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Unprecedented attention churning a dairy revolution
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Wednesday, 01 March, 2017, 08 : 00 AM [IST]
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Dr R S Khanna
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Dairy Sector – Dynamics 2016
Dairy sector in India is undergoing a fast change with active involvement of the milk producers. The year 2016, saw many dynamic changes full of vital stories of farmers. There has been unprecedented attention given to the dairy sector by all the stakeholders – the government ministries, the investors, the dairy product manufacturers, the marketers, the international dairy trade and above all the farmers.
The government interventions have been interesting and heartening. During 2016, the developments in the dairy sector were followed more closely by the news media than it has been receiving in the past. It is expected that many stories of development in the dairy farming, success stories of the individual farmers and entrepreneurs would continue to get sharp attention of the media. Dairy sector vibrated with the demonetisation, the digitisation, the food fortification, attention to development of indigenous breeds of cows and enthusiasm in marketing of A2 milk. The discussion in the paper is not exclusive to the developments only during 2016.
There have been many events that started during the previous years but their impact was visible during 2016. It is expected that these events would have far reaching impact on the developments of the dairy sector during 2017.
UN and IDF on Importance of Dairy
According to the report released during December 2016, by the FAO, Bangkok, the dairy industry is a potential "engine of poverty-alleviating growth," as the report puts it — so long as things remain egalitarian. The main beneficiaries have been small farmers, who produce nearly 80 per cent of the milk in Asia, because of low costs and a more equal distribution of cows and goats — in contrast to farmland, which can be dominated by big landowners.
The report has underscored that Asians are drinking more milk, traditionally absent from many Asian kitchens but which now flies off the shelves from Bangkok to Beijing. Production has almost tripled, from about 110 million tonne in 1990 to nearly 300 million tonne in 2013 — accounting for more than 80 per cent of the world's increase in milk supplies during that time.
Studies have found Thailand's National Milk Program, which brings milk to schools, causes students to grow taller and take in more protein and calcium. Similar programmes were rolled out from India to China to the Philippines.
During 2016, the International Dairy Federation underlined that dairy sector would play a significant role in the nutritional security, sustainability and socio-economic development of the world. IDF has identified dairy as “the No. 1 global agricultural sector by value and is directly responsible for 240 million jobs worldwide, and …1 billion livelihoods.” There were some 80 million women engaged in dairy farming. The milk production would play a key role in poverty alleviation, food security and as a nutritious product essential for children and pregnant women.
Milk Production and Prices
According to the DAHD, milk production between 2013-14 and 2014-15 increased by 6.26% from 137.7 million tonne to 146.3 million tonne and is expected to in the future. During 2016, milk procurement and the prices were very stable. An analysis of farmgate prices across northern India showed that price for 6.5% far and 9% SNF ranged between Rs 32 per litre and Rs 36 per litre during 2016. The fluctuation in prices was in tandem with demand and supply, recording upward trend during summers. Where there is no procurement of milk by the organised sector the prices for milk producers was Rs 22-24 per litre. The milk producer would benefit with the entry of organised sector.
Analysis of last four years, showed that highest prices were during 2013-14 ranging Rs 27.90 per litre in April 2013 to Rs 34.90 during March 2014 (Figure 1), mainly because of peak exports from India. The prices during 2014-15 nosedived from Rs 38.85 during May-June 2015, to Rs 31.70 during March 2015.
Across milksheds in northern India, the prices were highest in western Uttar Pradesh milksheds (Figure 2), despite high density of milk production. The high prices are attributed to good quality of milk and very strong competition for purchase directly from the farmers. In Bulandshaher district as many as 37 organisations were competing for milk procurement. The organised sector has given a body blow to the bulk suppliers and middlemen.
