Time series analysis of milk production in Uganda. A case study of Sameer Agriculture and livestock Limited.2014-2016

ABSTRACT

The topic of study was time series analysis of milk production in uganda. a case study of sameer agriculture and livestock limited.2014-2016, and study was guided by the following objectives; to determine the distribution/trend of milk production in Uganda and to forecast the milk production in Uganda. The research hypotheses was There is no trend for milk production in Uganda and .The study scope covered the distribution of Trend for milk production in Uganda, forecast milk production in Uganda over the next 5 years in Uganda and evaluate factors that determine milk production in Uganda. The period of data to be considered was from 2014-2016.

Milk production in Uganda has been declining and there is need for the government to support the farmers in ensuring the output in increased.

The level of milk production in Uganda has also shown that there needs to be an increase in the investments by the government.

The government needs to support cattle keepers with modern milk systems to enable milk production to increase.

Milk producers in Uganda need to be educated by the professionals on the best ways of increasing their milk output.

There needs to be government support to the farmers.

CHAPTER ONE

INTRODUCTION

1.1Background of the study

Approximately 150 million households around the globe are engaged in milk production. In most developing countries, milk is produced by smallholders, and milk production contributes to household livelihoods, food security and nutrition. Milk provides relatively quick returns for small-scale producers and is an important source of cash income. There are over 264 million dairy cows’ worldwide, producing nearly 600 million tonnes of milk every year (FAOstat).
The global average for milk production is approximately 2,200 litres per cow (FAOstat 2012).
The largest producer of milk is the USA producing over 87 million tonnes per annum
( FAOstat 2012).  India has the greatest number of dairy cows in the world with over 40 million cows.

Population growth, rising income and increased urbanization in the African countries as well as the subsidized prices of European beef and dairy exports have helped to stimulate the demand for livestock imports in sub-Saharan Africa. Africa has about 14% of the world bovine population but produces 16% and 3 % of the world beef and milk output respectively. In contrast, developed countries have about 30% of the world bovine population but produce 71 % and 77 % of the world beef and milk output. The number of sheep and goats in Africa constitutes 22% of the world population but contributes only 17% of mutton and goat meat output. The comparable figures for developed countries are 36% of population and 46% of output. The low yields have obviously contributed little to increases in output.

Currently, Uganda produces 1.3 billion litres of milk per year, of which 30 percent is consumed on the farm and 70 percent is marketed to consumers (Balikowa, 2006).There are five main milk producing regions or milk sheds in Uganda and 80 percent of the milk is produced in the southern (south-western milk shed) alone accounts for over 30 percent of the total milk production and therefore constitutes the major source of marketable milk in the country. The average milk production per cow per day is quite low (less than 10 litres) that account for 93.3 percent and only 0.5 percent cows produce 20 litres per day with Friesian cows being most productive. Elepu (2006) and Balikowa (2003) observed that milk collection in Uganda includes direct pick up from the producers by agents, co-operative assembly and individual supply (producers) deliver directly to pick up points. Majority of the milk is collected and distributed through Milk Collection Centers which are owned by private traders. Balikowa (2003) noted that there are two milk collection systems; the formal and informal channels. The informal milk collection channel is characterized by lack of milk collection infrastructure, limited quality control and selling of milk on credit but in some cases cash is paid. The common means of transport at farm level is the bicycles. In Uganda, milk processing is handled by over 10 private companies and over 100 small scale processors (Elepu, 2006). The processing companies include Sameer Agriculture and livestock limited, Jesa Farm Dairy, GBK Dairy products, White Nile Dairy, Birunga Dairy, Teso Fresh Dairy, Paramount Dairies Ltd, Alpha Dairy Products and MADDO Dairies Ltd (DDA, 2008). The products processed by companies are cheese, cream, ice cream, yoghurt, cultured milk, butter and ghee. Sikawa, & Mugisha, (2011).  found that on farm processing of milk is done at limited scale and approximately 9 percent of farmers’ process milk into ghee mainly for home consumption while 2 percent make other products particularly yoghurt and ghee and 89 percent do not make any milk product.

