Milk: Pricier at retail level, yet farmers deprived of fair price

The hiked price of milk at the consumer level has increased the profit of milk processing companies, but that has not been of benefit to farmers as the price at farm level has not increased in proportion to the jump in their production cost.

Dairy farmers say the cost of milk production has gone up in the last one year as the price of animal feed has doubled. However, the returns they receive for their product from the milk processing and marketing companies have not increased proportionately.

Aarong Dairy, a social enterprise of Brac, has increased the price of milk by Tk7 per half a litre to Tk45 and by Tk10 per litre to Tk80 at the consumer level.

For the last one year, the company has been paying Tk38.55 per litre of milk – Tk1.5-1.75 more compared to the previous year, said dairy farmers in Pabna.

However, sources at Aarong Dairy said during the last one year, they have been paying the farmers Tk4.50 more per litre compared to the previous year.

Infographic: TBS

Brac Enterprises Senior Director Mohammad Anisur Rahman told TBS, "We have increased the price of milk at the farmer level twice in a year. The cost of packaging, transportation, distribution has increased and so the price of the product has increased too."

In addition, the prices of raw materials required in processing, packaging and some other materials have increased by 15-40%. Transportation and distribution costs have risen by about 30% since the rise in fuel prices a few months ago, said Aarong officials.

Apart from Aarong, leading companies like Milk Vita, Pran Dairy, and Akij Food and Beverage Ltd are also in the process of raising prices of milk.

An official of Milk Vita, which operates under the Rural Development and Cooperative Division, said the company has appealed to the division to increase the price of milk by Tk10.

It is working on a proposal on providing a Tk10 government subsidy per litre of milk to dairy farmers, said Md Mahfuzul Haque, deputy secretary and general manager (administration, finance and audit) at Milk Vita.

Under the proposal, in addition to the price at which the company will buy milk from the farmers, another Tk10 per litre will be subsidised by the government.

Farmers in Pabna said currently they have to buy khoil (mustard cake), bran and ground maize at around Tk50 per kg, which is almost double the price compared to the previous year.

Shah Emran, general secretary of Bangladesh Dairy Farmers Association, told The Business Standard, "The price of wheat bran a year ago was Tk1,100-1,200 (50 kg sacks), which is currently Tk2,050. The price of all animal feed has increased by at least 40-50%, but the price of milk at the farm level has not gone up."

"Farmers are deprived of fair prices, while consumers are under pressure due to the jump in the prices of processed milk. The government needs a specific policy on the price of milk for farmers," he added.

According to dairy farmers and processing companies, the price of raw milk is determined mainly by the amount of fat contained. 

Farmers usually produce milk with 4-4.5% fat, which fetches a maximum Tk43 per litre.

The price of milk with 5.5-7% fat is Tk51.90-65.25, but only 2-3% farmers produce milk with such high fat.

Farmers said most of the milk is now priced at Tk40-45 per litre at farm level. On the other hand, milk is usually sold in the village markets for Tk55-60.

Farmers who produce a large quantity of milk every day have developed a relationship with the large companies as the demand for their product in the nearby markets is very low. So, they have to sell milk to the companies despite the fact that their income does not keep pace with the expenditure.

Milk Vita collects about 1.5 lakh litre milk from farmers every day. The farmers under this company have been deprived of a fair price of milk for a long time and so many of them no longer want to supply milk to it.

In this regard, an official of Milk Vita said the company could not collect the expected amount of milk from the farmers, so the company may make a loss this year.

Pran Dairy officials declined to comment on the price hike, saying that they will talk to the media only after the new price is effective.

According to the Department of Livestock Services, there are around 20 lakh dairy farmers in Bangladesh who produce around 1 crore tonne of milk every year. The leading milk processing companies are preparing milk and dairy products by processing around 7.5 lakh tonnes of milk, which is 7.5% of the milk produced here.