Keeping the milk and cash flowing in Mongolia

Project Result / Case Study | 28 May 2021

Mongolia’s livestock per capita is among the highest in the world, with over 67 million livestock compared to a human population of 3.3 million. Over a third of Mongolians live in rural areas. In 2020, about 61% of these households depended on pastoral activities and animal husbandry for their livelihoods.

While pastoral and animal husbandry comprise most of Mongolia’s agricultural output, domestic dairy production and processing capacity remains limited. In 2018, out of the 892 million liters of raw cow and sheep milk produced, only 10% was processed through dairy factories. In addition, getting to and from collection points on time is a challenge due to the immense distances and Mongolia’s topography.

Local herder Ms. Densmaan milks one of her 8 cows for milk to sell to collectors.

The lack of processing capacity and supply chain challenges in Mongolia results in lost income and livelihood for herders, who are dependent on processors to procure raw milk.

At Bayangol soum in Selenge province, Ms. Nyamtsetseg is up early in the morning to operate a milk collection facility.

Ms. Nyamstetseg manages one of the collection points in Bayangol, Selenge.

“People come to the collection point as early as six in the morning with the milk because if they arrive late, the tanks would have been filled up, and their milk would be worth nothing,” said Mrs. Nyamtsetseg.

On average, earnings from the sale of milk make up a third of income for herder households, which use the milk earnings to pay most of their daily expenses. When they are unable to sell their milk, many are forced to sell their livestock as they lack other sources of cash.

In 2020, ADB provided support for Milko Limited Liability Company (Milko), based in Ulaanbaatar and one of Mongolia’s leading privately-owned dairy processors, to expand its dairy operations by improving its raw milk sourcing and processing capacity. The project enabled Milko to install more collection points in rural areas, procure modern equipment, and invest in more efficient management and raw milk processing systems.

Milko has been able to double the number of its collection points, which helps shorten the time and distance over which milk is collected from local herders and transported to processors.

Ms. Densmaan, 60, is already seeing improvement in her family’s income. As a pensioner, she lives off a fixed income. Before the addition of new collection points near her home, Ms. Densmaan’s family earned almost no income from milk sales, as the nearest collection point before Milko’s new collection points were set up was 30km away across rugged terrain. Only Milko’s collection points are close enough to collect milk from where her family stays during the summer.

“We are very grateful that they are picking up milk from right next to our home,” says Ms. Densmaan. “Otherwise, we would not be able to deliver the milk to the collection point.”

Since the project began, the new collection points have increased the number of herders and smallholder milk suppliers from 300 to more than 700.

The project has increased Milko’s capacity to procure raw milk from local herders from 1,500 tons to 3,920 tons. The company’s capacity to process dairy products has climbed by 1,520 tons of powdered milk and 1,080 tons of dried curd annually.

Last year, Ms. Densmaan earned an annual income of $1,161.00 (MNT 3,330,000) from sales of milk from her 8 cows. The cows produce 50 liters of milk per day during the summer months.

“The income from milk sales is new income for us, and it is very helpful,” she says. “It covers a lot of our expenses, I rarely run out of cash as long as I am selling milk.”