1.2 Statement of the problem

The dairy industry remains a key livestock component with significant contribution to food security and income in pastoral communities of Uganda (FAO, 2008; ILRI, 2007). Dairy policies have been relaxed to allow market forces to determine farm level prices. This has exposed farmers to lower milk prices while downstream retail prices are higher (Artukoglu et.al, 2008, Tsougiannis et al, 2008). This has resulted into considerable mistrust among market chain actors in developing countries (Markus et al., 2008).  Milk production in Uganda has been declining over the years, the Sameer agriculture and livestock has faced numerous challenges in the milk production of Uganda, this is due to the declining quantity of milk production in Uganda. According to Elepu, (2006), about 80 percent of marketed milk still passes through traditional informal marketing channels in spite of high profile given to formal milk marketing channel.

This challenge in the milk production of Uganda has led the researcher to investigate into the time series analysis of milk production in Uganda, a case study of sameer agriculture and livestock limited.

1.3 Objectives of the study.

1.3.1 General objective.

The general objective of the study was to determine the time series analysis of milk production in Uganda.

1.4 Specific objectives.

1. To determine the distribution/trend of milk production in Uganda.
2. To forecast the milk production in Uganda.

1.5 Research hypotheses.

1. Ho₁: There is no trend for milk production in Uganda.

1.5 Scope of the study

The study scope covered the following aspects; study scope, time scope and geographical scope.

1.5.1 Study scope

The study scope covered the distribution of Trend for milk production in Uganda, forecast milk production in Uganda over the next 5 years in Uganda and evaluate factors that determine milk production in Uganda.

1.5.3 Time scope

The period of data to be considered was from 2014-2016.

1.6 Significance of the study

Improved performance of the dairy industry will only be meaningful if farm level marketing strategies are efficient (MFPED, 2007). Therefore, the analysis of milk distribution is essential for dairy development at micro level and in formulating plans for improvement in the dairy sector through formulation of a proper marketing channel and increased employment generation in agriculture. The study is to act as a working document for both the government and other stakeholders in addressing the constraints faced by dairy farmers participating in formal milk marketing channel for them to benefit from current high demand of dairy products. For policy implementers like extension agents, study results put them in a better position to enhance formal milk marketing channel after being enlightened with factors that affect the channel participation.

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

Cattle in Uganda is raised under different production systems, namely: pastoral (semi-nomadic) production, agro-pastoral (communal grazing) systems, beef ranching, dairy ranching, crop livestock mixed farming, semi-intensive dairying and intensive dairying, with various specialized features (Kasirye, 2003). Between the extensive and intensive management systems, there are a number of discrete systems that vary in objective, management strategies, attitude, feed and capital investment and level of productivity. Higher levels of investment in dairying are generally located near major urban or consumption centers that are associated with higher milk prices and stable demand for dairy products, (Mubiru et al, 2007).

In Uganda most of the cattle are found in the cattle corridor and milk is produced from cattle and goats (Matthewman, 1993). Dairy production systems in Uganda have been classified into three groups; pastoral, small-scale crop and livestock farms and specialized dairy farms (Okwenye, 1994). This classification is based on number of stock, feeding and grazing management and breeds reared. The Ministry of Agriculture, Animal Industry and Fisheries (MAAIF) jointly with the International Livestock Research Institute (ILRI) (MAAIF/ILRI, 1996) indicated that cattle production systems in Uganda form a continuum with semi-nomadic pastoralism at one end and zero grazing on the other. It also further categorizes dairying in the country into intensive, semi-intensive and extensive systems.

Small-scale crop and livestock farms may also occur and are located near urban centers using mixed dairy cow breeds (less than ten) (Okwenye, 1994). Milk produced under this system is handled in both plastic and metallic containers, and it is for sale to generate income and home consumption. Milk hygiene is considered vital since the production system is economically viable (Balikowa, 2004). Semi-intensive dairying systems predominate in mid-western, western, Central and parts of eastern Uganda. Farms are small, averaging about 1-2 ha in areas of high human population density and about 4-15 ha in relatively low-density locations. Large semi-intensive farms range from 20 ha to 40 ha of land. It is common to find animals herded, tethered or grazed on hillsides, valley bottoms, and roadsides and on inter-seasonal fallows (Matthewman, 1993).

