Uncertainty in milk production by smallholders in Tanzania and its implications for investment

Abstract

The study evaluates the impact of risk on enterprises of male, female and young farmers operating in the formal and informal smallholder dairy value chains in Tanzania. It also examines the effect of uncertainty on the decision to invest in milk production in the two value chains. Results indicate that youths in the informal dairy value chain face the greatest level of risk followed by men in the formal value chain, and then men in the informal value chain. Women in both value chains and youths in the formal value chain face relatively low risk. Overall, milk production in the informal value chain is found to be substantially riskier than production in the formal chain. Optimal investment triggers are found to be much larger than the conventional triggers and are sensitive to volatility of returns. The results’ managerial and policy implications for inclusive dairy industry development in Tanzania are highlighted.