The Hindu Business Line : ‘Pure’ dairy farming: An idea whose time has come

Home Page - Dairy & Dairy Products
Opinion - Dairy & Dairy Products
Agri-Biz & Commodities - Insight
‘Pure’ dairy farming: An idea whose time has come

Harish Damodaran

Which is India’s No. 1 farm commodity? Wheat, rice, sugarcane, cotton or oilseeds? Well, none of them: The right answer is milk. In 2006-07, the country produced an estimated 100 million tonnes (mt) of milk. At an average farmgate price of Rs 10 per kg, this would have been worth Rs 100,000 crore, exceeding that of any other crop (see Table).

Moreover, the share of the ‘milk group’ in the total value of output from agriculture and livestock during 2004-05 (at current prices) was 17.89 per cent. This means almost every fifth rupee generated from agriculture and allied activities in the country comes from dairying. And amidst an overall stagnant farm sector, this is one segment that has exhibited significant dynamism in recent times. Between 1990-91 and 2006-07, milk production has nearly doubled from 53.9 mt to 100 mt, while rising from 55.1 mt to 74.9 mt for wheat and 74.3 mt to 92.8 mt for rice.

Milk, not exciting enough

Yet, strangely enough, milk excites neither policymakers nor corporates. The planner sees dairying as basically an activity subsidiary to agriculture. Partly this belief stems from the cattle and buffaloes in India being largely fed on crop residues — wheat and paddy straw, sugarcane tops or the protein-rich cake remaining after extraction of oil from groundnut or mustard-seed. Milk, from this perspective, is more of a residual than a primary agricultural product. Though farmers do grow barseem, sorghum or maize as independent fodder crops in isolated plots, the idea of a ‘pure’ dairy farmer is something that has not really caught on, leave alone capture official imagination.

Likewise, the big corporate entities in dairying today are pretty much the same ones that have been around for the past three-four decades: Nestle, Amul, National Dairy Development Board and various other State dairy federations. Besides, there are the Hindustan Levers and Britannias which have either exited the business or gone low key after the initial hoopla.

The more successful recent entrants are not so well-known names: VRS Foods (‘Paras’ brands), SMC Foods (‘Madhusudan’), Bhole Baba Milk Food Industries (‘Krishna’) and Sterling Agro Industries (‘Nova’). As for listed companies such as Hatsun Agro Product and Heritage Foods, these are stocks — unlike, say, sugar or fertilisers — that have not exactly set the market on fire.

Even when it comes to the commodities space, the two premier exchanges — MCX and NCDEX — deal in everything from chana, chilly and coffee to guar seed, jeera, mentha oil and mulberry green cocoons, but not skimmed milk powder, ghee or khoa. That is again surprising, given the seasonal fluctuations in milk availability and demand, which make its products eminently amenable to futures contracts.

Harvested and marketed daily

Why this indifference? One reason has to do with the unique nature of milk as a ‘crop’ that is harvested and marketed daily. This is as opposed to wheat and paddy, which take over four months to mature, or sugarcane that is harvested 11-12 months after planting. Harvesting here is a conspicuous one-time event, whereas it is a daily affair for milk sans any pongal or baisakhi festivities marking its arrival.

Cane, wheat and rice, furthermore, generate bulk revenue at one go for the farmer, unlike the steady trickle of cash flowing daily from milk sales. A buffalo, once it delivers its first calf when around four years of age, keeps producing milk for the next 290-300 days, before going ‘dry’ prior to the next calving taking place roughly 450 days after the first.

A single buffalo in its lifetime undergoes 8-9 calvings, with each cycle yielding 1,500-odd kg of milk. A farmer, who keeps three-four animals and is able to coordinate their dry periods, can ensure year-round sales.

But this simple fact of being marketed daily in kg or litres — against quintals and tonnes in the case of field crops — renders cattle rearing and dairying a business that goes virtually unnoticed or is reported as a ‘subsidiary’ farming activity. It also means that milk does not have a distinct ‘lobby’ akin to the wheat farmers of Punjab or the cane growers of Uttar Pradesh. This, in spite of milk being a cash cow in the literal sense.