2.1 The distribution of milk

A 2010 estimate of Ugandan milk production showed that around 1.2 billion liters had been produced by approximately 1.2 million smallholders and 8000 large farms with more than 100 cows. The demand is rising and the total market capacity has seen a remarkable increase over the last 15 years. New dairies with large capacities have been established; this has affected a significant increase in the amount of processed dairy in Uganda. Uganda is an open market where governmental companies are not present. On the other hand, the government does not provide beneficial subsidiary schemes. One of the actors on the dairy market is Uganda Crane Creameries Cooperative Union (UCCCU). It is based in Mbarara in the south western region and is a registered cooperative that is principally owned by 10 District cooperative unions. UCCCU has about 18,000 individual farmers as members, organized in 140 primary cooperative societies. Its major objective is to promote the mutual economic interests of its members in accordance with cooperative principles. Their vision is to be the leading farmer owned provider of dairy products and services in the entire East African region. Through the UCCCU affiliated unions, dairy farmers currently have the capacity to bulk and sale an average of 200,000 liters of fresh milk per day.

The current market, which is predominantly local, has an annual turnover of US$ 5 million. The current main purchaser of UCCCU Raw Milk is Sameer Agriculture and Livestock Limited (SALL), which is Uganda’s main processor. Sameer Agriculture & Livestock(SALL) is Uganda’s leading and the most diversified dairy company, producing extended shelf life and UHT liquid milk, yoghurt, butter, cream, milk powder while also distributing ice cream products from its Kenyan sister company. The dairy leased the former Dairy Corporation of Uganda plant in Kampala, following the liberalization of the sector in 1996 and has invested further in the milk powder and juice plants plus other facilities including cooling centers around the country.

In an effort to bring milk quality to accepted national and international standards, the specific needs farmers have that have been mentioned above require addressing the following: Milking system The milking methods at almost all the member farms are labour intensive and there is a danger that the milk gets contaminated. No milking machines are used due to the fact that the milking is done in various locations and the lack of electricity in the rural areas. Milk has to be transported to collection centres by means of a bicycle. They carry a maximum of 50 litres using a milk can, whereas most farm production is more than that amount.

Collecting centres to access the market, dairy farmers are part of a cold chain from the primary milk collection centres to the bulking centres, numbering 60 coolers and generators owned by SALL. Cooling requires energy, and farmers can only safely deliver quality milk if it is not degraded between the point of milking to the delivery at the collection centre. The equipment used for cooling is under a lease arrangement with unfavorable business terms for the individual farmer. All the collected and chilled milk in the network is currently sold to SALL at UGX 300 (about US$ 0.12). The same litre processed is sold by SALL at UGX 2000, which equals about USD 0.80. In situations when SALL cannot take all the milk, farmers are not supposed to use the collecting equipment to sell to other buyers, and farmers have to pay rent on the machinery and cost of maintenance determined by SALL. The equipment binds the farmer to sell to SALL even when there are other buyers offering better terms of trade. Thus, there is a demand for a better solution for the farmer in terms of new technologies as well as more favourable business models. Some Milk Collecting centres are not on the electric grid and those that are; suffer from an unstable electricity supply.

Driven largely by dairy, the livestock sector has maintained positive growth rates averaging 3% per annum compared to the declining growth rates registered in the food and cash crop sub-sectors.

Development of the value chain in the dairy sector has led to employment creation and income generation not only for about 700,000 dairy farming households, but also for farm input dealers and dairy equipment dealers. Other sections include dairy ingredients dealers, raw milk traders, milk transporters, mini-dairies, large-scale milk processors and distributors. As a result of value addition, there has been an increase in the milk farm-gate prices from an average of sh450 to sh800 per litre.

In 2013, the value and quantity of milk and dairy exports is expected to be $12.1m, a rise from $11.5m in 2012, and $3.4m in 2011.While milk production has improved, and the biggest percentage goes unprocessed. Only 20% of the country’s milk output is processed. Local farmers, however, are getting together in their groups to process the milk. With the increase of small and medium-size dairy farming, and the long-standing ban on importation of dairy animals, the demand for good quality dairy stock has greatly increased over the last decade.

