Dairy farmers suffer alone

Infograph: TBS

Pabna dairy farmer Khokon Biswas sells 60 litres of milk per day. The dairy company that buys the liquid milk from the farmer recently raised both retail prices and collection rates. 

According to the new prices, Khokon now gets Tk46 per litre – which is Tk2.70 more than the previous rate. However, the production cost of one litre of milk in Pabna is now more than Tk50, says the Bangladesh Dairy Farmers' Association.

"It's impossible for farmers to make a profit by selling milk," said Khokon, referring to skyrocketing farming costs over the last few years.

Small dairy farmers like Khokon said though the dairy input cost hikes push small farms to the ropes as the farmers are unable to cope with the situation, other industries in the dairy supply chain, such as milk processors, cattle feed producers and veterinary drug-makers, fare well by raising product prices.

Milk price was as low as Tk33 per litre in 2018 as retail prices were above Tk65 per litre. The retail rates edged up gradually over the years, and jumped by Tk10 to Tk90 per litre this year.

In contrast, the processors raised the collection prices by Tk1.5-Tk1.75 per litre last year and Tk2.70 per litre recently in the face of the rise in inflation.

According to the Bangladesh Dairy Farmers' Association, Pabna, Sirajganj, Bogura and Mymensingh are the key dairy hubs in Bangladesh. The number of dairy farmers is around 20 lakh, who supplied 1.30 crore tonnes of liquid milk in FY22, as per data of the Department of Livestock Services.

The department says leading dairy processors such as Milk Vita, Aarong, Pran and Akij sold around 8 lakh tonnes of milk and dairy products in FY22.

Centering on cattle farming, some 250 registered feed producers are now in the market. The manufacturers produce 5.3 lakh tonnes of cattle feed per year for the local market, according to the Feed Industries Association of Bangladesh.    

According to unofficial data, the size of the local veterinary medicine market is around Tk3,000 crore, which meets nearly 70% of demand.  

Farmers say cattle feed amounts to 70% of farming cost. Prices of all types of feed have risen by at least 50% in the past five years. Besides, veterinary medicines costs escalated by more than 25%, labour costs by 100% and utility bills by at least 200%.

But milk collection rates at the farmers' level have not increased at that pace.

"All of my money from milk sales goes for feed," Pabna dairy farmer Khokon told The Business Standard.  

Another small-scale farmer in Bogura Jahidul Islam said he and his school-going son look after their four cows as they no longer can afford to hire labourers. But the farming costs still hurt them.

"The monthly power bills for the cattle shed is at least Tk700. Visiting a veterinarian doctor and medicines costs Tk2,000-Tk2,200," Jahidul said, expressing concern over the soaring feed prices.         

Farmers said the dairy processors used to slash the collection rate if demand went down. There were two rounds of price cuts alone in 2018.     

"The rates at which farmers sell milk to the companies are always below the production cost," Shah Emran, general secretary of the Bangladesh Dairy Farmers' Association, told The Business Standard.

Apart from the big companies, local restaurants and sweetmeat-makers are two regular clients of milk. If the milk demand for sweetmeat falls, farmers are offered throwaway prices. Farmers usually agree to rock bottom prices as a souring of relations with regular customers would mean no sales at all.

Referring to such facts, Shah Emran said until milk and dairy production through processing at the grassroots-level is increased gradually, fair prices will remain elusive.

Despite the small dairies being in a state of disarray, big processing companies claim they always value farmers as they play a key role in the supply chain.  

"We have raised the milk collection rate for farmers as they are in trouble due to soaring feed prices," Kamruzzaman Kamal, director of the Pran-RFL Group, told The Business Standard.    

While explaining the price gap between the farmers and the processors, Department of Livestock Services Director (Production) Md Reajul Huq said, "Some big farmers might post a profit by adding some values to milk and dairy items, but small and medium farmers cannot make a profit by selling milk. They couldn't do it before and still can't."    

"The profit for the farmers is elsewhere. By selling milk, they just gain a kind of working capital. The calves from the cows are the main source of their income. This is why they don't move away from farming even if they don't get a fair price for milk," he added.