only source of income for a large part of the population. For the Armenian government, the key objectives of dairy sector development are to attain the country's full self-sufficiency in dairy products, make them more competitive in foreign markets, protect local suppliers' rights, and ensure that rural incomes are compatible with urban income levels. But, according to data of 2015, the milk self-sufficiency of Armenia remains low (62.7 percent) and processors continue to underprice farm-gate milk. In Armenia, the insufficiency of milk output is accounted for, primarily, by the uncompetitive standing of raw milk producers in the chain of added value. Most of these producers (99.2 percent) are individual farms with an average livestock population of 1 animal. For this reason, the margin is distributed among farmers, processors, and traders disproportionately relative to their inputs; incomes of local people go down; milk supplies for commercial processing is decreased; processing capacities are underutilized; and the performance of the dairy sector as a whole is impaired. To make milk producers more competitive, several policy options are proposed: the introduction of a mechanism for regulating price relations among milk producers and processors; the use of incentives such as direct payments to producers to encourage them to reduce the seasonality of milk supply to processors; the establishment of marketing and milk processing cooperatives; the establishment of large commercial milk producers; and the delivery of training programs for farmers. The key stakeholders in the dairy sector of Armenia are government bodies, farmers, milk processors, retailers, and dairy product consumers (rural and urban populations). Your task is to develop recommendations for decision makers to help them select the best government regulation policies in the dairy sector, taking a balanced approach to the interests of all supply chain participants; and to identify the economic, social, and food implications of such policies.Cornell University Division of Nutritional Science