Currently, the demand for high grade in-calf heifers is more than the supply and hence prices of quality breeding animals are high. Of the milk produced, 70% is marketed and 30% is consumed at the farm level. The country is among the few low-cost producers of milk in the world. Uganda’s dairy sector has registered commendable growth averaging eight to 10% since 1991.

According to state minister for animal husbandry, Bright Rwamirama, the country’s daily milk processing capacity has raised from 869,800 litres, to 1,329, 180 litres per day. There are 38 milk processing plants in the country, including the newest Pearl Dairy Farm located in Mbarara. Rwamirama says there are four other milk processing factories that are set to open up in the country with a total milk processing capacity of 855,000 litres.

Extensive systems include pastoralism in drier districts or regions of the country; milk is produced from cattle which are herded around the village on communal land. Pastoralism is an important way of life in dry areas, where cattle owners are often transhumant. Milk contributes to subsistence food supplies in this system (Matthewman, 1993). Pastoral farms have large numbers of indigenous stock (greater than 50), grazing in coarse pasture throughout the year and milked twice a day. No supplementary feeding is provided (Okwenye, 1994).

Pastoral farms are managed with large numbers of indigenous stock (greater than 50), grazing in coarse pasture throughout the year and milked twice a day also exist and have no supplementary feeding, (Matthewman, 1993). Pastoralism is an important way of life in dry areas, where cattle owners are often transhumant. This system is dying out in the cattle corridor of Uganda and milk contributes to subsistence food supplies, (Matthewman, 1993). The majority of the cattle population (65.4%) in this area is confined to a narrow area stretching from northeast (e.g., Kotido District), through central (e.g., Nakasongola District) to southwest Uganda (e.g., Rakai and Ntungamo Districts) (MAAIF, 2010). This area is semi-arid, experiences a low incidence of tsetse fly infestation and has suitable climatic conditions that make it conducive to cattle rearing. Milk under extensive (pastoral) systems in Uganda is produced under questionable hygienic conditions and is handled in plastic, metallic and wooden containers that compromise its quality (FAO, 1990). Also under these systems calves are allowed to suckle before milking to induce milk flow and calm down the animal (Kurwijila, 1989).

Milk production and the dairy industry

Dairy production is a major contributor towards national economies and household food security and incomes in SSA, in spite of contributing a mere 2% toward the global milk production (FAO, 1998). Milk production in the region is estimated at 1.27 million metric tons/year. However, this level of milk production is inadequate for the existing human population who would require 103 million metric tons/year (Mubiru et al, 2007). Milk production in the tropics is changing from subsistence level to market oriented supply in order to produce additional income for the household (Chamberlain, 1989).

Milk production in the country takes place in regions referred to as milk shades (regions with high concentration of dairy animals) and these areas extend from just below 1° latitude in the north to Kabale in the south and from Mbale in the east to Kabarole in the west (FAO, 1992; Okwenye, 1994). Uganda is divided into five milk regions/sheds; southwestern, central, western, northern, and eastern. There are differences in the milk sheds in terms of the economic importance of the dairy industry to the region, herd population and production levels, farm size, grazing systems, practices, and cattle breeds used for milk production (Vikas et al, 2011). Karamoja zone is sometimes referred to as a separate milk shade (UBOS, 2009; DDA (2011).

Uganda‟s annual milk production was estimated at 1.5billion litres in 2010 representing an increment of 3% from 2009, of the 1.5 billion litres produced annually 30% is retained at the farms and only 1.05bn litres is commercially traded and of which 90% is marketed unprocessed as raw milk (Kahuta, G. (2013). Yearly milk consumption has improved in Uganda up to 50lt per person, providing the 1.5 billion liter milk industry with new market heights (DDA, 2011). However, the milk produced only meets approximately 20% of the population’s nutritional requirements and as such, methods need to be sought to increase milk production in the region (DDA, 2011).