Intl Production and Prices
The domestic milk prices are not any more neutral to the international prices. Internationally, average 2015 farmgate milk prices plunged and because of lack of exports, international trade received a setback during the first half of 2016. The cut in farmgate prices by more than 50% in New Zealand, resulted in fall in the production of milk. It is estimated that supply of dairy products fell by 2.6 million tonne from Oceania and European regions. During second half of 2016, demand picked up and prices gradually increased. At GDT, the price of SMP went up from US$1,800 during February 2016 to US$2,700 on January 3, 2017. The prices of WMP increased from US$1,950 during 2016 to US$3,300 and that of casein from US$3,800 to US$6,250. The prices of butter moved from US$2,600 to US$4,300; and that of butter oil moved from a low of US$3,000 during 2016 to US$5,352 in January 2017.
This has impacted domestic milk prices. With increase in international prices, dairies started manufacture and export of casein. The farmgate price instead of declining during December-February, went up in December 2016. A good news for milk producers means consumer prices of almost all dairy products are likely to increase from February 2017.
Fortification of Dairy Products
After national consultation, the FSSAI announced that liquid milk and dried milk can be fortified with Vitamins A and D. All the vitamins and minerals that can be added to milk are available in dry powder form as well as in the liquid form. The fat-soluble vitamins are also available in an oily form as well as in the water-soluble form. Liquid milk is fortified just prior to pasteurisation or ultra-heat treatment. The FSSAI has indicated that liquid milk can be fortified with 770 IU using retinal acetate, retinal palmitate, and retinal propionate; and for Vitamin D using cholecaliferol and ergocaliferol upto 550 IU. For fortifying dried milk, FSSAI has advised blending dry forms of vitamins and minerals with the dried milk powder.
Promoting Sale of A2 Milk
The DAHD has been advised by the dairy industry to market A2 milk separately, because all indigenous breeds of cows and buffaloes produce milk that contain A2 protein. Milk contains A1 and A2 types of casein. With the help of enzymes A1 and B, ß-casein can be cleaved to release an amino acid called ß casomorphin - 7 (ßCM-7). According to a report by Boyd Swinburn, professor at Deakin University, ßCM-7 may trigger a host of diseases: diabetes, heart disease, autism, schizophrenia, infant cot-death syndrome, multiple sclerosis, coeliac disease, and inflammatory bowel disease. Therefore, it is considered that for the benefit of consumers and the farmers rearing indigenous cattle, the organised sector should take initiative to market A2 milk. About Rs 2 crore each have been sanctioned to Odisha and Karnataka for marketing of A2 milk. A National Mission on Bovine Productivity has been allocated Rs 825 crore for this purpose.
New Dairy Products
The year 2016 saw some new products in the market. The FSSAI approved fortification of milk and milk powders, Amul launched camel milk, herbal-based memory milk, lactose-free milk, A2-cow milk and Kraft cheese entered the Indian market.
Goods and Services Tax
During August 2016, Parliament passed the Goods & Services Tax that would replace all the existing taxes viz., excise, VAT, Mandi tax and so on applied on various milk and milk products by the states. It is considered that the application of GST would relieve the industry of many hassles. It will reduce the number of taxes levied, reduce the dealing and documentation for one department. Simplification of taxation procedures is likely to reduce the transaction costs. According to the draft for GST application under discussion, the dairy products have been classified into three categories as shown in the Table 1:
Demonetisation
The announcement of demonetisation of Rs 1,000 and Rs 500 currency shocked people with ‘what next,’ shortage of currency, rush for new currency, cash obsession, cashless transactions, etc. The dairy sector has welcomed demonetisation. For example, Mother Dairy, Amul, and Karnataka Federation have seen the opportunity of making payments directly to the farmers. The GCMMF secured information on bank accounts of about 50 lakh farmers. Private dairy organisations like Kwality Limited, Hatson Agro, have been approaching complete digitisation of milk payment. The fact that the payment had been deposited in their account instilled confidence about the trustworthiness of such companies.