While the bulk monies from cane may help the farmer marry off his daughter, discharge old debts or buy new farm equipment, it is milk that provides the liquidity to meet day-to-day household expenses and an effective insurance against drought or crop failure.

Unattractive to corporates

At the same time, the manner in which dairying has evolved in India — being widely dispersed across space and time — has made it relatively unattractive to corporates. Dealing with a perishable commodity supplied by thousands of scattered producers — each delivering a few litres every day — involves formidable logistics requiring not just deep pockets, but painstaking effort and organisation at the grassroots level.

It is the complexity of this task, often belatedly realised, that has led to many corporates (barring the odd Nestle or Hatsun, which have invested in back-end extension and procurement infrastructure) burning their fingers in the sector. The ones to have truly succeeded are the cooperatives, especially Amul, which procures over 65 lakh litres of milk on an average daily from some 25 lakh producer-members. That works out to less than three litres per producer, making it arguably the country’s most efficient and transparent rural employment scheme.

The Amul model has proved to be robust and stood the test of time, for all the organised attempts at belittling and sabotage even from within. However, its chief protagonist has been the small or marginal farmer, engaged in dairying as a subsidiary income activity. The basic underlying framework, thus, remains one of livestock rearing and milk production being an adjunct to mainstream crop agriculture. Considering the sheer size to which it has grown today, there is a need to rescue dairying from a narrow ‘subsidiary/residual’ approach and view it as an independent business in itself. The ‘pure’ dairy farmer is perhaps an idea deserving of support whose time has come.

‘Pure’ dairying

By ‘pure’ dairying, one is not talking of the farms with 2,000-plus cattle that produce a quarter of the milk in the US or the average member of New Zealand’s Fonterra Cooperative, who supplies 3,600 litres per day (against Amul’s less than three!).

Even more far-fetched are the captive dairy farms of Saudi Arabia’s Almarai Company that house over 45,000 Holstein Friesians, protected against the desert heat by special air-droplet fans and evaporative cooling systems, fed on imported barley and concentrates, and milked in fully-automated, continuous cycle-operated parlours. These models are obviously unsuited for India, both from an economic cost as well as socio-political angle.

More promising are experiments of the kind being tried out by Hatsun Agro. The Chennai-based company is targeting ordinary five-acre farmers to switch to ‘pure’ dairying by getting them to exclusively grow quality fodder (‘Co-3’, desmanthes, multi-cut sorghum) and raise 35-40 cows (at 90 square feet per animal and 436 square feet equal to 0.01 acres, less than 0.1 acres suffice for 40 cows). By increasing on-farm fodder yields, relying less on expensive purchased concentrates and selective mechanisation (use of brush-cutters for harvesting, rain-guns to halve water consumption, and milking machines to save on labour), milk production costs can be reduced by up to Rs two to Rs 6.5-7 a litre. A farmer selling 300 litres daily at Rs 10 a litre can, then, earn over Rs 25,000 a month, it is claimed.

Concessional schemes

Models like these, no doubt, offer opportunities for educated rural youth nursing entrepreneurial ambitions and addressing the rather disturbing flight of talent from the countryside.

But this calls for a changed official mindset, still entrenched in the two-animals, milk-as-a-residual-product mould. A good cross-bred, giving 3,000 litres annually, costs Rs 18,000 or so. There is no dearth of concessional finance schemes for buying two cows; none when it comes to a 30-animal farm entailing investment of around Rs 8 lakh (inclusive of sheds and assorted machinery), even if the promoter is a small-holder having a secure marketing arrangement with a cooperative or private processor.

In this case, not only is there no subsidy, but banks additionally insist on land as collateral security — notwithstanding the fact that farms are often jointly-held family property, on which clean title deeds may not be available to the satisfaction of lenders.

It is necessary to revisit such policies, more so in a country that has emerged as the world’s leading milk producer.

If only organised dairying were to get the official recognition and treatment accorded nowadays to horticulture, bio-fuel plantations, floriculture or wineries, it could stimulate the growth of a new type of educated farmer-turned-rural entrepreneur without at all undermining the successful home-grown Amul model.

More Stories on : Dairy & Dairy Products | Dairy & Dairy Products | Insight

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page