In Uganda there are a total of 11 unions and 378 dairy cooperatives in the five milk sheds increasing market access for smallholder and commercial dairy farmers (DDA, 2011). Milk coolers (628) with a total capacity of about 1,183,761 litres per day have been installed for milk bulking and milk retailing across the country (DDA, 2011). Raw milk is transported by insulated milk road tankers from the bulking centers to processing plants and other urban milk retailing outlets to ensure that the cold chain is maintained (DDA, 2009). There are 7 large scale milk processing plants with installed capacity above 5,000 litres per day and many small-scale milk processing plants. Uganda is producing and marketing a range of dairy products such as pasteurized milk, UHT milk, yoghurt, ice cream, sour butter, sweet cream, ghee and cheese (DDA, 2011). Only 10-20% of the milk produced in Uganda is processed; the rest is handled through the informal markets which deal in raw milk and this is prone to spoilage (DDA, 2009).

In Uganda, the raw milk market is organized into two steps; the first step traders get the milk from farms and sell it to second traders, processors or directly to consumers and in the second step, traders then sell it to big processors or cool it and sell to consumers directly (Mbabazi, 2005).

FAO (1996) indicates that in Uganda 27% of the milk produced is wasted or lost; with 10% lost to spoilage during transportation, 11% during handling and marketing, while 6% is lost at farm level which translates into significant loss to the industry. Ninety (90) percent of the milk produced in Uganda is marketed in its raw form, and this milk is handled by middlemen at different levels of the value chain (Twinamatsiko, 2001); it is, however, important that the consumer should eventually end up with a qualitative wholesome product.

A 2010 estimate of Ugandan milk production showed that around 1.2 billion liters had been produced by approximately 1.2 million smallholders and 8000 large farms with more than 100 cows. The demand is rising and the total market capacity has seen a remarkable increase over the last 15 years. New dairies with large capacities have been established; this has affected a significant increase in the amount of processed dairy in Uganda. Uganda is an open market where governmental companies are not present. On the other hand, the government does not provide beneficial subsidiary schemes. One of the actors on the dairy market is Uganda Crane Creameries Cooperative Union (UCCCU). It is based in Mbarara in the south western region and is a registered cooperative that is principally owned by 10 District cooperative unions. UCCCU has about 18,000 individual farmers as members, organized in 140 primary cooperative societies. Its major objective is to promote the mutual economic interests of its members in accordance with cooperative principles. Their vision is to be the leading farmer owned provider of dairy products and services in the entire East African region. Through the UCCCU affiliated unions, dairy farmers currently have the capacity to bulk and sale an average of 200,000 liters of fresh milk per day.

The current market, which is predominantly local, has an annual turnover of US$ 5 million. The current main purchaser of UCCCU Raw Milk is Sameer Agriculture and Livestock Limited (SALL), which is Uganda’s main processor. Sameer Agriculture & Livestock(SALL) is Uganda’s leading and the most diversified dairy company, producing extended shelf life and UHT liquid milk, yoghurt, butter, cream, milk powder while also distributing ice cream products from its Kenyan sister company. The dairy leased the former Dairy Corporation of Uganda plant in Kampala, following the liberalization of the sector in 1996 and has invested further in the milk powder and juice plants plus other facilities including cooling centers around the country.

In an effort to bring milk quality to accepted national and international standards, the specific needs farmers have that have been mentioned above require addressing the following: Milking system The milking methods at almost all the member farms are labour intensive and there is a danger that the milk gets contaminated. No milking machines are used due to the fact that the milking is done in various locations and the lack of electricity in the rural areas. Milk has to be transported to collection centres by means of a bicycle. They carry a maximum of 50 litres using a milk can, whereas most farm production is more than that amount.

Collecting centres to access the market, dairy farmers are part of a cold chain from the primary milk collection centres to the bulking centres, numbering 60 coolers and generators owned by SALL. Cooling requires energy, and farmers can only safely deliver quality milk if it is not degraded between the point of milking to the delivery at the collection centre. The equipment used for cooling is under a lease arrangement with unfavorable business terms for the individual farmer. All the collected and chilled milk in the network is currently sold to SALL at UGX 300 (about US$ 0.12). The same litre processed is sold by SALL at UGX 2000, which equals about USD 0.80. In situations when SALL cannot take all the milk, farmers are not supposed to use the collecting equipment to sell to other buyers, and farmers have to pay rent on the machinery and cost of maintenance determined by SALL. The equipment binds the farmer to sell to SALL even when there are other buyers offering better terms of trade. Thus, there is a demand for a better solution for the farmer in terms of new technologies as well as more favourable business models. Some Milk Collecting centres are not on the electric grid and those that are; suffer from an unstable electricity supply.