To assess the impact of demonetisation on rural India, All India Radio and Kwality Limited organised a meeting with 30-35 persons in village Jhunjhuni in Mawana tehsil of Meerut district of Western Uttar Pradesh. There was complete unanimity in support of demonetisation, despite difficulty in withdrawal of funds and availability of cash. The villagers believed that it would wipe out the black money that had been gathered by many politicians, bureaucrats, government employees, rent-seekers, industrialists, black-marketers, hoarders, smugglers and so on. The effort was lauded for checking the domestic and cross-border terrorism. Villagers confirmed that there was no problem in purchasing principal requirements of food for their kitchen. Most households had stored food grains and other needs were fulfilled by the local shopkeepers through barter system or credit. Regular cash requirements in the village are quite low and therefore rural India can withstand the shocks caused by the delay in supply of new currency.
In the market segment, demonetisation led to ‘go cashless.’ Mother Dairy introduced cashless via Paytm and SBI Smart Charge Card and Amul tied up with MobiKwik.
Digitisation Digitised Communication
Farmers have graduated to using mobiles for spot communication. The Union ministry of agriculture launched many mobile applications during 2015 and 2016. The ‘Crop Insurance’ application would help the farmer to know the details of the status of insurance of his crop the amount covered, premium due, loan taken, and the status of claim. The ‘AgriMarket’ application informs the farmer about the prevailing price for various crops of the mandis within 50 km radius. It gives the option to the farmer to take his produce to the market that offers the best price.
The 'Kisan Suvidha' application has a simple interface and provides information on five critical parameters viz., weather, input dealers, market price, plant protection and expert advisories. The smart phone app is available in both English and Hindi languages and it will be made available in all languages as soon as possible. The ‘Pusa Krishi’ mobile app facilitates farmers to get information of the technologies developed by ICAR-IARI e.g., Natural Resources Management, Integrated Nutrient Management, Plant Protection, Soil and Water Management, Mechanisation, Diagnostic Technologies and so on.
The ‘e-NAM’ app has already connected 21 wholesale markets (mandis) from eight states. The farmer gets information that helps him to decide when, where and at what prices to sell his produce. This is an enabling tool for farmers enter electronic trading, get single licence valid for all the states and single entry point market fee. Under e-NAM farmers will initially be able to sell their produce through mandis within the state.
It will be extended to pan-India operation by 2017 and 585 markets by March 2018, making it possible to reach the goal of “one nation one market. ”
Similar to e-NAM is the ‘E- Pashudhan Haat’ that has been launched as an e-market portal for bovine germplasm in the form of semen; embryos; calves; heifers and adult bovines. Nakul Swasthya Patra and UID will be made mandatory for sale of bovine germplasm through E-Pashu Haat. Within a week of launch of this app, 150,000 doses of semen were exchanged through the portal.
Digitised Purchase of Milk
Most cooperatives and private dairy organisations purchase milk form the farmers through cyberactive automatic milk collection units. These systems are a great help in capturing information on farmers, their milk sale, quality of milk, and payment for the milk. It has substantially increased the trust, transparency and efficiency of milk collection system. Most farmers were paid through the society secretary or the village service provider. The Jan Dhan Yojana during 2015 promoted opening of bank accounts by the farmers. The demonetisation has helped the dairies to initiate linking milk purchase and payment for milk directly to the farmers and bypass the secretary and the VSP.
Digitised Breeding and Healthcare
National Dairy Development Board has set up a centralised server to capture real-time reliable data on cattle and buffalo breeding, nutrition and healthcare requirements of the farmer. Technicians employed by the identified service providing organisations contact the interested farmers, tag and register their cows and buffaloes, collect and capture the relevant data. These data include status of artificial insemination, pregnancy diagnosis and calving, individual animal milk yield on a monthly basis, take milk sample at the time of every milk recording and arrange to send it to the laboratory for milk component analysis – fat, protein, lactose, somatic cell count and milk urea nitrogen.
Based on these inputs the field staff provides services and sends mobile alerts to the farmers on the issues concerning, breeding health and nutrition. The ration balancing application provides the least cost balanced ration formulation to the farmers based on the profile of the cattle and available feeds and fodder with the farmer.
