A Visit to the Milk Market

Presented by
Aishvarya Srivastava Abhishek Tomar Sarthak Verma Anil Garg Krishna Gaurav Rakesh Kankanala Munawwara Shakila Subhabrata Bhattacharyya

Indian Institute of Management Lucknow

 Located at 6th milestone at Lucknow-Sitapur Road. Set up on 22nd July, 2006 Initiated by government of UP Primarily to facilitate milk trading among farmers.

Milk Industry in India

India is the largest milk producer in the world, 100 million tonnes

1/5thof the world bovine population

Productivity boom through operation flood.

Milk Industry in India

Dairying is a part of the farming system Comprises about 1/3rd of the rural incomes Livestock is a security asset to be sold in times of crisis

75 % of HH have 2-4 animals on average

Market Operations
Operates 7 days a week from 6 AM to 6PM No entry fees required for trading in the market

No licensing requirements
Officially run by the government but minimal interference in Dairy operations.

Administration
There is no paper work involved. The Mandi Adhikari periodically visits the dairy market for supervision. Two permanent security staff are stationed in the market.

Milk Market Advantage

Price at milk market fetches at least Rs 3/litre more than co-operative dairy procurement price in villages. Dairies in villages procure milk at lower price. Dairies usually decide price for milk after testing for fat content, but here it is done manually through experience of the traders. No taxes/fees collected from sellers. Household distributors in the city prefer to procure milk in market rather than going to villages.

Milk Trading
About 500 people visit the market everyday. This number includes buyers as well as sellers The total volume of trade per day is around 3500 litres On an average each seller sells about 20-30 litres of milk each day The excess milk, which remains unsold at the end of the day, is collected at a reduced rate by paneer dealers and sweet makers. Hence the entire milk that is brought to the market by a seller is ultimately sold.

Milk Trading
Market surviving on traditional channels of marketing. Traders procure milk from farmers in villages.

Arbitrage advantage in milk market compared to that of co-operative channels in villages.

Price advantage is huge on days with lower supply.

Buyers and Sellers

Farmers and traders from villages as far as 30km in and around Lucknow form the sellers as well as buyers Household milk distributors are the major customer base at the market Unpredictable supply and demand results in variation of selling price per litre

Buyers Profile
Common people/farmers coming to the market to purchase milk Sweet sellers, curd & paneer makers One seller purchasing milk from another seller at lower rate to satisfy his additional demands and sell to households at higher rate

Buyers Profile
Name : Ram Prasad. Age : 36 years. Location : Daliganj Primary Occupation : Milk Vending Buys milk from the market and sells in the city. Came on his bicycle with two empty cans. He is willing to buy 40 litres of milk at the rate of about 14-15 rupees per litre. The sale price in the city is about 22 rupees per litre. Thus he makes a profit of about 300 rupees.

Sellers Profile
Farmers owning buffaloes/cows producing milk and they themselves comes to market milk. Sellers who buy milk from the small farmers from the villages and sell the milk in milk market.

Sellers Profile
Name : SantRam Pandey Age : 32 years Location : Bakshi Ka Talab Primary Occupation : Farming He owns 8 buffaloes. Travels on a bike. He brings about 50 litres of milk in two cans. The expense he incurs (inclusive of travelling expenses) is about Rs 10/litre and he sells it at a rate of about Rs 18/litre. Thus, he makes a profit of about 400 rupees in a day.

Sellers Profile
Name : Deen Dayal Yadav Age : 40 Location : Mohanlalganj Primary Occupation : Milk Vending Buys milk from many farmers and sells in the milk-market. Travels on bicycle. He brings about 50 litres of milk in two cans. The cost price of the milk is on an average Rs 12/litre and he expects to sell it at a rate of about Rs 18/litre. Thus, he makes a profit of about 300 rupees in a day.

Determining Price
Premium on fat content hence buffalo milk fetches higher price, cow milk pricing based on total solids Farmers price is about Rs. 15 for cow milk and Rs. 20 for buffalo milk(1 litre bottle of water costs Rs. 12) Price is dependent on supply and demand in the market on the particular day. Seasonal dependency: High prices in summer when supply is low and Lower prices in winter when the supply is high.

Price fluctuations
Cold storage facilities for preserving left out milk for the day is not available near the market. Irregular supply results in fluctuation of price.
Milk remaining for the day is often procured by paneer/khoya makers at a lower price.

Milk production
Average yield of milk per cow is 15-20 lts/day. Average yield of milk per buffalo is 9-12 lts/day. Yield per animal is very low compared to many other countries. Average yield per animal in India is 1000 lts/year compared to world average of 2100 lts/year. (Source : CIFTI AGM 2004) Poor feeding practices do not enable farmers to capitalize on potential.

Drawbacks of the Market

No storage facilities No quality testing. Buyers use their own experience to adjudge the quality of the milk.

No shelter for buyers and sellers.

Canteen block present but not operational.

No organised dispute settlement system

Way Ahead

Milk market lacks private cold storage players as in fruit market. Transparency can be improved by introducing electronic milk-o-meters. Can evolve as a hub for marketing other dairy products. Regulatory role of government in case private sector gets increasingly active.

Potential to beUnleashed
Poor access to institutional credit Credits through informal procurement channels are at very high loan rates, and results in exploitation of farmer through lower milk prices Dairying is a part of the farming system. Traditional practice of selling rather than unleashing new channels. Competition does not exist at village level for procurement which results in lower milk prices often decided by local agents.

Opportunities
Room for concept similar to MACS (Mutually aided Cooperative societies) model which input supplies credit co-operative, medicines at cost, quality feed, breeding and health services. MACS implemented in Andhra Pradesh. Farmer milk prices set by MACS are usually higher than prices set by private dairy/co-operative.

Thank You