Driven largely by dairy, the livestock sector has maintained positive growth rates averaging 3% per annum compared to the declining growth rates registered in the food and cash crop sub-sectors.

Development of the value chain in the dairy sector has led to employment creation and income generation not only for about 700,000 dairy farming households, but also for farm input dealers and dairy equipment dealers. Other sections include dairy ingredients dealers, raw milk traders, milk transporters, mini-dairies, large-scale milk processors and distributors. As a result of value addition, there has been an increase in the milk farm-gate prices from an average of sh450 to sh800 per litre.

In 2013, the value and quantity of milk and dairy exports is expected to be $12.1m, a rise from $11.5m in 2012, and $3.4m in 2011.While milk production has improved, and the biggest percentage goes unprocessed. Only 20% of the country’s milk output is processed. Local farmers, however, are getting together in their groups to process the milk. With the increase of small and medium-size dairy farming, and the long-standing ban on importation of dairy animals, the demand for good quality dairy stock has greatly increased over the last decade.

Currently, the demand for high grade in-calf heifers is more than the supply and hence prices of quality breeding animals are high. Of the milk produced, 70% is marketed and 30% is consumed at the farm level. The country is among the few low-cost producers of milk in the world. Uganda’s dairy sector has registered commendable growth averaging eight to 10% since 1991.

According to state minister for animal husbandry, Bright Rwamirama, the country’s daily milk processing capacity has raised from 869,800 litres, to 1,329, 180 litres per day. There are 38 milk processing plants in the country, including the newest Pearl Dairy Farm located in Mbarara. Rwamirama says there are four other milk processing factories that are set to open up in the country with a total milk processing capacity of 855,000 litres.

Uganda’s dairy production is largely dominated by small-scale farmers, who own over 90% of the national cattle population. These small-scale farmers are In rural areas, where 96% of the poor Ugandan live, about 60% of households keep mostly indigenous cattle, as seen in the ‘cattle corridor’ zone. National milk production stood at 1.8 billion in July 2012, according to the Dairy Development Authority (DDA).

CHAPTER THREE

METHODOLOGY

3.0 Introduction

This chapter presents the methodology which consists of the research design, data types and source, tools of data collection, and data analysis.

3.1 Research design

This study adopted a cross sectional survey design. This design was preferred because it enabled collecting data in a short time (Creswell 2003 and Koul 2005).Quantitative approach was also used because of its flexibility to form multiple scale and indices focused on the same construct (Ahunja 2005).

3.2 Study population

The researcher used secondary data obtained from the Uganda dairy cooperation and World Bank Africa database for the period between 2014 and 2015.

3.4 Data type and sources

Source of data was from secondary sources, The main source of data for this study was from UBOS and Uganda dairy cooperation, Economic Development (MOFED), Department of National Accounts, UBOS,. In addition World Bank Africa database will be used. The data will be from 2014 to 2016. Secondary data was sourced because it yields more accurate information than obtained through primary data, and it was also cheaper.

3.5 Tools of data collection

The data was got by presenting an introduction letter given to me by the head of department Economics and Statistics. This was clearly present my purpose to the different organizations where Iam eligible to collect the necessary data for my analysis.

3.6 Data Analysis

The time series data was analyzed using regression analysis, correlation and forecasting.

This is also known as the Box-Jenkins model. This methodology will be used to forecast the milk production in Uganda (2014-2017) acase study of fresh diary company. The model is based on the assumption that the time series involved are stationary. Stationary will first be checked and if not found, the series will be differenced d times to make it stationary and then the Autoregressive Moving Average (ARMA) (p, q) will be applied. The ARIMA procedure provides a comprehensive set of tools for univariate time series model identification, parameter estimation, and forecasting, and it offers great flexibility in the kinds of ARIMA models that can be analyzed. The ARIMA procedure supports seasonal, subset, and factored ARIMA models; intervention or interrupted time series models; multiple regression analysis with ARMA errors; and rational transfer function models of any complexity. The Box-Jenkins methodology has four steps that will be followed when forecasting milk production as below;