Farmer Involvement in Improving Indigenous Cows and Buffaloes
Through digitisation, the farmer and animals are uniquely identified along with the pedigree details, reliable records are maintained on breeding, health and nutrition. This has helped reduce the number of AI per conception, improve conception rate, pregnancy rate, analyse disease pattern for different species/breed/ village/district. It is expected that over time period, the data can be utilised for progeny testing of bulls and genetic improvement. On a similar basis, the Prabhat Dairy, JK Trust have attempted to tag animals to track the milk production pattern of cows, and help farmers in seeking financial assistance for purchase of cows. At the time of outbreak of disease, the animals can be traced using the GPS or GPRS system.
Of late, there is growing interest in breed improvement amongst the milk producers. There are many individual farmers, medium scale dairy farms, and new entrepreneurs who have entered the arena not just to produce milk but to get involved in long-term improvement of breeds. Majid Pathan in a village near Pune, realised that IVF technology used amongst humans can work exactly the same way in animals. Pathan found that two cows belonging to Khillari and Gir breeds, namely Revati and Rupa, produced substantially higher amount of milk. Revati gave 13.5 litre milk in a day, and Rupa 24 litre. Rupa’s daughter Shobha gave 28 litre of milk a day. This proved that Rupa was genetically superior. Pathan considers that his cows could be used as donors to produce ova that could be implanted in surrogate cows to reproduce nearly 50 calves in a year through IVF technique.
Karamveer of Kurukshetra in Haryana is an owner of a proud Murrah breed bull named Yuvraj. Yuvraj is an extraordinary bull of eight years that weighs 1,500 kg and stands 5' 9" tall. Yuvraj's mother was a high yield buffalo, said to be producing close to 25 litre of milk a day. Karamveer claims that progeny of this bull are super buffaloes that give between 15-20 litre of milk per day, the quality of milk is good, buffaloes have extended lactation period. Yuvraj’s calves are born with 75 kg body weight, grow fast and become adult at two years of age. Each calf is sold at Rs 2.5 lakh. So far the bull is stated to have produced 150,000 calves.
Having won many awards, Yuvraj is a considered perfect specimen of the Murrah breed. It generates 3.5 to 5 ml of very high quality semen that is converted to frozen semen doses. The bull can produce 150,000 semen doses, each costing Rs 300. Karamveer can make Rs 4,50,00,000 every year. So it makes no sense for Karamveer to sell his bull even when offered Rs 9 crore at Karnal.
Similarly, Munna Singh of Ahamiya village in Rewa district of Madhya Pradesh has refused to sell his bull named Heera for a whopping Rs 4 crore offered to him. Singh had bought this bull from Haryana. The bull weighs over 1,000 kg, is 9.5 ft long and stands more than 5.5 ft. Now 5 years old Heera has sired two bull calves, the future bulls. Unlike Karamveer, Munna does not sell semen but has been breeding buffaloes of farmers from neighbouring districts in Madhya Pradesh and from Uttar Pradesh. Around 300-400 buffaloes have been bred for a charge of Rs 2,000 to Rs 4,000 each.
A Murrah buffalo named Lakho Rani belonging to Sherbaj Singh of Chak Vairo Ke village from Fazilka has set a new record by producing 26.335 kg milk in a single day. She won over Rs 7 lakh in prize money. Sherbaj Singh has a herd of 70 Murrah buffaloes.
Conclusion
The dairy sector is likely to get increased attention of all the stakeholders. The governments are likely to provide more funds for rural dairy sector. It is expected that the commercial bank, flushed with funds consequent to demonetisation, would also increase loans for purchase of animals and for setting up of medium scale dairy farms. Apart from the processing, dairy farming would also get attention of the investors as well as entrepreneurs. There would be more efforts in selling A2 milk, cow milk, fresh milk and doorstep supply to the consumers by the organised dairy farms.
Implementation of GST would have positive impact on the dairy industry. Prices of milk would be stronger during entire 2017 with emphasis on export of dairy products and also because the summer of 2017 may see lower availability of milk. The dairy industry would take advantage of demonetisation and digitisation.
(The author is chairman, Kwality Limited, New Delhi. He can be contacted at dr.rskrsk@gmail.com)
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