Production and Consumption Responses to Policy Interventions in Tanzania's Dairy Industry

The study uses a partial equilibrium model of Tanzania’s informal dairy value chain to determine the benefits to milk producers and consumers from three policy interventions proposed in the Tanzania Livestock Modernization Initiative (TLMI). Using aggregate time series data to simulate the model, the study finds that from an individual policy perspective, expanding the national herd would produce the largest benefits for producers and consumers; producers would gain over 550 million shillings annually and consumers would gain about 35 shillings per capita. Comparing the other two interventions, consumers would benefit more from a better regulatory environment than from a reduction in cow prices, while producers would benefit more from a reduction in cow prices than from better regulations. If all policies are implemented simultaneously, even greater benefits would be realised; consumer surplus would increase by 85 shillings annually and producer surplus would increase by over one billion shillings in real terms. The results suggest that policy interventions outlined in the TLMI that address supply constraints are critical to developing the country’s dairy industry.