Identification.0 This involved finding out the values of p, d, and q

where;

p is the number of autoregressive terms

d is the number of times the series is differenced

q is the number of moving average terms

Analytical Procedure

This study used monthly data to examine the determinants of milk production in Uganda. The co-integration procedure requires time series in the system to be non-stationary in their levels. Moreover, it is imperative that all time series in the co-integrating equation have the same order of integration. Thus, the study first ascertained the time series properties of milk production and other explanatory variables by using the augmented Dickey-Fuller (ADF) and Philips-Perron test for stationarity (Dickey and Fuller, 1979 and 1981). The equation estimated for the ADF test is stated as follows:

The null hypothesis is that the series contains a unit root which implies that β₁=0 the null hypothesis is rejected if β₁ is negative and statistically significant. To determine the long run relationship between milk production and explanatory variables, the Johansen co-integration procedure was used (Johansen and Juselius, 1990 and Johansen, 1991). The procedure involves the estimation of a VECM. The VECM used in the study is as follows:

Where, Yt is the dependent variable, Zt is the explanatory variables, Xt is exogenous variable, Yt-1 –θZt-1 is the error correction and D is represents the difference operator. Furthermore, ε represents the vector of white noise process. The VECM allows causality to emerge even if the coefficients of the lagged differences of the explanatory variable are not jointly significant.

(Granger, 1983; Engle and Granger, 1987; Miller and Russek, 1990; Miller, 1991; Dawit, 2003). In this study, an attempt is made to specify the coffee export supply function of Ethiopia following Alemayehu (2002) and UNCTAD (2005). The hypothesized variables in this study are rainfall, relative domestic price, labour employed in agriculture, real exchange rate, domestic interest rate, foreign capital inflow, capacity utilization rate, real income, and term of trade. All variables are in natural logarithmic forms and β’s are parameters to be estimated which are elasticities.

1.8  Limitations of the study

1. The researcher faced financial constraint in terms of transport, stationery, research assistants, printing and binding services during the research process.
2. The time available for the research was limited to balancing time between research and other responsibilities may be hectic.

CHAPTER FOUR

DISCUSSION OF FINDINGS

 4.0 Introduction

This chapter presents the data analyzed from secondary data sources on the times series analysis of milk production in Uganda. A case study of sameer agriculture and livestock limited 2014-2016. The data was tabulated to give a meaningful presentation and interpretation. Presentation and interpretation were based on the specific objectives to address the research problem.

This section further reports the estimates for milk production in Uganda function. In order to detect the long-run co-movement among the variables, the cointegration procedure developed by Johansen (1991) and Juselius (1990) was employed. An error correlation model for the determinants of milk production in Uganda was used.

4.1. Histogram Normality Test

A regression was run and on clicking on the view-residual test-histogram-normality test, the histogram is bell-shaped, suggesting a normal curve shape, and the jarque-bera statistics has high p-value of 0.558725 indicating that the errors in the regression are normal that is to say; the Jarque-bera statistics probability of 0.558725 is greater than zero and it has a percentage of 55% greater than 10%(55%>10%) thus the errors in the regression are normal.

4.1.2 Test for omitted variables

Chow Breakpoint Test

The null hypothesis is rejected and we conclude that there is a structural break inthe data.

 Distribution of milk production

The graph above shows that milk production in Uganda has been constantly changing however there is a general; decline in milk production as presented by the graph.

4.1.3 UNIT ROOT TEST

H₀   the series are stationary

Unit root tests were carried out using the augmented Dickey-Fuller test statistic. This was carried out to check whether the series were stationary (integrated) or not. This is because standard inference procedures do not apply to regressions which contain an integrated dependent variable or integrated regressors. The test statistic tested the null hypothesis that the time series has a unit root against the alternative that there is no unit root. The test statistic values are compared to the critical values at five percent significant level. The test statistic values less than the critical values at five percent level of significance indicate that the series are non-stationary otherwise they are stationary.

In the table 4, the milk production D(SER01) is not stationary in the levels and after the first difference since there ADF statistic are lower than the critical values.

The findings indicates that the durbin-watson prob(f-statistic)= (0.093822)>0.05, therefore reject the null hypothesis, therefore the series are not stationary.

TREND

COIN INTERGRATION

The next attempt involved testing the residuals for the order of integration. The application of the Augmented Dickey Fuller test statistic revealed that the residuals are stationary in levels.

Table 5: Cointegration tests output

Among the variables that are integrated of order 1(1), an attempt was made to check whether Cointegration holds. The purpose of the Cointegration tests was to determine whether a linear combination of a group of non-stationary series is stationary. Engle and Granger (1987) pointed out that a linear combination of two or more non- stationary series may be stationary.

H₀   There is no linear deterministic trend in milk production

The null hypothesis that there is no linear deterministic trend in milk production is accepted at 5% significance level.

4.1.2 Regression Analysis

Forecast 2017

The results in the table indicates that

From the figure above shows that milk production in Uganda started to decline from January to April 2016 production was declining while there is a slightly improvement in June 2017 to September 2017 while the milk production  generally decline from November 2017 to December 2017.

This implies that milk production in the year 2017 is general low as compared to previous years of 2016 and 2015. It also further indicates that the government needs to increase milk production in Uganda.

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.0 Introduction

From the results its is evident that production of milk in both years of 2016 are slighlt similar however the production of milk has been reducing in 2016 while the production in 2016 was extremely low in 2017.

The study also recommends that government should get involved in measures which increase milk production some of these measure include using modern systems to increase milk production in the milk production areas , this is because there has been a declining trend of milkn production in Uganda which has costed most of the milk producers in Uganda this is also in line with  (Matthewman, 1993) who  states that in Uganda most of the cattle are found in the cattle corridor and milk is produced from cattle and goats. Dairy production systems in Uganda have been classified into three groups; pastoral, small-scale crop and livestock farms and specialized dairy farms , this types of milk production in Uganda which is mostly pastoral has affected m8ilk production this is because milk production in Uganda depends so much on nature.

While during drought period milk production is low because of low water consumption this is generally evidenced by the fact that milk production has been on the decline mainly from 2017.

The study shows that milk production in 2015 was not the same as 2016 and there has been also a general decline in the previous this shows that there needs to be an intervention this is also in line with (Okwenye, 1994) this means that proper feeding of cattle is necessary to enable the milk production to be high.

The results in the study indicates that milk production in Uganda has not been constant and therefore the years in 2015 and 2016 the trend in  milk production has been varying , the figure further shows that milk production in January was the highest and milk production in 2015 was high again months of may and June however milk production in Uganda was lower in February 2015 and march this view is also shared by (FAO, 1992; Okwenye, 1994) who indicate that

Milk production in the country takes place in regions referred to as milk shades (regions with high concentration of dairy animals) and these areas extend from just below 1° latitude in the north to Kabale in the south and from Mbale in the east to Kabarole in the west. Uganda is divided into five milk regions/sheds; southwestern, central, western, northern, and eastern. There are differences in the milk sheds in terms of the economic importance of the dairy industry to the region, herd population and production levels, farm size, grazing systems, practices, and cattle breeds used for milk production , however Karamoja zone is sometimes referred to as a separate milk shade.

The study shows that milk production in Uganda has been facing constant changes in Uganda and therefore the government needs to develop an intervention policy this is shown by the fact that milk production in 2016 was slightly lower than that of 2016, however production in 2016 was high in February 2016 up to may 2016 then milk production began to decline production began to fall from June 2016 up to august 2016 it was a continuous decline this shows that there has been a general decline in milk production and therefore there needs an intervention to ensure that there is an increase in milk production.

5.1 Conclusion

Milk production in Uganda has been declining and there is need for the government to support the farmers in ensuring the output in increased.

The level of milk production in Uganda has also shown that there needs to be an increase in the investments by the government.

The government needs to support cattle keepers with modern milk systems to enable milk production to increase.

5.2 Recommendation

Milk producers in Uganda need to be educated by the professionals on the best ways of increasing their milk output.

There needs to be government support to the farmers.

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APPENDIX

VARIANCE LEVEL

H₀   There is no linear deterministic trend in milk production